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Tutorial on Business Plan
WANG, Hao
hwang@se.cuhk.edu.hk
Table of Content
1. What is Business Plan?
2. Who needs a Business Plan? And Why?
3. Finding the right plan for you
4. How will you use your plan
5. Elements of Business Plan
6. Steps to a Great Business Plan
7. What to avoid in your Business Plan
8. Does your plan include the following factors?
9. Top 10 Do’s and Don’ts
A business plan is so vital to the health of your business
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What is Business Plan?
• A written description of your business’s future
• A document describes what you plan to do and
how you plan to do
• Used by
– Investment-seeking entrepreneurs to convey vision to
investors
– Firms are trying to attract key employees, prospect
for new business, deal with suppliers or simply to
understand how to manage their companies better
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What is Business Plan?
• Simply stated…
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Conveys your business goals
The strategies to meet
Potential problems may confront and way to solve
Organizational structure
The amount of capital required to finance your
venture
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Who needs a Business Plan? And Why?
• Anybody beginning or extending a venture will
consume resources and expected to return a profit
– Should take time to draft some kind of plan
• For startups
– Seeking funds to help start a new venture
– Most books on business planning seem to be aimed at
startup business owners
• Since like guidance
– Business plans are useful at all stages
• For established firms seeking help
– Middle stage
• Help them find funding for growth
• Help manage an already fast growing business
• Convey the miss and prospects of the business to customers,
suppliers or others
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Finding the right plan for you (1)
• Plans differ widely in their length, their
appearance, the detail of their contents, and the
varying emphases they place on different
aspects of the business
• Roughly, business plans can divided into four
different types
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Mini-plan
Working plan
Presentation plan
Electronic plan
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Finding the right plan for you (2)
• Mini-plan
– 1 to 10 pages
– At least cursory attention to such key matters
• Business concept, financing needs, marketing plan and
financial statement
– Quickly test business concept and measure the
interest of others
– It's not intended to substitute for a full-length plan
• Working plan
– Used to operate your business
– Internal using
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Finding the right plan for you (3)
• Presentation plan
– Suitable for showing to bankers, investors and others
outside the company
– Use standard business vocabulary
– Omitting the informal jargon and slang
– Reader will not be familiar with your operation
– Competitive threats and risks
– High-quality printer with color
– Make to be booklet, durable and easy to read
– Included graphics
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Finding the right plan for you (4)
• Electronic plan
– more business information that once was transferred
between parties only on paper is now sent
electronically
– An electronic plan can be handy for presentations to a
group using a computer-driven overhead projector,
for example, or for satisfying the demands of a
discriminating investor who wants to be able to
search deeply into the underpinnings of complex
spreadsheets
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How will you use your plan
• Do you intend to use your plan to help you raise
money?
– Clearly focused vision of how your company is going
to make money
• Do you intend to use your plan to attract
talented employees?
– Stock options and other aspects of compensation
• Do you expect showing your plan to suppliers to
demonstrate that you're a worthy customer?
– Convince a supplier of some precious commodity to
favor you over your rivals
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Elements of a Business Plan
• 7 major sections of a business plan
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7.
Executive Summary
Business Description
Market Strategies
Competitive Analysis
Design and Development Plan
Operations and Management Plan
Financial Components
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Executive Summary
• Tell readers what you want
• Keep short and businesslike
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2.
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Business concept
Financial features
Financial requirement
Current business position
Major achievements
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Business Description
• Short description of the industry
• Provide information on all the various markets within
industry, including new products or developments
• Investor will want to know how dependable your
information is and will not risk money on assumptions
1. Concentrate on its structure
• State whether business is new or already established
2. Legal form should be showed again
• Sole, partnership or corporation
3. Describe the products/services
4. Competitive Edge
5. How will you profit?
• If for financial purposes, how to expand your business and
make more profitable
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Market Strategies
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Define your market
Projecting Market share
Positioning your business
Pricing
Distribution
Promotion Plan
Sales Potential
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Competitive Analysis (1)
• Identify and analyze the competition
• A statement of the business strategy and how it relates
to the competition
• Purpose
– To determine the strengths and weaknesses of the competitors
within your markets
– Your distinct advantage
– The barriers to prevent competition
– Weaknesses can be exploited with the product development
cycle
• Identify the current and potential competition
– To look at the market from the customer's viewpoint
– To group competitors according to their various competitive
strategies
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Competitive Analysis (2)
• From “Developing Business Strategies”, David
A. Aaker
– Suggests concentrating your efforts in 4 areas:
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The reasons behind successful as well as unsuccessful firms
Prime customer motivators
Major component cost
Industry mobility barriers
• Competitive advantage
• Create a Competitive Strength table
– Product, Distribution, Pricing, Promotion and
Advertising
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Design and Development Plan
• Purpose
– Provide investors with a description of the product’s
design
– Chart its development with the context of production,
marketing and the company itself
– Create a development budget
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2.
3.
4.
Product development
Market development
Organizational development
Assessment of risks
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Operations and Management Plan
• Purpose
– Describe how the business functions on a continuing
basis
• The logistics of the organization
– Different responsibilities of the management team
– The tasks assigned to each division
• Financial Table
– The operation expense table
– The capital requirements table
– The cost of goods table
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Financial Components (1)
1. Income Statement
2. Cash Flow Statement
3. Balance Sheet
• Income statement
A simple and straightforward report
Business’s card-generating ability
Draws information from the various financial models
Monthly basis in 1st year, quarterly in 2nd and annually for each
year thereafter
– Income; Cost of goods; Gross Profit Margin; Operating expenses;
Total expenses; Net profit; Depreciation; New Profit before
interest; Interest; Net Profit before tax; Taxes; Profit after taxes
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Income Statement
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Income. Includes all the income generated by the business and its sources.
Cost of goods. Includes all the costs related to the sale of products in inventory.
Gross profit margin. The difference between revenue and cost of goods. Gross profit margin can
be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated
as a percentage of revenue.
Operating expenses. Includes all overhead and labor expenses associated with the operations of
the business.
Total expenses. The sum of all overhead and labor expenses required to operate the business.
Net profit. The difference between gross profit margin and total expenses, the net income depicts
the business's debt and capital capabilities.
Depreciation. Reflects the decrease in value of capital assets used to generate income. Also used as
the basis for a tax deduction and an indicator of the flow of money into new capital.
Net profit before interest. The difference between net profit and depreciation.
Interest. Includes all interest derived from debts, both short-term and long-term. Interest is
determined by the amount of investment within the company.
Net profit before taxes. The difference between net profit before interest and interest.
Taxes. Includes all taxes on the business.
Profit after taxes. The difference between net profit before taxes and the taxes accrued. Profit after
taxes is the bottom line for any company.
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Financial Components (2)
• Cash Flow Statement
– Showing how much cash will be needed, when it is
going to be required and from where it will come
– Shows a schedule of the money coming into business
and expenses need to be paid
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Cash Flow Statement
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Cash sales. Income derived from sales paid for by cash.
Receivables. Income derived from the collection of receivables.
Other income. Income derived from investments, interest on loans that have been extended, and the liquidation of
any assets.
Total income. The sum of total cash, cash sales, receivables, and other income.
Material/merchandise. The raw material used in the manufacture of a product (for manufacturing operations only),
the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies
used in the performance of a service.
Production labor. The labor required to manufacture a product (for manufacturing operations only) or to perform a
service.
Overhead. All fixed and variable expenses required for the production of the product and the operations of the
business.
Marketing/sales. All salaries, commissions, and other direct costs associated with the marketing and sales
departments.
R&D. All the labor expenses required to support the research and development operations of the business.
G&A. All the labor expenses required to support the administrative functions of the business.
Taxes. All taxes, except payroll, paid to the appropriate government institutions.
Capital. The capital required to obtain any equipment elements that are needed for the generation of income.
Loan payment. The total of all payments made to reduce any long-term debts.
Total expenses. The sum of material, direct labor, overhead expenses, marketing, sales, G&A, taxes, capital and
loan payments.
Cash flow. The difference between total income and total expenses. This amount is carried over to the next period
as beginning cash.
Cumulative cash flow. The difference between current cash flow and cash flow from the previous period.
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Financial Components (3)
• Balance Sheet
– Generated solely on an annual basis for the business
plan and is more or less a summary of all the
preceding financial information
• Assets
– Cash; Accounts receivable; Inventory; Total current
assets
• Liabilities
• Shareholder’s Equity
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Steps to a Great Business Plan
• 8 steps to produce a plan
1. Review two sample plans furnished.
2. Focus and refine your concept based on the data you have
compiled.
3. Gather all the data you can on the feasibility and the specifics
of your business concept.
4. Outline the specifics of your business. Using a “what, where,
why, how” approach might be useful.
5. Include your experience, education and personal information.
6. Fill in the templates at the end of each session with clear
language and realistic projections.
7. Print off the business plan templates into an MS Word
document.
8. You may wish to enhance your presentation with bar charts,
pie charts and graphics.
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What to avoid in your Business Plan
• Place some reasonable limits on long-term,
future projections
• Avoid optimism
• Avoid language or explanations that are difficult
to understand
• Don't depend entirely on the uniqueness of your
business or even a patented invention
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Does your plan include the following
factors?
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A Sound Business Concept
Understanding of Your Market
A Healthy, Growing and Stable Industry
Capable Management
Able Financial Control
Financial Management Skills
A Consistent Business Focus
A Mind set to Anticipate Change
Include Plans for Conducting Business Online
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Top 10 Do’s and Don’ts
THE TOP TEN DO'S
THE TOP TEN DON'TS
Prepare a complete business plan for any business you
are considering
Be optimistic in estimating future sales
Use the business plan templates supplied
Be optimistic in estimating future costs
Your business plan as you proceed through the course
Disregard or discount weaknesses in your plan
Research (use search engines) to find business plans that
are available on the Internet
Stress long-term projections.
Better to focus on projections for your first year.
Package your business plan in an attractive kit as a
selling tool
Depend entirely on the uniqueness of your business or
the success of an invention
Submit your business plan to experts in your intended
business for their advice
Project yourself as someone you're not. Be brutally
realistic.
Spell out your strategies on how you intend to handle
adversities
Be everything to everybody. Highly focused specialists
usually do best.
Spell out the strengths and weaknesses of your
management team
Proceed without adequate financial and accounting
know-how
Include a monthly one-year cash flow projection
Base your business plan on a wonderful concept
Freely and frequently modify your business plans to
account for changing conditions
Pursue a business not substantiated by your business
plan analysis
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The End
Thank you !
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