Making a Business Plan Romit Dasgupta (Globsyn)

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1) Should we admit our weakness ?

My Take: With business plans, one needs to be real. You can assume that the people evaluating your plans have met similar people before, perhaps even been in your shoes at some point. Therefore, if you/ your organizationhave/has any weakness, talk about it, but more importantly emphasize on how you have gone about addressing that issue.

2) Is there a fixed formula for VC’s ?

My Take : Not to my knowledge. Unlike Angel Investors (who are often entrepreneurs) VC’s are more structured. They would often have a teamof specialists who would evaluate your plan. Most of the time, they comprise of people with very strong Financial Background and Industry Knowledge.Having said that, I would also say that once you have gone through 4 to 5VC firms, you would start getting an idea about what they are looking for.Most of the time VC firms specialize on certain verticals, it would be worth the while to do some research and have some knowledge about the firm before you meet them. Areas like Who are the partners/their background, What have they funded in the past, what has been the performance of those companies etc.

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3) How do you calculate your market cap ?

My Take: Business schools would teach you that Market Capitalizationis the multiplication between the number of outstanding shares and currentstock price. But unfortunately that is only for Listed entities. For private companies, I can suggest 2 options. First, make some strong justified assumptions about your business look at the corresponding players in the same market and gauge what percent of the entire market you are dominating, though this will not give you an exact figure, it would give a sense of where you are vis-a-vis your business universe. The second option is to compare yourself to a similar listed company. Look for those who have similar exposure in debt, customer base, growth prospects, profits etc. You might have to work out the PE ratio for your company (with some assumptions) to get to an actual valuation.

4) Cash Generation in BCG vs GE Matrix?

My Take : There are two instances in the market where you can generate cash. First when the industry is attractive even though your competency islow, i.e. “Easy Cash Business” this is what you would see in GE Matrix. Elsein a situation when your product has a high market share in a slow growing market, which means that the unit generates far more revenue than what is needed to sustain it .. i.e. “Milking the Cash Cow” – BCG Matrix !

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Business Executive

Family Business Owner

Entrepreneur

A Student

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Business Executive

A Student Assignment for a class ?Thinking of getting into their own business ?B-Plan competition ?

Planning growth or expansion of their division ?Require funding from the management ?Raising debt/equity from the market ?

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Family Business Owner

Entrepreneur

Diversification of business ?Professionalizing the business ?Role of 2nd / 3rd Generation in the Family Business?

Put their thoughts on a piece of paper ?Impress the VC’s / Angel Fund ?To understand the viability of their thoughts ?Raise Funds ?..Others…

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The Business BackgroundThe MarketOperationsThe ManagementThe ProposalThe Sales ForecastFinancial InformationThe Summary

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The Business :

What is it ? What does it do ?How was it established ? By whom ? Why ?Has it been successful ? Why ? Learning from the past (Company Traits)

The Product & Service:

Broadly explain how the product/service works Any unique features it has ? Any IP ?How is it supplied/distributed/sold

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The Market :

Market structure (Monopoly/Multiple suppliers/Customer base etc)Who do you sell to ? Why do they buy ? Why from you ?What is the distribution network ?Competitors ?

How did you get there / Why are you doing what you are doing ?

You can either talk about your journey else if you are a start up you can talk about your involvement in the market, how you came across the idea of the business etc..

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Market StructureThis section would define the attractiveness of your offering in the market that you are offering your service. If it’s a monopolized market how do you plan to sell your product? Else, if it’s an open market with multiple service providers how do you differentiate ?

Overview – briefly outline the market you compete in/ propose to compete in. Define and explain it. Why will people buy your products and services ? What benefits does it offer ? How big is your market ? Who is your customer ? – Describe them.

Porter’s 5 Force Analysis Porter’s five force analysis sometimes gives a snap shot of the market which would help you understand how the forces would impact your business (Forces – Buyers, Suppliers, Internal competition, Substitute, and new entrants )

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The 5 force analysis is typically used to underline the strategy with which you should enter the industry

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PEST /PESTLE Analysis –A PEST Analysis helps us get a perspective of external factors and their impact on our business (Political, Economical, Social and Technological, Legal & Environment)

Political Factors- The degree of government intervention in the economy (tax, labor laws, trade restrictions etc)

Economic Factors – Economic growth, Interest rates, Inflation rate

Social Factors – cultural aspects, population growth rate, age distribution etc

Technological Factors – Technological change, R&D, Automation

Legal Factors – Consumer Law, Employment Law, Health & Safety Law

Environment Factors – Climate Change, Environmental Awareness

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Market Segmentation

Markets often fall into different segments with their own characteristics. (Say you are a Car Repair Center vs a Car Repair Center for only BMW cars); Therefore its always a good idea to break the market as per the service that you are offering

SWOT Analysis :

Used as a strategic planning tool to evaluate the Strength, Weakness, Opportunity and Threats involved in a business.Another way to use the SWOT is matching & converting.Strengths +Opportunity = Competitive Advantage (MATCHING)Weakness +Threats = Point of Vulnerability (CONVERTING)

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Other areas :In addition in this section areas like Distribution, Differentiation, Barriers to entry, Pricing of product, New Technologies should be covered.

The traditional format forSWOT Analysis given on theLeft.

Remember that SWOT Changes with time

STRENGTH WEAKNESS

OPPORTUNITY THREATS

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BCG matrix is often used to prioritize which products within company product mix get more funding and attention

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Ansoff Matrix is a growth strategy tool ..

Increase consumption

Giving existing customers more choice

Get new customers in

Get into new Markets and competitors

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The GE Matrix is an alternative technique for product management to help a company decide what product(s) to add to its product portfolio, and which market opportunities are worthy of continued investment.

LEADER GROWTH CASHGENERATION

TRY HARDER PROCEED WITHCARE

PHASEDWITHDRAWL

DOUBLEOr QUIT

PHASEDWITHDRAWL

WITHDRAWAL

Indu

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Attr

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Business Strength Low

High

High

Low

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OST Chart - Is a marketing strategy tool, which would help you togo from the Objective of the organization to the tasks it needs to undertaketo achieve those objectives

Objective Strategy Tasks Ownership

Write one of the objectives of the organization

Highlight the strategy required to achieve the objective –Strategy 1

Break the strategy to tasks. T1

<Name of Person/Team>











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In this section you will have to describe how you effectively run/want torun your business. Some of the things you could focus on are :

1) Describing Processes- These would include buying process, Stock control, New Store Development, Store Design, regulatory controls,Product display & promotion etc..

2) Demonstrate Control – How do you manage inventory ?, How do you identify slow moving/aging stock, how do you manage staff overtime

3) Highlight Differences – highlight if you are trying to do anything differently which might lead to less administrative burden/ reduce staff time / automate etc.

4) Show Experience – Though team experience is covered in detail in the management section, in this section you can highlight what specificteam experience would help you achieve the above mentioned pointsin operations

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This is a very important section, not only for existing businesses, but morefor the Start Ups. You have to SELL YOURSELF and you TEAM here. Some of The things you can focus on are :

a) What experience that you and your team bring is relevantto the business ? Give Brief Bio of the Team/ Attach Detail CV

b) What weakness do you have as a team and how you plan to address them?

c) Can you show some evidence from past experience ?

d) What skills (Technical/Financial/Marketing/HR/Operational) are requiredto run your organization. How do you plan to address these ?

e) It is also a good idea to show an Organizational Structure (Typically Tree Structure)

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This is your SELLING PITCH ! Here you have to clearly explain what you propose(WHAT/HOW/WHERE/WHEN)

Focus on including :

1) Give SMART Objective – Simple, Measurable, Attainable, Relevant, Time-Bound

2) Explain why you think you will succeed ?

3) Ask for what you want ..

4) What have you invested ? (Money/Time/Effort..)

5) What is in it for the investors ? Why should they invest ?

6) The Exit for Investors

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In this section, you will have to project NUMBERS for the sale of your products/Services. For start Ups this section would be completely assumption based,Which is why Sensitivity Analysis needs to be done on the numbers

Sensitivity AnalysisPessimistic (60%) Actual (80%) Optimistic (100%)

2011 2012 2013 2011 2012 2013 2011 2012 2013Total Capacity 900.00 1600.00 1600.00 900.00 1600.00 1600.00 900.00 1600.00 1600.00Utilization 540.00 960.00 960.00 720.00 1280.00 1280.00 900.00 1600.00 1600.00Total Revenue 1512.00 2688.00 2880.00 2016.00 3584.00 3840.00 2520.00 4480.00 4800.00Operating Cost 1410.00 2375.00 2660.00 1410.00 2375.00 2660.00 1410.00 2375.00 2660.00PBIDT 102.00 313.00 220.00 606.00 1209.00 1180.00 1110.00 2105.00 2140.00Interest 150.00 200.00 180.00 150.00 200.00 180.00 150.00 200.00 180.00Cash Profit (48.00) 113.00 40.00 456.00 1009.00 1000.00 960.00 1905.00 1960.00Depreciation 160.00 200.00 210.00 160.00 200.00 210.00 160.00 200.00 210.00

PBT (208.00) (87.00) (170.00) 296.00 809.00 790.00 800.00 1705.00 1750.00Provision Tax 0.00 0.00 0.00 130.00 200.00 325.00 130.00 200.00 325.00

PAT (208.00) (87.00) (170.00) 166.00 609.00 465.00 670.00 1505.00 1425.00

Actual Forecast

Year 1 2 3 4

Product 1 100 120 130 140

Product 2 0 0 20 30Projection

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The amount of financial information required for B-Plan would depend onthe circumstance, the audience, business complexity, etc. However givenbelow are a list of documents which should be considered:

1) Profit & Loss Statement (Sum of income – deduct cost)

2) Balance Sheet – a statement of assets and liabilities

3) Cash Forecast – Detailed cash flow statement

4) Funding requirement and flow

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CA

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Most Important for day to day operations

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BALA

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Must Match !

Annual Statement

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Prof

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Stat

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Gives us an idea howa business performs ina given period. Also Called Income Statement

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The summary though written at the end of the B-Plan is often a documentwhich is read first. This is the elevator pitch equivalent for the B-Plan. You have to assume that the investors that you are targeting are VERY BUSY AND SELFISH PROPLE !! Therefore your summary MUST be short and precise and must cover all critical areas of the plan.

The Summary in a nut shell is the “hook” for the investor to be interested inyour B-Plan. Areas that you should cover in the Summary are :

•The Business•The Team•The Proposal / Why it will succeed / Rewards•Any Major Risks•What you want from the Investor

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1) Make sure that the business plan is presentable

2) Make sure you do proper research before referring / quoting any dataor fact , people reading your B-Plan are often very well informed

3) Try and be to the point and do not write just to fill pages

4) Always Summarize your plan well. Often that is the first piece which is read

5) If you are presenting your business, be smartly dressed, remember the Investor is investing money on you and not on your business (For Start Ups)

6) Internalize your B-Plan, the investors could ask you questions from any partOf your plan, and in no particular order

7) Do not sell yourself cheap !

8) Believe in yourself and your capabilities . That makes all the difference !

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