CRAFTING A WINNING BUSINESS PLAN

UMI MBA2 WKD ENTREPRENEURSHIP & SMALL BUSINESS MANAGEMENT 19/06/11 By: Kennedy Ssejjemba

Why develop a business plan?

A business plan is a written summary of an entrepreneurs proposed business venture, its operational and financial , p details, its marketing opportunities and strategy, and its managers skills and abilities The purpose of the business plan is to tell a story; the story of your business

Why develop a business plan?

Three essential functions of a business plan: 1. It guides the companys operations by charting its future course and devising a strategy for success 2. It helps to attract lenders and investors 3. It forces potential entrepreneurs to look at their business ideas in the harsh light of reality i.e reality, competitive and value test 4. It is a tool for communication gaining stakeholders support

Types of business plans

Introducing a concept to a potential investor
Short concise summary plan Geared towards equity investors or debt providers: 25-40 pages

Operational plan primarily for the entrepreneur and his/her team to guide the development, launch, and initial growth of the venture it may exceed 80 pages

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Dehydrated business plans shorter than the above, typically no more than 10 pages
Purpose is to provide an initial conception of the business to test initial reaction to the entrepreneurs idea. Entrepreneur can share this with confidants and receive feedback before investing significant time and effort on a longer business plan

Flexibility is needed
The business plan is a living document Most business plans become obsolete the day they come off the presses! Entrepreneurs must continually update and revise their business plans

The story model how do you capture the interest of the reader of your plan?
Help the reader by highlighting different key points (catch points) throughout the plan
Effective techniques include extensive use of headings and subheadings, strategically placed bullet points, diagrams, charts and the use of side bars the idea is to make the document not only content rich but visually attractive

What lenders and investors look for in a business plan

Capital investments in the business Capacity cash flow Collateral any assets an entrepreneur p g to y p pledges a lender as security for repayment of a loan Character competent management Conditions potential growth in the market, competition, location, strengths, weaknesses, opportunities and threats

Business Plan Outline

I. II.
a) b) c) d)

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II. Executive summary (not to exceed two pages)
e) Brief overview of the strategies that will make the firm a success f) Brief description of the managerial and technical B i fd i i f h i l d h i l experience of key people g) Brief statement of the financial request and how the money will be used h) Charts or tables showing highlights of financial forecasts

Cover and title page Executive summary (not to exceed two pages)
Company name, address, and phone number Name (s), addresses, and phone number (s) of all key people Brief description of the business, its products and services, and the customer problems they solve Brief overview of the market for the products and services

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III. Vision and mission statement a. Entrepreneur's vision for the company b. What business are we in? What in? c. Values and principles on which the business stands d. What makes the business unique? What is the source of its competitive advantage?

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IV. Company History (for existing businesses only) a. Company founding a b. Financial and operational highlights c. Significant achievements

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V. Business and industry profile a. Stage of growth (start-up, growth, maturity) b. Company goals and objectives
i. ii. ii iii.
Operational Financial i i l Other

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VI. Business strategy a. Desired image and position in the market b. SWOT analysis
1. 2. 3. 4.
Strengths Weaknesses Opportunities Threats

c.
i. ii. iii. iv. v.

Industry analysis
Industry background and overview Significant trends Growth rate Key success factors in the industry Outlook for the future

c.
1. 2. 3.

Competitive strategy
Cost-leadership Differentiation Focus

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VII. Company products and services a. Description
1. 2. 3. 3 4.
Product or service features Customer benefits Warranties and guarantees Uniqueness

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VIII. Marketing Strategy a. Target market
1. 2.
Complete demographic p p g p profile Other significant customer characteristics

b. c.
1. 2. 3.

Patent or trademark protection Description of production process (if applicable)

Raw materials Costs Key suppliers

b. c.
1. 2.

Customers motivation to buy Market size and trends

How large is the market? Is it growing or shrinking? How fast?

d.

Future product or service offerings

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VIII. Marketing Strategy d. Advertising and promotion 1. Media used-reader, viewer, listener 1 used reader viewer profiles 2. Media costs 3. Frequency of usage 4. Plans for generating publicity

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VIII. Marketing Strategy e. Pricing 1. Cost structure
a. b.
Fixed Variable

2. 3.

Desired image in market Comparison against competitors prices

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VIII. Marketing Strategy f. Distribution strategy 1. Channels of distribution used 1 2. Sales techniques and incentives

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IX. Location and layout a. Location
1. 2. 3. 4. 5.
Demographic analysis of location vs. target g p y g customer profile Traffic count Lease/rental rates Labor needs and supply Wage rates

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IX. Location and layout b. Layout 1. Size requirements 1 2. Ergonomic issues 3. Layout plan (suitable for an appendix)

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X. Competitor analysis a. Existing competitors
1. 2. 2 3.
Who are they? Create a competitive profile matrix Strengths S h Weaknesses

b.
1. 2.

Potential competitors: companies that might enter the market

Who are they? Impact on the business if they enter

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XI. Description of management team a. Key managers and employees
1. 1 2.
Their backgrounds Experience, skills, and know-how they bring to the company

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XII. Plan of operation a. Form of ownership chosen and reasoning b. Company structure (organization chart) b c. Decision making authority d. Compensation and benefits packages

b.

Resumes of key managers and employees (suitable for an appendix)

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XIII. Financial Forecasts (suitable for an appendix) a. Financial statements
1. 2. 2 3.
Income statement Balance sheet B l h Cash flow statement

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XIV. Loan or investment proposal a. Amount requested b. Purpose and uses of funds b c. Repayment or cash out schedule (exit strategy) d. Timetable for implementing plan and launching the business

b. c. d.

Break-even analysis Sensitivity analysis Ratio analysis with comparison to industry standards (most applicable to existing businesses)

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XV. Appendices Supporting documentation, including market research, financial statements, organization charts, resumes , g , and other items

PRACTICAL EXERCISE
Makini Schools owners want to consolidate their position through investment in amenities like swimming pools, music rooms, art studios and language labs. They also want to focus attention on rounding out their management team by bringing on board a chief financial officer and their children In order to achieve the above, the Okellos would like to access a development loan of US$600,000 from a financial institution. This loan will be paid over 10 years at an interest rate of 18% with a grace period of 1 year Develop a 3 year business plan for Makini Schools and advise them accordingly Assume they have cleared all the outstanding debts