Business Plan
The Techniques
• Our Case : The Red Line

Saigon Hotel
• Mission and Vision
• SWOT Analysis
• The Financial Plan Step by Step


Initial Balance Sheet
Year 1
•
•
•
•


Profit and Loss
Balance Sheet
Calculation of financial debt and interest
Cash Flow Statement
Year 2
Etc.
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Hanoi Hotel : Mission and Vision
• What we are

A medium size high level hotel in the centre of HCMC
• 130 rooms
• Average income per night/room in 2003 : 80 US$
• Mission

We want to deliver excellent service to our business (40%)
and leisure (60%) customers and want them to come back
• What we want to become

Possibility to add 60 additional rooms
• Vision

We want to become immediately after the Rex the reference
hotel for people who want a unique experience and not the
standard (high level) service provided by international chains
Vietnam Master in Management – HCMC dec 2003
BP Techniques
SWOT Analysis
STRENGTHS
Good image
Excellent location (centre)
Experienced management and
personnel
WEAKNESSES
Not a member of an international
chain
Quite old building (we should
renovate all rooms for a total
capex of 3Mio US$)
OPPORTUNITIES
New building with 60 rooms (total
capex of 4Mio US$)
Become member of international
network (license of 1 MioUS$)
THREATS
A lot of new hotels are coming on
the market
Competition try to hire our
personnel
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 1 : Initial Balance Sheet
• last available figures for
existing company
• opening Balance Sheet for new
venture
Liabilities = only equity
 Assets = only cash

BPcons.xls - STEP1!A1
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 1bis : Simplified Balance
Sheet
• Calculation of Working Capital

R + S - DSTop
• Calculation of Capital
Employed

FIX + WC + CASH
BPcons.xls - STEP1bis!B1
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 2 : Profit & Loss Year 1
based on
• P&L of last year
• Operational assumptions for
year 1
Turnover
 Margins (Cost of sales)
 Costs of goods and services
 Salaries and productivity of
labor

• Fixed assets table

depreciation
• Balance Sheet of last year

calculation of interests on
debt
BPcons.xls - STEP2!A48
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 2bis : Fixed assets &
depreciation
based on
• Fixed assets at the end of last
year
• Depreciation rules
• Capex of the year
Tangible
 Intangible

BPcons.xls - STEP2bis!A111
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 3 : Balance Sheet Year 1
based on
• Balance Sheet of Year 0
• P&L of Year 1


EAT & DIV for EQ
Depreciation for FIX
• Operational assumptions

Change in Working Capital
• Duration of inventories
• Duration of collection
• Etc.

•
Capex for FIX
Financial assumptions



New LT debt
Capital increase for EQ
Reimbursed LT debt
• Short term fin debt to balance
BPcons.xls - STEP3!A1
Vietnam Master in Management – HCMC dec 2003
BP Techniques
How to do to finance the
company ?
• Cash Flow from financing activities
• First : use the existing cash or credit lines
• Second : seek additional debt provided by banks


Duration should depend on needs but …
• Always seek long term to reduce the risks
Limits for the bankers
• Future Cash flows
• Cover of interest ratio must be respected
• Cover of debt must be respected
• Finally : seek new capital provided by shareholders

Is it an interesting investment for them ?
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 4 : Cash flow statement
Year 1
based on
• Cash Flow from operations

P&L of the year

Operational assumptions
• EAT
• Depreciation
• Changes in components of WC
• CF from investing activities

Fixed assets assumptions
• Capital expenditures
• Assets sales
• CF from financing activities

Financial assumptions
• New and reimbursment LT
• Calculation short term debt
• Sanity check : the cash
BPcons.xls - STEP4!A173
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Step 5 : Profit & Loss Year 2
based on
• P&L of Year 1
• Operational assumptions for
Year 2




Turnover
Margins (Cost of sales)
Costs of goods and services
Salaries and productivity of
labor
• Fixed assets table

depreciation
• Balance Sheet of Year 1 & 2

calculation of interests on debt
BPcons.xls - STEP5!A48
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Iterative Process
•
Step 5 :

•
Step 6 :

•
P&L for year 3
Steps 9

•
•
Cash flow statement for year 2
Step 8

•
Balance Sheet for year 2
Step 7 :

•
P&L for year 2
Balance Sheet for year 3
Step 10
……
Vietnam Master in Management – HCMC dec 2003
BP Techniques
How to build the Financial
Plan
Balance Sheet t
BPcons.xls - STEPfoll!A48
BPcons.xls - STEPfoll!A1
Profit & Loss t+1
Balance Sheet t+1
Cash Flow Statement t+1
BPcons.xls - STEPfoll!A160
Vietnam Master in Management – HCMC dec 2003
BP Techniques
Sensibility studies
• We can see immediately all the consequences of
changing one assumption



occupancy rate or load factor
unit price
additional capital expenditures
• more rooms, more planes, more shops
• fixed and variable costs



interest rate
exchange rate
etc.
BPcons.xls - SENSIB!A1
Vietnam Master in Management – HCMC dec 2003
BP Techniques