Developing a Winning Business Plan

Elikem Nutifafa Kuenyehia Legal & Management Consultant Adjunct Lecturer, GIMPA

Preliminaries & Objectives

• Who?

• What?

• Why?

• Format • Timing

Objectives of this session

• To answer the question ‘why bother with a business plan?’ • To arm you with the ability to : – Write a business plan – Critique a business plan • To demonstrate that anyone can write a business plan • To facilitate discussion on the elements of a business plan • To answer questions you may have about business plans

Agenda

• Recommended Business Plan Approach/Philosophy.

• Role of business plans.

• Elements of business plans.

• Wrap up • Questions & answers

Recommended Business Plan Approach/Philosophy

• Must tell a STORY about: – The enterprise – The management team – The product or service – Financing needs – Strategies – Financial & non financial goals • Must be balanced – Must highlight both positive and negative

Recommended Business Plan Approach/Philosophy cont’d

• Must be a forward looking document – Time frame of about three years • Be clear, concise and well organised – Easy to read and grasp key points – Be simple to understand • Provide realistic data to substantiate claims • Relentless attention to detail

Recommended Business Plan Approach/Philosophy cont’d

• One size does not fit all: – Detail of info presented will vary depending on: • Whether plan to be used to solicit funds • Whether existing business or start up • Who is writing • Prepare it yourself – Its your venture – Get help if necessary – If you use someone else, be actively involved

Role of a business plan

• Serve as a roadmap by charting future course for enterprise • Translates vague notion of wanting to start a business into quantifiable targets and a plan for reaching those targets.

• Provide a yardstick for measuring actual performance. • Make him/her proactive by revealing potential problems.

Role of Business Plan cont’d

• Force in-depth understanding of industry and competition.

• Force him/her to consider upfront profitability of venture.

• Serve as a medium to attract both lenders and investors and • Reduce the risk and uncertainty associated with launching a business venture • Enhance chance of success

Elements of a business Plan

• executive summary • mission and/or vision statement • business entity • product or service • management team • market and competition • marketing and sales • risks and reward • financial planning and financing

Executive Summary

• Must provide overview of the entire business venture.

• Should be capable of being read alone.

• Must grab attention.

• Should be able to read in five minutes • Should clearly communicate: – What business venture is – What distinguishes business from competition

Executive Summary cont’d

• Should clearly communicate: – Consumer pain (existing problem or opportunity gap).

– How relevant business will remove this pain (solve customer problem).

– Basic business model • Should briefly describe: – Target market – Management expertise – Competitive advantage – Financing requirement • Cedi amounts required • How funds will be utilised • Possible return on investment • Should be written after entire plan written

Executive Summary Must Answer Following:

• What is the business idea? In what way is it unique?

• Who are the target customers?

• What is the value for those customers?

• What opportunities and risks does one face?

• How much investment is necessary?

• What are the sales, cost and profit situations?

• What is the competitive environment like?

Mission vs Vision Statement

The mission statement:

– defines the company purpose and – defines the direction in which it will move

• The vision statement:

– Sets a quantified target for the enterprise to achieve within a time frame

The Business Entity Section

• Provides information on the background of the company or relevant entity behind the business venture. Details such as: – How entity organised – Process involved in providing product or service – How resources utilised

The Business Entity Section cont’d

• Must answer the following questions: – What form of venture?

– When entity established and by whom?

– Details of shareholding/partnership structure.

• What skills and experience do they bring?

• What is their involvement in the venture?

– Start up or going concern?

– Total No. of employees – Location of entity – Plans to outsource etc

Product Or Service

‘if you do not know what the customer value is, the whole thing is a waste of time’

Essential premise of a business plan should be to address a current customer pain i.e. it should recognise a customer need and seek to address that need.

Must seek to address the need in a way that is better than the competition

Product Or Service

• Must make it crystal clear: – The detailed function the product or service fulfils – The value the customer will gain from the product or service – How the product/service differs from the competition (both direct and indirect).

• If relevant include details about product development, nature of technology etc – But in plain simple language

Management Team

• Most important section of the plan after executive summary.

• Success of venture will typically depend on ability of management team to execute.

• Must select competent team to execute – Even sole proprietors will depend on ‘wider team’ – Must be balanced (technical, managerial, business)

Management Team cont’d

• In choosing management team, need: – Common vision – Complimentary skills, attributes and strengths – Lean Team – Resilience – Ability to get along

Management Team cont’d

Section must answer following Qs: – Who are key members of management and what are their roles?

– What distinguishes them (education, professional success, standing etc)?

– What transferable experiences/abilities do they possess?

– What experiences/abilities are lacking?

• How will that gap be closed?

– How high is motivation of each person?

Market & Competition

• Must demonstrate that you have a thorough understanding of: – Needs of the customer.

– How competitors are meeting those needs.

• Requires understanding of: – Industry and industry dynamics.

– Market growth and drivers of that growth.

• Use external Data to back your claims

Market & Competition (cont’d)

• Amalgam of data sources: – Annual Budget – Newspapers – Statistics published by ISSER, Statistical service – Census Data – Internet – Primary research • Use reliable data sources and do a sense check

Market & Competition cont’d

• Should include info on: – Customer segmentation.

– Strengths and weaknesses of competitive set.

– Your competitive advantage vis-à-vis competitive set.

– Your positioning vis-à-vis competitive set

Market & Competition Cont’d

• Should answer questions such as: – How is the industry developing?

– What are the key success factors in the industry?

– What market volumes (value and amount) do you expect?

– What would influence growth?

– Who are target customer groups?

– What are the key buying factors influencing customers?

– Who are the major competitors?

Marketing & Sales

• Includes description of: – Target customers.

– Pricing.

– Distribution.

– Promotion & Advertising strategies.

– Sales tactics.

• Project sales based on above & reasonable assumptions.

Marketing & Sales cont’d

• Should clearly & concisely articulate: – Core target customer group.

• Gatekeepers and ultimate customers.

– Size of core group.

• Include brief but rich profile of core customer to justify marketing and sales decisions made.

Marketing & Sales

• Must answer questions such as: – Who are the target customers? What do they ‘look’ like?

– Size of pie? Size to be captured by you?

– What is the sales price and its justification?

– How will you draw attention of target to product/service?

– What advertising & promotional devices?

Risk & Reward

• Highlight risk and state the measures to counter these risks – Important because business plan is about

anticipated

events given certain

assumptions

– Risk section therefore address issue of what happens if key assumptions changes • Address the rewards that investors can expect from the company’s success • State how investors will harvest their investment • And include the exit strategy for potential investors

Financial Planning & Financing

This section should:

• Indicate the potential of the business venture • Include exhibits of forecasted financial statements • State the amount and nature of the money being sought • Describe the uses that will be made of the capital raised • State how additional funding will be obtained

Financial Planning & Financing cont’d

• Will include: – Actual income statements for existing business.

– Pro forma income statements for first three years. Based on assumptions.

– Pro forma balance sheet detailed anticipated assets and liabilities.

– Pro forma cash flow analysis projecting anticipated monthly cash flows.

Conclusions

• A winning business plan: – Tells a

story

about how it will ease customer pain

differently

from the competition.

– Acts as a road map and proactive problem solving document.

– Is realistic and grounded in data.

– Is balanced (risks, strengths, weaknesses).

– Is written by the entrepreneur (or he should be actively involved in writing it).

– Depends on the people behind it to bring it to life.

The End

Questions?

Follow Up Questions

May email follow up questions to: [email protected]