Business Plan Workshop

Presented by Biruwa Ventureswww.biruwa.net

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http://www.biruwa.net/

Why Entrepreneurship?

Looking at a Problem as an Opportunity

Why start a business in Nepal?

• Nepal is a virgin market – unmet demand

• Nepal is full of problems – look at this as an opportunity

• More educated young people, fewer jobs

• Entrepreneurship is not work!

Risk vs. Reward• Starting a business is risky

• Linear returns vs. Exponential returns – socially, financially, personally…

• Be insane, never be scared of failure

“You won’t succeed, unless you try”

- Michael Jordan

Rise of an opportunity• Change is good for

business

– Social

– Demographic

– Economic

– Political

– Technological

– Industry/market

– New technology or innovation

An IdeaGenerat

e

AssessEvolve

The Business Plan

What is a business plan?

• It is NOT a report

• It is the PROCESS of finding out how to develop your business venture

• A business plan describes all the parts of the company necessary to make money

Why Write One?• Plots a course

– Helps you think long term

• Feasibility study– Is your idea viable?

• Become a better decision maker– Helps you anticipate

problems– Will increase your

knowledge

• Reality check– Identify strength and

weaknesses – where you will need help

• Implementation plan– Use it as a guide – Keeps you honest /

accountable– Creates a time line

• Selling tool– Use it to sell to your

potential investors, partners, customers and suppliers

Where to begin?

Business Plan Research• Where to start?

– Talk to other entrepreneurs, business leaders, professors, friends, etc.

– Secondary data• Newspaper, reports,

census, database, etc. – Primary Data

• Questionnaires, focus groups, product sampling, company data etc.

Business Plan Outline

1. Table of Contents

2. Executive Summary

3. Product Overview

4. Industry Overview– Industry trends– Rules & Regulations– Competitive analysis

5. Marketing Strategy– Target Market– Marketing Channel– Pricing Strategy

6. Operational Plan– Supply Chain– Production &

Distribution– Operations– Human resources

7. Financial Plan– Cost Estimates– Cash flow statement– Income statement– Balance sheet

8. Appendix

Executive Summary

• Complete this section at the end

• Why is it important?

– Will help capture interest and support of your readers

– Usually an investor will read this section of the document first and decide if it is worth spending more time on it

• What is it?

– Summary of business opportunity

– Usually around 2-pages

– Demonstrates your knowledge of the business

– Proves that any investment in the venture will yield good return

What to include in the Executive Summary?

• Introduce the business opportunity and vision for your business

• Marketing Highlights– Product/Service

distinctive features– Target market summary– Competitive analysis– Key marketing

strategies

• Operational Highlights– Critical legal issues– Supplier summary– Management team

overview

• Financial Highlights– Summary of finances

and projections– Equity investment of

owners

Case study: Microbrewery

• Create a brew-pub to serve the beer enthusiast market in Kathmandu

• Marketing Highlights– Distinctive taste

– Focus on experience, quality, taste

– Beer enthusiasts and budget conscious customers

– Large brewers (Gorkha Brewery, foreign beers, etc.)

– Strict government Regulation

The Product

Product: the Five W’s

• What you should know:

– Who are you selling to?

– What are you selling?

– Where do you sell?

– When do you sell?

– Why and how do you make money?

Product Description


– Communicating your product completely and concisely

– Fill gaps identified in the market

– Identify and use your Value Proposition

• What to include?

– What are your product’s/service’s unique feature?

– What are the value added features?

– How is your product different?

– History of the product in the market

Product Description (Microbrewery)

• We will deliver premium quality draft beer inside the bar and sell to beer enthusiasts at affordable prices

• Better tasting beer, variety, unique bar atmosphere

• More options for customers

• Different taste from competition, constantly changing - evolving

The Industry

Industry Trends


– Understand current economic and industry trends

– Identify if your product will meet customer needs

– Provides you strategic information to make your business competitive

– Assists you in determining the longevity of the market


– Changing Environment• Social; Economic;

Demographic; Environmental; Technological; & Political

– Past, present and future industry trends

– Key success factors in your industry

– Barriers to entry, size of industry

Industry Trends (Microbrewery)

• Large number of young professionals (20-35 years in age)

• Increasing disposable income

• Rising consumption of micro-brews in U.S. and Europe; New entry into Indian market

• Customers seeking variety

• Government action against larger corporations

• Dominant position of Gorkha Brewery in market (80% market share)

• Increasing market share of imported beer

• Rs. 31,00,00,000 worth of alcoholic products imported in Nov/Dec 2011

• Rs. 19,00,00,000 of liquor imports last fiscal year

Operating Regulations


– Includes all application government regulations required to operate your business

– You have to ensure that your business meets these regulations


– Filing dates

– Restrictions

– Industry specific considerations

– Permits required

– Qualification required

– Quality assurance

– Insurance

Operating Regulations (Microbrewery)

• Liquor permits / license

• Yearly licensing fees• Meeting quality

standards• Regular testing• Can you follow certain

international standards to assure customers?

Competitive Analysis

• Why is this important?

– Helps you differentiate your business

– Helps identify areas / customers not being targeted

– Helps you understand what the market likes of dislikes

– Identify threats


– Years in business

– Product/service description

– Product/service differentiation

– Customer profile

– Pricing

– Strengths/weaknesses

– Opportunity/threats to your business

Competitive Analysis (Microbrewery)

• Gorkha Brewery (80% market share)

– 50-50 Khetan Group and Carlsberg Group

– Large control in market

• Barriers to entry – financial, supply chain, distribution, legal

• Price in market higher than consumer preference - Rs. 200+ a bottle (higher – Rs. 300+ in restaurants)

• Create a brand (Sam Adams Beer)

The Marketing Mix

• What is it?

– Methods you choose to communicate with your target market

– It is a well-defined plan of action that includes timing, costs, and expected return of chosen promotional methods


– A new business should create awareness among customers to generate revenue

– The timing of promotional methods will have an direct impact on cash flow

Target Market

• Why is this important?

– Helps you forecast the sales and cash flow projection

– Determines whether there are enough customers in the market to make your business profitable

– Helps you make critical and focused marketing decisions


– Age range

– Income range

– Gender

– Location

– Average / frequency of purchase

– What need does your product fulfill?

– Who influences their purchasing decision

The Marketing Strategy

Target Market (Microbrewery)

• Young professionals: 20-35 yrs

• Medium to high income (Rs. 20,000 and above)

• Mainly male

• Do women prefer fruiter beers?

• Near work areas, offices

• Nepal 1.2 lt per annum (Kathmandu 3.5 lt) = total 3,21,00,000 lt

• Total market value of beer market in Kathmandu = Rs. 3,50,00,000 (Rs. 3.5 arab)

• Need for variety and affordable prices

The Marketing Mix - Channels


– A description of how and where you plan to sell your product

– You must match your location and distribution strategy based on buying patterns of your customers

– Always consider your customers preferences before making a move


– How to market?

– Different costs associated with marketing channels

– What is the marketing importance each of the channels?

– Potential for future growth

– Traffic flows at the potential location

– How will your method affect: sales, services, promotion, timing, economics?

The Marketing Mix – Channels (Microbrewery)

• Print vs. Social media

• Target areas near offices or existing bar areas like Thamel or Jhamisikhel

• Usually works near colleges (KU, Manipal)

• Sponsor events, get endorsements

• Need areas with heavy foot traffic

The Marketing Mix - Pricing


– This is how you will position yourself in the market against your competitors

– Price is a function of your costs, competition, and your customers

– This will determine your profitability

– An effective pricing strategy can help you enter the market quickly


– Know your costs: labor, cost of materials, overhead, profit margin

– Pricing considerations: Low, Medium, or High

– Customer’s perception of value

– Discounting (trade or volume)

The Marketing Mix – Pricing (Microbrewery)

• High capital equipment cost Rs. 8 lakh for equipment from China

• Government licensing fees

• Sell more, lower margins vs. Sell less, higher margins

• Price lower than Rs. 100 per pint (473 ml)

• Make premium brews for high end customers, make higher margin

The Operational Plan

Supply Chain


– Can you find necessary suppliers and equipment?

– Helps you identify suppliers that best fit your business needs

– Answers if you need backward linkages

– How much inventory will you need?


– Pricing

– Trade discounts

– Supply shortages

– Exclusive product rights

– References

– Back up suppliers

Supply Chain (Microbrewery)

• Chinese suppliers vs. local fabrication

• Regular maintenance

• Finding key ingredients for quality brew– Keeping supply local vs.

importing (question about quality)

– Malt extract (liquid or dried), Hops, Specialty grains, Yeast

• Maintain exclusive rights to ingredients

Production / Distribution Plan


– Outlines the method of production & distribution

– Ensures that you have considered all components of the production process

– Impacts your physical location, human resources, licensing, etc.

– The ability to protect your intellectual property, patents, trademark – impacts competitive advantage


– Production methodology

– R&D requirements

– Cost analysis (direct and indirect overhead)

– Time requirement

– Equipment and plant requirement

– Facilities description

– Leasehold improvements

– Warehousing requirements

– Sub-contracting arrangements

Sierra Nevada Brewing Co.

•Established in 1980 with $50,000 loan – produced 950 barrels of craft beer

•In 2010, it produced 786,000 barrels of beer

•6th largest brewing company in United States

Production / Distribution Plan (Microbrewery)

• State of the art-equipment, to maintain utmost sterility during production, cooling and storage

• Creating a recipe for great tasting beer; experiment, give free tasting

• First distribute at bar, consider bottling options and distribution at other retailers and bars

• 6-months to set up facility, 6-months to brew the first sellable batch

• Build storage facility to keep brews

Human Resources• What is it important?

– Forces you to do a skills inventory of yourself and develop a plan to “fill the gaps”

– You have limited time, do what you are best at and find help

– If there is a need to hire, factor that into the cost structure

– A strong management team is extremely important for potential investors


– Organizational structure and staffing plan (Full time & Part time)

– Salaries and benefits

– Job description

– Roles and responsibilities

– Service and employee contracts

– Future HR plans

– Business skills audit

Human Resources (Microbrewery)

• Need someone with brewing experience, take training overseas?

• Bar tenders also work as brewers; can share knowledge with customers

• Give training to brewers

• Find someone with distribution/logistics experience

• Account professional brewer into cost structure

The Financial Plan

Financial Statements


– Determines your business’ liquidity (Balance Sheet)

• Do you have enough current assets to meet your current liabilities?

• What is your debt to equity ratio?

– Provides overall profitability summary over a period of time (Income Statement)


– Balance sheet• Current assets, fixed

assets, other assets

• Current liabilities, long-term liabilities, shareholders equity

– Income statement• Sales/Revenue

• Expenses (variable and fixed)

• Profit/Loss

• Tax owed

Cash Flow Statement


– Shows the actual flow of money in the business

– Determines if the business is viable

– Helps you make purchasing and hiring decisions

– Tells you if you need a loan or cash injection


– Sources of cash: sales, loans, equity investments

– Uses of cash: expenses to be paid, start-up cost,

– Balance (Monthly receipts minus disbursements)

– Factors to consider: seasonality, return on promotions, payment items

Financial Estimates (Microbrewery)

• Start-up costs

– Build-out cost (Building, bar, tables, chairs, electrical, refrigerator, etc.) = Rs. 25 lakh

– Capital Equipment (brewing equipment, barrels, keg fillers, lab equipments, etc.) = Rs. 20 lakh

– Starting Inventory (barley malt, specialty grains, hops, yeast, water, etc.) = Rs. 15 lakh for first year

– Labor Cost (1 brewmaster, 3 bartenders, 1 manager, 3 waiters, 1 help) = Rs. 16 lakh for first year

• Total Start-up cost = Rs. 76 lakhs

Wrapping Up

DILBERT!

Building your Company

Idea Business Plan

Size of the

Opportunity

Customer Discovery

Customer Validatio

n

Theory Implementation

Source: Steve Blank – The Lean LaunchPad

CUSTOMER SEGMENTS

VALUE PROPOSITIONS

images by JAM

CHANNELS

images by JAM

CUSTOMER RELATIONSHIPS

images by JAM

REVENUE STREAMS

images by JAM

KEY RESOURCES

images by JAM

KEY ACTIVITIES

images by JAM

KEY PARTNERS

images by JAM

COST STRUCTURE

images by JAM

images by JAM

customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

images by JAM

Case Study & Presentation

• Executive Summary

• Product Overview

• Industry Overview

• Target Market

• Marketing Strategy– Marketing Channel

– Pricing Strategy

• Supply Chain

• Rules & Regulation

• Production & Distribution

• Human Resources

• Financial Estimates– Cost Estimates

– Breakeven analysis

– Cash flow statements

Date post:	30-Oct-2014
Category:	Business
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