Supervision and support by the tutor

Each project team is supervised and supported by a tutor. This means that the tutor will get to know the students and their way of working well. The tutor is NOT an expert on writing a business plan. He/she is an expert in guiding a project group. His or her task is to supervise the project team (monitoring the learning process, the group process, project working, planning, and making individual students recognise their strengths and weaknesses). The tutor is not a member of the project team itself. You may expect your project tutor to give you guidance and support if matters get into a deadlock. (S)He is your contact if you have any questions or if there are any problems, but (s)he will not tell you what to do exactly. Your tutor has a say in the assessment of the team and the individual student.

Chapter 3 - Writing the business plan

Steps to help you conclude the Business Plan Project successfully

Introduction

Before starting a project you have tot think about a logical structure, both of the work to be done and the way you want to present the results (the report). To be successful a project needs careful planning and execution.

E.g. while working on your idea and developing a market perspective you may find that your idea is not sufficiently marketable: there may be too much competition or there may not be a market. Do not hesitate to start working on a new product as soon as you feel this is the case. Make sure you include this possibility in your overall project plan and time schedule.

A lot of background material about these aspects you can find in your books for marketing and accounting & finance. Do not hesitate to ask questions to your lecturers during class!

Ø Project plan

For the contents of the project plan see chapter 2.

Ø The idea

A brainstorm session to come up with a good idea for a business and a product.

Ø Business definition

By now you have come up with a good idea for a business. But before you can actually start writing the business plan you have to answer some vital questions. What drives your company? What do you want your image to be in the eyes of your customers, employees or other stakeholders? Why are you in business?

External analysis

A starting company faces a lot of threats, but fortunately also a lot of opportunities. These opportunities and threats are generated by the market. Therefore, in order to determine the opportunities and threats you have to analyse the market. Usually this analysis is called an external analysis. It analyses the external environment of the company. This external analysis consists of different parts:

Ø DESTEP

Any company operates under circumstances over which it has only limited control. These circumstances are the ‘Macro environment’ of the company, and are generally subdivided into six factors: Demographic, Economic, Social-cultural, Technological, Ecological, and Political-legal factors. Together they form the acronym DESTEP. DESTEP factors are developments in society which influence the entire industry. Take the livestock sector: a growing environmental awareness has and has had great influence on this industry. You can also imagine that a shift in the composition of the population (age or cultural background) will affect the food sector.

Determine which macro-environmental factors have a big influence on the industry you will be operating in and analyse those factors.

Ø Competition

Whatever business you are planning, there are always others with the same brilliant ideas who offer a product very much like your own. This is what we call competition within the industry or sector. Before starting your own firm, it is useful to have a look at the industry. Is it highly competitive, growing or decreasing, or is it dominated by one powerful market leader? In most countries there is a governmental institution that gathers a lot of statistical information on industries, or business sectors. And most of them use a standardised system to determine what industry your company belongs to. Maybe the website of the Chambers of Commerce could give you a lead.

· determine in as much detail as possible (and do not be too easily satisfied!) to which industry or market segment your company belongs.

· Determine the development of the number of competitors within your industry or market.

· which of your competitors are most important, form the most influential threats for your own company and why?

· is it likely that new competitors will enter the industry or the market within five years? Provide a sound motivation.

Ø Customers: needs, behaviour, market segments

After having analysed the DESTEP factors and the competition you will have some idea about what the industry looks like. Now you have to find out what the size of the market is, which segments or target groups you are going to serve and what the exact product is you are going to offer. In short: you have to define your market. To define your market, you might have to answer the following questions:

· what are the geographical boundaries?

· what are the characteristics of our customers? (individuals, families, companies, government)

· what needs are we satisfying?

· with what product or service are we going to satisfy our customer’s needs?

By answering these questions you have defined your potential market. Within this market you have to win your own customers. To do so you need to know something about the size of that potential market and about the changes in demand during the last few years.

· give a reliable estimate of the size of the potential market in relevant units (number of customers, total revenues, units sold etc.).
Don’t forget to state your sources!

· are any shifts in demand to be expected in the next three years (this is not only about the size of the market)?

When offering a product or service, you must start by looking at the needs and behaviour of the target group (the marketing concept), putting your client in the centre of attention.

Like Paul Simon already said, “You’ve got to keep your customer satisfied”. You will therefore have to investigate the needs and behaviour of the potential buyers. In order to define target group(s) you will have to find groups of customers that have some things in common in relation to your product or service.

· what kind of criteria will you be using to split-up the market in segments?

· give a detailed description of the segments you find.

Field Research

Ø Surveys or questionnaires

You have been considering your prospective customers. One of the next steps is to find out what they want, what they need, what they are doing now and what they think of your plans. It is essential to have a well-structured market survey. If you poll the wrong people you will find that their answers differ from those of your original customers. Describe the following items for the structure of your market survey: the target group, the random sample and the statistical conditions (see your Marketing book).

Now make the survey, clearly formulating your objectives and what you want to achieve. We recommend that you make a trial survey before you hand in your survey. You will get a fair idea of the quality of your questions if you test your survey on a few people. If there are any problems during your trial survey, you can change the questions so that the real (simulated) survey will go smoothly. Check your trial survey with your marketing lecturer!

When making your survey please note that it is very important (and therefore necessary) to analyse the information needs before making a survey. Sometimes in analysing the information needs it turns out not to be such a good idea to have a survey at all. Make sure you can, at all times, answer the questions why/what (why are you asking this specific question, what do you want the answers to resolve, why are you (or are you not) doing a survey, etc.).

Marketing

Ø Marketing strategy: target group, positioning and objectives

When you’ve executed the research you have to make some important, strategic decisions:

· What is/are your target groups for the first three years?

· How will you position your product during the first years?

· What are your objectives for the first year, the second year and the third year?

Ø Marketing mix

After you have made the strategic decisions on segmentation and positioning and after having set the objectives, you need a real plan for action. How are you going to use the tools in the marketing mix to reach your objectives? Use the four P’s.

· Formulate your marketing mix. Remember it is an action plan, so it should be very detailed. Someone else reading the plan must be able to execute it without any further analysis.

This is a very large and important part of your business plan and the outcome should be consistent with the other parts!

Finance

Ø Opening balance sheet

If you want to start a company you will have to make short-term decisions after having made a number of long-term decisions (what legal form, range of products, target group, desired market share). One of the components of the report is the financial planning for the first year. First of all you must determine your initial financial position.

Which factors of production are required to make your company work? In other words: which investments must be made to become successful? The answer to these questions is an investment budget.

Part 1

Make a survey of the investments required for the start-up of your company. You should distinguish between fixed and current assets. Clearly indicate (use a note) explaining how you arrived at your estimates.

Now that you know the size of your investments for a start-up, the next question is: where will the money come from? Or, who is going to finance it? Before you try to find your financiers, it is essential that you, as an entrepreneur, make an overview of the capital required and the available equity. This overview is called the financing plan.

Part 2

Make an overview of the financing required for the investments desired. Make sure you distinguish between owners equity, long-term and short-term debt. Clearly state how you have calculated these amounts. Be realistic and think of the securities. The bank is likely to demand a 30% solvency (debt ratio) for a standard financing agreement.

The opening balance sheet can now be compiled on the basis of an investment forecast and the financing plan. In it, solvency and liquidity can again be scrutinised. Please consider possible investments in the run-up period.

Part 3

Draw up the opening balance sheet and add it to the investment forecast and the financial budget. (add an extensive explanation to both).

Suggestion: Make the assignments in Excel so that any calculating errors are avoided and changes (in price, for instance) can easily be made and calculated!

NOTE: State the type of company.

Ø Financial planning (first year of business)

The first financial assignment gave a provisional description of the initial financial position of your company. But what do we do now?

Is your company really profitable? How profitable do you want it to be?

If you want an answer to these questions you must make an operating forecast. This forecast gives an overview of the expected costs and return, resulting in profit or loss. In other words, an operating forecast is a preliminary profit and loss account.

Part 1

Make an overview of the returns which you think or hope to achieve and the attendant costs for the first year of your operations. Give a quarterly specification. Clearly indicate how you calculated your estimates.

The first financial assignment (Opening Balance Sheet) gave a provisional description of the initial financial position of your company, in which you assessed the static liquidity or included the static liquidity in the decision-making process. But what about the dynamic liquidity? Will you be able to meet all your short-term debts? You will need a cash flow forecast to answer these questions.

Part 2

Make an overview of the cash flows which you think or hope to achieve and the expenditure for your first year of operations. Give a monthly specification. Clearly indicate –use a note – how you calculated your estimates.

The first financial assignment gave a provisional description of the initial financial position of your company, in which you made a forecast of the profitability of your company in its first year of operations. A combination of these two assignments will enable an assessment of the financial position of the company at the end of its first year of operations.

Part 3

Draw up a predetermined closing balance sheet at the end of year 1 and assess the solvency and the liquidity.

Suggestion: Make the assignments in Excel so that any calculating errors are avoided and changes (in price, for instance) can easily be made and calculated!

NOTE: Hand in a version (if necessary an improved version) of the Opening balance sheet,in addition to this assignment.

The Business Plan

Now draw up the final business plan. This final plan is a team product. Ensure that ‘third parties’ will get a good picture of the entrepreneurs, the company, the envisaged market and the operating procedure. Also give a clear description of the financial aspects of the enterprise.

The business plan will have to meet the following requirements:

· a front page with a title, a picture, the names of the members of the project team, the date and the name of the tutor;

· table of contents.

· a clear and legible layout;

· checked spelling;

· use of headers and footers;

· numbered pages;

· a table, graph or plan where these are requiredand where they serve to illustrate the text;

· list of sources (articles, books, Internet addresses);

Date: 2015-12-18; view: 782