Monday, February 20, 2012

Writing a Corporate Business Plan

Writing a corporate business plan is of course a very different proposition from that of creating a business plan for a start-up. The aims of the plan certainly will be different and hence the details included will also be so.

The start-up business plan is of course much more likely to focus on the initial strategies of bringing the product or service to the market, the team behind it, core marketing strategies and of course the financial forecasts giving both investors and the entrepreneurs behind the business a good idea of what is to come.
Communication, integration, change, organization, implementation, participation, commitment, accountability, goals, strategy, objectives, control, feedback, resources, results, and coordination–– they  are   important factors in moving an organization from where it is to where it should be in the future?

Conceptual Framework
 One of the fundamental characteristics of today's organizational environment is change. Much has been written on this fact. Today's change has been called discontinuous, rapidly accelerating, and pervasive. The "futurists" describe what changes the future will bring, while some other thinkers tell us how change is affecting us physically, psychologically, socially, and organizationally. It is undeniable that the fact and necessity of change should be a major consideration in the management of virtually any organization or project. Furthermore, it is absolutely critical for managers to be competent in introducing, responding to, or coping with fluctuations in the environment.

2 The concept of integrated corporate planning aids the manager or management team in defining what the environment holds and how to navigate through that environment in order to achieve the changes that are desirable for long-term success of the organization. In the parlance of this article, these desirable changes are the goals (long-term) and objectives (intermediate to short-term) that are used to guide operations.

A corporate planning model
 There are a great many descriptions of corporate planning methodology, and each is suited to the professional and academic preferences of its author. Regardless of the model selected, the corporate planning process can be employed successfully if it is applied in full awareness of the situations in which the organization exists. Regardless of how successfully it was applied elsewhere, the implementation of a patent model without careful consideration of the environment and the management systems, command practices, and culture of the unit will lead to a marginal process (at best) or an outright square-filling exercise (at worst). Hence, the model to be described here cannot be taken part-and-parcel and put into practice without tailoring it to the idiosyncrasies of the organization wishing to improve results.

The essence of the corporate planning process consists of the elements shown below. Most of these elements are developed sequentially, but some of the early steps are accomplished concurrently. Most organizations will find that the flow of events shown should be used only as guidance and that continual iteration and skipping forward or back is the best way to develop a workable, effective plan.3 For the purpose here, it is assumed that planners have a clear understanding of the unit's mission; if not, this process is unlikely to produce meaningful results. Step by step, the planning process includes:

THE CORPORATE  PLANNING  PROCESS

STEP  1
 -Assess  the  previous  period's  plans.
 -----------------------------------------------------------------------------------------
 STEP  2
 -Analyze / review  customers / constituents satisfactions.
 -------------------------------------------------------------------------------------------
 STEP  3
 -Assess  the  internal  organization  situation [SWOT ]
 [strengths-weaknesses-opportunities-threats]
 -Assess  the  external   environment  [ PEST ]
 [political - economic-social-teconology ]
 --------------------------------------------------------------------------------------------
 STEP  4
 -set  strategic  directions  for  the  company
 -------------------------------------------------------------------------------
 STEP  5
 -determine / identify  SWOT  for  each  units
 *marketing
 *sales
*manufacturing
 *supply  chain
 *finance
 etc  etc
 -----------------------------------------------------------------------------------------------
 STEP  6
 -determine  the  requirements  for  performance  levels.
 --------------------------------------------------------------------------------------------------
 STEP  7
 -identify   and  evaluate  objectives/   strategies
 ----------------------------------------------------------------------------------------------------
 STEP  8
 -choose  strategies/objectives/goals   for  the  next  period.
 -----------------------------------------------------------------------------------------------------
 STEP  9
 -create  corporate  plan
 ---------------------------------------------------------------------------------------
 STEP  10
 -development  of  operating  plan/ for  units
 *marketing
 *sales
*manufacturing
 *supply  chain
 *finance
 etc  etc
 ----------------------------------------------------------------------------------
 STEP  11
 -development  of  budget / for  units
 *marketing
 *sales
*manufacturing
 *supply  chain
 *finance
 etc  etc
 -----------------------------------------------------------------------------------------------
 STEP  12
 -development  of  implementation plan.
 ------------------------------------------------------------------------------------------------
 STEP  13
 -monitoring  system   for  the  corporate  plan.
 ------------------------------------------------------------------------------------------
 STEP  14
 -contingency  plans .
 ---------------------------------------------------------------------------
 STEP  15
 -Rewards ./ incentives  for  achievements.
 =================================================
 Assessing the previous period's plan to determine
(a) the progress of the organization against the plan,
(b) areas where problems were encountered and where special attention needs to be paid in the future, and
(c) planning material that is still current and appropriate. This analysis will result in continuity from one year's plan to the next.

Analyzing customer/constituent satisfaction with the products and services received. Any problems or opportunities noted should be included in the plan.

Setting the strategic direction of the organization. This critical step, accomplished by the top manager, sets the tone for the planning process and gives all in the unit a good idea of where the boss is headed.

Assessing the unit's internal environment; that is, looking at its human, physical, and financial resources and then drawing conclusions based on the analysis. Included here should be an assessment of the unit's organizational culture, climate, and working conditions.

Assessing the unit's external environment, including economic and social factors, financial or budgetary constraints, political and environmental considerations, and community or government regulations. The focus should be on identifying challenges that will be presented from outside the unit.

Determining the kinds of goods/services that will be required of the unit during the planning period and the levels at which those products must be provided. This forecasting activity involves projecting future market or constituency needs as well as internal performance targets, such as return on investment, productivity increases, or improved responsiveness to customer desires. The thrust here is to respond to the environment based on the professed aims of top management.
Determining the unit's strengths, weaknesses, opportunities, and threats (S.W.O.T.) regarding the information collected and analyzed in the previous three steps. Essentially, this step involves synthesizing internal and external information with an eye toward identifying strengths that can be relied on to obtain or exceed required performance levels; weaknesses that must be addressed if performance is to be satisfactory; opportunities that may be exploited, perhaps by using one or more strengths, in order to move ahead at a quicker than normal pace; and threats that must be avoided by sound planning.

Identifying and evaluating strategic aims. These "goals" should relate directly to the S.W.O.T. factors and concern a range of outcomes which the unit could move toward in order to fulfill its mission. For example: "To increase market share of product XYZ" or "To improve human resource management." These are broad timeless statements that guide the further planning efforts of the unit. In this step, it is important to generate several alternative goals that might be pursued. The management team will then have a variety of paths to choose from in moving the unit ahead.
Choosing from the list of long-range goals those which will form a framework for this period's operational planning.
Preparing the "corporate plan." In essence, this step consists of documenting the planning process up to this point.
In its simplest form, the plan includes:
––The top manager's assessment of the unit and his/her enunciation of the very broad direction in which the unit should move.
 ––Analysis of the environment.
 ––Discussion of the unit's S.W.O.T. factors.
 ––Listing of the key goals.

A discussion of each of these goals should be included to provide guidance as to the nature of desired short-range accomplishments to support the long-range aims. The plan's value as a communication vehicle is substantial, but the real value to the organization comes from going through the process which resulted in selecting and then documenting the goals.
Developing operational plans to guide the implementation of the goals. These short- to intermediate-term objectives define the major results that must be accomplished for the unit to move incrementally closer to the goal. For example, "To achieve sales of 15,750 units of product XYZ by 31 December 2013" or "To complete implementation of the automated personnel management information system by 31 December 2013." These operational objectives are supported by detailed action plans that spell out how and by whom the objectives will be met.

Monitoring the implementation of the objectives through periodic reviews with the responsible individuals/offices.

Evaluating progress/results against the objectives to determine the extent to which movement toward the goal has been realized. If problems are noted, adjustments can be made to either the action steps or the schedule in order to get things back on track.
Appropriately recognizing or rewarding accomplishments that support the long-range direction of the firm/agency. This positive reinforcement for a job well done will lead to improved organizational effectiveness.

The importance of communication, flexibility, and control
 The entire process just described is based on communication. In fact, the process could not work at all without open communication up, down, and across the organization. The key to getting the information flowing is the participation of the people who will be responsible for executing the plan. Normally, the extent of participation in deciding on the unit's overall directions and corporate goals will not be great. That is the province of the top management team. However, once operational objectives are established and action plans developed, participation should be as wide as organizationally possible. Without participation in implementing the long-range aims that top management sets, the vital ingredient of corporate planning––commitment––is missing.

 Two other vital ingredients of a successful corporate planning system are flexibility and control. These issues will be discussed in future blogs as they very much deserve their own special place in the sun. Enjoy!

Thursday, November 3, 2011

Investor Preferences in the Business Plan

So what is that investors look for in your business plan? The may be a number of opinions on what a investable business plan is. Depending on the investor I'm talking to their is normally a range if different responses. Everything from "as long as the opportunity is clear' to 'I really invest in the person behind the business more than the opportunity itself' Truth be told it probably a combination of the previous two for me, but in the table below I tried my best to summarize the key issues in the business plan that needs to be included to ensure you are really communicating what the investor is looking for.

Too many entrepreneurs limit their opportunities by writing weak business plans. Great ideas are common; much rarer are businesses with the people and products to enter a market and take share or dominate. Only 1 % to 2% of all business plans presented to angels or VCs receive funding. 

Companies don’t build themselves. People build companies. Ultimately, an angel investor is selecting a management team. A great team can make even a mediocre company achieve reasonable success, whereas a company with the best technology will not be successful with a mediocre management team. 

Some of the key factors of a business plan that improve the success potential of a startup are shown below.



Success Factors 
Factor 
Description 
Management 


• Years of operational experience in a similar industry 

• Startup experience with a similar business model that led to a successful exit 

• Willing to be coached 

Market 


• Addressable market that is fragmented and growing 

• Customers already lined up 

Technology 


• Patent protected 

• Creates strategically defensible position 

Competition 


• Shows that company has some competition, regardless of product or service 

• Clearly summarizes competitors and key threats 

Business model 


• Similar to one or more used by successful companies 

• Demonstrates that customers have real pain that product or service solves (“must have” vs. “nice to have”) 

Exit strategy 


• Identifies target acquirers 

• Shows deal history of acquisitions and IPOs with key financial multiples and ratios 

Risks 


• Objectively assesses risks and describes actions to reduce, mitigate or eliminate them 

Financial projections 


• Shows conservative, expected and targeted figures with assumptions for each 

• Focuses on cash flow and profitability 

Capital structure 


• Detailed 

• Preferrably shows ownership by founders and only small numbers of unprofessional or inexperienced investors 

Investment desired 


• Places an offer on the table - indicates valuation 

• Shows uses of funds in detail 

• Details expected future rounds and uses of funds from each round 


Thursday, March 24, 2011

Who reads your business plan?

So much is written about writing the business plan, what to include, how much of this and which specifics of that, that we often forget about one of the most important considerations of the business plan, who will read it. For you as the entrepreneur, we also have to remember that the - Who will read it question is really crucial.

The saying goes that beauty is in the eye of the beholder and that is as true here as anywhere else. What is the reader looking for, what do the they notice and what does not really matter? At a recent business plan competition where a number of the judges were not from a business finance background, I was astounded at what they were looking at and seeing as important. Points of view were often very different and what one appreciated as a job well done, others over looked completely in favor of something else.

Nine times out of ten when I’m looking at a new business plan I’m rushed and my aim is to quickly work out whether it makes sense to meet the company behind the plan or whether we should politely let them know we are not interested, with a brief explanation as to why. As you would expect, we review many more business plans than we take meetings – I have never run the numbers but a back of the envelope estimate suggests that excluding plans from entrepreneurs who are well known to us the ratio of meetings to business plans received is in the region of 1:10, and lower still from entrepreneurs we have no connection with. With these sorts of ratios it is important for our productivity that we get to a decision quickly.

From the entrepreneur’s perspective situation is very different. The business plan and accompanying email is an important document, the one shot to impress a potential investor and try to get a meeting. Hence a lot of work goes into the business plan, and a lot of hope can be invested in it.

Clearly there is an undesirable asymmetry here – entrepreneur spends a long time creating the business plan, investor reads it quickly. I am writing this post to address that issue.

I am not anti-writing business plans by any means, and I think they serve important purposes beyond getting a first meeting with investors:

* writing a business plan typically helps to clarify and enhance thoughts and plans about the business
* investors will look to the business plan for information at later points in the process (hopefully including a more thorough read prior to the first meeting, assuming there is one)

However, I thought it might be helpful to highlight the parts of business plans I zoom in on when deciding whether to go for that first meeting:

* Summary of product
* Evidence of momentum – e.g. user traction or customers
* Summary financials
* Evidence of ambition
* Maybe a description of the market dynamics (often I feel comfortable enough with the market already)

The astute amongst may have noticed that despite the fact VCs always harp on about the importance of ‘team’ it isn’t on this list. That’s because we form our opinion on people from meeting them much more than from reading about their history.

The key issues is to perhaps include the most important elements of your plan in both he Executive summary, boude and conclusion for the reader not to overlook it.

Wednesday, February 2, 2011

How to write a business proposal

It's becoming increasingly more common place in South Africa for entrepreneurs to be asked for a business proposal or business profile by suppliers or government departments inviting tenders for certain projects. The business profile and business plan is not the same thing in many ways and the business profile will be a much more straight forward document highlighting specific areas of the business that ensures viability and feasibility on the receivers side. They are obviously aiming to ensure that you will be able to deliver to your promises. If you have already had a business plan drawn up or were happy enough to write a business plan for yourself then much of the information needed will already be available to you.

You will need to follow these indications when developing your new business proposal, which can be a complex and time-consuming process. In other situations, a new business proposal can be written as an unsolicited proposal from one party to another, in which case the new business proposal will not be as formal as was the case with the RFP. That does not mean, however, that it should not be clear and detailed regarding all aspects of the new business. When writing such a proposal, you must remember that you are selling the concept behind a proposal to a person or financial entity which has not manifested direct interest in that venture. You need to emphasize exactly why and how you consider that the collaboration you are proposing would benefit both parties involved.

This is not an RFP. You need to convince the person or organization you are submitting the new business proposal to that working with you and your company would impact their business in a positive way. Remember that you do not only want to convince the recipient that working with you would benefit both parties involved, you need to also explain why they would choose you or your company instead of a competitor. After all, you wouldn't want that person or financial entity to simply read your proposal, decide that they like the concept but give the contract to one of your competitors, would you? The new business proposal should also clearly specify the budget needed for your project, a time frame as far as delivering the services or goods is concerned and the responsibilities of both parties in order to make the collaboration work should your proposal be approved.

Try to come up with a list of the main categories you will be including and the key points you will want to emphasize, and, based on that outline, write the proposal. Try to be as detailed as possible and include any additional information you might have regarding any aspect of your proposal. As a final word of advice, treat the task of writing a new business proposal with the goal of getting an interview in mind, where you will be given the best opportunity of directly selling your services to an already interested party.

Monday, January 10, 2011

Business Plan Outline

When drawing up a business plan it is important to take into consideration what information you wish to make known to your business investors and financiers in order to gain favour with them. A clear-cut business plan is of utmost important and will also help and guide you as your grow your new business.

What information needs to be in your business plan? What is the order of information that will make the most sense to lenders and investors? You can answer these questions with the business plan outlines provided below.

What are the standard elements of a business plan? If you do need a standard business plan to seek funding — as opposed to a plan-as-you-go approach for running your business, which I describe below — there are predictable contents of a standard business plan outline.

For example, a business plan normally starts with an Executive Summary, which should be concise and interesting. People almost always expect to see sections covering the Company, the Market, the Product, the Management Team, Strategy, Implementation, and Financial Analysis. The precise business plan format can vary.

Is the order important? If you have the main components, the order doesn’t matter that much, but here’s the sequence I suggest for a business plan. I have provided two outlines, one simple and the other more detailed.

Simple business plan outline
1. Executive Summary: Write this last. It’s just a page or two of highlights.
2. Company Description: Legal establishment, history, start-up plans, etc.
3. Product or Service: Describe what you’re selling. Focus on customer benefits.
4. Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
5. Strategy and Implementation: Be specific. Include management responsibilities with dates and budgets. Make sure you can track results.
6. Web Plan Summary: For e-commerce, include discussion of website, development costs, operations, sales and marketing strategies.
7. Management Team: Describe the organization and the key management team members.
8. Financial Analysis: Make sure to include at the very least your projected Profit and Loss and Cash Flow tables.
Build your plan, then organize it. I don’t recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary obviously comes as the first section of a business plan, I recommend writing it after everything else is done. It will appear first, but you write it last.
Tim Berry mentions a number of these issues in his business planning blog

A business plan may change with time and one must always leave room to grow and expand the original vision and direction that the business is taking when starting up your new business venture. As an entrepreneur, seeking mentors and angel networks to help you along, constantly refer back to your original plan, but be open to change and expansion in accordance with what you current economic situation in your country may be experiencing at the time. You may need to add more products, or discontinue some, and recreate your plan, purpose and vision.

Thursday, December 23, 2010

Tips for business plan writers

Starting a new business venture requires some research and investigation into the market into which you desire to go into. Whether starting a business online or not, a good business plan and a profile is a requirement , when applying for a small business loan from any financial institution in South Africa. In a recent article about Business Plan Writing, a few important factors were mentioned to help improve your chances of requiring financial assistance. Business planning is of utmost important when persuing your new venture. It is important to go into a business venture with a clear direction and knowlege of your targeted market. It is important to familiarise yourself with what business plan software is available on the market. Writing your own business plan is not that difficult and can be done without having to lay out excessive amounts of money on a professional business plan.

Why you need a business plan in South Africa
Whether you’re starting a new business or looking to expand your existing business, it is crucial to have a business plan in South Africa. If you need a bank loan or investment from outsiders, you need to have a business plan to show for this investment of capital. A business plan is your key to success
Writing a business plan is something that many small businesses fail to do although it is a necessary step in preparing for obstacles in the future. When you write a business plan, it forces you to start thinking about problems and solutions in your business and industry.

The first step to writing a business plan would be to do research into the feasibility and profitability of your new business. Investors and banks have to see that you have the resources and experience to make your business work and a business plan is the blueprint for what you plan to do for the future.

Your business plan should include the following elements:
An introduction that explains what your business is and what your objectives are.
A marketing analysis about the industry your business will be operating in and how you fit into it.
A marketing plan (which is basically your marketing strategy)
A management plan about how where you are going to set up your business, where your business will be located and the regulations and restrictions about your business.
A financial plan that clearly describes how you are going to finance your business and what your financial projections are.
An executive summary which is a one page overview about your business that you should write after you have finalised your business plan. Advice for writing a business plan.

Advice for writing a business plan
When you write a business plan, a good piece of advice is to break it up into smaller tasks. Don’t try to write the whole plan in one day. Start writing section you are most comfortable with – if you have marketing experience start off with the marketing plan. Another tip for writing your business plan is to spend quality time when you are writing it and don’t put it off so that it is a rushed job.

Business continuity plans for your business in South Africa
A business continuity plan is a series of documents that describes the priorities and actions that a business should take in the event of a disaster or system’s failure. A business continuity plan is as important as your initial business plan because it addresses the often overwhelming task of creating plans so that your business runs smoothly.

In conclusion, the internet is full of resources and help such as the article above. Once you have searched for a bussiness plan that best suits your industry, you will be well on your way to having a clear direction as to where u see your business in the next five years and beyond. Help and advice is only a click away through all major search engines!

Find out more about business continuity plans in South Africa
Source: http://www.continuitysa.co.za/news-room/writing-business-plans.html

Monday, December 13, 2010

Raising finance for a new business


Raising finance for a new business is often the most challenging task of the entrepreneur. No one enjoys asking others for money (well almost no one) and going hat in hand to your local bank or investment firm is perhaps similar to a trip to the dentist. But it does not to be that hard. Raising start-up funds should be seem as your first real opportunity to see whether you fist of all can communicate your idea effectively an secondly whether other professionals see the opportunity in the same light that you do. Its one thing convincing friends and family, who after all are often interested in seeing you in a good mood, vs convincing the people to such an extent that hey will invest money into the idea. Granted tht if you are one of the lucky few, friends and family may be the same people who will be finding the business in the first place.

In general, raising finance for your business can be divided into 6 simple steps.

1. Seeking out the Investors

This is arguably the hardest part of the process. If you are someone who regularly runs to stay fit you will know that the hardest part is to put your shoes on and start running. Once that is happening the rest sort of happens by itself. Most people start within family circles, friends, business associates and other acquaintances. Others may go directly to the bank or government institutions proving grant or loans for start-ups.

Once you find the right contact willing to finance your business, a well written business plan should normally take care of the rest. The first step often takes the longest so don’t loose fath when I takes longer that expected. Is your idea is viable and it excites you then the right investor or investment body will come along.

2. The Approach.

During the approach, two things must happen. As with any new relationship its always useful to start by breaking down the barriers between you and the other party. In his classic book, How to Win Friends and Influence People, Dale Carnegie talks about finding some thing in common with the other person. A common interest can help you to get to know the other party in question and help them to start understanding that you are actually not to different from them. Remember that the first thing you may have in common is that you may both be interested in meeting the right venture partner. Secondly you need to make the other person believe that you know your subject area and that your business idea can also help them with other own goals fr the future. Simultaneously be building a degree of kudos. The venture source needs to invest capital, and you need to raise capital. Fulfilling your mutual needs is the task you must accomplish together.

3. Choose the most suitable source

once you have identified suitable funding sources, list the reasons why they would be interested in funding your business. Always consider the ‘WIFM’ concept. When listening to your proposal or business concept the other party will be listening through a filter of ‘What’s In It For Met?’ Not everyone invests in the same deals for the same reasons, as certain benefits among the features will be more important to individual capital sources than others. In fact, the same plan is likely to be supported by different people for different reasons. You need to identify the needs and reasons for investing of your potential money source. Study the background of the various funding sources, ideally considering the other businesses they have invested into.

4. Presenting the Business Plan.

During this stage you can really show of your knowledge and passion for the industry and the business that you are intending to start or grow. This is an area where most entrepreneurs actually do well in. Do remember however, that your presentation need to reflect the investors interests and answer questions that thy may have. If you have already build up a relationship with the investor it may be easier to understand and address their concerns. If not, be sensitive to any body language or signs form the investors as to which areas you need to focus on.

A rookie mistake at this stage is to over value your business or present and half developed concept. Unless your market research has show exceptional interest from potential clients, investors will be looking for working concepts. Remember that they are thinking, what can go wrong with this, is it a good investment opportunity. They are not interested in simply paying your salary for the next two years while you further develop your concept.

5. Address their concerns confidently.

Don’t be taken aback if there are allot of questions or objections. These merely indicate that the investors are interested and want their doubts put to rest. They may ask about your income potential and how you came up with the amounts mentioned. Real sales is of course the ideal at this stage as it takes the doubts out of business. "What are you going to do that's different, and how are you going to do it better than what is already being done?" In handling objections, the first thing to avoid is to be defensive. Instead, acknowledge the comment, and respond to the objection in a sincere way. See objections as a support mechanism. If investors have objections or doubts then so may your eventual clients. These may be people who have been involved in start-ups before and its really an opportunity for some very valuable free advice. Don’t be afraid to ask questions of your own.

6. Getting to a yes.

If the first five steps was executed well then this final step should take care of itself. Look for definite answers and commitment, if there is a maybe, discuss next steps and how you could potentially turn the last objections into a yes. Remember, apart from your business plan, your enthusiasm and entrepreneurial spirit are two characteristics that investors will value most.