Business Plan Dušan Milutinović, M.B.A.

Why make a business plan?  What is a business plan?  Establishment/development needs  Loan  Investment  Reporting to internal/external stakeholders  Discipline of management action and reasoning

What are stakeholders and investors looking for?  Form vs. content  Visualization of all functions  Management Team  Good problem prediction  Explain assumptions and predictions  Explain critical factors of success/failure  Explain major landmarks  Provide proof of top management/entrepreneur commitment

Procedures and Methodology  Detailed expert and business analysis  Answer all questions  Top management interviews  Knowledge of micro/macroeconomic environment and economic laws that apply – theory and practice  Qualifications of the presenter and analyst  Consulting with experts  Review and update

Formats Used  europe EBRD World Bank  USA EY model Northpoint model

Length of the Business Plan  Depends on the stage of development of the firm Start-up Early stage Late stage  Layers of business plan writing and presenting

Structure  Executive Summary  The Firm  Market Analysis  Competitive Analysis and Barriers to Entry  Products and Services  Sales and Marketing  Operations  Finances  Appendix

Executive Summary  Length – 1-2 pages  Content – the essence  A negative decision is made quickly  Method of preparation  Summary financial data Requested ammount Prospects

About the firm  Vision and Mission  Strategy and Value Propositions  Legal forms – why, and breakdown of ownership.  Technology and alliances  Facilities and equipment  Risks – in general

Market Analysis  Market description – Critical needs  Market research Focus groups Studies etc.  The buyer Buying criteria – Who is the decision maker, influencer… Buying cycle  Market size Today In one year In five years  Market segmentation - criteria Geographical Demographical Psychographical etc.

Analysis of the Competition and Barriers to Entry  Potential and existing competition  Total market size and growth  Analysis of major competitors  Analysis of consumer perception based on focus group – perceptual map  Comparative advantage  SWOT analysis

Products and Services  Product lines  R&D, future plans  Positioning  Product life cycle  Packaging  The product/service delivery cycle  Post sales services and costs

Sales and Marketing  Sales characteristics and methods (internal or external) Training of sales reps Sales reps motivation  Sales activities Prospect identification Prioritization of prospects Measurement of sales efforts by period (telephone calls etc.) and per product/services sold Average sale size Customer retainment rate  Up-to-date sales successes and market penetration  Graphical depiction of market share

Marketing Process and Communications  Marketing Plan (4 P-s)  Distribution Channel Strategy  Results of market tests  Distribution channels...internet  Pricing Strategy (EDLP, Penetration, Value, Mark-up, lock-in)  Growth strategy

Marketing Communications  Promotion, advertising  Printed materials  Fairs  Media and PR  Conferences, Seminars  Internet  Professional and industry publications  Direct mail and coverpage  Telemarketing

Operations Analysis  Characteristics of the production process - subcontractors  Production process description  Necessary facilities and equipment?  Raw materials?  Cost of production?  Future capital investment needs?  Production process and inventory management?  Warehousing?  Location  Necessary time for investment to be operational  HR needs

Financial Analysis  Assumptions, Assumptions, Assumptions!!!  Necessary reports and projections: Balance sheet, income statement, cash flow, NPV, ratios  Current and prospective ownership structure  Exit strategies ...

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