Download - 1 Writing a Business Plan
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Richard OCallaghanHook Head Training and Consulting Limited
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Contents What is a business plan? Reasons for business planning
Typical Business Plan Model Information Required for a Business Plan Gathering Information
Your Product or Service You and your Team Marketing your product/service and
business
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A Business Plan
Describes The business - What business are you in? The markets - Where is the opportunity?
Industry forces - What are the competitivethreats? Whats our competitive edge?
Who is the team to implement the Plan? What resources are available for success? How much capital is required? What are the financial rewards to
investors?
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5 Major Reasons for
Business Planning Forces you to look at your business as a whole The Plan is a tool to manage your business
It demonstrates to others your goals andobjectives It provides the basis for your financial
projections
It can help you get the money you need tolaunch your business
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Why write a Business
Plan ? It forces you to think in concrete terms (justify
the potential you see in your business) It prepares you to face a number of
stakeholders Incubator managers Bankers Financers
Senior employees It gets the buy in from the team
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Cost Projections Sales Projections
Pro Forma Financial Statements
Operating Plan Marketing Plan
Financial Plan
What will it cost to produceyour product or service?
What will it cost to sell any givenamount of your product or service?
How will your business make money?How much? For how long? Risks?
Industry,Buyer & Competitor
Analyses
Opportunity Product/ServiceWhy this business? Whynow? Why you?
What are you going to provideand who wants to buy it?
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Typical Contents can
Include Statement of Purpose/Mission Statement Table of Contents Business Description
The Market Location Management Personnel
Operational Plan Resources Financial Statements Supporting Documents
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Before you start writing the
plan You must gather a significant amount of
information on: You Your firm Your product Your finances
Your targets Future potential
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Business Planning is an
Iterative Process
Tell the story(Draft your narrative sections)
Run the numbers(Develop your Financial Plan)
Verify the story(Examine the narrative sections)
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Gathering Information Get a hard back notebook or a ring-binder and
a folder/pouchor Use a folder on your computer Gather all your information first A lot of thinking will be required
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Where Is Your Firm Now? Consider the following: Are you a company, partnership or sole trader Have you completed a design or developed a
prototype product/ service Have you developed or launched its firstproduct/service
Are there any secured customer commitments ororders
Have you generated any revenue; if so, howmuch, from where, etc.
Have you secured finance from any source(including government grants)
Underpin this with a statement of who is involvedand what their experience, track record and
commitment to business is
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What is your
Product/Service? Write a short description of the product/service Then outline:
How does your product/service address a real marketopportunity ? What the specific benefits and value does the
customer derive from using your product? How can these benefits can be demonstrated and
measured
Why will the customer purchase your product/serviceon an ongoing basis? What are the distinctive advantages of your product
and why it is a potential winner? At the outset it is essential to establish the link
between the market opportunity and your product
or service
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Typical Mistakes at this
Stage You are so close to the product that you cannotdescribe it clearly
You provide excessive productdetail/specifications etc
You are of the opinion that the customer benefitsare self-evident you may know them but
You have not considered how long yourcompetitive advantage will last?
You concentrate on the product/service and donot adequately outline your skills and those of your team
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You need to convey to the reader aclear picture
This is the market opportunity
This is my product
These are the key benefits: the value proposition
This is the evidence that substantiates the valueproposition
And these are the people who will make it happen - andwhy
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What is your Market? Having understood your core proposition thereader wants a clear picture of your market interms of
Market size Market segmentation and niches Actual and projected growth rates in target
market Geographic breadth and variation Market context - relevant environmental,
regulatory, technological, demographic/socialchanges
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How do people make money
in this market? Basis of competition - price, differentiation,
range, discount structure, etc. Nature and number of substitutes (and near
substitutes) The ease or difficulty of gaining market entry The margin opportunity - current and future
It is essential to demonstrate a real understandingof what makes the market tick, why it is anattractive market, and why it will remain so forsome time
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You then need to explain where in themarket you will compete ...
choice of target market segment and rationale for this precise description of target customers key buying factors
the purchasing process: who buys and over what timeframe?
And how you will compete product positioning in the market: performance, image,
quality, etc. pricing and discount structure product support and service customer retention strategy scope for follow-on sales
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In addressing these issues beware
of Providing information unsupported by factual
evidence Lack of basic, first-hand market research The risks inherent in under-pricing Equating a large, growing market with ease of
gaining share
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Who will you Compete Against?
Basic competitor analysis tells us aboutcompetitors
Identity, size, financial results, etc. Product range and performance Market reputation - quality, service, image Market positioning - price, support, selling methods
But this is only a photograph
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A Good Business Plan will also
Illustrate how you will Withstand retaliation from incumbents Renew and extending initial competitive
advantage Retain customers and building loyalty Prevent others from capturing the value you
create
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How will your Product or
Service be Produced? The operational part of the plan should set out
What is involved in producing the product ordelivering the service
Resources required to do this: labor, material,facilities, etc.
Capital expenditure - amount and phasing Which activities will be controlled in-house (eg.
design or assembly) and which will be sub-contracted (eg. packaging) What it will take to gear up production post
start-up Status of any agreements with suppliers
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Who are the People?The question with which most investors start.
In describing yourself and your team youneed to focus on ... It is the people who
make it happen
Directly relevant industry, market experience andskills Accomplishments and track record (P&L
responsibility) Range, depth and quality of relevant contacts:
customers, suppliers, key personnel etc. Experience that the team has had working together Status and nature of the commitment of both
yourself and the team Key recruits still required
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What are your Financial
Projections? This part of the plan should focus on ...
Core assumptions behind the financial model The link between these assumptions and your
market data Key financial indicators - projected cash flow,
maximum cash requirement, summary profit &loss statement, balance sheet
Your expected best/worst/most likely positionsand your reasoning for these positions The potential downside (what happens if the wheels
fall off) and upside (what happens if it really takesoff)
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How much Money do you Need?
Your summary financial projections willdrive the funding requirement. Forinvestors, the key issues are ...
how much money is needed what it is need for: staff, premises, capital
expenditures, research & development, markettesting, and so on
when and in what stages it is required the key milestones against which funds will be
drawn down the form in which the finance is required
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Ability to make
Repayments The projected timetablefor the business to achievelift off
Target time to break even,generate positive cashand profit
Repayment projections,
and proof how you canmeet them Valuations achieved by
comparable businesses
THIS ISTHEKEY
ISSUEFOR THE
BANKS