What, How and Why..

December 17th, 2011

So what is a Business Plan
 Four Pillars of a business plan
• What I am doing?
– My Offering has to be defined.

• Where I am doing?
– My market has to be defined.
 Four pillars of a business plan
• Why I am doing?
– My business model has
to be defined

• How I am doing?
– My resource plan has to be
Defined, people and funding.
 Objective of the Business Plan
• To create a written outline that evaluates all
aspects of the economic viability of your business
venture.
• It will define and focus your objective, using
appropriate information and analysis.
• You can use it as a selling tool with lenders,
investors, landlords and banks.
• Your business plan can uncover omissions and/or
weaknesses in your planning process.
• You can use the plan to solicit opinions and
advice.
Some suggestions!!
 The key components of a Biz Plan
• A Vision Statement: This will be a concise outline of
your purpose and goal
• Market : Stay focused on the specialized market you
intend to serve.
• Your Business Profile: Describe exactly how you plan to
go about your intended business.
• The People: Who are the people behind the venture
• Economic Assessment: Provide an assessment of the
competition you can expect in your business.
• Cash Flow Assessment: Include a cash flow projection
that will incorporate all your capital requirements.
 Vision Statement
• A means of setting a central goal that the business
will aspire to reach
• Helps to provide a focus for the mission of the
business
• It is very critical to define right at the beginning
• If you don’t have 6/6 vision, try something different!!
 A Sound Business Concept
• Business is what makes money, hobbies are done
part time most of the times!!
• The single most common mistake made by
entrepreneurs is not selecting the right business
initially.
• The best way to learn about your prospective
business is to work for someone else in that
business before beginning your own.
• There can be a huge gap between your concept
of a fine business and reality.
 Understanding of Your Market
• A good way to test your understanding is to
test market your product or service before
your start.
• You think you have a great product/service
offering?
• Try selling a basic version or at least concept
to some known/some unknown people first
• Establish a valid customer need which your
offering serves.
 How big is the Market
• Market size assessment is a critical factor
• In big market opportunities, you have time to
learn and relearn as you can always sell to the
next client!!
• Market sizing may differ from company to
company or product to product
• A minimum viable market sizing is too critical
• In case of a very big market, a sustainable
segment too is a great market
 Market Sizing
Market Size

Future Market Technology

Outlook Trends

Market
Regulatory
Structure and
Environment
Channels

Competitive
Landscape
 Target Segment
• Profiling your customer segment is a critical
step.
• Try to use as many demographics as possible.
– Age
– Gender
– Location
– Channels etc.
• B2B businesses need different kinds of
customer profiling.
Marketing Strategy
 And the 5th P??
Employees Customers Partners

And everyone else

 Identify Management Team
• Core skills for any business should be in the
core team.
• Identify core skills and get teams which have
the requisite skills
• Significant others and family members don’t
qualify automatically!!
• Knowing someone as a person or as a
professional is not the same!!
 People Growth Plans
• Have you made a logical
organization structure?
• Every business with growth
needs more detailed teams.
• You should make a realistic
organization chart steady state.
• Plan for salary changes over years!
Sample Organization Chart
 Financials- Cash Flow Statement

• 90% Businesses die due to lack of cash!!

• In new businesses cash flow mostly means cash
outflow!!
• Cash Management is completely different from Profits
• All profits are not resulting in cash-flow instantly
• So don’t be conservative when you plan for cash flow.
• You will face unwarranted situations.
• Answer could be just the cash cushion at that time.
 Sample Cash Flow Plan
For year ended March 31 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12

Starting Cash

Sources
Cash Sales
Cash received from credit sales
Equity capital
Total sources

Uses
Cost of Sales
Advertising & publicity +travel
Payroll expenses
Facilities and rent
Office deposit
Other G&A
Outsourcing
Purchases of fixed assets
Total uses before Taxes
Income taxes
Total uses after Taxes

Net Change in cash

Ending Cash position

Financials- Capital Investment Plan
• Have you thought through what capital
investments you need to make?
• Land, Machinery, equipment?
• Frequency or replacement cycles?
• Software Licenses?
• Building deposits?
 Financials- Profit and Loss Statement
• Does your offering make money on a
standalone basis?
• Are you budgeting for extra marketing and
sales expenses upfront?
• Are you budgeting for mistakes which you will
make right upfront?
• Are you conservative about the profits?
• Are you taking care of all regulatory
requirements?
 Sample P&L
Amount in INR
For year ended March 31 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12
Sales
Cost of sales
Gross Profit
Gross profit margin

Marketing and sales expenses

Advertising and publicity
Total Marketing and sales

General and Admininstration

Payroll
D&A
Facilities & equip rent
Provision for bad debts
Travel and auto
Other G&A
outsourcing costs

Total General and Admininstration

Total Operating Expenses

Operating profit
Operating profit Margin
Profit Before Taxes
Pre-Tax Profit Margin
Income Taxes
Net Profit
Net Profit Margin
Accumulated profit / (losses)
Beware!!
 Top 10 Don’ts!!
• Be optimistic (on the high side) in estimating future sales.
• Be optimistic (on the low side) in estimating future costs.
• Disregard or discount weaknesses in your plan. Spell them out.
• Stress long-term projections. Better to focus on projections for your
first year.
• Depend entirely on the uniqueness of your business or the success
of an invention, while you were sleeping ten more teams were
working on this idea!!
• Project yourself as someone you're not. Be brutally realistic.
• Be everything to everybody. Highly focused specialists usually do
best.
• Proceed without adequate financial and accounting know-how.
• Base your business plan on a wonderful concept. Test it first.
• Pursue a business not substantiated by your business plan analysis.
 Case Studies- 1
• A large cosmetics company is starting its
operations in India.
• Established brand in the US.
• 19-30 years old women is the target segment.
• Looking to tap India.
• Prepare a business plan for it
 Case Studies- 2
• A large Indian business conglomerate
• Getting into low budget housing
• Prepare a business plan for it
 Case Studies-3
• A new team looking at starting an e-
commerce business
• Children’s toys is the main product
• Experienced team in e-commerce space
• Prepare a business plan for it
 Case Study- 4
• A large FMCG company is starting a chain of
wellness centers
• Tier 1 and 2 metros are the target cities.
• Prepare a business plan for it
Any More Questions?