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Business development plan

  1. 1. Welcome Mr.Ramesh K RautMr.Ramesh K Raut
  2. 2. Business Development Plan
  3. 3. Suggested Readings Books • David H. Holt: Enterpreneurship, Prentice Hall of India, New Delhi, • Hisrich, Robert D. and Michael P. Peters: Entrepreneurship. • Furatko, Donald F. and Harold P. Welch: Strategic Entrepreneurial Growth,Harcourt Publishers: New York. • Agrawal, G.R., Entrepreneurship and Small Business Management in Nepal, M.K. Publisher, Kathmandu, 2005. • Various international journals like : Harvard Business Review (hbr), Journal of Management, • National Journal like : New Business Age, Boss Magazine • Publication of FNCCI : Doing Business in Nepal etc.
  4. 4. Objectives of the Course To help the students to prepare a comprehensive, well-researched business plan for a business opportunity. To encourage student to initiate their own business on the basis of their BDP. ( to develop as a job creator) To promote as a professional B D Planner/ Financial Planner.
  5. 5. • Contd…. To equip student to understand and analyses the BDP as a : Banker : Able to analyze the BDP whether loan should sanction or not. Investor : Able to analyze the BDP whether investment should invest or not. Venture Capitalist: Able to analyze the BDP whether the project feasible or not.
  6. 6. Qualities of Successful Entrepreneur Self Confident and optimistic Able to take calculated risk Respond positively to challenges Flexible and able to adapt Knowledgeable of markets Able to get along well with others Independent minded Versatile knowledge
  7. 7. Energetic and diligent Creative, need to achieve Dynamic leader Responsive to suggestion Take initiatives Resourceful and preserving ( safeguarding) Perceptive with foresight Responsive to criticism
  8. 8. Process of Developing New Venture
  9. 9. BDP is prepared in following cases To start new project / business. To operate existing project with increasing the capacity or make advancement in operation. To add the new project with running existing project. To operate the existing project in normal course of action systematically.
  10. 10. Purpose of BDP Internal Purpose: to craft the clear & comprehensive vision of the organization. to invite the existing shareholders for additional investment in the project. to motivate the staffs to achieve the goal. to show the commitment by top management.
  11. 11. • Contd…. External purpose: to attract the potential investors /venture capitalist. to assure the lenders / bankers to fulfill the legal requirements as per the instruction of government & authorities.
  12. 12. Contd…. To minimize the cost, risk and uncertainties, To formulate effective strategy, To safeguard the entrepreneurs from failure of business because it has been already identified the weaknesses and threats. To visualize the future of organization
  13. 13. • Contd… It enhance the knowledge about on project/ business It prevent / drop out the unrealistic projects, To attract the funding agency To convince the stockholders To assure the stakeholders
  14. 14. Structure of Business Plan There is no hard and fast rule of BDP structure , Major components should include under appropriate heading. Length of plan and its structure may be differ as per the project’s cost, nature, Environment, risk and investor’s interest.
  15. 15. Cover & Prefatory Pages Title of the Plan /Cover page Acknowledgement ( optional) Executive Summary Table of Contents List of tables and figures
  16. 16. Main Text of BDP Some of these contents areas may be more or less important depending on the kind of business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to follow a goal.
  17. 17. Supplementary Part Registration documents of entities like license, MOA / AOA, PAN etc. Ownership certificates Agreements and authorization copies CV of promoters Photographs of layout, plant, location and product.
  18. 18. Contd………… Map and designing Calculation sheets. Renewal certificates ( to show genuineness of business) Awards, recognition if available, Note: these documents help to make the BDP more strong and realiable.
  19. 19. Who prepare the business plan? Internal Expert : Entrepreneur / experts working with business prepare the BDP. .External Expert / Outsourcing Freelancers consultant may hire by the company. A team of Management expert, finance expert, technical expert prepare business plan.
  20. 20. Expertise required Knowledge of Business / Economy Knowledge of Product/production Knowledge of Market Knowledge of Org & Mgmt. Knowledge of Laws Knowledge of corporate Finance
  21. 21. Is BDP public document? Some think that BDP is private matter and should be highly confidential. They reluctant to provide access to unnecessary audience. Some want to publicize BDP to attract more and better investors. Good BDP is a assets of the Company which can be sold in a reasonable price.
  22. 22. How to write BDP? Exploring areas of interest Selection of suitable project, Market survey / Field Study & Consultation on Legal and Social aspect Technical aspect Financial aspect Environmental aspect Establishment of business entity
  23. 23. Literature review  Articles related to BDP,  Real Business plan of different projects,  Project guidelines issued by Departments of Industries  Publication of Government authorities, FNCCI, NCC, NRB, MOF etc.  Books related to entrepreneurship  International and national journal of Management, Entrepreneurship etc.  Websites of OECD, UNCTAD, Business School etc.  www.doingbusiness.org
  24. 24. Contd.. Macro economics condition, Social norms and values Relevant acts, rules, regulations, Government priority sector, Industrial policy, Industrial Relations, Income Tax and VAT provisions,
  25. 25. Guideline for selection of suitable project Major consideration… Your project would be better if not : Trading business Mega project Complex and lack of expertise in country Import based (more than 50% raw materials from outside) Easy to penetrate in market
  26. 26. Continued…. Project should be: Easy to manage by your own capacity Easy to establish and operate Suitable and acceptable in our society Unique in its nature, Sustainable Eco friendly
  27. 27. Continued….. Influential to equity investor outside your family, Influential to banker to enjoy leverage advantages ( Debt to total capital ratio to be at least 50%) Be assure that the existing infrastructure is sufficient to operate the business.
  28. 28. Criteria of Selection Realistic and affordable Small and Medium size / SME Interested area of entrepreneur, Less competitive area Favourable environment for business Attractive to new generation Sustainable and secure Convincing to lenders / venture capitalist
  29. 29. Legal and Social Aspect  To initiate the business a legal entity to be required,  Nature of business and size of the project determines the formation of entity.  Sole proprietorship Firm (only one shareholder),  Partnership ( at least 2 partners),  Private limited (1–50 shareholders),  Public limited (at least 51 to unlimited shareholders)  Cooperative (at least 25 members ).
  30. 30. Legal Aspects: Acts to be considered Company Act Partnership Act Private firm registration act Income Tax Act VAT Act Cooperative Act Industrial Enterprise Act,
  31. 31. Other Acts / Rules to be considered  Nepal Environmental Policy and Action Plan, 1993  EIA Guideline for the Forestry Sector, 1995  Environment Protection Act ,1996 and Environmental Protection Regulation, 1997  Lands Act, 1956 (Revised 1965)  Nepal Industrial Development Corporation Act, 1958  Aquatic Animals Protection Act, 1961  Forestry Act, 1963  Irrigation Act, 1963
  32. 32. Acts / Rules to be considered • Labour Act, 1991 • Nepal Electricity Act, 1964 • Tourism Industry Act, 1965 • Plants Protection Act, 1972 • National Parks and Wildlife Conservation Act, 1973 • Pasture Land Nationalization Act, 1974 • Decentralization Act, 1982 • Solid Waste Management and Resource Mobilization Act, 1986 • Royal Academy of Science and Technology Act, 1988 • Water Resources Act, 1992 • Forest Act, 1993 • And so on………….
  33. 33. Other Policies to be Considered:  Eleventh Interim Plan 2008 -2010  Local-Self Governance act , 1998  New Industrial Policy ,2010  Trade Policy, 1982  Trade and Transit Agreement (with India),1992  Import and Export (Control) Act, 1997  Collaborative Forest Management Guideline, 2003  Procedural Guideline for the Sale of Forest Products 2060 B.S.
  34. 34. LABOUR ISSUES In the manufacturing sector, all small enterprises with less than ten workers are categorized as informal. Labour act attracted if 10 or more workers employed in the entity. Trade Union is another major factors to be considered.
  35. 35. Local issues • Pokhara is a leading city in tourism industry, consider “Nepal Tourism Year- 2011” and make your plan, • Lekhnath Municipality is growing as new industrial zone. • Education and Health tourism is another issue in Pokhara, think about it.
  36. 36. Technical Aspect Technical know how is most vital factor of the business, High technology requires high investment and high skilled manpower. It increases repair & maintenance cost and decreases operating expenses. Technology may be obsolete accidently which causes more loss to the firm,
  37. 37. Financial Aspect Finance is important factor that influence the decision of the firm most. Capital structure should be optimum. Consider working capital and cash flow Projection of revenue and expenses should base on real ground.
  38. 38. Length of Plan • The length of Business Plan depends on various factors like : purpose ( for whom) and nature ( what type ) and size ( How much) . • If business plan prepare to seek millions of amounts as a equity capital to start a risky venture, it should do a lot of explaining and convincing. • If the plan for internal purposes, to manage an ongoing business, a much more abbreviated version should be fine. • More risky business requires more explanation to convince the investors.
  39. 39. Length of Plan… New venture requires more explanation, Mega project are also obviously long, Project that requires Foreign Investment also need more explanation, Small and Medium size project, familiar project and existing project need short explanation, Lengths and depth of BDP depends on the users demands and interest.
  40. 40. Structure of BDP Part I: Background / Introduction of the Company  Legal status  Ownership  V M G O of company  Location  Existing status of the company –  Resources:-financial, sales revenue, Expenditure,
  41. 41. Continued… Introduction the project Objectives Strategy Rationale Location Uniqueness of project Milestone / highlights of project
  42. 42. Part II: Production About the Product Production Materials Availability of materials Cost of Materials Alternative sources of materials Production Techniques Production Plan
  43. 43. Contd… Equipments Purchase of Equipments Capacity of Equipments Operation of Equipments Repair, Maintenance of Equipments Availability of work force Factory Location and Layout Foundation of Equipments and operation initiation Capacity of Equipment
  44. 44. Chapter III : Management & Human Resource Plan Structure of the organization Human Resources Policy Job Description Need of Indirect staff Need of Direct staffs Need of Expertise Training, development etc.
  45. 45. Chapter IV : Environmental / SWOT Analysis Macroeconomic analysis Demand and supply analysis, Assessing the various risk political, economic, socio cultural, technological, legal
  46. 46. Analysis of competitors, Suppliers, Labour market Analysis of internal factors Labour Union Promoters / shareholders Organisational values and norms
  47. 47. Chapter V : Marketing Plan Present Scenario of product Gap Analysis Marketing Strategy Marketing Plan Marketing Functions –4Ps Marketing Challenges
  48. 48. Chapter VI : Financial Calculation & Analysis  Existing Investment ( if business is already set up)  Proposed Investment / new investment  Details of fixed assets  Details of Working Capital  Capital Structure  Sources of Equity  Sources of Debt / Loan ( LTL, STL)  Loan Repayment Schedule/ Amortisation Schedule
  49. 49. Contd… Estimation of Sales / Revenue Estimation of Variable cost Estimation Overhead Expenses Estimation Production cost Estimation of Financial Cost Projected Income Statements Projected Balance Sheet Projected Net Working Capital Projected Cash Flows Break Even Point
  50. 50. • Cond… Evaluation the projects by using Pay Back Period, NPV, IRR, PI Sensitivity Analysis
  51. 51. Major Financial Ratios Return of Investment (Net Income / Investment) Return of Equity ((Net Income / Equity) Current Ratio (Current Assets / Current Liabilities) Quick Ratio (Current Assets / Current Liabilities) Interest Coverage Ratio (Interest/EBIT)
  52. 52. Debt to Total Capital Ratio ( Debt/Total Capital) Net Profit Margin ( Net Profit / Sales) Gross Profit Margin ( Gross Profit / Sales) Operating Profit Margin I( Operating Profit/Sales) Total Assets Turnover Fixed Charge Coverage Ratio (DSR) Debt to Equity Ratio ( Debt/Equity Ratio)
  53. 53. Underlying Assumptions Cost of materials, labour utilities, No. of Operating Days, Working Hours Basis of salary, Allowances, Depreciation,
  54. 54. Insurance, repair & Maintenance Compensation etc. Pricing Policy Capacity of Project Growth rate of production and Sales Credit Policy and Receivables calculation Inventory Policy
  55. 55. Conclusion & Recommendation Conclusion The Project is Technically viable  and Financially Feasible Recommendation with Suggestions To success of the project, following things to be considered……………..
  56. 56. Qualities of Good BDP Convincing Understandable Realistic Sincere Trustworthy Plausible Practicable Uncomplicated
  57. 57. Affordable Feasible Popular Sustainable Economical Profitable Socially acceptable Unique
  58. 58. Top Business Personalities Steve Jobs
  59. 59. Rupert Murdoch
  60. 60. Lloyd Blankfein
  61. 61. Warren Buffett
  62. 62. Rex Tillerson
  63. 63. Bill Gates
  64. 64. Jeff Immelt
  65. 65. Katsuaki Watanabe
  66. 66. A.G. Lafley
  67. 67. John Chambers
  68. 68. Li Ka-shing
  69. 69. Lee Scott
  70. 70. Lakshmi Mittal
  71. 71. Jamie Dimon
  72. 72. Mark Hurd
  73. 73. James McNerney
  74. 74. Marius Kloppers
  75. 75. Steve Schwarzman
  76. 76. Carlos Slim
  77. 77. Indra Nooyi
  78. 78. Ratan Tata
  79. 79. Bob Iger