Business Plans Importance and Structure

1. Business Plans Importance and Structure

2. Lesson Objectives • Define “Business Plan” • Describe why it is important to review projects • Identify the elements of a business plan • Describe the elements of a business plan

3. What is a Business Plan? Definition: “A business plan sets the method for running a specific activity over a specific time” • Defines the steps needed to be successful. • Defines the market place. • Defines how the business will be financed. • Projects the profitability of the business. • Defines how the business will be structured. • It is a document that needs to be continually reviewed and updated as business conditions change.

4. Reviewing projects • Businesses needed to learn from previous experiences. • It assists in developing strategies. • It helps them learn what went well. • It identifies areas of weakness. • It helps to develop actions to improve. • It brings a conclusion to a project

5. Sections of a Business Plan • Executive Summary • Company Details and Legal Structure • Product / Service Details • Business Organisation, Aims and Objectives • Market Analysis • Sales and Marketing Strategies • Financial Resources • Risk Management

6. Executive Summary • Executive summary: This contains all the key points of the business plan. It is a normally a one or 2 page addition to the front of the business plan. It outlines the plan, and it sets the scene for the main business plan. • Vision – What is the overall concept. What will be achieved. • Purpose - What will the product / service do? • Summary of proposition – How it will work, how is the organisation set out, what research has been conducted to justify the conclusions. • Outline of rewards – What can be gained by investing in the business. What level of profitability can be achieved over a set period of time.

7. Company details and legal structure • Where the business is located. • Management: How the business will be managed to ensure it is an success. • Skills requirements – What skills and attributes will be needed by the staff in order to fulfil the business plan objectives. How any competences are assessed and how any shortfall will be addressed. • Legal structure – Will the business be set as a Sole Trader, Partnership, Social Enterprise etc. How will the legal requirements be met. • Professional advisors – Who will advice the business. Could be financial., legal, trade or professional services.

8. Product / Service Information • This section provides detail on what the customers will be purchasing. • It will give the product / service specification and the target customers i.e. business to business or business to consumer • It will outline the route to market (direct sales, wholesale, internet based)

9. Business Organisation • How will the business be structured? • What will its aims be? • How will these be translated to SMART objectives? • What type of strategy will be implemented?

10. Business Organisation (cont) • Production or service supply: • Supplies of materials – Detailing where the physical resources will be sourced for the business. Consideration will be given to supply chain, costs and delivery timescales. • Accommodation – Where the business will operate. What resources will it need, the size, any infrastructure requirements. • Equipment – Will any machinery be needed to be purchased or leased. Is it needed to produce the product or support it.

11. Market Analysis • Summary of markets and competition: • Local business environment – What is the current situation of the business environment. Is the target area in a period of expansion, is there any regeneration or is it in decline? • National business environment – What are consumer trends, is there a period of recession or growth? What initiatives are being implemented by government that may affect the business? • Market research – Summarising the data collected, how it has been interpreted, presenting the results and drawing any conclusions.

12. Sales and Marketing Strategies • Sales- Who are the target customers, what are the projected sales volumes. • Sales – What price levels / strategies are being utilised. • Marketing – How the product / service is to be marketed. • Promotion – What methods will be used to promote the product to its target audience.

13. Financial Resources • Summary of finance: • Profit and loss forecast: Projecting income and expenditure over a fixed period of time. • Cash-flow forecast: Projecting when cash will be coming into (sales) or leaving (expenses) the business. Ensuring that any shortfall in income is covered by additional sources (loans etc) • Break-even analysis: Knowing at what production quantity the business will move from a loss to a profit.

14. Financial Resources (cont) • Funding required: Knowing what level of money will be required and at what time. • Purpose – Will the money be used for start up, running costs or specific points in the plan to cover new developments or purchases of equipment /services. • Timing of requirements – At what point would the funding be needed. • Preferred sources – Where the funding comes from. It could be banks, grants, family and friends for example. The source of funding will dictate any levels of interest to be paid and over what timescale the debt has to be repaid.

15. Risk Management • An important part of the business plan is to identify any risks associated with the business plan. These include: • Financial risks – insufficient funding • Market – pricing strategy, demand forecast and competition • Operational – ability to supply quality product / service • The risks will have to be assessed • Priority given to those with the most impact. • Devise alternative strategies to combat.

16. Appendices • Any other evidence to support business plan – Any other relevant information that would help to convince a potential investor on the likelihood of the venture being a success. • These can include • Detailed sales analysis • Cash flow forecasts • Staffing costs • Profit / loss forecast • Balance sheet forecast

17. Summary • A Business plan is a detailed document of how a business plans to operate. • It is a living document that needs to be reviewed and updated on a regular basis. • It should contain enough detail to allow informed decisions to be made by investors about the potential success. • Remember: “Failing to plan is planning to fail”