Вusiness plan

Business Economics Lecture #3 BUSINESS PLAN April 14, 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I N PREVIOUS LECTURES , WE EXPLAINED ECONOMIC UNDERPINNINGS OF BUSINESS ▶ We talked about the supply and demand model, showing impact of market changes on equilibrium price. ▶ We talked about theory of firm, explaining cost structure and its derivation. ▶ We talked about various market regimes, from perfect competition to oligopoly. ▶ We discussed how firms strategically interact with each other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T ODAY, WE WILL DEFINE WHAT A BUSINESS PLAN IS AND HOW WE SHOULD CREATE ONE ▶ A business plan is an important document for any business and it can be written for a variety of reasons. ▶ Internally, it can help owners and managers crystallize their ideas, focus their efforts and monitor performance against established objectives. ▶ Externally, the business plan can act as a medium for attracting finance for start-ups or expansion. ▶ There are several ways how to create a successful business plan, but all of them follow a similar logic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ Cover page and executive summary ▶ Company and product presentation ▶ Market description ▶ Operational and financial plan ▶ Risk factors and their mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T HE BUSINESS PLAN SHOULD START WITH A COVER PAGE AND TABLE OF CONTENT ▶ On the cover page, we should find the following information: ▶ name of the company address url address ▶ telephone/email ▶ ▶ ▶ In a real business plan, you may also introduce on the cover page a confidentiality notice, number of copies, etc. ▶ The table of contents is advisable in a real business plan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T HE FIRST SECTION OF YOUR BUSINESS PLAN SHOULD BE THE EXECUTIVE SUMMARY ▶ An executive summary is ▶ NOT an introduction ▶ NOT a preface NOT a random collection of highlights ▶ ▶ An executive summary is the business plan in miniature. ▶ The executive summary must be logical, clear, interesting and exciting. ▶ If it gets the readers attention, the rest gets read. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T HE FIRST SECTION OF YOUR BUSINESS PLAN SHOULD BE THE EXECUTIVE SUMMARY ▶ The executive summary tells ▶ who you are, ▶ what your strategy/vision is, what you are doing and/or propose to do, what is the market, ▶ ▶ ▶ ▶ how many $$$$ do you need and what will you do with them, ▶ what your sustainable competitive advantage is. When the reader is finished, he or she should be able to tell someone what you are up to. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T HE FIRST SECTION OF YOUR BUSINESS PLAN SHOULD BE THE E XECUTIVE S UMMARY ▶ The executive summary should contain: ▶ description of the business concept and the business, ▶ the opportunity and strategy, ▶ the target market and projections, ▶ the competitive advantages, ▶ the economics, profitability and harvest potential, ▶ the team. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ Cover page and executive summary ▶ Company and product presentation ▶ Market description ▶ Operational and financial plan ▶ Risk factors and their mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AT THE BEGINNING , YOU SHOULD DESCRIBE YOUR CURRENT AND TARGETED POSITION ▶ You usually start the business plan by introducing yourself: ▶ what is the ownership and legal structure of your (future) company; ▶ what is the management structure; how many employees are there; what is the location; ▶ ▶ ▶ what is the past performance of your company (if appropriate); ▶ what are your current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . AT THE BEGINNING , YOU SHOULD DESCRIBE YOUR CURRENT AND TARGETED POSITION ▶ You also specify what your objectives are. ▶ You objectives are clearly mainly economic (sustainable profit), but you may also specify: ▶ turnover target, ▶ market share target, non-financial targets (prestige, innovation, etc.). ▶ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU SHOULD PRESENT IN DETAIL THE PRODUCTS OR SERVICES THAT YOU WILL OFFER ▶ You should provide a detailed description of products or services that you will offer, which should be clear even for people who are not familiar with your business. ▶ You should describe product’s unique qualities and explain how it is different from what your competitors provide. ▶ You can mention any property rights (if applicable) or regulatory issues (if appropriate). ▶ You should describe the most important points of the manufacturing process and necessary facilities. ▶ You should describe how you will launch the production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ Cover page and executive summary ▶ Company and product presentation ▶ Market description ▶ Operational and financial plan ▶ Risk factors and their mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU HAVE TO DESCRIBE YOUR CLIENTS , YOUR SALES PLAN AND YOUR MARKETING STRATEGY ▶ You have to explain who your customers are. ▶ You should segment the market: group consumers by some criteria. ▶ You should target the market: chose which group(s) to sell to. ▶ ▶ You should evaluate what is the absolute size of your market - it has to be large enough too be worthwhile. You should also specify what your pricing policy will be. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU HAVE TO DESCRIBE YOUR CLIENTS , YOUR SALES PLAN AND YOUR MARKETING STRATEGY ▶ You should describe how you can approach the market and what your sales pipelines will be. ▶ You should position the market: find the optimal marketing strategy for the segment you are targeting. ▶ Determine what consumers currently think about your product (with respect to competing products). ▶ Decide what you want consumers to think about your product. Figure out how to make them think what you want them to think. ▶ ▶ You should not forget to mention possible trends and developments expected in the market in the future. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU HAVE TO DESCRIBE YOUR CLIENTS , YOUR SALES PLAN AND YOUR MARKETING STRATEGY ▶ You should not forget to mention possible trends and developments expected in the market in the future. ▶ How to evaluate these trends: ▶ ▶ ▶ ▶ ▶ statistical demand analysis, extrapolation, surveys, test markets. Do not forget that company can grow by expanding market size or stealing market share. ▶ Size of the potential market depends on how broadly one thinks about the product (are coffee and tea substitutes?) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU HAVE TO DESCRIBE THE LEVEL AND CHARACTER OF COMPETITION YOU FACE IN THE MARKET ▶ You have to define who your competitors are. ▶ You have to determine what their strengths and weaknesses are - in terms of quality of products and services and in terms of prices. ▶ You should try to foresee what the response of the competition will be when you enter the market. ▶ You should evaluate the relative importance of each competitor. ▶ You have to stress how your product is superior. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ Cover page and executive summary ▶ Company and product presentation ▶ Market description ▶ Operational and financial plan ▶ Risk factors and their mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU HAVE TO PROPOSE AN OPERATIONAL PLAN AND TIMING OF YOUR PROJECT ▶ You have to describe in detail how you are going to proceed in launching the plan. ▶ You have to set up a list of task for the short run and the long run, in which you show the expected deadlines for individual steps. ▶ In the operational plan, include not only the launching of the project, but also some projection for the beginning period in which your business is supposed to stabilize - it should be clear what is the time horizon necessary for your business to become profitable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T HE CORE OF YOUR BUSINESS PLAN SHOULD BE A FINANCIAL PLAN ▶ You have to state your initial simplified balance sheet (that will make clear what you need to open your business). ▶ Based on this, you will summarize your funding requirements and you will indicate where the funds should be coming from (individual investors? bank loans?). ▶ You should also provide detailed projections for your income statements, showing what costs and revenues you expect to have. ▶ The projection can be different for initial phases of your project and for later phases. ▶ You have to show that your project has the potential to generate stable profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ▶ Cover page and executive summary ▶ Company and product presentation ▶ Market description ▶ Operational and financial plan ▶ Risk factors and their mitigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Y OU SHOULD FINISH YOUR BUSINESS PLAN BY A SWOT ANALYSIS ▶ The SWOT analysis helps you to summarize your project. ▶ It helps you to analyze your Strengths and Weaknesses, and to identify both the Opportunities open to you and the Threats you face. ▶ Strengths and weaknesses are internal to the company. You can change them over time but not without some work. ▶ Opportunities and threats are external - they are out there in the market, happening whether you like it or not. You cant change them. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .... .... .... . . . . . I N THIS LECTURE , WE EXPLAINED HOW A BUSINESS PLAN SHOULD BE WRITTEN ▶ The overall appearance of your plan should be professional. ▶ The plan is a selling document - don’t lose sight of the vision. ▶ The excitement must come through. ▶ However, the plan must be defensible. ▶ How NOT to do it: https://www.youtube.com/watch?v=aFdBcYN3sNw https://www.youtube.com/watch?v=st0V9XbOtdY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . T O BE CONTINUED . . . :) ▶ ▶ Road plan: ▶ The plan (around 10 pages long document) has to be submitted by email by May 31. ▶ Presentation dates: May 5, May 12, May 19 (for signing up, check your email). Next week, we will start to talk about financial statements of a company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .