how to build ur business plan

1. How to build Your Business Plan
Khawla AlShurafa
16, February 2008

2. Why Three Apples?

3. Why Three Apples?

4. Why Three apples
Business
Plan
Three
Basics

5. What is more important
Plan or Planning?

6. Workshop Papers
Financial
Plan
PEST

7. Dynamic Balancing of Your
Business Wheel
Customer Innovation
If your
business
wheel is
STRATEGY unbalanced,
it will roll
neither far
nor fast.
Finance Processes
More information at 1000ventures.com:
“Balanced Approach to Business Systems”

8. The Tree of Business
From Strong Roots To Superior Results
Deliver Superior Value
Marketing, Selling, “Profits should be a reflection
not of a corporate greed but a
Servicing, Partnering
vote of confidence from society
that what is offered by the firm
is valued.”
– Konosuke Matsushita
Live Your Vision
Strategies, “Vision without action is a daydream.
Organization, Action without vision is a nightmare.”
– Japanese proverb
Processes, Innovation
Strengthen Your Roots
Vision, Values,
Capabilities, Resources “For every thousand hacking at the
leaves of evil, there is one striking
© 2006 Vadim Kotelnikov at the root.” – Henry David Thoreau
© Vadim Kotelnikov More information at 1000ventures.com: “The Tree of Business”

9. “If you don’t know where you’re
going, it doesn’t matter which
road you take.”
. . .anonymous

10. Strategic Management Model

11. Strategy Formulation
Vision & Mission
External Opportunities & Threats
Internal Strengths & Weaknesses
Long-Term Objectives
Alternative Strategies
Strategy Selection

12. Refresh

13. Write Your Dream
In Life?
In
?

14. To accomplish great things, we
must not only act, but also
dream; not only plan, but also
believe

15. Key Terms
Vision Statement –
What do we want to become?
Mission Statement –
What is our business?

16. Articulate Your Vision
"Leaders inspire people with clear visions of
how things can be done better." The best
leaders do not provide a step-by-step
instruction manual for workers. The best
leaders are those who come up with new idea,
and articulate a vision that inspires others to
act.
 Create and project a clear vision
 Articulate a few clear stretch goals for your
company
 Make sure you have the very best people to
carry your vision out.
More information at 1000ventures.com: “Vision, Mission, Goals”

17. Examples of a Corporate Vision
GE We bring good things to life.
Ford To become the world's leading consumer company for
Motor Co automotive products and services.
Microsoft To enable people and businesses throughout the world to realize
their full potential.

18. Refresh

19. MenaItech Vision
To provide the highest quality and
most comprehensive enterprise level
HR solutions that fit the MENA
region’s requirements, utilizing the
latest technologies and best HR
business practices

20. Mission
Peter Drucker: -- Think through
the overall mission of a
business. Ask the key question:
“What is our Business?”

21. Mission Statement
• Purpose/reason for organization
• Promotes shared expectations
• Communicates public image
• Who we are; what we do; what
we aspire to

22. MenaItech Mission
To provide HR solutions that maximize
the return on the human capital
investment for all MenaITech
customers by providing accurate and
reliable management information,
improving access to information, and
reducing costs of operating the HR
solution.

23. Long-term Objectives
Mission-driven pursuit of specified
results more than one year out

25. Long-term Objectives
Essential for ensuring the firm’s
success
• Provide direction
• Aid in evaluation
• Create synergy
• Focus coordination
• Basis for planning,
motivating, and
controlling

26. Strategies
Means by which long-term objectives
are achieved

27. The Three Hierarchical Levels of Strategy
Corporate
Strategy
Business you should be in
Business Strategy
Tactics
to beat the competition
Functional Strategy
Operational methods
to implement the tactics
More information at 1000ventures.com: “Enterprise St

28. The Organization Life Cycle
Introduction Growth Maturity Decline
stage stage stage stage
concentration Integration Diversification Retrenchment
Industrysales
Revenue
0
Industryprofits
Time

29. STRATEGY FORMULATION
Identify
Mission
Derive
Objectives
Identify
Alternative Strategies
Evaluate
Alternatives
Select
Preferred Alternatives

30. Competitive Strategies
– producing and marketing a good quality
Cost Leadership product or service at a lower cost
than your competitors.
– creating a product or service that is
Differentiation perceived as being unique
"throughout the industry".
– addressing a "focused" segment
Focus of the marketplace, product form or
cost management process
Source: “Competitive Advantage”, Michael Porter 1000ventures.com

31. Strategies
Some Examples
• Geographic expansion
• Diversification
• Acquisition
• Market penetration
• Retrenchment
• Liquidation
• Joint venture

32. Annual Objectives
Short-term milestones that firms must
achieve to attain long-term objectives

33. Policies
Means by which annual objectives will
be achieved

34. Strategy Implementation
Annual Objectives
Policies
Employee Motivation
Resource Allocation

35. Strategic Management
achieves a firm’s success
through integration ––
Management Marketing
Finance/Accounting Production/Operations
Research & Development MIS

36. Strategy implementation
 Most difficult stage
 Mobilization of employees &
managers
 Interpersonal skills critical
 Consensus on goal pursuit

37. Strategy Implementation
Success Rates and Major Impeding Factors
Planned implementation according to
100%
strategic plan
Actual implementation as reported by
50%
managers themselves
Actual implementation as estimated by
10%
outside observers
Adapted from “Strategic Management”, Alex Miller, 1998 More information at 1000ventures.com: “Strategic Mana

38. Strategy Evaluation
Internal Review
External Review
Performance Metrics
Corrective Actions

39. Strategy Evaluation
Final Stage of Strategic Management
Subject to future modification
Today’s success no guarantee of future
success
New & different problems
Complacency leads to demise

40. And In Conclusion:
Plan-Do-Check-Act
.P. considers both the preplanning and
strategic planning processes;
.D.encompasses both the deployment
and implementation of the plan;
.C. tracks progress, measures results
and outcomes, and evaluates all
three.
.A. feeds the evaluation back to the
system and either adjusts or
standardizes the system based upon
that feedback.

41. Strategic Planning
New Dynamic Model for the New Era of Rapid
Change
TRADITIONAL STATIC MODEL
Effective if change cycle is longer than duration of your project
Planned
Planning Implementation
Results
NEW DYNAMIC MODEL
Effective if change cycle is shorter than duration of your project
External Change : technology x market x competition
Planning (+ adapting + anticipating)
Internal change: learning x capabilities Results
•Planned
•Modified
Implementation •New
© Vadim Kotelnikov More information at 1000ventures.com: “Strategic Planning”

42. Refresh

44. Organization Environment
Societal-environment
Economic Legal
Task-environment
Internal:
Culture
Structure
Resources
Competitors
Distributors
Social Physical
Technological

45. Opportunities and Threats
(External)
Largely beyond the control of a single
organization

46. Opportunities & Threats
(External)
Analysis of Trends:
• Economic
• Social
• Cultural
• Demographic/Environmental
• Political, Legal, Governmental
• Technological
• Competitors

47. Environmental Scanning
(Industry Analysis)
Process of conducting research and
gathering and assimilating external
information

48. Strengths & Weaknesses
(Internal)
Controllable activities performed
especially well or poorly

49. Strengths & Weaknesses
(Internal)
Typically located in functional areas of the firm
• Management
• Marketing
• Finance/Accounting
• Production/Operations
• Research & Development
• Computer Information Systems
• Culture
• Structure

50. Assessing the Internal
Environment
Financial Ratios
Performance Metrics
Internal Factors
Industry Averages
Survey Data

51. SWOT Analysis
Internal External
Build on STRENGTHS Exploit OPPORTUNITIES
• What is your competitive advantage? • What trends may impact your business?
• What are your core competences? • How can you exploit external changes?
• What are your distinctive capabilities? • How to turn problems into opportunities?
• Other strengths • Other opportunities
Revolve WEAKNESSES Avoid THREATS
• What are your weak point? • What obstacles do you face?
• What problems do you have? • What your competitors could do?
• What necessary expertise do you lack? • What could damage your business?
• Other weaknesses • Other threats
1000ventures.com

52. A word of caution,
 SWOT analysis can be very subjective. Do
not rely on it too much.
 Two people rarely come-up with the same
final version of SWOT.
 TOWS analysis is extremely similar. It
simply looks at the negative factors first in
order to turn them into positive factors.
So use it as guide and not a
prescription!

53. Simple rules for
successful SWOT analysis
 be realistic about the strengths and weaknesses of your
organization
 analysis should distinguish between where your organization
is today, and where it could be in the futures
 be specific. Avoid grey areas.
 always analyse in context to your competition i.e. better
than or worse than your competition
 keep your SWOT short and simple. Avoid complexity and
over analysis
 SWOT is subjective.

54. Refresh

55. MenaItech SWOT

56. Refresh

62. What is PEST Analysis?

63. Porter’s Model
Factors That Determine Competitiveness Within an Industry
New entrants
Threat of new
entrants
Bargaining INDUSTRY
power of COMPETITORS
suppliers
Suppliers Buyers
Bargaining
Intensity of rivalry power of
buyers
Threat of
substitutes
Substitutes
Source: “Competitive Strategy”, Michael E. Porter 1000ventures.com

64. Analysing the environment -
Five Forces Analysis
 Five forces analysis helps the marketer to
contrast a competitive environment.

65. The threat of entry.
 Economies of scale.
 The high or low cost of entry
 Ease of access to distribution
channels
 Cost advantages.
 Will competitors retaliate?
 Government action
 How important is differentiation?

66. The power of buyers
 This is high where there a few, large
players in a market
 If there are a large number of
undifferentiated, small suppliers
 The cost of switching between
suppliers is low

67. The power of suppliers
 The power of suppliers tends to be a
reversal of the power of buyers.
 Where the switching costs are high
 Power is high where the brand is powerful.
 There is a possibility of the supplier
integrating forward
 Customers are fragmented (not in clusters)
so that they have little bargaining power

68. The threat of substitutes
 Where there is product-for-
product substitution
 Where there is generic
substitution (competing for the
currency in your pocket)
 We could always do without e.g.
cigarettes.

69. Competitive Rivalry
 This is most likely to be high where
entry is likely; there is the threat of
substitute products, and suppliers and
buyers in the market attempt to
control.
 This is why it is always seen in the
centre of the diagram.

70. Financial Analysis
Financial Ratios are Important –
–Ration Analysis
•Liquidity ratios
•Profitability ratios
•Activity ratios
•Leverage ratios

71. Financial Analysis
Basic Steps
1. Historical income statements/balance
sheets
2. Compare historical statements over
time
3. Calculate changes individual items-
cumulative
4. Change as percentage and absolute
amount
5. Adjust for inflation if significant factor

72. Altman’s Bankruptcy Formula
Z = 1.2x1 + 1.4x2 + 3.3x3 + 0.6x4 + 1.0x5
where
x1 = Working capital divided by total assets.
x2 = Retained earnings divided by total assets.
x3 = Earnings before interest and taxes divided
by total assets.
x4 = Market value of equity divided by total
liabilities.
x5 = Sales divided by total assets.
Z = Overall index of corporate fiscal health.

73. Altman’s Bankruptcy Formula
Z<1.81 significant credit Problem
Z>3.00 Healthy Organization
1.81<Z<3.00 ?????????????????

74. Refresh

76. Overview & Current Situation
The largest retailer, discount store chain in the world
(Sales $345 b 2007 FY & 1.9 m associates)
Global company since 1991 (2007 > 6,700 stores)
Masters of Cost leadership Strategy
Three operating SBUs

77. SBUs growth & Percent of total sales
Wal-Mart
Wal-M Stores Sam’s Club
International
% Total % Total % Total
No No No
Sales Sales Sales
2007 3443 65.6 % 579 12.1% 2757 22.3%
2006 3289 67.9% 567 12.9% 2181 19.2%
2005 3151 68.1% 551 13.2% 1480 18.7%
% No
increase 9.3 5.1 86.3
2007/2005

78.  Current Financial Performance
PM% ATO ROA% ROE% LTD b$
2007 3.6 2.44 8.8 22 27.2
2006 3.6 2.58 9.3 22.9 26.4
2005 3.6 2.72 9.8 23.1 20.1
2004 3.5 2.77 9.7 22.4 17.1
2003 3.5 2.74 9.6 21.8 16.5
2002 3.2 2.81 9.0 20.7 15.6
2001 3.1 3.0 9.3 23.0 12.5
2000 3.3 3.06 10.1 25.5 13.7

79.  Current Financial Performance
Net Sales $b CSSI*% Stock price
2002 201.2 6 56.98
2003 226.5 5
2004 252.8 4
2005 281.5 3
2006 309 3
2007 345 2 46.37
*CSSI: Comparable Store Sales Increase in USA

80. Recommended Strategy
1. Growth (USA) via related (concentric) Diversification with
Focused Horizontal Growth portfolio (outside USA) via:
a- Internal development of new stores type (high quality
up-scale goods, image & profits) to fit urban locations
b- Acquisition of local chains (having such image or
specialty chains)
c- Focus locations portfolio choice (Expand in NA, China,
India & Slow growth in Europe)
b- Establish JV (instead of Acquisition)

81. Business Plan

83. “What we think, know, or believe in is,
in the end, of little consequence. The
only consequence . . . is what we
do..”
(Haines, 1995)

84. What is a Business Plan?
A business plan is a written
description of the goals and
objectives of the business and how
they are going to be achieved. It
includes the mission of the business
along with the production,
organizing, marketing, and financing
intentions.

85. Why need Business Plan?
1. To Map the Future
2. To Support Growth
and Secure Funding
3. To Develop and
Communicate a Course of
Action
4. To Help Manage Cash
flow
5. To Support a
Strategic Exit

86. PLAN YOUR PLAN
Believe it or not, part of planning
your plan is planning what you'll do
with it

87. PLAN YOUR PLAN
Do you intend to use your plan to help you
understand your organization situation?
Do you intend to use your plan to help you
raise money?
Do you intend to use your plan to start up
new Business?
Do you anticipate showing your plan to suppliers
to demonstrate that you're a worthy customer?

88. Do you need to an estimate of your start-up costs?
Do you need to make revenue estimate (by defining your
market -- who your customers will be -- and the percentage of
the market you can expect to reach)?
Do you intend to use your plan to
attract talented employees?

89. Refresh

90.  Job Interview

91. How Effective Is the
Business Plan?
 How effective a Business Plan is depends
on how well the following questions are
answered:
 Who are we?
 What do we do?
 What do we have to offer?
 Why will someone pay for our
products/service?
 What resources do we have?
 Where are we going?
 What do we need to get there?
 Why will we be successful?
 Why should someone participate or invest?
 How will we measure performance?

92. Key Components of a Business
Plan
The business plan covers areas:
1. Executive Summary
2. The Industry, the Company, and the Products
3. Market Research and Analysis
4. Marketing Plan
5. Operating Plan
6. Management Team
7. Financial Plan

93. Executive Summary
 Always “ Leave it until the End”
1. Business name
2. Business Location
3. What Product or services you
sell
4. Purpose of Plan

94. The Industry, the Company, and
the Products
This section of the business plan
describes the business venture in a
detailed but concise manner. You
must clearly describe:
 The nature of the industry
 The proposed business
 The product the business
plans to offer

95. The Industry
Present the current status and outlook for the industry in
which the business will operate.
 New products and developments
 New markets and customers
 General trends affecting the business
 Identify sources of information used to describe trends

96. The Company
Write a detailed description of the proposed
business venture, the products and services it
will offer, and the principal customers.
 Mission statement with goals and objectives
 Ownership and legal form of the company
 Reasons why the business will be successful

97. The Products or Services
Describe in detail the products or services to be sold, as
well as the application of the product or service.
 Benefits to the customers
 Competitive advantages
 Unique features
 Current state of development

98. Market Research and Analysis
This section of the business plan presents enough facts
obtained through market research and analysis to
determine if the product or service has a substantial
market in a growing industry despite a competitive
market.
 Customers
 Market Size and Trends
 Competition
 Market Share and Sales

99. Types of Market Research
PRIMARY RESEARCH = DO IT YOURSELF:
 Observation
 Surveys
 Interviews
SECONDARY RESEARCH = USE EXISTING DATA:
 Public Library
 College or Universities
 Chamber of Commerce
 Business Publications
 Trade Shows
 The Internet
 Census Information
 Sales Tax Data

100. Types of Market Analyses
The information obtained through primary and
secondary research techniques can be analyzed in a
variety of ways.
 Economic Trend Analysis
 Political and Social Analysis
 Customer Analysis
 Market Potential Analysis
 Competitive Analysis

101. Customers
Identify your target market and develop a
customer profile.
 Demographic profile
 Lifestyle patterns
 Expectations

102. Competition
List the strengths and weaknesses of competitive
products and services and list the companies that
supply them.
 Identify and list current and future competitors
 Assess the competition on the basis of price,
quality, performance, service, etc.
 Discuss advantages and disadvantages of
competing products or services

103. Market Share and Sales
Summarize what it is about your product or
service that will make it sell in the face of
current and future competition.
 Identify and list major customers and
estimate potential sales
 Estimate share of the market
 Estimate sales in units and dollars for the
next two to five years

104. Marketing Plan
This section of the business plan describes the company’s
marketing goals and objectives and how they will be
achieved.
 Overall Market Strategy
 Pricing
 Sales Tactics
 Advertising and Promotion
 Packaging
 Marketing Plan Outline

105. Overall Market Strategy
Describe the general marketing philosophy and strategy
of the company.
 Derived from market research and analysis results
 Include discussion of markets targeted for sales
promotions
 List short-term and long-term marketing objectives
 Discuss specific marketing tactics

106. Sales Tactics
Describe specific actions that will be taken to generate sales and
distribute the product or service to customers.
 Analyze effectiveness of everything available within the
sales system
 List channels such as salespeople, agents, dealers, and
direct mail services
 Describe methods that will be used to distribute products
to customers
 Describe merchandising techniques

107. Advertising and Promotion
Describe approaches the company will use to
bring the product or service to the attention of
the target market.
 List advertising methods along with benefits
and costs
 Discuss promotional efforts and strategies
 Publicity

108. Marketing Plan Outline
A marketing plan outline is a useful tool for pulling together
information related to the marketing plan. The marketing plan
outline should include information on the following:
 Marketing situation
 Marketing objectives
 Marketing Strategies
 Budget
 Action plan
 Evaluation

109. Operational Plan
Detailed information on
development specifics such as
who might be supplying your
products, how will it be shipped,
personnel and resources
management.
© COPYRIGHT 2004 BANGKOK BUSINESS CHALLENGE®

110. Financial Plan
•Important Assumptions
•Key Financial Indicators
•Break-even Analysis
•Projected Profit and Loss
•Projected Cash Flow
•Projected Balance Sheet
•Business Ratios

111. What to Avoid in Your
Business Plan
 Place some reasonable limits on long-
term, future projections. (Long-term
means over one year.) Better to stick
with short-term objectives and modify
the plan as your business progresses.
Too often, long-range planning
becomes meaningless because the
reality of your business can be
different from your initial concept.

112.  Avoid optimism.
 Do not ignore spelling out what your
strategies will be in the event of
business adversities.
 Use simple language in explaining the
issues.
 Make it easy to read and understand.
 Don't depend entirely on the
uniqueness of your business or even a
patented invention.

114. What are the key steps to
preparing Action Plan?
 Step 1.
 Take (you're Targets of Financial,
Marketing, Sales…) , Group
strategies and tactics.
 Detail the activities necessary to
achieve each outcome.

115. What are the key steps to
preparing Action Plan?
 Step 2: Create an action plan, An action
plan has five elements :
1. Outcomes
2. Activities
3. Resources
4. Responsibilities
5. Timeline

116.  Step 3 :For each activity identify
resources, responsibilities and timelines.
 Step 4: Review your plan.
 Step 5 :For each year or new project
create a new action plan.

117. You're Action Plan is SMART,
How?
Specific
Measurable :
Achievable:
Realistic:
Time specific :