Business Planning How to create a Business Plan by Mag. Maria Peer

2 Business Planning: Definition A business plan is a document designed to provide sufficient information about a new or existing business to convince financial backers to invest in the business

Mag. Maria Peer 3 Purposes of a business plan Clarify the idea To gain finance: professional providers of venture capital will demand evidence of careful planning To monitor progress over time: the business plan can be used as a working document for the owner (objectives, forecasts, monitoring process)

Mag. Maria Peer 4 What is in a business plan? Introduction Personal information Objectives Marketing plan Production plan Financial information Calculating break-even revenue Collateral

Mag. Maria Peer 5 Introduction Brief summary of what the business will do Where it will be done Why the entrepreneur has decided to set up this business Little detail but designed to give an overall impression of the business idea

Mag. Maria Peer 6 Personal information Curriculum vitae (CV) of each owner focused on previous experience, line of business, management generally Personal details of key staff within the business Statement of the owner‘s personal objectives, how committed they are and what they hope to gain from the enterprise

Mag. Maria Peer 7 Objectives Quantifiable targets It should be possible to measure whether or not the objective has been achieved within the timescale allowed for that target Split into short, medium and longterm Diversification into other markets, products or regions

Mag. Maria Peer 8 Marketing plan What will make this product or service stand out? USP How will this USP be communicated to the potential costumer? How well do pricing and promotion fit in this strategy Is enough money budgeted to communicate the USP carefully

Mag. Maria Peer 9 Marketing plan: place How, where and at what cost is distribution to be achieved? E.g. Fair Trade products – how will Billa and Spar be persuaded to stock them? The marketing plan may be structured around the 4 Ps A small firm‘s marketing strategy is very different from that of a large firm

Mag. Maria Peer 10 Marketing plan: pricing Will be based on breaking even Cost based methods – mark-up pricing will be used Small businesses must also consider the marketing within which they are operating (likely to be price takers) Finding the right balance between covering costs and undercutting competitors in attempt to gain market share Penetration pricing in the first few months of trading – to build up a customer base

Mag. Maria Peer 11 Marketing plan: sales forecast Most important feature – key question Key financial issue Revenue must be high enough to cover the costs

Mag. Maria Peer 12 Marketing plan: answer the questions What is the market size and potential? Is the market growing or getting smaller? Who are your customers? What are their needs? Who are the major competitors? What are their prices, strengths and weaknesses? What is your expected turnover in the first year? Why do you think you can achieve your expected turnover? Has your product or service been market tested? What marketing and sales methods will you use? What are the costs involved?

Mag. Maria Peer 13 Production plan Section of the business plan which explains how the business will create the goods or services it intends to selle To be considered: staffing levels, knowledge and qualification required and stocks of certain items (shop) Details of how the business will run – the day-to-day practical details.

Mag. Maria Peer 14 Details required in a production plan How customers are to be served: personally or with automated systems or the Internet The staff levels needed (and their training) The equipment required for information and communications technology, the target stock levels The planned customer service times

Mag. Maria Peer 15 Financial information Projected balance sheet for the end of the first year‘s trading A projected profit and loss account for the first year and a cash flow forecast for the first six to twelve months Break-even analysis (number of units the business needs to sell or the sales turnover needed to cover the overheads Statement of financial requirements – showing a prospective lender how much money is required and how much money will be spent

Mag. Maria Peer 16 Marketing plan: collateral This means security – securing the loans against assets which can be sold to repay any debts If the business has no assets to use as collateral, the entrepreneur has to offer personal assets as security, such as his or her house. In which case business failure may be a financial desaster for the family concerned

Mag. Maria Peer 17 Key terms Collateral – the asset needed as security on a bank loan Entrepreneur – a person who is prepared to take business opportunities,often in the context of starting up a new business Venture capital – risk capital put into a small to medium-sized business, usually as a mix of eqity and loan capital