How to Prepare Business Plan

Description
what are the things which needs to be kept in mind while preparing business plan.

Some Thoughts on Business Plans

Is a good business plan a predictor of likely success?

• Sahlman:

No!

• Why bother then?
Introduction

• The process of making a business plan is valuable • To raise money
"In preparing for battle I have always found that plans are useless, but planning is indispensable." -Dwight Eisenhower “Those who fail to plan, plan to fail.” -George Hewell

“Dynamic Fit Management” framework

People & Resources

The framework

Opportunity

Context

Deal

Anticipation What can go wrong/right?

Response Risk/Reward Management

Arthur Rock: “I invest in people, not ideas”

• People ?!? • The founders : the cornerstone of every venture
People

• To know and to be known • The investors • All in all : the people engaged in a venture are to be taken care of in priority

What is the nature of opportunity?

• Market

• Growth ?

• Attractive industry ?
• Product / Service
Opportunity

• Success in a closely related business • Geographic expansion • Simply give ammunition • Creation of a future need

• People
• Good management & Commercialization skills • Addition of these factors

How will the company make money out of it?

• Creation of value • Calculation of revenues – costs

• Investments required and its conditions
• Protection of the value
Opportunity

• Retain customers instead of finding new ones • Arbitrage business • Take advantage of pricing disparity • Arbitrage opportunity is a potentially profitable way to enter a business

What contextual factors will affect the venture?

• Entrepreneurs should be aware of what may affect opportunities:
• Macroeconomic environment • Tax policy, rules and regulations

• socio- political
• Why is it so important?
External context

• Exogenous to the venture, but has a direct impact on the business • Can create or kill opportunity: • A new economic situation • New Technology, new factor prices, new rules

Thus a Business Plan should:

• Show that the entrepreneurial team is aware of the context:
• The context is a support to their opportunity • The negative aspects of the context are identified and dealt with • Show that the entrepreneurial team is aware of a high probability of changes in the context: • How will changes affect the business? • Is the project able to evolve? • Does the deal anticipate changes? (preservation, exposure management)???

External context

Risk management

• High uncertainty, difficult to predict future • Risk is unavoidable

• Increase ratio of rewards to risks
• Proof options for decision for different scenarios
The deal

• Ensure flexibility, different ways for future cash flows • Use instruments like insurances, hedging

Finance and due diligence



Specific numbers almost certain to be wrong • “we???conservatively???project...” • Consider key drivers for success
The deal

• Determinate the break even point, and point for positive cash flow • Use sensitivity analysis • Investors will ask references (customers, partners, suppliers...)

Financial Attractiveness Strategy (source, cost, availability, adequacy)

Technical Attractiveness Strategy (Existing/new technology and products/services)

Market opportunity

Marketing Attractiveness Strategy (size, Entry, Sustenance)

Entrepreneurial Capability Strategy (Attitude, Skills, Knowledge pool/network – individual/group)

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Impress with CLARITY Convince with OBJECTIVITY Create INTEREST SIMPLE and understandable by technical layman Written in a CONSISTENT style REALISTIC assumptions

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Preparing a detailed business plan helps
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Clarify the thoughts/ ideas Synthesize a successful plan of action Helps not to miss out anything Provides a road map for achieving the goal Helps in identifying gaps in resources Helps in phasing/ scheduling implementation Put down a set of assumptions that can be revisited Helps to understand the risk profile Communicates effectively and evoke interest in investors

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Discuss a particular market opportunity. Examine the markets that you will compete in, and explain who your customers will be. Describe the products or services that your company will provide. Your competition, and how you will defend against it. The operation that you will put in place in your company. The management team that will implement the plan. The size and profitability of your company.

1. 2. 3. 4. 5. 6. 7. 8. 9.

Executive summary Product or service Management team Market and competition Marketing and sales Business system and organisation Operations and implementation schedule Opportunities and risks Financial planning and financing

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The written version of the “60 second pitch.” Many people who read your plan, will only read your Executive Summary... ...and then they may read your financials. NOT an introduction, but a short version of the whole plan.

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Should contain the most important aspects

? Value to the customer, market opportunity and growth prospects ? Innovativeness, uniqueness of the offering ? Management expertise/ competence ? Financing requirements and Profitability ? Readiness to launch the project ? Risk analysis and mitigation measures

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repare a realistic three-to-five year plan to inspire credibility
? ? ? ? ? ? ? ? Identify major milestones Plan for aggregating resources Ramp up plan (scale and scope) Human resources planning Investment scheduling Strategic partnerships Market launch, sales campaigns Prepare a Gantt chart for tracking the progress



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