Theoretical Framework for

Business Planning for C2R

Prof. dr. Ton Broekhuis
Makassar
Januari 2014
a.a.broekhuis@rug.nl
1
How to Write a Business Plan
Prof. dr. Ton Broekhuis
Makassar
Januari 2014
a.a.broekhuis@rug.nl
2
Organic Chemistry @ University Nijmegen
PhD @ University Nijmegen
23 yrs Research / New Product Devt.
now: 12-th yr Product Technology
My Background
My first boss in Shell !!
First day in the job: My boss:
1. We have a technical problem, I hope that you can solve it
2. You write a research program that solves our problem
3. You come back tomorrow morning at 9.00 hrs and explain
your plans
Next Morning:
1. Me: Explained my plans - all just clever technical stuff
2. My boss: This is nice, but in Shell you always have to explain
the incentive.
Incentive
How much value can you generate by spending money on
research
Always calculate the value of your research project!!
My boss: Come back tomorrow and talk to me again
My Dream: My Own Business
To be independent
Personal fulfillment
Lifestyle change
Respect
Big money
Power
Right livelihood
Types of Businesses
Business Service
Retail
Manufacture
Wholesale
Project
My Dream: My Own Business
> 80% of new start-ups fail
30 40 % of owners do not know the money flow
second round starters are more successful
Why so many fail?
Misunderstanding of the market
customer and customer needs
market size and location
competition
Misunderstanding of the product
technology
cost
Wrong investment
too quick
too late
wrongly phased
lack of financial support when needed
Misunderstanding of development time
product
market
Why so many fail?
No Business Plan made
To be successful you have to do it!
How to make a Business Plan ?
Quick Plan (1 day)
Normal Plan (up to several months)
Writing a Business Plan
Is not rocket science!
Is like working through a checklist
What is a Business Plan?
Written statement that describes and analyzes your business
and gives detailed projections about the future
What
How
When
Where
Why
$
$
Why need a Business Plan?
Improves your chances to success
It helps you to get money for investment
Helps you to decide to stop or to proceed
Lets you improve your business plan
Helps you keep track
Making it, tells you what you can and what not
General business skills
Specific business skills
It is a document your investor wants to see !!!
Investors
Yourself
Your rich father-in-law
A group of people in a cooperation
Another company
Banks (most often)
What Bankers Like
An owner with a good business plan and an owner who
understands what he/she is and will be doing
For an existing business: sufficient cash flow to make loan
payments
A newbusiness owner with positive experience
An owner with financial reserves
Net Present Value, Payback Time and Return on Investment
evaluations
Product
function
Sales
forecast
Production
system
Manufacturing
processes
Cost / risk
Materials
Product
form
Production
planning
Price
Distribution
coverage
Target
market
Promotion
Facilities
Product design
Business
Production
A Product Business
General Design Chart
Content Business Plan
Title Page
Plan Summary
Table of Contents
Problem Statement
(Need for R&D Investment)
Business Concept
Marketing Plan
Sales Revenue Forecast
Profit and Loss Forecast
Capital Spending Plan
Personnel Plan
Business personality
Staffing schedule
Job descriptions
Specific Business Goals
Personal Background
Supporting Documents
Title Page
Title of the Plan
Your name and other contact details
Date
The Plan Summary
Is the most important page!
must be specific
keep it short and crispy
it is what makes people read the full plan
It states the amount of money you seek !
It further tells the reader:
who you are
what you want to do
how much money you need
how much money you will make
Example statements for
Summary of Plan
1. Must say how much money is needed
2. Must say something about market potential
3. Should say how this potential will be achieved
4. Tells something about the position of the competition
5. Show with financial overview that the loan can be payed back
6. Say how the borrowed money will be used
7. Say why you or the investing team are capable to do the job
Table of Contents
After the Plan Summary !
Plan Summary
The Problem Statement
The Market Plan
Financial Plan and Project Value Analysis
Personal Background
Risk Analysis
Personnel Plan
Supporting Documents
The Problem Statement
Successful businesses solve problems of their customers!
identify your customer
Identify and describe the problem of the customer that you will
solve
Describe how the business will solve this problem (description)
also describe what the business will not do
if you can try to qualify and quantify the solution
ask in this process any general and specific business questions (use
Porters business models)
Marketing Plan
Is just a part of the main checklist:
understand the customer - describe the target customer
understand the competition
know your business position in the local, regional. Environment
how to differentiate from the competition
how will the customer know about you?
does your advertising fit with the . regional spread?
Create a marketing budget as part of the investment
Business Personality
Depending on the type of business
you may want to be customer intimate
one of many suppliers
have a strategy view
Future Trends
Make analysis of potential future changes affecting the
business
Write a future trends statement
Specific Business Goals
What is it that you want your business to do for
you?
become miljonair is 5 yrs
work from9-5
be a global player
etc.
Sales Revenue Forecast
Actually the 2
nd
step in starting the preparation of a business
plan:
a negative break-even analysis tells you to stop here!
forecast sales revenue (true sales, be realistic)
list fixed costs per period (week, month or year)
list gross profit per sale
break-even sales revenue: amount of money you need to cover variabel and fixed
costs : fixed cost per period / average gross profit = break even sales revenue
use Excel or other math system
How to Forecast Sales
Retail: get indicators from similar activities or branch
associations
Service: estimate time needed per billable service
Manufacture and Wholesale: Know the business or do
surveys
Project: pre-project revenue estimation
Profit and Loss Forecast
Map: (Excel)
sales revenue
variable costs
product costs
logistics
fixed costs (examples)
equipment and building etc.
wages / salaries
payroll taxes
rent/lease offices
insurance
maintenance
Cash Flow Forecast
Collect expenditures and income in one sheet (Excel)
can be kept simple in early phase
investors may like to see more detailed (but uncertain) information
like credit sales
like credit purchases
taxes
depreciation
interest on loans
calculate net cash flow
calculate cumulative net cash flow
Investment needed: sum of:
capital spending
largest number in cumulative net cash flow
Capital Spending Plan
Includes everything you have to buy before start-up
buildings (construction or rental)
office furniture
computers
equipment
Project Value Judgment
Net Present Value
must be positive at discount rate above minimum acceptable rate of
return (MARR) or at cost of capital
Internal Rate of Return: k for which NPV = 0 (is not the same as return
on investment)
Cumulative Cash Flow Payback Time
when will the cumulative cash flow become positive
is not the same as break-even sales revenue
Example
Personal Background
Explain who you are and why you will be good in the
business you propose
what are strong and weak points
what do you like and what do you dislike
Your Business Accomplishments
Investors like to know to whom they trust their money
Write a resume of accomplished jobs and tasks
not a standard resume
but facts that you accomplished which relate to the business goals
no problem to mention mistakes as long as they relate to the goals
be proud of yourself
Personal Financial Statement
Investors may want to see what their risk will be:
own cash position
current income
asset ownership
house
car
duties
mortgage
alimony
rich father-in-law
Risks Facing Your Business
Analyse and collect possible risk items
competition
developing a new market
evaluate effect of economic cycles and trends
evaluate cash flow stability
how does own or personnel expertise take you
Personnel Plan
Howdo you want your customers to see you
Make personnel plan
howmany
which skills and competences: make job descriptions
when to contract them
Job Descriptions
Job title
Job duties
Skills required, personality desired
Education required
Supervisor
Pay rate and salary indication
Supporting Documents
(Research) Reports
market research
technical reports
consultant reports
make sure you know and understand the contents
previous financial statements (business extension)
proposed lease agreements
capital expenditure details
bids (in case of construction plans)
Patents
Awards
Literature
How to Write a Business Plan, Mike McKeever, 7
th
edition
NOLO Berkeley, 2004, ISBN 1-4133-0092-8
Engineering Economics and Economic Design for Process
Engineers, Thane Brown, CRC Press, 2007, ISBN 0-8493-
8212-2
What we expect from you
x