STRATEGIC PLANNING

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First EBN Spring University April
1999 Business and Financial Planning Principle
s-Methods-Software
DESMOND RYAN Dublin Business Innovation
Centre IDA Enterprise Centre, The Tower, Pearse
Street, Dublin 2, Ireland. Tel No 353-1-671
3111 Fax No 353-1-671 3330 E-Mail
desryan_at_dbic.ie WWW www.dbic.ie
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Presentation Objectives
Theme of today's presentations Basics of BIC
Management

• To Provide an Overview of Strategic Planning
• To Relate Strategic Planning to Business Planning
• To Relate the Business Plan to Financial
  Planning
• To Show how Software will assist BIC Executives

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The essence of a BIC
BIC Deliverables
Incubation Space
Access to Funds
Business Planning
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Business Strategy Planning

• Plans Are Nothing
• Planning is Everything
• Dwight D. Eisenhower
• BICs must help clients to plan effectively

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Why BIC Clients Need Strategic Planning?

• Truisms of planning
• Framework for planning
• Strategic v operational plans
• Mission statements
• Developing strategies
• Setting long-term objectives
• Assessing strengths weaknesses
• Determining threats opportunities
• Implementation
• The Business Plan

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Why Do Strategic Planning?

• Provides a framework for management
• Used to communicate about the company
• Serves as a monitor
• Strategic Business Plans are important BIC
  deliverables

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Strategic Business Planning Must....

• 1. Take a medium term
• view, e.g. 2 to 4 years
• 2. Be developed by
• owners/directors
• 3. Focus on matters of strategic importance

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Business Strategy Planning

• 4. Be separated from day to day issues
• 5. Be Realistic, Detached Critical

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Business Strategy Planning

• 6. Not to be viewed as another form of budgeting
• 7. Be written down
• 8. Be reviewed periodically

OUR STRATEGIC PLAN DETAILS OUR SALES AND
PROFITS FOR THE NEXT
FIVE YEARS SO THAT
EVERYBODY KNOWS HOW MUCH
THEY CAN SPEND
Here Lies the Fourth Business Plan of XYZ Ltd.
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Truisms of Planning

• BIC Clients should understand
• Planning is a means and not an end
• Planning is not a procedure
• Process is as important as the plan
• Planning must be done by the client from top down
• Think strategically and act operationally
• A plan is a businesss most important document
• The plan belongs to the client not to the BIC

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Truism of Planning

• In this world nothing is certain except death
  taxes
• Murphys first law
• If anything can go wrong, it will
• Murphys fourth law
• - if there is a possibility of several things
  going wrong, the one that will cause the most
  damage will be the one to go wrong
• If you dont know where you are going, any road
  will do

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Strategic Vs Operational Planning

• Strategic planning is
• - Visionary conceptual
• - Directional
• - Broad
• Operational planning is
• - Short-term, tactical specific
• - Action orientated
• - Focused on Implementation results

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Business Strategy Planning

• Framework For Planning

FORMULATE VISION
DEVELOP MISSION
SET OBJECTIVES
PREPARE STRATEGIES
ASSESS INTERNAL STRENGTHS WEAKNESSES
DETERMINE EXTERNAL THREATS OPPORTUNITIES
REDEFINE FUNDAMENTALS SELECT
SPECIFY GOALS
PREPARE PROGRAMMES
IMPLEMENT PROJECTS
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Mission Statements

• What Business - Industry
• - Activity
• Products and Services
• Processes and Technologies
• Customers, Clients and Users
• Markets and Segments
• Channels and Outlets

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Take Stock And Redefine

• REFORMULATE YOUR VISION
• REVIEW YOUR MISSION
• REDEFINE YOUR STRATEGIES
• REVISE YOUR OBJECTIVES

EXPLOIT OPPORTUNITIES
BUILD ON STRENGTHS
MINIMISE WEAKNESSES
AVOID THREATS
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Assessing Strengths Weaknesses

• Cut through the symptoms and identify
• internal strengths and weaknesses in the
• following key areas
• Sales/marketing/distribution
• Product features/range/competitiveness
• Manufacturing efficiency/capacity
• Financial position/resources/performance

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Assessing Strengths Weaknesses (contd)

• RD effort/direction/resources
• Management resources/expertise
• Purchasing and materials - sources/supply cost
• Systems and organisational effectiveness
• Seek to establish the outstandingly good
  features, achievements and unique qualities of
  your proposed company. Summarise and rank the
  good/bad points.

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Determining Threats Opportunities

• Identify critical threats main opportunities
• due to
• Industry Features
• Size and segmentation
• Growth pattern and maturity
• Established practices
• Emergence/contraction of niches
• International Dimension
• Changes In Market Place
• Customers
• Distribution channels

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Determining Threats and Opportunities (con
td)

• Competitors
• Identities
• Performance
• Likely plans
• Capacity to make/sell/innovate
• Market shares
• Strengths/weaknesses
• Technology
• New materials/processes
• New products/applications
• Infringement/overlapping by other sectors

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Preparing A Business Plan?

• Why Prepare a Business Plan?
• Because they are designed to-
• Help an entrepreneur clarify, focus and research
  his project usually over a 3-5 year period
• Act as a framework within which a business can
  develop and pursue medium term business
  strategies
• Serve as a basis for third party discussions with
  banks, investors, government and other agencies
• Provide benchmarks against which actual
  performance can be assessed

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What will the Plan do for BIC Clients ?

• It Acts as a Map for the Business
• It Supports Management Control
• It is a Briefing Document for Key
• Staff
• It Helps Secure Finance

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Tips When Preparing a Business Plan

• Own the Contents
• Ensure the Plan fits You
• Be Realistic
• Be Clear in Your Objectives
• Be Concise and Clear, Avoid Padding
• Well Presented, Typed and Bound
• Remember not everything goes as Planned

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The Structure of the Business Plan

• Executive Summary
• Background Description of the Business
• Management Organisation Structure
• Market Research
• Marketing and Sales Plan
• Operation Plan
• Financial Plan

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Check List
Management Have you clearly stated how the
Business will be Managed? Market Have you
clearly shown that there is a market for
your Product or Service? Operations Have
you thought through the day to day Operational
Issues to make your Business a
Success? Finance Have you clearly
demonstrated the Financial viability of
the Business?
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The Operations Plan

• Describe the Service or Process
• Include a Layout Drawing Manufacturing
• Describe Procedures for Monitoring and
• Controling Quality
• Sources of Raw material, Terms of Trade,
• possible Vulnerability
• Employment and Training
• How Competitors do it

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The Financial Plan

• Financing a Business
• Strategy and Raising Finance
• Types of Project Finance
• Approaching Sources of Finance
• Capital Financing
• Putting a Value on Equity
• Debt Financing
• Banks and Debt Financing
• Grants and Subsidies

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The Financial Plan

• Total Funding Sources of Funds
• Three years Cash Flow Forecasts
• Projected Profit and Loss Accounts
• Projected Balance Sheets
• Costing Pricing details

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Management Organization Structure

• Current Structure Organization
• Organization Charts
• Key Management Functions
• Profiles of Promoter Key Managers
• Remuneration Contracts
• External Professional Advisors

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Projections and Assumptions

• Three year Projections
• Market Demand Sales growth
• Prices Costs achieved
• Stocking Levels
• Creditor Debtor Days
• Equipment available, and Lease or Buy
• Productivity, staff plant
• Quality Levels Yields
• Research Development
• Can Buy Technology

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Financing a Business

• Key Questions
• What are you trying to do ?
• What do you estimate it will cost to do it ?
• Can you or should you finance it yourself ?
• Business Planning is the Key Activity
• Matching Plans with Probable Outcomes
• Reconciling Planned Sales and Expenditures
• Simulation of Business Process
• Evaluation of Financing Options
• Resources Required
• Cash Required
• Sources of Cash
• In-Kind Options

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Strategy and Raising Finance

• Typical Start-Up Problem
• Lack of Capital
• A Problem Well Stated !
• Objectives in Securing Needed Finance
• Money . . .
• What for exactly ?
• When is it needed ?
• Where might it come from ?
• Cost of Finance
• Interest and Borrowing Degrees of Freedom
• Dilution of Ownership, Control, and Returns
• Cost of Capital

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Types of Project Finance

• Capital
• Equity Cash vs In Kind
• Seed / Venture
• Bank Finance
• Term Loan
• Overdraft
• Commercial Mortgage
• Grants Subsidies
• State Schemes
• Enterprise Organisation Dublin
• Business Innovation Centre
• Others (e.g., First Step)
• Creditors ?

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Capital Financing

• Promoters Money
• Putting Your Money Where . . . !
• Shortage of Cash !
• Abundance of In-Kind ?
• Investors Money
• Identifying Appropriate Investors
• Negotiating Mutually-Agreeable Exchange
• Mechanisms for Offering Returns
• Equity/Preference Shares/Loans/Options
• Business Expansion Scheme (BES)
• Seed/Venture Capital
• Few Sources
• Get to Know Evaluation Criteria ?
• Dont Expect Quick Fix !

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Putting a Value on Equity

• No Hard and Fast Rules
• Important to Know . . .
• Investment to Date - Both Cash and In-Kind
• Development Investment Required
• Realistic Evaluation of Cash Needs and Scheduling
• Realistic Estimation of Profits and Returns on
  Equity
• Balancing . . .
• Resourcing the Business
• Retaining Ownership
• Retaining Control
• Realising Immediate vs Future Value
• Attracting / Retaining Critical Skills
• Developing Strategic Alliances

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Getting Over Financing Obstacles

• Be Practical and Realistic About What you Need
• Be Careful in Justifying Figures
• Be Vigorous in Validating Your Assessments
• Be Creative About Options and Sources
• Be Considerate of What Others Require of You
• Be as Persistant as You Need Be
• Be Always Conscious of What YOU Need and Want

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Effective Business and Financial Planning are
critical functions for BICsThis presentation
and other relevant information can be downloaded
at www.dbic.ie
Conclusion