1. business and industrial

Business Plan
Implementation
1
Writing a business plan
A good business plan proves its value in business. It should serve both as an
instrument to convince investors and as a monitoring tool for the entrepreneurs
themselves. The purpose of this conceptual business plan structure is to
provide a framework for writing a business plan in which ideas and plans can be
structured. This section aims at describing, in a structured way, what a business
plan should look like, and which subjects are important.
The business plan structure is a generally applicable one, although in the first
section a distinction is made between a business plan for a start-up company
and one for an existing one.
In general, we can distinguish between three major parts of a business plan.
First, you have to analyse how the situation is now, either before your company
is in business or, in the case of an existing company, what your company is
doing now. Next, you have to develop a vision as to where your company wants
to be heading at over the next, for example, three years. This planned growth
must use the strengths of the company while explicit weaknesses should be
solved. The question about the desired situation is an important one. The
company is exposed to a lot of opportunities and threats of the environment and
they should be analysed properly. Finally, you also have to describe how your
company will be going from the current situation to the desired one. That is,
what activities will it carry out and what strategy will be followed in order to go
from its current position to the desired one. This relates to how your company
will approach the market, how the organisation of your company will look like,
how the manufacturing process (when applicable) is organised, etc.
Before we draft a general outline of what a business plan should look like, we
will first discuss some general remarks with respect to writing business plans.
1.1
What is a business plan?
The business plan is a way to:
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1.2.
pinpoint the current and desired situation of the company and the current
and desired situation of the environment.
pinpoint the long- and short-term objectives based on the desired
situation of the company.
make explicit the activities that will be carried out in order to reach the
objectives.
Some guidelines for your business plan
Some guidelines when preparing your business plan:
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1.3.
Keep it brief and to the point, without being incomplete. The plan
should not contain more than 50 pages. For a start-up, 20 will be
enough.
Keep it simple. If you can not describe your company goal in a few
sentences, it is too complicated.
Make clear structures. This includes a summary, an index, logically
structured paragraphs, and supplements.
Describe your product-market-combinations (PMCs).
Show your company’s advantages over that of your competitors.
Give the main reason(s) why customers will buy your products and not
those of the competition.
Focus on future. Try to forecast trends and use these forecasts to
describe what the company must do in the next three years.
Don’t be too optimistic in assessing your sales potential. Develop
several scenarios with the most positive, most negative and most
probable result. Develop sales forecasts based on market analysis and
not on production capacity. From the market analysis you can derive
your desired production capacity and not the other way around.
Give attention to current and possible problems. Potential investors
will discover these problems anyway. It enlarges your credibility to show
these problems.
If you wish to use the plan to attract external funding, show that
your management team is capable of running the company. The
quality of this team can be of decisive importance to the investor.
Show the return on investment over a period of three years.
On what should you focus?
Some general remarks when preparing and discussing the business plan:
 Most people tend to give a more positive picture of the future company.
 If you forecast the growth for your product-market combinations (PMCs),
substantiate them with facts and figures. Pay attention to recognisable
advantages with regard to your competitor. Important is that the trend in
the market is almost the same as the growth expectations. Establishing a
positive growth in a declining market is not realistic.
 Strengths and weaknesses never are absolute but relative. Analyse the
position of your competitor when you determine the degree of strength or
weakness.
 Entrepreneurs often think that profit comes when the market or turnover
growths. It can be true, but it is not necessary. When choosing your
PMCs, you should pay attention to the added value that can be made
with the PMC. It is possible that a PMC with little turnover but with large
added value is more attractive than one with a big turnover and little
added value. To make a decision you should make a calculation about
the added value of each PMC.
 Financing growth should be done carefully. Improperly financed fixed
assets  which are necessary for growth  in combination with growing
debts can lead to a deteriorating solvability.
 Figures are helpful to draw comparisons between branches. Be aware of
the definition of the numbers and their relevance.
Although this section and the previous one contained a number of general
guidelines and remarks, you will have to keep in mind that there is no general
way for writing a good business plan. However, the remainder of this section
contains a structure and a short questionnaire that can help you to make your
business plan a good one.
2.
Conceptual business plan structure
Title page
This title page should contain:
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The company's logo
Name, address, telephone and fax number
Start-up date of the company
Number of the report (number x of y distributed reports)
Period covered by the business plan
Date
Management summary
This summary must be attractive and convincing. This is the reader’s first
contact with your company. It gives the headlines of your business plan. This
summary can also be a short proposal to other interested parties (e.g. potential
investors).
To mention on this page:
 Name, address and telephone number of the company
 Name and position of the contact within your company
 Date
Index
1 INTRODUCTION (FOR START-UP COMPANIES) ............................................................ 7
1.1
THE ENTREPRENEUR ................................................................................................................7
1.1.1
PERSONAL DATA...................................................................................................................7
PERSONALIA, (NAME, ADDRESS, PLACE ETC.) ..........................................................................................7
WHAT EDUCATION DID YOU HAVE? WHAT IS YOUR RELEVANT (WORK) EXPERIENCE? ..........................7
1.1.2
GOALS AND MOTIVATION ......................................................................................................7
GIVE AN EXPLANATION WHY YOU WANT TO SET UP THIS COMPANY, IN THIS BRANCH; WHAT IS
YOUR MOTIVATION FOR THIS CHOICE? WHAT ARE YOUR PERSONAL GOALS, WHAT DO YOU
WANT TO ACHIEVE? ..................................................................................................................................7
1.1.3
PERSONAL CIRCUMSTANCES .................................................................................................7
1.1.4
STRENGTHS AND WEAKNESSES ..............................................................................................7
1.2
THE ENTERPRISE ......................................................................................................................7
1.2.1
LEGAL STRUCTURE AND MANAGEMENT.................................................................................7
1.2.2
PERMITS ..............................................................................................................................7
1.2.3
COMPANY INSURANCE ..........................................................................................................7
1.2.4
THE START ...........................................................................................................................7
1 BACKGROUND (FOR ESTABLISHED COMPANIES) ....................................................... 8
1.1
1.2
HISTORY ....................................................................................................................................8
CURRENT SITUATION ................................................................................................................8
2 INTERNAL ANALYSES ...................................................................................................... 9
2.1
2.2
2.3
2.4
2.5
2.6
THE MANAGEMENT TEAM .........................................................................................................9
STAFF AND ORGANISATION ......................................................................................................9
MARKETING ...............................................................................................................................9
PRODUCTION PROCESSES........................................................................................................9
FINANCE ....................................................................................................................................9
SUMMARY ................................................................................................................................10
3 EXTERNAL ANALYSES ................................................................................................... 10
3.1
3.1.1
3.1.2
3.2
3.3
3.4
3.5
MARKET ANALYSES ................................................................................................................10
PRODUCTS .........................................................................................................................10
THE MARKET ......................................................................................................................10
PRODUCT-MARKET COMBINATIONS (PMCS) ........................................................................10
COMPETITIVE FACTORS ..........................................................................................................11
OTHER EXTERNAL FACTORS ..................................................................................................11
SUMMARY ................................................................................................................................11
4 MISSION AND COMPANY OBJECTIVES ....................................................................... 12
4.1
4.2
4.3
MISSION ...................................................................................................................................12
STRATEGY AND STRATEGIC OBJECTIVES ..............................................................................12
SPECIFIC OBJECTIVES ............................................................................................................12
5 MARKETING .................................................................................................................... 13
5.1
5.2
5.3
5.4
MARKETING OBJECTIVES .......................................................................................................13
MARKETING STRATEGY ..........................................................................................................13
THE MARKETING P’S ...............................................................................................................13
SELLING PROGNOSES .............................................................................................................14
6 PRODUCTION .................................................................................................................. 15
6.1
6.2
6.3
PRODUCTION PROCESS ..........................................................................................................15
PRODUCTION REQUIREMENTS................................................................................................15
BUYING ....................................................................................................................................15
7 ORGANISATION & PERSONNEL .................................................................................... 16
7.1
7.2
KEY FUNCTIONS ......................................................................................................................16
ORGANISATION .......................................................................................................................16
8 ADMINISTRATIVE ORGANISATION ............................................................................... 17
8.1
8.2
ADMINISTRATION ....................................................................................................................17
CONTROL.................................................................................................................................17
9 FINANCE .......................................................................................................................... 18
9.1
9.2
FINANCIAL HISTORY ................................................................................................................18
FINANCIAL PROGNOSIS...........................................................................................................18
10 RISKS ............................................................................................................................... 19
10.1
10.2
RISKS .......................................................................................................................................19
SCENARIOS .............................................................................................................................19
11 APPENDIXES ................................................................................................................... 19
1
Introduction (for start-up companies)
1.1
The entrepreneur
In this section the reader meets the entrepreneur(s). Shortly give a clear
description of yourself, so external parties can see who the entrepreneurs
behind the company are.
1.1.1
Personal data
Personalia, (name, address, place etc.)
What education did you have? What is your relevant (work) experience?
1.1.2
Goals and motivation
Give an explanation why you want to set up this company, in this branch; what
is your motivation for this choice? What are your personal goals, what do you
want to achieve?
1.1.3
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Personal circumstances
Give an outline of your current income and expenses.
Which insurances do you have? What other insurances do you plan to take
because of your entrepreneurship?
1.1.4
Strengths and weaknesses
Draw an honest picture of strong and weak features of yourself. How do you
plan to excel in your strengths and deal with your weaknesses?
1.2
The enterprise
1.2.1
Legal structure and management
What will be the legal and organisational structure of the firm and how will
power be divided? Why?
1.2.2
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Permits
Does your company needs to have a number of permits (e.g. environment,
etc.)? Do you have all these permits, and if no, how and when will you apply
for them?
Are there specific educational demands?
1.2.3
Company insurance
What business insurance do you plan to take?
1.2.4
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The Start
How did you prepare yourself for the start of your own company?
Did you receive coaching during the preparation, if yes, from whom?
1
Background (for established companies)
This part is meant as a short meeting in which the reader can get a clear picture
of the organisation.
1.1
History
 Briefly describe the history of the company. What is the legal and
organisational structure of the enterprise?
 Who are the stockholders or owners/managers? Why did you choose for the
current legal structure?
1.2
Current situation
 Briefly describe what your products and services are, where and how your
products are used. Keep the description short, later in the business plan you
will get the opportunity to make a broader description.
Shortly describe your current customers, the number of customers, their
relative importance, the proportion of big and small customers, the
proportion of new and regular customers, branches, position in the value
chain, etc.
2
Internal analyses
An organisation exists of people, assets, systems and activities. In this chapter
you will have to discover and focus on the company's strengths and
weaknesses.
2.1
The management team
The management team is one of the most important internal factors. The
management team can be analysed in terms of leading qualities (motivation,
delegation, control), purposiveness, use of internal and external information,
insights in the organisational activities, external contacts, internal and external
communication, insight in and reaction to (changing) environment, etc.
2.2
Staff and organisation
The business activities are carried out by personnel. Obviously, companies that
succeed in motivating their staff succeed in being more competitive. Aspects on
which personnel can be assessed include level of education, working
environment, motivation, willingness to change, absence through illness,
participation in decision making, absence or presence of function descriptions,
educational plans, plans for the needs of the personnel, follow up planning,
function conversations, variable rewarding possibilities, and so on.
2.3
Marketing
Knowledge of your market(s) and the use of marketing instruments are
indispensable. Points of attention include:
 General: market segmentation, target group definition, knowledge of
customers, availability of a marketing plan, insight in turnover, sales and
costs per product-market combination.
 Sales: sales representatives, order winners or order takers, new
customers.
 Product: width of assortment, features (functionality, quality, packing,
unique features), are there possibilities for creating extra value,
substitutes.
 Promotion: PR, advertisements, mailings, flyers, exhibitions, etc.
 Price: pricing strategy, comparison competition, actions, and discounts.
 Distribution: efficiency, costs, (alternative) distribution channels.
2.4
Production processes
Points of attention include:
 Process: good machines, efficiency, quality, influence of environmental
legislation.
 Technology: quality machines, investments, protection (patents,…)
 Logistics: warehouse, complexity, dependence to third parties.
2.5
Finance
Insights in finance are a condition to survive for all companies. This includes
financial prognoses, costs, revenues, liquidity, ratio analyses.
2.6
Summary
Summarise all the important conclusions in a table in terms of strengths and
weaknesses of your company.
3
External analyses
Eventually it is the market that will decide whether your company will be
successful or not. In addition to the market, other macro-environment factors
will influence your company and its accomplishments. Examples of such
macro-environment factors include the economic situation, legislation,
technological developments, socio-demographic factors etc. A thorough
analyses of possible opportunities and threats is important for strategic
decisions.
3.1
Market analyses
3.1.1
Products
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Describe in detail your products or product groups, your pricing strategy, the
product characteristics, the product's lifecycle, etc.
State the products, which are highly competitive.
3.1.2
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3.2
The market
Give a qualitative description of what the total market looks like, and pay
attention to trends, new developments, innovation, market life cycle.
Give a quantitative description of what the total market looks like with regard
to size, geography, market leaders, growth figures, profits, seasonal
influences and economic situation. Make use of market surveys of the
sector.
Give a description of your customer groups in terms of customer
characteristics, relative share in sales, and so on.
Product-market combinations (PMCs)
Based on the description of your customers and customer groups you can
describe your PMCs. Pay attention to the development phase of the product
group and how the image of the product group contributes to the desired
company's image.
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Give per PMC an accurate description of the characteristics of your
(potential) customers and their motives to buy your products instead of your
competitor's ones. This can, for example, be done in terms of product
range, quality, price, service, delivery period, etc.
If you are an existing company, describe your 5 biggest customers. For each
one, state the percentage of contribution to your turnover, how this figure
changed in the last years, what the future will bring, why they bought your
products, why they remain your main customers and what percentage of
your turnover per customer is contributing to your profit.
Make a table with branch turnovers for the next years and describe your
market share.
3.3
Competitive factors
Describe, per PMC, your most important competitors and describe and assess
them in terms of the competitive factors as defined by Porter:
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Current competitors
Future entrants in the market
Buyers of your products (e.g. relative share, buying combinations)
Suppliers (e.g. relative share, supplier combinations)
Substitutes, alternative products or services.
At the end of this section you can find a checklist of questions that you should
try to answer when analysing the competition.
3.4
Other external factors
Describe the influence of other external factors in terms of opportunities and
threats. Other external factors include government, legislation, European and
international standards, and socio-cultural developments.
3.5
Summary
Summarise all the conclusions in a table in terms of opportunities and threats.
Checklist of Questions for Analysing your Competition
Product/service
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What products or services does your competitor offer?
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Where is your competitor settled?
How big is his reach?
To whom does he sell?
How dominant is his position?
 What is the image of the competitor?
 What is the quality of his product?
Distribution
Communication and promotion
 What kind of media does your competitor use?
 How frequently are they used?
 What is the information value of is promotion activities?
 Which products does he promote the most?
Pricing
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How is his discount policy?
 How broad is his price range
 What do customers think of his prices?
Staff
 How many employees does your competitor have?
 What is their level of education?
 Does his staff fit his strategy/formula?
 What is his rewarding level and structure (material as well as
immaterial)?
Finance
 What is his turnover and market share?
 How is his financial position?
4
Mission and company objectives
After the internal and external analyses, the strengths and weaknesses have to
be confronted with the opportunities and threats (SWOT analysis). After you
have formulated the mission of the company, you can formulate the objectives
and the strategy to reach those objectives, using the SWOT analyses. This
gives a framework for decisions and actions for the next years.
4.1
Mission
The mission is a statement of your company’s function, on a short and long
period. Where does your company stand for? A company often strives to
accomplish certain things, what is your intention? A mission gives the company
a part of its identity.
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4.2
State in one sentence what the function of your company is. Use terms as
products, services, customers (market), and way of realisation (technology).
Give the framework of norms, values and behavioural rules, within your
company.
Strategy and strategic objectives
The strategy shortly describes how you want to fill in your mission. In a strategy
you should choose a focal point: product, market or technology/formula. The
strategic decisions are a translation of the strategy into more concrete,
measurable objectives with a time path of between 1 and 5 years.
Shortly state the strategy and the unique aspects of it:
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4.3
What do you do, what your competitor does not do?
What are your key success factors in relation to those of the market? (costleadership, differentiation, focus)
What is your orientation point and how do you execute your strategy?
(product, technology or market)
Describe the unique features of your product or service that play a part in
strategy making.
Formulate a number of realistic and controllable objectives for a period of 1
to 5 years.
Specific objectives
Derive short-term objectives from your strategic objectives. These objectives
are mostly operational decisions and cover a period of 1 to 2 years.
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Formulate result-minded short-term objectives. Give a clear timeline and
eventual restrictions.
What are the extracted objectives on functional parts of the company?
5
Marketing
This chapter describes the marketing strategy that your company is going to
follow in order to reach your objectives with regard to your PMCs.
5.1
Marketing objectives
Describe in a few sentences what objective you wish to accomplish with your
marketing strategy. It is essential to think customer minded. Do not confuse this
with the strategic focal point that you have chosen. With the product as focal
point, it is still important to be customer minded.
5.2
Marketing strategy
Describe per PMC how you are going to do the marketing for it. Think about
product, price, promotion and distribution when describing your marketing
strategy. Describe whether all the PMCs fit the mission and strategy of the
company, and state the relative importance of the PMC to another. Also
describe the use of the marketing instruments, and for which PMC you are
going to use them.
5.3
The marketing P’s
Pay attention to consistency and synergy while using the marketing
instruments. At the end describe how the marketing budget will be divided over
the instruments. This is useful for your future cost analysis.
Price
Give a description of your price strategy and
the structure of the prices (e.g. cost-price,
competition oriented, percentage). Also
describe your profit margin and your credit and
discount policy.
Place policy
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Settlement policy
Distribution
 Channels
 Transport
 Warehouses
 Leverage time
 Leverage reliability
 Ways of ordering (online,…)
Price policy
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Way of cost price calculation
Catalogue price
Discount policy:
 Actions
 Quantum discounts
 Extra
Place
Describe your distribution. Give a
description of the costs per distribution
channel and describe the geographic
location in which you will operate.
Promotion
Describe in detail which promotion
tools you will use to bring the
product under the attention of the
customer. Give an overview of the
costs per promotion tool. Calculate
the costs per customer.
Select the most efficient technique.
Product policy
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Promotion policy
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Means
 Personal: exhibitions (company visits,
seminars)
 Semi-personal: (telemarketing,
business mail)
 Others: (commercials, packaging,
annual report, user manual,
databases)
 Cross-sale
 Actions
 Relation management
Product
 Free publicity, form and frequency
Describe the characteristics of your
products. Which product characteristics
are important as buying motives?
Brand
Product features, functions,
size, quality
 Design, style, colour,
packaging
 Product varieties
 Service, guarantee, return
policy
Presentation and personnel
Describe the image you wish to communicate. Show that your marketing
strategy and the service to your customers are consistent to your image.
5.4
Selling prognoses
Make an estimation of the sales per product-market combination that you
expect for the next three years. Elaborate a most negative, most positive and
most probable scenario. Give arguments for these prognoses. If possible, show
your market share.
6
Production
Describe the different aspects related to the production of the goods and
services that you will market. Discuss them in terms of technology, volume,
flexibility, standardisation versus specialisation, etc.
6.1
Production process
Describe the steps and stages in the production process. Make use of a table or
flow diagram. Give a short explanation for each production step. Give also for
each step the required time and money, problems and risks. For each
production step, discuss why you will perform this step in-house rather than
contracting it out. Try to give a cost-price calculation. Specify the unique
features of the production process and the improvements you made to it.
6.2
Production requirements
Describe the capacity planning for the next three years, based on the sales
prognoses. Specify exactly what will be the consequences with respect to:
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Raw materials
Resources
Staff
Production facilities
Machines
Transporting
Research and development
Describe the quality control and production control programs within your
company and the amount of money and staff associated with them.
6.3
Buying
Describe your buying function in terms of:
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What is your buying strategy?
Who is responsible for buying what?
How do you select your suppliers?
Who selects them?
How do you organise your logistics?
7
Organisation & Personnel
In this section you will elaborate on the "human capital" of your organisation.
Very important is that there is a good fit between staff, personnel policy,
strategy, market approach, selling prognoses and production. In addition,
especially within a service company, people make the company’s image.
7.1
Key functions
Describe what the key functions in the organisation are and how they will be
filled during the next three years. Specify the experience and skills that the
persons must have for these positions.
7.2
Organisation
Describe the structure of your company and explain why you prefer such a
structure. How will your company grow over the next three years and what will
be the effect on the organisational structure. Give an overview of your
company's employees in terms of age, education, experience, skills, etc.
Other questions that have to be answered include:
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How do you organise your staff employees?
Which educational options are available for them?
What are the instruments you will use to motivate your personnel?
How do you assess the achievements of your employees?
How do you reward your employees?
8
Administrative organisation
The administrative organisation is important for financial issues. However, the
use of budgets and achievement indicators can also support the delegation of
responsibilities and they also are an operational translation of strategic
objectives. By ongoing control, operational choices are brought into line with the
chosen strategy. Ongoing control should be achieved by having objectives,
developing action plans, measuring your employees' achievements, and so on.
For organisations focused on production, insight in cost structures is of primary
importance.
8.1
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8.2
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Administration
How is the administration organised? Who does the (financial)
administration?
Who is making the annual reports? Do you have external support with other
financial issues?
Control
How do you fine-tune your decisions, made on a lower level, to your
strategy?
What periodic (financial) information is used by the management for the
purpose of control. Variables may include productivity, efficiency, costs,
sales, offers, leverage times, margins, service level, customer satisfaction,
liquidity, etc.
How is the information supply and reporting of management information
organised?
9
Finance
In this part of the business plan all issues that have been discussed so far are
translated into numbers. Investors, venture capitalists and banks will use the
figures in the financial plan to base their investment decisions on.
9.1
Financial history
Compare your current achievements with those out of your history. You also
can compare them to those of your competitors. Or even to the branch
averages.
 Describe the achievements of the company, in the past and present.
Give a profit/loss statement, a balance sheet and a cash flow statement
of the last 3 to 5 years.
 Give a detailed outline of your achievements by calculating the following
figures and ratios:
 Returns
 Liquidity
 Solvability
 Efficiency
9.2
Financial prognosis
Make a financial prognosis with respect to what you think your company will
achieve in the future. Describe the next factors for the next 3 to 5 years:
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Investment and financing plan,
Expected profit/loss statements,
An overview of cash flow,
Expected balance sheets and ratio,
Liquidity prognoses,
Start-up costs for new products and services.
Also give references to the parts where you already made calculations that you
use in the prognosis (e.g. production, staff, marketing).
If the plan is used to obtain external financing, make an extra financial plan with:
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Need of capital (over time)
Payback options
A financing proposal
A thorough cost price calculation of your most important products.
Break-even point (per year)
Specify your strengths and weaknesses regarding financing. Also describe
your financial opportunities and threats.
10
Risks
10.1
Risks
It is of vital importance to recognise potential risks that can threaten your
company’s existence. Specify potential risks how they will influence the
performance of your company. They may include:
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10.2
Unforeseen costs in research and development
Cost control in production activities
Failing to reach leverage times
Problems with suppliers and distributors
Failing to reach sales expectations
Failing to reach gross profit margin
Debtors
Changes in currency prices
Unforeseen industrial developments
Interest risks
Scenarios
Specify how you will deal with these risks. Elaborate a number of scenarios
where you describe how you will deal with them.
11
Appendixes
The appendixes may contain:
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Turnover objectives
Market surveys
Production flow diagrams
Break-even calculation
Current and expected balance sheet, statement profit and losses
Investing plan
Liquidity prognoses
Action plans for parts of your company