IB2170 Starting a Business Lecture 7

1
IB2170 Starting a BusinessLecture 7

• Raising Money and Business Plans

2
Business Planning

• Those who do not plan their future, they will
  have no future at all

Peter Drucker
3
A Sound Business Idea will Require

• Marketing-based recognisable opportunity
• Source of competitive advantage
• Necessary technical and commercial skills

4
Analytical Framework A. PRELIMINARY EVALUATION
UNKNOWN RISK
2. IDEA
1. PEOPLE
MATCH ?
3.
FAVOURABLE ENVIRONMENT MARKET COMPETITION ENTRY
NEEDS VIABILITY
OBJECTIVES MOTIVATION SKILLS PERSONALITY
RESOURCES CIRCUMSTANCES
REASONABLE PROSPECTS
5

Analytical Framework
B. DETAILED EVALUATION
REASONABLE PROSPECTS

• OBJECTIVES
• ENVIRONMENT
• COMPETITION
• RESOURCES
  (physical, people, money)
• CONTROLS
• CASH FLOW
• FINANCIAL
• STRUCTURE
• MANAGEMENT

4. BUSINESS PLAN
MEASURED ACCEPTABLE RISK
6
Business Planning - Benefits of a Business Plan

• Systematic approach to planning - mistakes on
  paper
• A completed plan will give you greater confidence
• Will show how much funding is required
• Reduce the risk of failure
• Communicate your ideas to others, e.g. Bank
  Manager, Potential Investors
• Insight into the planning process
• Controlling and monitoring your business

7
Business Plans - Some Reasons for preparing.

• Economic - analysis of risk and rewards.
• Explore the what if
• Marketing - attract resources to business,
• e.g. finance, suppliers, staff
• Managerial - basis for evaluation of actual
  performance

8
Business Plans - Planning a Business Start-up -
Situation Characterised by

• Credibility Problems
• Shortage of Resources
• Very Limited Information in Market
• Confidence Problems

9
Business Plans - Planning a Business Start-up -
Key Issues

• Owner/managers equity
• Ability to win customers quickly
• Ability to deliver to competitive standard
• Owner/managers drive motivation

10
Business Plans - Planning an Expansion -
Situation Characterised by

• Established track record
• A resource base
• A market knowledge
• Known competitive position

11
A Business Plan as a Marketing Communication

• Who will read it?
• What are there interests?
• What outcomes do you seek?

12
A Business Plan as a Marketing Communication

• Bankers
• loan opportunity
• new account
• longer term other bank services, revenue
• minimal risk - see money back

• Venture Capitalists
• investment opportunity
• part of portfolio
• capital appreciation potential
• U.S.M. potential
• acceptable risk and reward

13
Clearing Bank - mnemonic

• Character
• Ability
• Means
• Purpose
• Amount
• Repayment
• Insurance

14
How an Investor Reads a Business Plan - Six Steps

• Determination of the characteristics of the
  company and the industry in which it operates
  many venture capitalists specialise in certain
  sectors of industry
• Determine the terms of the proposed idea
• Read the latest balance sheet
• Determine the calibre of the people involved in
  the deal
• Determine what is different about the proposed
  deal
• Give the plan a once over lightly

15
Typical Content of a Business Plan

• Summary
• Description of the business
• Market analysis
• environment
• market
• competition
• Marketing
• product service and differential advantage
• access to customer communication
  pricing/discount/credit

16
Typical Content of a Business Plan

• Manufacturing/service operations
• Management and organisation
• key staff, remuneration and organisation
• Financial information
• projected - profit and loss, cash flow, balance
  sheet and break-even analysis
• Sensitivity analysis
• Appendices
• technical and research details in support of text
  of report

17
Typical Content of a Business Plan

• Summary
• Written after the plan itself
• Gives concise overview of the plan
• Outlines the deal (if appropriate)
• Shows how much finance is required
• Describes the company and market place
• Shows scope for growth and ROI
• Highlights capability of team

18
Typical Content of a Business Plan

• Summary
• Description of the business
• Brief narrative explaining track record
• Form of incorporation
• Written in laymens language..
• Describe
• Principle products/services to be developed
  in terms of
• markets, applications, unique selling points,
  life spans.
• Current Technology.
• Other future developments i.e. need for
  replacement, barriers to entry/competitor
  activity.

19
Typical Content of a Business Plan

• Summary
• Description of the business
• Market analysis
• Environment - SWOT
• Market nature and extent, segment, targets
• Competition Direct and indirect (positioning
  map)
• Marketing
• Product/service and differential advantage.
• Access to customer communication (promotional
  plan)
• pricing/discount/credit.

20
Typical Content of a Business Plan

• Manufacturing/service operations
• Management and organisation
• key staff, remuneration and organisation
• Financial information
• projected - profit and loss, cash flow, balance
  sheet and break-even analysis
• Sensitivity analysis
• Appendices
• technical and research details in support of text
  of report

21
Typical Content of a Business Plan

• Manufacturing/service operations
• Premises
• Owned/leased
• IT
• Manufacturing capability
• Process
• QC
• Suppliers
• Contingencies
• Labour/staff
• Employment

22
Typical Content of a Business Plan

• Manufacturing/service operations
• Management and organisation
• key staff, remuneration and organisation
• Strengthsfinder and skills analysis
• Roles and responsibilities
• Ability to attract (early stage)

23
Typical Content of a Business Plan

• Manufacturing/service operations
• Management and organisation
• key staff, remuneration and organisation
• Financial information
• projected - profit and loss,
• cash flow (2 years) and seasonality and OD
  provision
• balance sheet and break-even analysis (chart)
• Ratios
• Sensitivity analysis given different scenarios
• Links ,i.e. promotional budget
• Commentary highlight key numbers and issues

24
Typical Content of a Business Plan

• Manufacturing/service operations
• Management and organisation
• key staff, remuneration and organisation
• Financial information
• projected - profit and loss, cash flow, balance
  sheet and break-even analysis
• Sensitivity analysis
• Appendices
• technical and research details in support of text
  of report

25
Typical Content of a Business Plan

• Appendices
• Technical and research details in support of text
  of report
• Appendices are not counted in word limit. So
  attach
• evidence.
• Mintel, Fame, One source, Yellow Pages,
  Questionaire design and analysis of feedback,
  Government information, commentator views,
  articles etc but extract and insert key
  summaries to support commentary and clearly
  reference.