1. Vietnam Master in Management – HCMC dec 2003 BP Techniques Business Plan The Techniques Our Case : The Red Line  Saigon Hotel Mission and Vision SWOT Analysis The Financial Plan Step by Step  Initial Balance Sheet  Year 1 Profit and Loss Balance Sheet Calculation of financial debt and interest Cash Flow Statement  Year 2  Etc.

2. Vietnam Master in Management – HCMC dec 2003 BP Techniques Hanoi Hotel : Mission and Vision What we are  A medium size high level hotel in the centre of HCMC 130 rooms Average income per night/room in 2003 : 80 US$ Mission  We want to deliver excellent service to our business (40%) and leisure (60%) customers and want them to come back What we want to become  Possibility to add 60 additional rooms Vision  We want to become immediately after the Rex the reference hotel for people who want a unique experience and not the standard (high level) service provided by international chains

3. Vietnam Master in Management – HCMC dec 2003 BP Techniques SWOT Analysis STRENGTHS Good image Excellent location (centre) Experienced management and personnel WEAKNESSES Not a member of an international chain Quite old building (we should renovate all rooms for a total capex of 3Mio US$) OPPORTUNITIES New building with 60 rooms (total capex of 4Mio US$) Become member of international network (license of 1 MioUS$) THREATS A lot of new hotels are coming on the market Competition try to hire our personnel

4. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 1 : Initial Balance Sheet last available figures for existing company opening Balance Sheet for new venture  Liabilities = only equity  Assets = only cash BPcons.xls - STEP1!A1

5. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 1bis : Simplified Balance Sheet Calculation of Working Capital  R + S - DSTop Calculation of Capital Employed  FIX + WC + CASH BPcons.xls - STEP1bis!B1

6. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 2 : Profit & Loss Year 1 based on P&L of last year Operational assumptions for year 1  Turnover  Margins (Cost of sales)  Costs of goods and services  Salaries and productivity of labor Fixed assets table  depreciation Balance Sheet of last year  calculation of interests on debt BPcons.xls - STEP2!A48

7. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 2bis : Fixed assets & depreciation based on Fixed assets at the end of last year Depreciation rules Capex of the year  Tangible  Intangible BPcons.xls - STEP2bis!A111

8. Vietnam Master in Management – HCMC dec 2003 BP Techniques based on Balance Sheet of Year 0 P&L of Year 1  EAT & DIV for EQ  Depreciation for FIX Operational assumptions  Change in Working Capital Duration of inventories Duration of collection Etc.  Capex for FIX Financial assumptions  New LT debt  Capital increase for EQ  Reimbursed LT debt Short term fin debt to balance Step 3 : Balance Sheet Year 1 BPcons.xls - STEP3!A1

9. Vietnam Master in Management – HCMC dec 2003 BP Techniques How to do to finance the company ? Cash Flow from financing activities First : use the existing cash or credit lines Second : seek additional debt provided by banks  Duration should depend on needs but … Always seek long term to reduce the risks  Limits for the bankers Future Cash flows Cover of interest ratio must be respected Cover of debt must be respected Finally : seek new capital provided by shareholders  Is it an interesting investment for them ?

10. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 4 : Cash flow statement Year 1 based on Cash Flow from operations  P&L of the year EAT Depreciation  Operational assumptions Changes in components of WC CF from investing activities  Fixed assets assumptions Capital expenditures Assets sales CF from financing activities  Financial assumptions New and reimbursment LT Calculation short term debt Sanity check : the cash BPcons.xls - STEP4!A173

11. Vietnam Master in Management – HCMC dec 2003 BP Techniques Step 5 : Profit & Loss Year 2 based on P&L of Year 1 Operational assumptions for Year 2  Turnover  Margins (Cost of sales)  Costs of goods and services  Salaries and productivity of labor Fixed assets table  depreciation Balance Sheet of Year 1 & 2  calculation of interests on debt BPcons.xls - STEP5!A48

12. Vietnam Master in Management – HCMC dec 2003 BP Techniques Iterative Process Step 5 :  P&L for year 2 Step 6 :  Balance Sheet for year 2 Step 7 :  Cash flow statement for year 2 Step 8  P&L for year 3 Steps 9  Balance Sheet for year 3 Step 10 ……

13. Vietnam Master in Management – HCMC dec 2003 BP Techniques How to build the Financial Plan BPcons.xls - STEPfoll!A1 BPcons.xls - STEPfoll!A48 BPcons.xls - STEPfoll!A160

14. Vietnam Master in Management – HCMC dec 2003 BP Techniques Sensibility studies We can see immediately all the consequences of changing one assumption  occupancy rate or load factor  unit price  additional capital expenditures more rooms, more planes, more shops fixed and variable costs  interest rate  exchange rate  etc. BPcons.xls - SENSIB!A1