BM6106 New Business Enterprise Week 11.

BM6106 Sem2 2012-13 – Weeks 11-12!
• Executive Summary (summary of the key points of the plan, not just an introduction!)!
• Table of Contents with page numbers!
• The opportunity (the market, competition and your position/advantage)!
• Marketing (market analysis, sales forecast, marketing activities)!
• Operations (premises, scheduling, capacity etc.)!
• Staffing (skills required and available, management, key personnel, payment)!
• Start-up schedule (detailed plan for the early stages of the business)!
• Medium-term plan (growth strategy and plans)!
• The longer-term plan (continued growth and/or exit strategies)!
• Financial highlights and projections (summary of outcomes, spreadsheets, notes)!
• Risks and contingencies (analysis of threats and risks, contingency plans)!
• Appendices (might include CVs, market research data, partnership agreement, quotations,
property details, floor plan, artist??s impression of decor, etc.)!
Writing up the plan: suggested minimum contents!
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!2!
1) Insufficient thought given to market segmentation and targeting!
2) Derivation of sales forecast not adequately explained!
3) Sales forecast not credible !
4) Pre-sales period too short or not considered!
5) Major errors in financial projections that make it difficult or impossible to
form a view about profitability, cash flow and funding requirement!
6) Insufficient or inappropriately targeted promotion!
7) Insufficient opening stock!
8) Output VAT left in sales figures in P&L because prices are VAT-inclusive,
with the effect that profit is significantly over-estimated !
9) Inappropriate assumptions about bank lending and/or investment!
10) Insufficient thought given to key aspects of operational processes!
Top twenty mistakes (in approximate rank order of frequency)!
11) Growth strategy not sufficiently ambitious or convincing!
12) Insufficient attention given to risk and contingency planning!
13) Insufficient attention paid to seasonality !
14) Long-term plan not thought through or not credible!
15) Bad mistakes in spelling and/or grammar make meaning unclear and
undermine the credibility of the management team!
16) Owners take too much money out of the business in the early stages!
17) Insufficient thought given to capacity planning and peak period demand!
18) Learning strategy of the management team not convincing!
19) Choice of legal form not adequately justified!
20) Owners earn too little to make the business worthwhile!
Top twenty mistakes (in approximate rank order of frequency)!
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!3!
The Market: knowledge and analysis!
• Is the market opportunity clearly identified and explained?!
• Is your market research clearly explained and presented?!
• Is there sufficient evidence of market knowledge?
(e.g. size, broad dynamics, segment growth, longer-term trends)!
• Is there sufficient evidence of understanding of buyer behaviour?!
• Are your target market segments clearly defined and analysed?!
• Are your initial target segments and ??most likely?? first customers clearly
identified!
• Does your marketing plan make logical use of your market knowledge?!
• Is seasonality adequately researched and thought through?!
• Is micro-seasonality adequately researched and thought through?!
• Is the derivation of your sales forecast adequately explained?!
• Is there a clear linkage between your market research and sales forecast?!
• Is there sufficient detail in your sales forecast (e.g. should you include
more sales categories?)!
• Is the sales forecast based on capacity, rather than an an analysis of
demand and your competitiveness? (it must not be!)!
• Are your assumptions about initial market penetration optimistic and not
justified by analysis?!
• Are your assumptions about longer-term sales growth optimistic and not
justified by analysis?!
• Are your assumptions about sales growth rather conservative, given the
market opportunity that you have identified?!
• Are your assumptions about seasonality of demand clear?!
Sales Forecast!
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!4!
• Is your market offer clearly enough defined?!
• Is your promotion sufficiently closely targeted? !
• Is your market offer sufficiently focussed on early customers?!
• Is your promotional budget/effort sufficient to generate the sales that you
forecast?!
• Is your pricing strategy clear and convincing?!
• If a distinctive service theme, is this adequately communicated? (e.g.
might an artist??s impression help?)!
• Are there convincing plans for extension of the market offer, where
appropriate? (i.e. product development / innovation)!
• Are there convincing plans for market development where appropriate?!
Market Offer and Marketing Plan!
• Have you allowed a long enough pre-sales period (I.e. between incurring
your first costs and achieving your first sales) to allow you to complete all
of the necessary activities? (e.g. premises refurbishment, equipment
purchase and installation, stock purchases, staff recruitment and training)!
• Are these start-up activities and schedule clearly defined?!
• Are responsibilities clear during the start-up period?!
• Is enough management time available during the start-up period?
!(e.g for selling, managing promotions, managing refurbishment etc.)!
• Do you have appropriate management skills for the start-up activities?!
• Are regulations complied with (e.g. planning, hygiene etc.)!
• Could you defer some of the initial expenditure and commitment?!
• Could you manage down the risk of your start-up?!
Start-up Plan!
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!5!
• Is your growth strategy clear and convincing?!
• Is your competitive advantage adequately explained?!
• Are your ideas about competitive positioning sufficiently developed?!
• Have you adequately considered possible competitor response?!
• Is your growth strategy sufficiently ambitious for your needs and
aspirations?!
• Is your longer-term plan for the business adequately outlined?!
• Does your longer-term plan make sense (in the context of the rest of
the business plan)?!
• Are exit routes adequately considered?!
Competitive, Growth and Longer-term Strategies!
• Is your choice of legal form convincingly explained?!
• Are the strengths of the management team clearly substantiated?!
• Are the implications of departure of individual owners considered?!
• Are there critical skills and experience which appear to be in short supply in
the business?!
• Is the management team likely to be over-stretched, particularly at start-up?!
• Is the learning capability / learning strategy of the management team
convincing?!
• Can the business justify the size and cost of the management team?!
• Are staffing issues adequately thought through (e.g. payment, scheduling)?!
• Are the owners?? drawings/salaries too high in the early stages?!
• Are the owners?? drawings/salaries too low to be credible in the longer term?!
Ownership, Skills and Staffing !
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!6!
• Is the allocation of space convincing? (e.g. might a floor-plan help?)!
• Are the opening stock levels sufficient and thought through?!
• Are the operating stock levels and control system thought through?!
• Are the logistics of supply, storage and delivery adequately
addressed?!
• Are operational processes clearly thought through and convincing?!
• Is the flow of people and materials thought through? !
• Can peak period demand be adequately serviced?!
• Is quality management convincingly addressed?!
• Is payment handling and cash control convincingly addressed?!
• Are security and safety adequately considered?!
• What critical business controls need to be introduced?!
Operations Planning
• Are the initial conversion, refurbishment and equipment costs clear and
sufficiently detailed? !
• Are the initial conversion, refurbishment and equipment costs properly
researched or might they be underestimated?!
• Is the initial stock investment underestimated?!
• Are some costs omitted from the cost structure? (e.g. business rates,
employers?? NI, insurance, utilities, repairs & maintenance, legal costs,
professional fees, stationery, consumables, bank charges, interest)!
• Do some costs appear on the P&L but not the cash flow forecast – or vice
versa?!
• Are your gross margins thought through and realistic?!
• Are other cost forecasts realistic?!
• Are your costs substantiated by research? (i.e. could you justify them?)!
Cost Forecasts
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!7!
• Are some items wrongly included in the P&L when they should be included in the cash
flow only? (e.g. VAT, capital injections and repayments, loan injections and
repayments, fixed asset purchases, stock purchases) !
• Is depreciation incorrectly included in the cash flow? (this not a cash item and should
appear in the P&L only)!
• Is the depreciation period for each category of fixed assets appropriate?!
• Are there discrepancies in the end-of-year figures between the P&L and cash flow
projections?!
• Have you registered for VAT where your projected turnover would require it?!
• Is VAT treated correctly in the projections?!
• Are your assumptions about credit terms and payment periods justified?!
• Are your financial projections clear and easy to read? !
(don??t show decimals / right justify all the figures / use thousand separators)!
• Have you included annual totals on both P&L and cash flow projections? !!
Financial projections !
• Is the owners?? capital base sufficient? (the bank is unlikely to lend more
than your own investment in the business)!
• Is your gearing increased above this level by a seasonal overdraft?!
• Does the business seem to need a long-term overdraft? (if so, loan
funding would be more appropriate)!
• Is the business generally under-funded? (If so, it needs more capital)!
• Is the business over-funded? (Do you always have substantial amounts
of cash in the bank? Do you really need a loan/ one of that amount?)!
• Is the term of your bank loan appropriate? (e.g. could you pay it off
earlier? / is the term related to the life of assets that it is funding?) !
• Are you borrowing from the bank/ using investors?? funds in order to fund
your salaries? (it may appear so from your projections!)!
• Is your funding request made clear to the bank?!
Funding and the bank’s/ investor’s perspective
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!8!
• Are risks in general convincingly addressed?!
• Is the risk of departure of key personnel considered?!
• Is the risk of competitive entry adequately considered?!
• Is the departure of individual owners considered?!
• Are security risks (e.g. theft, damage) considered?!
• Are you aware of your personal financial exposure?!
• Are you happy to bear these risks?!
• Have you thought through the financial impact of contingencies?
( a sensitivity analysis may help here)!
• Is there sound contingency planning?!
Risk Analysis and Contingency Planning !
• Does the business plan start with a good executive summary
(or business summary) which summarises the key elements of the
entire plan? !
• Is the structure appropriate and clear?!
• Is there a contents page?!
• Are sections readily accessible (by page or section number)?!
• Does the style find an appropriate balance between high
commitment and prudent awareness of risks?!
• Is important documentary evidence included in the appendices?
e.g. a summary of market research data, property particulars/
plans, CVs of the management team, partnership agreement etc.!
Your Business Plan : the document!
BM6106 New Business Enterprise Week 11
Refining and Evaluating Your Business Plan!9!
• Does the quality of the document reflect that of the management team?!
• Are the cover and executive summary definitely free of any
typographical, grammatical and spelling errors?!
• Are you confident that there are no basic spelling mistakes in the text?!
• Are you confident that there are no homophone spelling mistakes in
the text? (e.g. stationery (!), its, complement, their, led, etc.) !
• Are you confident that there are no basic grammatical errors?!
• Have you spell-checked the document?!
• Have you proof-read the document?
If so, all should be well! GOOD LUCK !! !
Your Business Plan : production quality!
EVALUATING AND REFINING
YOUR BUSINESS PLAN!