ICWAI / ICSI
Business Plans
15 November 2011
GJA
Index
Topics
Business plan – what?, why?, and who?
Components of a business plan
How to make a compelling business plan
– Live case
How to make a presentation on business plan
– Live case
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GJA
Index
Topics
Business plan – what?, why?, and who?
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GJA
What is a business plan?
> A business plan is a comprehensive, written description of
the business of an enterprise
> It is a detailed report on a company's products or services,
production techniques, markets and clients, marketing
strategy, human resources, organization, requirements in
respect of infrastructure and supplies, financing
requirements, and sources and uses of funds
> The business plan describes the past and present status of a
business, but its main purpose is to present the future of an
enterprise. It is normally updated annually and looks ahead
for a period of usually three to five years, depending on the
type of business and the kind of entity
By:
UNITED NATIONS CONFERENCE ON
TRADE AND DEVELOPMENT
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Why a business plan?
> Getting an integrated view of your business
> Mutual understanding within the management team
> Determining financial needs and raising funds
> Approval from board of directors/shareholders
> Recruiting
> Deriving objectives for employees / stake holders
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Who are the audience to a business plan?
> Current and potential owners
>
>
>
>
Private equity
Venture capital
HNI
Corporate / strategic player
> Current and potential lenders
>
>
Commercial banks
Industrial development boards
> Top management team
>
>
Board of directors
Leadership – corporate level
> Governmental and quasi governmental bodies
>
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For technical assistance / grants
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Profile of the reader
> The profile of the reader of a business plan, under various
audience group may wary, so do their expectations
PE / VC /
Strategic
investor
Lenders
Investment
committee / Board
Deal doers and
advisors
Board / credit
committees
Deal Doers and
advisors
Looks for :
strategic outlook, and
key numbers
Looks for :
Details, data, workings, supportings
Looks for :
strategic outlook, and
key numbers, track record, owners
Looks for :
Details, data, workings, supportings
> A well written business plan should address the needs of all
reader profiles
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Who prepares the business plan ?
> A purpose oriented business plan should not be prepared
independently by a consultant
> It should be prepared / inspired by :
Start up
> The promoter
group
> Assisted by a
professional
consultant
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Established enterprise
>
>
>
>
Overall responsibility with the CEO
Input from all functional department
CFO to consolidate
Assistance from a professional
consultant
> For independent review
> Grounds of complexity
GJA
Index
Topics
Components of a business plan
> Components
> Structure
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Components – what are the reader expectations? (1/2)
> A good business plan should address almost all the reader
expectations
> Typical reader expectations (as per Nexus Venture Partners):
> Who is behind the company?
> Founders
> Key Management /Board Members, and
> Advisor Profiles
> What is the customer pain point
that the company is trying to
address?
> How is your company different
from the other companies trying
to address similar need?
> Customer need and existing solutions
available to address the Need
> Examples on how your company will
address the customer need
> Explanation on why your company's
solution is better than the existing
solution(s)
> Any external environment/context that
may influence customers towards your
company's solution
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Components – what are the reader expectations? (2/2)
> Typical reader expectations:
> What is the product or service of
the company?
> Functionality and Feature Roadmap
> Immediate & proposed products
> How will your company make
money?
> Business model for the company
> Financial Plan and Assumptions driving
the financial plan (revenue drivers,
channel economics, product pricing, etc)
Source:
www.nexusvp.com
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Structure of the business plan (1/9)
> Business plan should be arranged in well defined and structured format:
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1
> Cover page, index,
introduction letter
6
> Human resources
2
> Executive summary
7
> Legal, and environmental
framework
3
> The opportunity / the
market / the clients
8
> Financial plan
4
> Products / Services and
pricing
9
> Glossary, Notice to the
reader, contacts
5
> The business model
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> Appendices
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Structure of the business plan (2/9)
> Executive summary - contents
> Executive summary
> About 5 pages
> Fist section, but the last
section to be written
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2
> Overview (one page)
> Legal entity / address / entity type
> Promoters
> Vision and mission statement
> Head lines (one page)
> Unique upsides of the business plan
> 4Ps – Promoter, Product, Pricing,
Profitability
> Brief description of the project
> What is the project?
> Location and its advantage
> Project cost
> Means of financing
> Summary table capturing key
financials
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Structure of the business plan (3/9)
> Market analysis
3
> Market analysis
> Opportunity for you
> Marketing strategy
> Sales projections
> Support with independent
market reports
> Specify sources
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> Macro economic /Industry / Market
analysis
> Overall performance of the industry,
historical as well as forecast
> Industry SWOT
> GAPS felt in the industry
> Justify the need of a better product
/ service
> Company specific information
> Establish the company’s offering
meeting the demand GAP
> Company SWOT
> How are you planning to tap the
GAP?
> Marketing arrangement / team
> Sales projections
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Structure of the business plan (4/9)
> Products / services, and pricing
> Products / services
> Pricing and its rationale
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> Products / services
> Current and proposed products /
services offering
> Product description and history,
product attributes, research and
development
> Quality assurance and control,
sourcing
> Packaging / shelf life
> Production process
> Sourcing arrangements
> Pricing
> Costing and pricing
> Pricing strategies
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Structure of the business plan (5/9)
> The business model
> Business model
> Organisation structure
> Project particulars
> Production process
> Sourcing arrangements
> Goals
> Distribution
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5
> Organisation structure
> Project particulars
> Cost of the project
> Explanation and break down of
each lie of investment
> Funding requirements
> Borrowings and repayment
schedule
> Key machineries and technologies
> Contingency provision
> Risks and mitigation matrix
>
>
>
>
>
Process flow chart (and explanation)
Sourcing arrangements
Goals (short, medium, and long term)
Distribution arrangements
Project implementation schedule
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Structure of the business plan (6/9)
> Human resources
> Human resources
> Try to bring out the
individual and collective
strength of the team
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6
> Leadership team
> Functional management team
> Profile of promoters and key
management
> Detailed write up reflecting relevant
experience / successful
entrepreneur track record
> Functional experience of key
personnel
> Photographs / contact details
preferred
> Profile of the consultants involved
> Proposed HR plan:
> Head count
> Average salary
> Cost to company
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Structure of the business plan (7/9)
>
Legal framework, and environmental and social factors
> Legal framework, and
environmental and social factors
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>
>
>
>
7
Approvals and licensing requirements
Environmental risks
Social compliance
Development and social benefits.
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Structure of the business plan (8/9)
>
Financial plan (1/2) 8
> Historical
> Three year historic financial
> Product / service realization &
margin performance
> Historical working capital trends
> Financial plan
> Historical
> Forecast
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> Forecast
> Three to 10 year forecast,
depending on the industry
> Provide detailed assumptions for
each line item
> Provide supporting workings for
computations such as sales, direct
costs, etc
> Provide logical and mutually
corroborative assumptions and
workings
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Structure of the business plan (9/9)
>
Financial plan (2/2) 8
> Indicators / KPIs
> IRR
> Payback period
> Break even point
> Summary of key ratios (one table)
> Financial plan - contents
> Forecast
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> Financial forecast
> Income statement
> Balance sheet
> Cash flow statement
> Capacity utilisation and quantities
> Cost of sales
> Working capital
> Consumption
> S,G&A expenses
> Income tax
GJA
Practical suggestions …
> Financial forecast
> Provide separate index for financial information
> Provide detailed write up for all assumptions
> Do not make arbitrary assumptions
> Restrict the years of projections to the number of years which
allows visibility
> Provide cross referencing / page referencing between financials
and the assumptions for better navigation
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Other important sections
1
9
10
> Cover page
> Legal name of the company
> Title / project name
> Date
> Introduction letter
>
General / specific address to audience
> Disclaimer / notice to the reader
> bring out the uncertainty around financial forecast
> Glossary of terms
>
Provide either in after the introduction letter OR prior to the disclaimer
> Appendix
>
For external information
> Contacts
>
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E-mail, Telephone, fax, address of the enterprise and the promoter
GJA
Index
Topics
Others …
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Matters not to forget …
> Make it look good – seek professional help if required
> Follow a structure
> Provide main index and sub indices, especially for financial
information
> Focus on formatting, language, etc.
> Organize financial information in an orderly manner
>
>
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Top – down approach
Bottom – up approach
GJA
Practical suggestions …
> Prefer MS Word / MS Power Point
> Prepare tables in MS Excel and import to the doc./ppt. file as a link
> Define the formatting in the Master Slide to avoid repetitive formatting
> Do not copy from another business plan or blindly follow the structure
followed by the previous / other document
> Do not use overwhelming colors / pictures
> Avoid too many photographs. If photographs are used, stick to high
resolution files
> Do not use confusing graphs. A simple table may explain the contents
better
> Do not share editable copies with external parties
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GJA
Financial highlights (1/6) : Tierra is expected to generate positive cash flows from Year1
____________________________________________________________________
Heading – should convey a
Financial highlights
► The key financial highlights of the project during the forecast period is summarized
below:
message
3,643
Tierra- financial highlights
4,000
Use uniform colors, fonts,
bullets across the document
2,832
3,500
Year 2F
Year 3F
Year 5F
Year 6F
Year 7F
804
Year 8F
345
163
90
49
433
367
Year 9F
271
500
498
307
1,000
710
1,500
152
2,000
Year 4F
Follow
standardized
graphs/charts
1,601
2,500
INR lakhs
Year 1F
2,187
3,000
Year 10F
-
(500)
Summarize key findings in a
text box
Source : information provided by Tierra
Tierra is anticipated to generate positive cash flows from second
year of operation, achieve break even level of sales in third year,
and payback the investments in four years. Net revenues are
expected to double in 3 years at INR 1,601.0 lakhs
Provide footnotes
Source for tables / charts
Note:
► Workings for IRR, pay back period, Break even turnover, and details
of KPIs and financial ratios are presented in following pages
► The detailedd financial forecast along with workings and assumptions
are presented under sub section – financial forecasts
______________________________________________________________________
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Page number
Give footer (company logo)
Index
Contents
Live cases
> Order of documents
> Documents
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Order of documents
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> Business plan
:
Project LakeHouse
> Presentation
:
Project LakeHouse
> Teaser
:
Project LakeHouse
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