Hit 220 lecture 2 2014
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The document provides an overview of business plans, including their objectives, importance, and key elements. It discusses that a business plan is a written document that describes a business concept and goals, management, marketing, operations, and financial plans. Business plans are important as they allow entrepreneurs to realistically assess their business idea, secure financing, and provide guidance to employees. Key elements included in a business plan are an executive summary, company description, management team, marketing plan, operations plan, and financial projections. The document also provides tips on developing an effective business plan and what readers are looking for from a plan.
Hit 220 lecture 2 2014
- 1. HIT 220 LECTURE 2 OBJECTIVES At the completion of this exercise, you should be able to: o Define a business plan Describe the importance of a business plan Identify the elements of an effective business plan M.MASUNDA,BBS,MBA:HIT22O(2014)
- 2. TEXTS Timmons and Spinelli (2004) NEW VENTURE CREATION: Entrepreneurship for the 21st century, 6th edition,McGrawhill Barringer and Ireland (2006) ENTREPRENEURSHIP: Successfully launching new ventures, Pearson M.MASUNDA,BBS,MBA:HIT22O(2014)
- 3. BUSINESS PLAN is a written document, which describes in detail the overall plans of a business in which an entrepreneur aims to get involved. A business plan is a roadmap detailing the business concept, the goals of the business, how ownership/ management intends to achieve those goals, and the specific data needed to support the financial objectives for the business Usually 25-35pages document It isn’t a contract or a budget M.MASUNDA,BBS,MBA:HIT22O(2014)
- 4. WHY WRITE A BUSINESS PLAN? It is an internal doc which acts as a roadmap for the initial mgt and employees of the firm. It helps to focus ideas and serves as a feasibility study of the business's chances for success and growth. The process of putting a business plan together forces the person preparing the plan to look at the business in an objective and critical manner. a business plan is an ideal tool to check facts and to comprehensively examine the practicality of an idea before putting it into action. It is a selling doc for the firm, it presents the young firm to potential investors, suppliers,, business partners and job seekers. M.MASUNDA,BBS,MBA:HIT22O(2014)
- 5. WHY WRITE A BUSINESS PLAN? o It is a strong communication tool for your business. It defines your purpose, your competition, your management and personnel. o The process of constructing a business plan can be a strong reality check. o The finished business plan provides the basis for your financing proposal. M.MASUNDA,BBS,MBA:HIT22O(2014)
- 6. WHY WRITE A BUSINESS PLAN? Overcome subjectivity bias Increase awareness of key challenges Convince other stakeholders Employees Capital Providers Partners Angel DebtVC M.MASUNDA,BBS,MBA:HIT22O(2014)
- 7. WHO READS THE BZ PLAN AND WHAT ARE THEY LOOKING FOR? A firm’s employees Investors and other stake holders Potential bankers Potential alliance and potential major customers Merger and acquisition candidates M.MASUNDA,BBS,MBA:HIT22O(2014)
- 8. WHO READS THE BUSINESS PLAN—AND WHAT ARE THEY LOOKING FOR? There are two primary audience for a firm’s business plan Audience What They are Looking For A Firm’s Employees Investors and other external stakeholders A clearly written business plan helps the employees of a firm operate in sync and move forward in a consistent and purposeful manner. A firm’s business plan must make the case that the firm is a good use of an investor’s funds or the attention of others. M.MASUNDA,BBS,MBA:HIT22O(2014)
- 9. DO’S AND DON’T’S OF PREPARING A BUSINESS PLAN DO Involve all of the management in the preparation of the business plan. Make the plan logical, comprehensive, readable and as short as possible. Demonstrate commitment to the venture by investing a substantial amount of time and some money in the preparation of the plan. Articulate what the critical risks and assumptions are and how and why they are tolerable. Disclose and discuss any current and potential problems in the venture. Let realistic market and sales projections drive the assumptions underlying the financial spreadsheets, rather than the reverse. Have a non- disclosure statement that state that information in the plan is proprietary and cannot be copied, disclosed shared or otherwise compromised. Be more convincing in the first pages. M.MASUNDA,BBS,MBA:HIT22O(2014)
- 10. DON’TS Have unnamed mysterious people on the management team. Make ambiguous or unsubstantiated statements, such as estimating sales on the basis of what the team would like to produce. Describe technical products or manufacturing processes using jargon or in a way that only experts can understand, this limits the usefulness of the plan. Say you “think” or “believe” the product will work. Rather use facts to support your assertions. M.MASUNDA,BBS,MBA:HIT22O(2014)
- 11. WHO SHOULD WRITE THE BUSINESS PLAN? the owner of the business Consultants can be hired M.MASUNDA,BBS,MBA:HIT22O(2014)
- 12. BUSINESS PLAN OUTLINE Cover page Table of contents Executive Summary Company profile/ Business description Management and Organization The Marketing Plan The Operational Plan The Financial Plan M.MASUNDA,BBS,MBA:HIT22O(2014)
- 13. M.MASUNDA, BBS, MBA: HIT 22O (2014) BUSINESS PLAN APPEARANCE Folder or binder Quality paper and printer Free of spelling errors and grammatical inconsistencies
- 14. COVER PAGE The cover page answers these questions: Who wrote the plan and how can they be contacted? Why was the plan developed? To whom is it presented? – includes the name of the company, its address, its phone numbers, the date and contact details of the lead entrepreneur M.MASUNDA,BBS,MBA:HIT22O(2014)
- 15. M.MASUNDA, BBS, MBA: HIT 22O (2014) TABLE OF CONTENTS Follows the cover page Lists the major components of the plan and corresponding page numbers
- 16. The Executive Summary cont. The following information should be addressed in the executive summary: Company profile Nature of the product/service being offered Size and growth trend of the market Make-up and background of the management team Financing requirements Key projections (sales, gross profits, net income) Proposed use of funds Proposed exit strategy including projected ROI M.MASUNDA,BBS,MBA:HIT22O(2014)
- 17. COMPANY PROFILE/ BUSINESS DESCRIPTION intro this section by describing the opportunity the entrepreneur has identified i.e the problem to be solved or the need to be filled 1.1vision 1.2 mission 1.3 objectives 1.4 company history. 1.5 Technology and The product 1.6 intellectual property M.MASUNDA,BBS,MBA:HIT22O(2014)
- 18. MANAGEMENT AND ORGANIZATION 2.1Company Structure and Ownership 2.1.2Existing Shareholders 2.1.2 New Shareholders 2.2Organizational Structure and Management 2.2.1 Key Management and Personnel Proposed Organizational Chart 2.2.2Risk Reduction Strategies M.MASUNDA,BBS,MBA:HIT22O(2014)
- 19. THE MARKETING PLAN 3.1Market Analysis 3.1.1 Target Market 3.1.2 Market segmentation 3.1.3 Demand forecasts 3.1.4 Market Trends 3.1.5 Industry Analysis 3.1.6 Competitor Analysis - Direct - Indirect 3.2 Marketing Strategies M.MASUNDA,BBS,MBA:HIT22O(2014)
- 20. The Operational Plan 4. 1the Production / Manufacturing Process 4.2 Resources Required – Including HR (Specifically For Operations) 4.3Techiques 4.4 Size, Capacity, Location, Facilities 4.5 Operational Work Flow M.MASUNDA,BBS,MBA:HIT22O(2014)
- 21. THE FINANCIAL PLAN 5.1 Capital requirements 5.2 Source of funds 5.3 Financial statements M.MASUNDA,BBS,MBA:HIT22O(2014)
- 22. APPENDICES AND SUPPORTING DOCUMENTATION The following supporting documentation, inter alia, should be included where applicable: newspaper clippings, promotional literature, product brochures, market research, trade and industry publications partnership, association or shareholders' agreements offers to purchase, purchase and sale agreements contracts, orders, letters of intent memoranda of understanding, lease, franchise, agency or distribution agreements documentation relating to licences, copyrights, trademarks and patents quotations or pro-forma invoices for capital items to be purchased detailed personal balance sheets of the entrepreneurs copies of identity documents and marriage certificates of the entrepreneurs schedules of life assurance and endowment policies of the entrepreneurs M.MASUNDA,BBS,MBA:HIT22O(2014)
- 23. APPENDICES CONTINUED copies of company or close corporation certificates and registration documents drawings, work flow charts, plans, factory layouts, maps, etc a list of persons to whom reference can be made regarding creditworthiness, product and service quality, and the skills, abilities and integrity of the entrepreneurs Resumes Credit information, include in Appendix Quotes or Estimates Letters of Intent from prospective customers Letters of Support from credible people who know you Leases or Buy/Sell Agreements Legal Documents relevant to the business Census/Demographic data M.MASUNDA,BBS,MBA:HIT22O(2014)
- 24. WHY VENTURE CAPITALISTS REJECT BUSINESS PLANS Unacceptable management team 52% Company not market driven 38% Time frame too long 33% Inadequate financing plan 25% No proprietary position 15% No experience in industry (VC) 12% Other pitfalls: too long, opportunity too small, poor organization, lack of focus M.MASUNDA,BBS,MBA:HIT22O(2014)
- 25. ELABORATION & SYNTHESIS CHARACTERISTICS OF AN INNOVATIVE PRODUCT OR SERVICE NOVELTY RESOLUTION Originality (Is it new or different?) • Does it solve the problem or help manage the challenge? • Is it useful and practical? • Does it work? • Does it provide value? • Is it cost-effective • Is it understandable? • Is it well presented? • Is it attractive and credible? • Will people ‘buy it’? • Can it be commercialized? M.MASUNDA,BBS,MBA:HIT22O(2014)