Transcript Who Needs Business Plan - World Zarathushti Chamber of

Myths
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90% Small startup fall into a financial crises and fail in the first 3
years
In S’pore when I was involved with EDB for small and medium size (SME)
business survey—all, repeat all had closed in the first 3 years of startup
because of owners ill-health or some personal reason like a family issue.
Not financial crises.
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A great idea combined with a strong surge of wanting to start a
company are the key success factors
Passion is great. Love for your business is good. But you must have
customers to start with. This is what will make you survive.
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Jobs are more secured than your business.
The answer is perhaps a shade more than your own business. There are
other aspects for consideration!
Being shunted to a lousy role which you don’t enjoy. Dragging yourself each
morning to go to work and to face a boss you dislike to such an extent that
you wish he gets a heart attack and stays home for a year.
Just Do It
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Biggest problem for a budding entrepreneur is
Negative Advise. By and large the Parsis of my
generation were risk averse. Happy to do a bank
job or steady secured job So your elders who
come from my generation type are the wrong
people to go to for any inspiration. They can only
get worried that you wish to risk so much.
 Most entrepreneurs I know do it because they
want to, not just to get rich.
Planning Your Business
Who Needs Business Plan
About the only person who doesn't need a
business plan is one who's not going into
business.
You don't need a plan to start a hobby or
to moonlight from your regular job.
Who?
 Startups.
The classic business plan writer
is an entrepreneur seeking funds to help
start a new venture. Many great
companies had their starts on paper, in the
form of a plan that was used to convince
investors to put up the capital necessary to
get them going
Old Companies too !
Business owners find plans useful at all stages
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There's been a significant market change
Your firm develops a new product,
technology, service or skill
Your company has crossed a threshold
You have had a change in management
Raising money or persuading new
partner to join the firm
Types of Business Plan
 B.P.
depends on type of business
 Details of content
 Emphasis on different aspects of business
 Mini
Version--to test a business concept
 Working Plan-- a tool to be used to
operate your business
A Mini Plan
 Business
concept
 Financing needs
 Marketing plan
 Financial statements--- cash flow, income
projection and balance sheet
Business Desciption
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Sole proprietorship, Partnership or Listed
Type of business-wholesale, retail, food
service, manufacturing or service-oriented
Describe the products or services
Present industry outlook
Future industry possibilities
Whom will sell to, how the product will be
distributed
Success Factors
Explain factors you think will make it
successful, like the following: it's a wellorganized business, it will have state-ofthe-art equipment, its location is
exceptional, the market is ready for it, and
it's a dynamite product at a fair price.
Market Strategies
Market Strategies results from a meticulous
market analyses. This helps to define
target market
 establish target pricing
 sales and promotional strategies
 growth potential within the industry
 develop your estimates for future of
business
Market Analyses
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total available market
size, structure, growth prospects, trends
and sales potential
Market Share
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Projecting the market share is a subjective
estimate. It's based on not only an analysis of
the market but on highly targeted distribution,
pricing and promotional strategies
 In order to project market share over 3 years,
consider two factors:
 1. Industry growth which will increase the total
number of users.
 2. Conversion of users from the total feasible
market
Positioning Your Business
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Positioning strategy is affected by the
motivations and requirements of target
customers as well as actions of competitors.
 You need to answer several strategic questions :
 How are your competitors positioning
themselves?
 What specific attributes does your product have
that your competitors' don't?
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What customer needs does your product fulfill?
Pricing-- price to sell
 Demand
pricing
 Competitive pricing
 Cost-plus pricing
 Value pricing
Distribution
Depending upon the industry and the size
of the market
 Direct sales
 OEM (original equipment manufacturer)
sales
 Wholesale distributors
 Retail distributors
 Direct mail
Promotion/Communication Plan
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Advertising
Packaging
Public relations
Sales promotion
Identify and Analyze Your Competition
Competitive Analyses
Determine strengths and weaknesses of
the competitors
 Think of strategies that will provide you
with a distinct advantage,
 What barriers can be developed in order
to prevent more entries into your market
 What weaknesses that can be exploited
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Competitive Edge
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What do you need to provide enduring
competitive advantage.
 Define the elements that will set your product or
service apart from your competitors
(You will be better because you will supply full
line of products; You're going to provide unique
service after the sale; You'll give a money-back
guarantee )
Design and Development Plan
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Product development
Costs that should be included in the development budget include:
Material. All raw materials used in the development of the product.
Direct labor. All labor costs associated with the development of the
product.
Overhead.
G&A costs. The salaries of executive and administrative personnel
Professional services. Those costs associated with the consultation
of outside experts such as accountants, lawyers, and business
consultants.
Capital equipment.
Risk Mitigation
Assessing Risks
Risks involved should be assessed and a
plan developed to address (mitigate) each
one.
Financing Start up
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are two areas that need to be
accounted for when planning a start up
 the organization structure
 the start up expense and capital
requirements
Overhead expenses
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Travel
Maintenance and repair
Equipment leases
Rent
Advertising & promotion
Utilities
Packaging & shipping
Payroll taxes and benefits
Uncollectible receivables
Professional services
Insurance
Loan payments
Depreciation
P&L
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Sales Revenue
Raw Material Cost
Gross profit margin.
Operating expenses. Includes all overhead and labor expenses
associated with the operations of the business.
Total expenses. The sum of all overhead and labor expenses
required to operate the business.
Net profit (PBIDT)
Depreciation.
Net profit before interest (PBIT)
Interest.
Net profit before taxes (PBT)
Taxes
Profit after taxes (PAT)
Cash Flow Statement
The cash-flow statement is one of the most critical information tools for your
business, showing how much cash will be needed to meet obligations, when
it is going to be required, and from where it will come. It shows a schedule
of the money coming into the business and expenses that need to be paid
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Total PAT + Depreciation
This amount is carried over to the next period as beginning cash
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Cumulative cash flow. The difference between current cash flow and
cash flow from the previous period.
Balance Sheet
1. Assets
2. Liabilities
3. Equity
Assets
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Fixed—machine,land building (long term)
 Current—cash, inventory, receivables
Liabilities
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Long Term—debt of over a year
 Current—loans of less than year,payable
Owners Equity—total assets less total
liabilities
Classic Problems with new business—
valley of death (3years)
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inadequate market knowledge
ineffective marketing or sales approach
inadequate knowledge of competitive pressures
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potentially faulty product performance
rapid product obsolescence
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poor timing for the start of a new business
- under capitalization
- unforeseen expenses