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7 steps in business plansIncorporating the winning strategies

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Arriffin Mansor© 2008

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7 steps to business planning1. Determine economical size of your business in terms of variable

costs, fixed, volume and targeted profit.2. Determine the minimum amount of working capital required based

on the operating and trading strategies.3. Determine the minimum amount of fixed assets required based on

the size and capacity of the business.4. Arrive at the amount of equity and loan financing required based on

the working capital and fixed asset. The debt equity ratio should not the exceed that of the market.

5. Determine the targeted return on equity based on the Du Pont business structure format. Ensure compliance with growing healthy business.

6. Estimate the cash flows from the beginning of the performance period to the end.

7. Estimate the income statement and balance sheet of the business.

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7 steps business plans include workbook and excel templates

Work book approach

Computer aided approach

Prepared templates and models that make learning effective and efficient.

Systematic and efficient learning

Learning are not bogged down to calculations. More focus on strategic decisions.

Background Reading ReferencesFormats or forms are provided

Enable sensitivity and simulation analysis where impact study are highlighted

Sequential fill up the blanks answers

Take back templates for work applications with little modification

Documentary evidence of learning mistakes

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7 steps in business plans

• Costs volume profit analysis

• Working capital required.

• Fixed Asset Strategies

Equity and Loan leveraging

• Du Pont ROE format.

Cash flow projections

Financial statements

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Step 1 : Cost volume profit analysis

• Determine the suggested product prices (external)

• Determine the volume of sales that could be generated from the targeted market.

• Separate fixed from variable costs (internal)

• Arrive at the profit margin.• Are you happy with the targeted

profit?

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WORKING CAPITAL

• Cash (days sales)• Stocks (days purchase)• Debtors (days sales)• (Creditors (days

purchase) )Preference should be given to working capital rather than fixed asset investment

STEP 2

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STEP 3: FIXED ASSET INVESTMENT

1. Asset could preferably be leased or rented.2. Control is good enough. There is no need to own.3. Alternatively own assets through bank loans or

financing.4. Internal rate of return and net present value is the

tool used in long term investment ( more than 1 year)

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STEP 4 : EQUITY AND LONG TERM LOANS

• Financing the business through equity or loans or a combination of both.

• The mix between equity and loans is called leveraging.

• In Malaysia, the bank is willing to give you RM2 for every RM1 you invested as equity.

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STEP 5: TARGETED RETURN ON EQUITY

• Set the business goal in term of return on equity (ROE)

• Structure the business based on the Du Pont format.

• Ensure all KPIs comply to a healthy growing company.

• Ensure that your strategies are incorporated in the fundamental structure.

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STEP 6: PROJECTED CASH FLOWS

• Project inflows and outflows for the business

• Detailed cash flows for the initial period with summary for the subsequent period.

• Show material items such as loan receipts and repayment

• Ensure liquidity at all times

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STEP 7: CONSTRUCT THE FINANCIAL STATEMENTS

• Based on all the previous steps the income statement and balance sheet could now be constructed.

• The balancing items could be the borrowed loans and equity.

• Ensure that the financial statements are in consistent with your stated strategies.

12 workshops on business plans

A business plan is the collective

involvement and commitment of the

members of a team.

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7 STEPS IN BUSINESS PLANS

COSTS VOLUME PROFIT ANALYSIS

WORKING CAPITAL

FIXED ASSETS

EQUITYLT LOANS

ROE CHART

CASH FLOWS

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•Set the right costs and volume of business•Set the right pricing strategies

• Winning trading and operating strategies

•Minimum Fixed Asset Strategies•Rent lease or LT loans

• Own or borrowed funds• Leveraging or gearing ratio

• Return on equity as ultimate objective• Realistic assumptions

• Ensure liquidity at all times•Loan repayment calculations

FINANCIALSTATEMENTS

7• Income Statement and Balance Sheet•Comply with basic key performance indicators

The fundamental structure is now complete. The descriptive frills can be completed by looking at

the check list.

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7 steps in business plans

7 steps in business plans 15

F/A(3)

Equity and

Loan(4)

WORKING CAPITAL

CHECKING THE OBJECTIVE

INCOME STATEMENT

Balance Sheet

Leveraging

Land & Buiding

Furniture and fittingsPlant and Machinery

Cost volume profit analysis

Liquidity management & loan repay

Thank you

Questions welcome