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PREPARING AN EFFECTIVE BUSINESS PLAN
PRESENTED BY
Kenneth W. K. Adokoh(BSc. Hons Mathematics, AeCP Financial Mgt)
Policy Implementation & Strategy Manager
phf International Housing Consultancy2009
PREPARING AN EFFECTIVE BUSINESS PLAN
CONTENTS
BACKGROUND OF phf International Housing Consultancy
WHAT IS A BUSINESS PLAN AND ITS PURPOSES
THE BUSINESS PLAN DETAILS
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
PREPARING AN EFFECTIVE BUSINESS PLAN
BACKGROUND OF phf International Housing
ConsultancySocial Housing and Regeneration Specialists
Housing Management
Urban Renewal
Sustainable Neighbourhood Development
Community Regeneration Packaging
Social Care PackagingRural Housing Management
PREPARING AN EFFECTIVE BUSINESS PLAN
WHAT IS A BUSINESS PLAN
WHAT IS A BUSINESS PLAN
1 “ A business Plan is a document that highlights the operational and financial
objectives of a business Entity.
The Business Plan contains the individual detailed plans and budgets showing how
the objectives would be achieved.
WHAT IS A BUSINESS PLAN
2 “ Is a comprehensive planning document, which clearly describes the business developmental objectives of an existing or proposed business and
its plans for several years into the future.
WHAT IS A BUSINESS PLAN
3 “ A business Plan is a strategic top level plan or budget expressed in financial
terms looking forward at least one year, often five years or more.
The business plan is usually implemented using individual plans such as
operational and Marketing Plans.
WHAT IS A BUSINESS PLAN
4 “ It is a detailed description of the plans of an existing business and its
expansion plans , or a new business, with financial projections.
A BUSINESS PLAN AND INVESTMENT PROPOSAL
How does a business plan differ from Investment Proposal ?
The business plan differ from Investment proposal, but the difference is not
much.
The business and the Investment proposal have the same contents, you can think of an investment proposal as
a business plan with a different audience.
A BUSINESS PLAN PROPOSAL
How does a business plan differ from Investment Proposal ?
The business plan is considered as an internal document, while the
investment proposal , which is designed to be presented to external agencies such as lenders, banker and
other investors.
BUSINESS PLAN AND FEASIBILITY STUDY
Remember:There is a difference between a
Business Plan and a Feasibility Study.
A FEASIBILTY STUDY
A Feasibility Study is an expert document, which advises on the commercial or technical viability of a project or a
venture.
The Feasibility study is one of the key input documents used in the
preparation of a business Plan. But it is not a business Plan.
A FEASIBILTY STUDY
A Feasibility Study is an expert document, which tell the commercial or technical
viability of a project or a venture.
The Feasibility study may contain headings or sections as in business plan, it is not a business plan, but
rather one of the key input documents used in the preparation of a business
Plan.
A FEASIBILTY STUDY
Examples of Feasibility Study
• Market facility Study• Production or Technical Feasibility
study
These two feasibility studies reports are essential in a well developed business plan for major funding.
PURPOSES OF A BUSINESS PLAN
TYPES OF BUSINESS PLAN
THERE ARE MANY TYPES OF BUSINESS PLANS. THE PURPOSE OF THE BUSINESS PLAN DICTATES ITS
TYPES:
BROADLY SPEAKING,THERE ARE TWO TYPES:• Business Plans Prepared for the Purposes of
Internal operations• Those used for external Purposes such as
raising capital.
PURPOSES OF A BUSINESS PLAN
Reasons why a business plan is prepared include:
•It defines and focus the business objectives using appropriate information
and analysis•It contains detailed financial projections, forecast about a business’s performance, and a marketing plan, it is a useful tool
for business planning.
PURPOSES OF A BUSINESS PLAN
• The business Plan can be use as selling tool in dealing with Investors, Lenders
and Banks
• It can be used to solicit opinions and advice from people including, internal
managers and external experts such as Accountants.
•The business Plan may uncover omissions or weakness in the company’s
planning process.
DETAILS OF THE BUSINESS PLAN
DETAILS OF THE BUSINESS PLAN
There is no standard Contents Or Details of a business plan.
The contents or details will usually be determined by the preparer/Consultant. The length of the business plan depends on the complexity of the business and
may be as many as 30 – 40 pages.However, most business plans will cover
six or seven sections
DETAILS OF THE BUSINESS PLAN
THE COVER PAGEThe cover page of the should include:
•The legal name of the company•The name of the document
•Name, address and Phone of the individuals or business who prepared the
plan•Date of Preparation of the Document
DETAILS OF THE BUSINESS PLANTHE COVER PAGE – Example
STELCO LIMITED BUSINESS PLANPrepared by
RDA Investment ConsultantsP.0. Box 16816
Accra NorthTel: 021 3043 41
MAY, 2008
DETAILS OF THE BUSINESS PLANSection 1 – Executive Summary
The Executive Summary is normally the first part of any business plan. The summary allows the company to tell its story without disclosing all
the detailed information.
The Executive Summary should be brief covering ( 5 pages ) or less and should pique the
reader interest.
This Executive Summary section highlights the main points covered in the body of the business
plan and its written upon its completion.
DETAILS OF THE BUSINESS PLAN
Section 1 – Executive SummaryThe summary will cover the following:
• The Purpose of the Business Plan• The Project Concept
•The Company, Governance and Management
• The Industry Market and Marketing Plan• Technical Aspect of the Project
• Financial Analysis and Plan•Risk and Socio Economic Analysis
DETAILS OF THE BUSINESS PLANSection 2 – The Project Concept
• What the projects is all about ie The project involves the completion of the newly
constructed three star hotel resort located in Accra.
• It provides more detailed description of the business venture ( product and services )
• Product protection and exclusive rights, copy rights, Trade marks
•Uniqueness of the product or services
DETAILS OF THE BUSINESS PLAN Section 3 – The Company,
Governance and Management
cover the following:• Mission , Vision , Objective, Values
• The Incorporation of the Company and its authorised business, Certificate to Commence Business
• Promoters Ownership of the company ( Sole proprietorship,
Partnership, Limited )
• Directors of the Company ( Name and Role Summarized Cv )
•Background of Key Management Personnel ( Brief Resume )
DETAILS OF THE BUSINESS PLANSection 3 – The Company, Governance and Management
•Summary of planned staff numbers and recruitment plans
• Training Policies
•Organizational Chart ( Identify Reporting Relationship
•Duties and Responsibilities of Key Personnel ( Brief Job description to indicate who is responsible for what
• Contracts with Professional or Consultants ( External Assistance )
DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the Market
This section will cover the industry in which the company operates, its market and competition
in the market. Details will include• Regulations in the industry
• Industry outlook and growth, industry trends and new developments
•Analysis of the forces and the impact on the industry
•Analysis of the opportunities and threats in the industry
DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the Market
• National and economic trends ( population shifts, consumers trends, relevant economic
indicators ) ii The market and customer ( Size of the market,
market trends and new requirements )• Analysis of Competition ( market share )
•Demand and supply iii Marketing Plan which will indicate marketing
positioning ie critical product / service characteristics or uniqueness in relation to
competitors, pricing polices, selling and distribution policies, advertising and promotion,
DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the
Market
•Sales Strategy (sales objectives and targets, agent, commission sales staff,
sales support, sales tools )•Product / service support policies
•Interest shown by prospective customers or existing customers
• Tracking Methods ( methods for confirming who your customers are and
how they heard about the company)
DETAILS OF THE BUSINESS PLANSection 5 – Technical Aspect
This section will cover four major sub heading:
(i) Manufacturing and Operations• Premises location
• Other facilities such as electricity, water, telephones
• Manufacturing capacity• Sources of raw materials• Use of Subcontractors
• Brief description of production processes
DETAILS OF THE BUSINESS PLANSection 5 – Technical Aspect
This section will cover three major sub heading:
• Machinery and equipment ( new or used, leased or purchased )
• Cost of facilities, equipments and materials• Capital estimates for start up or expansion
ii Regulatory Requirements• Food and Drugs Certificate, Tourism
Certificates• EPA
• Health and Safety etc.
DETAILS OF THE BUSINESS PLANSection 5 – Technical Aspect
This section will cover three major sub heading:
iii Quality Control Measures and Procedures
iv Personnel Requirements ( full time, Part time, skills level, availability, training
requirements)
v Project Time Table
DETAILS OF THE BUSINESS PLANSection 5 – Technical Aspect
Example : Project Time Table
Table 7: Project Timetable. Project Timetable I tem Action 2007 May
- J une- J uly
July
Purchase of Equipment & Furniture
Placing and arrival of orders
Installation of Equipment
Installation of Equipment
Advertising and Recruitment & Training
Commission
Commissioning of the Project
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
The financial plan contains detailed operating forecast for the period of the plan including cash
flows etc. This section would include the following:
•The History financials, with comments• The purpose of the loan, Timing and Deal offer
•Detailed description of assets to be financed (Capital Expenditure & Working Capital )
•Equity Contribution
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
•Summary of the loans terms including repayment terms, purposes, security to be
provided•Current operating line of credit (amount,
security, )
•Financial Forecast ( Analysis of projected income, cash flow and Balance sheet statements
detailing profitability , liquidity and financial viability analysis Break Even and sensitivity
Analysis
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
Example: Project Cost Summary
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
Example : Working Capital Break Down
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
Example : Financial Plan6.4 Financial Plan
I t is proposed that the project be financed by 54% and 46% equity and medium term loan respectively as shown in the table below: Table 12: Proposed Financial Plan
Sources % Amount
(US$) Sponsors Equity
54 413,260
Medium Term Loan
46 350,000
Total 763,260 The sponsor’s equity of 54% represents the total investment made in the project to date of $413,260. I t is anticipated that the debt finance will be over five year period at 9%, with 1 year moratorium. The loan will be secured on a charge on the fixed Assets of the company.
DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan
Example : Viability Analysis
DETAILS OF THE BUSINESS PLAN Section 7 – Risk and Socio Economic
Impact
Risk and Mitigating FactorsThere are many risk factors when not
properly identified and mitigating factors put in place at the on set of the project
will affect its sustainability. The risk may come from management, competition
and others.
DETAILS OF THE BUSINESS PLAN Section 7 – Risk and Socio Economic
Impact
The socio economic impact of the project will include:
• Employment Creation
•Tax Revenue ( Direct and Indirect )
•Environmental Impact
DETAILS OF THE BUSINESS PLAN Section 7 – Risk And Socio Economic
Impact
Example of Risk and Mitigation Measures
Table 16: Risk and Mitigating Measures
RISK MITIGATING MEASURES
Competition and market Provide reliable service, adopt competitive prices and use advertising and promotional strategies described in the business plan.
Supply of Raw materials Enter long term supply agreements with the supplier and also source raw materials from different supply sources.
Management Appoint qualified and experienced personnel for the management of project.
Cost over run Appoint qualified Engineers and Architect to complete the project on time. Contingency cost has been catered for in the cost estimates.
DETAILS OF THE BUSINESS PLANSection 8 – Appendices:
•Financial Data : Details of financial Assumptions & Projections
5 Year Projected Profit and Loss Accounts, Cash flows, Net Present Value, Internal Rate of Returns, Pay Back Period, Projected 5 Year
Balance Sheet, Break Even Analysis• Feasibility Study Reports
• Physical Valuation Report e.g. Quantity Surveyors, Land Economists
•List of Important Suppliers or Trade References
DETAILS OF THE BUSINESS PLANSection 8 – Appendices:
•Name of Accountants , Solicitors and Bankers• Copy of Incorporation documents
•Copy of Other Regulatory documents i.e. EPA, Fire Service, Food and Drugs Board, Building
Permits, AMA permits, •Details of Board and Management Cv’s •Copy of Memorandum of Understanding
• Copy of Contracts•Orders and Enquiry Status
•Technical Details on products
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
Business Plans are turned down by financing Companies, Bankers and Others Investors due to
some of the following reasons:
Management: • An incomplete team or an over reliance on one
team member •Inexperience in the required fields and an
inability to take the company through the next business cycle
•lack of commitment
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
Business plan: •Poorly presented, unrealistic, lacking in
research and not thought through
•Inability to define the company’s uniqueness of product, service or technology and to define
barriers to entry
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
Market:
•Inability to demonstrate the understanding of the Industry
•No clear demonstration in the business plan that the market is strong enough, or big enough, to support the company or its plans for growth
and expansion
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
Technical Analysis:•Inability to demonstrate the technical
understanding of the Product, Machinery
• Inconsistencies between technical or Expert Report Relied on and that presented in the
business plan.
•Inconsistencies of Technical Reports and Financial Projections in the business Plan without
explanations
WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING
Other Reasons or Common Mistakes Include:
•Invalid or unsubstantiated assumptions •Overly optimistic projections
•Inconsistencies between text and projections •Unprofessional document - poor organization
•Too much/too little detail •Underestimating capital requirements
•Underestimating the competition
PREPARING AN EFFECTIVE BUSINESS PLAN
END OF PRESENTATION
Thank YOU