Entrepreneurial Management (EM 05) Business Plan

Management05 – Business Plan

Suhas Dutta

Content (c) Copyright 3nayan Consulting. All rights reserved, 2014 - 18.2

Sir Richard Bransonon Entrepreneurship, and Business Plans

E:/VIDEO/BMA/Interview the Richard Branson business plan.mp4

E:/VIDEO/BMA/Interview the Richard Branson business plan.mp4

Syllabus coverage

• What is a BP? Why is it important? Who prepares it?

• Typical BP formatoFinancial aspects of the BPoMarketing aspects of the BPoHuman Resource aspects of the BPoTechnical aspects of the BPoSocial aspects of the BP

• Preparation of BP - Common pitfalls to be avoided in preparation of a BP


Learning objectives

• The importance of writing a business plan

• The elements of a business plan

• Writing a business plan

• Questions around a business plan


Business plan

• A formal written expression of the entrepreneurial vision, describing the strategy and operations of the proposed venture.

• Could take the shape of a /ano Loan proposal

o Investment prospectus

o Venture plan

• A Business plan is a:o Written document describing all relevant

elements involved in starting a new venture. It is an integration of various other plans (e.g.. Marketing, finance, technology, HR etc)

o Road map for accomplishing the entrepreneurial pursuits.


Purpose & importance of a BP

• The important purposes are to explain and describe the:oIdea behind the businessoProduct and services of the businessoBackground (s) and experience (s) of the entrepreneur (s) who are starting

the business

• Importance of a BPoProvides guidance for entrepreneurs in planningoHelps to secure financeoHelps to communicate ideas to bankers, VCs, angels, consultants,

potential team members etcoTool to manage the business


Elements of a BP

• History and background

• Goals and objectives

• Products / ServicesoCompetitionoGrowth potentialoEconomic / technology trends

• Form of ownership

• Staff and management

• Marketing

• Financial statements (current / projected)


Preparing a BP – Introductory elements

• Cover letter

• Cover sheet

• Executive summary

• Main body

• Appendix


Who prepares a BP?

•Expected to be theentrepreneur.

•Consultation maybe provided bylawyers,accountants,consultants, etc

Preparing a BP –A typical BP format


What?Product

NeedWhere?Location

Who?Ownership

How much?Cost

Funding Pattern

AssistanceSummary

• Current domestic and international industrial scenario• Rationale for project selection

Project

Introduction

Promoter(s)• Educational qualifications, Work experience, domain experience• (If state is one of the promoters) Experience state has in projects

of this type

•Description of the project• Installed, and operating capacity•Unique proposition, and positioning• Legal requirements / stipulation• Required clearances

Plant & Machinery

Location

Land & Building

• Location• Criteria for selection•Alternatives examined• Locational advantages

•Area• Constructed area• Type of construction• Cost

• Capacity• Equipment balancing• Suppliers• Cost•Alternatives available• Criteria for choosing



Project

Introduction

Promoter(s)

Plant & Machinery

Land & BuildingSummary

Location

Production Process

Assets

Production Programme

•Nature of assets• Itemised description along with source and

cost of procurement

•Description of production process• Process flow chart•Details of technology• Indigenous technology, bought or imported• Technical know-how• Evaluation of alternatives• Potential technological disruption• Various process parameters• Time required to produce one unit• Production schedule for foreseeable time• Input output ratio•Quality standards / benchmarks to be

followed



Summary

• List of raw materials needed• Per unit, quantity required• Requirement schedule per output•Quantity specs• Source of procurement• Cost of raw materials per schedule•Available supply• Required tie ups•Alternate sources•Any evaluation done

Plant & Machinery

Land & Building

Location

Production Process

Assets

Production ProgrammeProject

Introduction

Promoter(s)

Manpower

Utilities

• Requirements of power, water etc•Quality, value per schedule• Source of utilities• Specific arrangements for alternate power

• Schedule of requirements, cost & type of manpower for next 10 years• Requirement of administrative,

managerial staff•Assumed availability• Training scheme for non-available

Raw Materials



Plant & Machinery

Land & Building

LocationProduction

Process

Assets


Project

Introduction

Promoter(s)

Manpower

Utilities

Raw Materials

Funds Req-

ments

Working Capital

Req-ments

Cash FlowStatements

Cost of Production.Profitability

•What stock level of raw materials?• Stock level of work in progress, and finished goods• Inventory maintenance cost• Credit line extended to customers• Calculation of working capital and source of the same•Details, in case forex is required• Credit line extended by suppliers

• Cost of the projects including cost of land, building, machineries, other assets, technical know-how fees, pre-operative expenses, contingencies and margin money

• Funding pattern for cost of setting up from different financial institutions to cover CAPEX• Contribution from promoters•Other sources of funds



Plant & Machinery

Land & Building

LocationProduction

Process

Assets


Project

Introduction

Promoter(s)

Manpower

Utilities

Raw Materials

Funds Req-

ments

Working Capital

Req-ments

Cash FlowStatements

Cost of Production.Profitability

Marketing: Prospective

Marketing: Current

Implem-entationSchedule

Break Even

Analyses

•Major uses of product•Any substitute product available• Similar products available• Product differentiation & strengths•Major buyers• Purchase influencers•Major purchasing factors• Competitor strengths / weaknesses• Competitor trade practices, trade channels

•Geo-spread of market•Distribution channels• Trade practices•Market entry strategy, promotions


Calculating Break Even Point

E:/VIDEO/BMA/Episode 59 How to Conduct a Breakeven Analysis.mp4

E:/VIDEO/BMA/Episode 59 How to Conduct a Breakeven Analysis.mp4

Preparing a BP – Financial plan

• The financial plan comprises of:oQuantum of fund inflowoSchedule of inflowoUsage of fundsoCash availabilityoProjected financial position


STARTUP COSTSCASHFLOW STATEMENT

INCOME STATEMENT

BALANCE SHEET

One time expenses – preliminary assets, building, computers, vehicles etc.Describes inflow and outflow of cash

proforma

Essentially, the profit & loss statementAssets = Liabilities + owners equity

More assets => +ve net worth

Preparing a BP – Marketing plan


CUSTOMER PROFILE

MARKET SEGMENTS

KNOW YOUR COMPETITION

IDENTIFY YOUR TARGET MARKET

UNDERSTAND YOUR CUSTOMER

4

3

5

2

1

MARKET RESEARCH

DEFINE PURPOSE

SELECT METHOD

COLLECT DATA

ANALYZE DATA

CONCLUDE

Preparing a BP – HR plan


NEED

Summary

RECRUIT & HIRE

PAY & MANAGE

MOTIVATE

TRAIN

EVALUATE

Preparing a BP –Technology plan

• Need for a tech plan

• Steps for technology


ASSESS BUSINESS

NEED

WRITE THE PLAN

PROCUREMENT

SOURCE

TECHCONSIDERATIO-

NSPROCURE

Preparing a BP – Social plan


SOCIAL RESPONSIBILITY

CUSTOMERS

SUPPLIERS

CREDITORS / INVESTORSCOMMUNITY

ENVIRONMENT

BUSINESS ETHICS

Preparing a BP –Common pitfalls

• Capacity – utilization estimates – unrealism

• Capacity computation – miscalculation

• Market study – neglected task

• Machinery selection – serious errors

• Technology oriented products – a shaky arrangement

• Project running & resource straining – safe limits exceeded

• Project cost – an underestimate

• Location selection – some temptations

• Selling price – unfounded optimism

• Cashflow in initial years – poor detail


Further readings / viewings

• Kiki’s delivery service – Japanese animated fantasy feature film.


Entrepreneurial Management (EM 05) Business Plan

Documents

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