B-Plan Preparation

Some Guidelines
The following text has been arranged in a manner that will give you a step-by-step understading of the whole process that is involved in the generation of a business plan. The indexing is as follows: Part 1 Idea generation and Customer Analysis Idea generationIdea Categories An analysis of existing ideas and some examples What is the meaning of all this exercise? Bad Idea to Good Idea (a fun way of doing it!) Customer AnalysisThe Customer The Analysis An Example Part 2 Marketing Strategy and the Finances The Marketing StrategyPositioning Packaging Pricing The FinancesSome Costs The sources Year-wise Profitability Projection

PART 1

Idea generation & Customer Analysis

Idea Generation
If we just do a 5 minute brainstorming on arbitrary issues (especially the ones we can better relate to), we can easily come up with loads and loads of ideas. Idea generation actually requires just an initial trigger to set the brain in a creative mode. This trigger comes if you forcefully start thinking on some issues you have good knowledge of and/or can show some innovation in. These ideas could be applications, redefinition of a working system to make it more efficient, a new technology tool to help in the working of an issue, etc. A comprehensive study was recently conducted on training and sequence of group idea generation. For carrying out this study, the experimenters trained volunteers with some idea generation skills but more importantly gave them practice in idea generation. These practices made the triggering of the creative mode easier and quicker. They were then further tested in alone-to-group and groupto-alone idea generation sequences. It was eventually found that the alone-to-group sequence generated a larger number of ideas. The quality of ideas also improved due to the training and the adoption of the correct sequence. Hence, what we propose is that you start practicing brainstorming by thinking of new ideas for just ten to fifteen minutes daily. Do this in solitude. After a few such sessions you would have generated enough ideas to open them up for a group discussion and short list some of them based on application and feasibility in development. The final list would compile ideas selected from amongst the vast resource of ideas generated by contribution from each group member.

Idea Categories
Go through some failed inventions in the history of human civilization and you will realize that ideas can be so random as to not fall in any category at all. However, for a generalization we would certainly list some categories in which you can start practicing idea generation: - Household related ideas - Websites and portals - Manufacturing

- Core Sciences - Material Sciences - Hardware and/or software technology products (including Biotechnology, Electronics etc.) - Telecommunications - Entertainment - Tourism - Setting up shops or stores (Retail) - Environment (eg. SODIT) - Rural development - Social cause - IPR and patent issues - Banking/ Finance - Consultancy, marketing or ad-making. - Human Resource development - Hospitality - Food Processing - Restaurants. The message that we would like to put forward is: try to recognize your talents, the things you do best and the things that you actually like to do. Then, think up of ways of making money out of it/them. Hence, if you just follow your heart and let your mind be free, you will definitely come up with viable and sustainable ideas.

An analysis of existing ideas and some examples

The percentage of truly new, novel and innovative ideas is just a mere 3-4%. Hence, 96% of ideas focus on the existing ideas. The ways in which the existing ideas can be worked upon are: I) Enhancement Means: improvement / refinement of features cheaper, better, faster, more user-friendly Examples: DOS to Windows; Mechanical Watch to Quartz Watch; Modem to ADSL modem; Ordinary TV to Flat Screen TV; Desktop PC to laptop PC to Tablet PC; Propeller engine to Jet engine. II) Extension Means: Adding some extra features. Examples: Toothbrush with built in Toothpaste; pen with a torchlight; the changing face of mobile phones; Memory sticks with MP3 players; Wristwatch with calculators; Cinema Multiplexes; Day care centers with tuitions; Swiss knife. III) Specialization Means: Creating your own niche out of a large field. Examples: Low cost airlines (Ryan Air, EasyJet, Air Deccan); Boutique financial advisory services; Super-specialty hospitals (Fortis Heart Centre); Finishing schools; Executive Search firms (CxOs only, finance professionals only).

The key to innovation is to recognize and exploit the changes that have taken place in the values, perceptions, attitudes, demographics giving rise to some gaps in the market. Treat these changes as opportunities, look for new realities and incongruity between peoples perception of the reality and what has become actual reality.

What is the meaning of all this exercise?

Well, lets just say, it is required in whatever you may do in future. If we knew how many creative thoughts and ideas we really had, we would be simply amaze ourselves. Moreover, brainstorming is a fabulous tool to generate ideas and to bring all the minds together under a single umbrella, leading to huge shift in thinking. In such a session, no ideas go waste, as each idea has the effect of bouncing off another person giving him a new string to start on and suddenly he will have an idea which sparks the ideas of another person. It is like a virus (in a good way) everyone becomes infected with, thus becoming a part of the process of thought innovation. Some of the outright benefits of brainstorming are: - It encourages creativity, expanding thinking to see all perspectives of a problem, providing a wide range of options. - Everyone equally involved, no one judging another persons ideas, every idea is recorded as worthy. - Ideas grow quickly due to contribution of various people - Sense of ownership to each member. - Environment free of criticism - Improvements in productivity It must be noted that Business plans are not meant entirely for those people who want to open companies or run businesses. Innovative ideas are needed in each kind of work that you would be involved in some years down the line.

Bad Idea to Good Idea

This is a method of idea generation whilst having fun. This method was contributed to the NEN by Tina Seelig (ED of Stanford Technology Ventures Program). A brief-up of the method is: Divide a group of people into various teams of around five members each. Ask each team to generate some really bad ideas (like advertising on footwear, food chewing service etc.) within 10 minutes. Select the worst from them. Take the ideas from all the teams, shuffle them and give them back in such a way that no team gets the idea it had offered. Now give some time period to each team for coming up with an innovative presentation on how they would convert this bad idea into a good business plan. This method not only gives an innovative approach, but also fosters an open and resourceful mindset. Hence, in totality, it develops idea generation and opportunity recognition skills in the participants.

Customer Analysis
The customer
Each category of idea has a target consumer set. You need to identify the sector of the general population that will go on to buy your product/avail your service. This is important to make a good judgment of the quantity of the product that would be in demand at a particular time, to estimate your capital requirements and financial strategy and to think up of a suitable way of marketing and even advertising your product to attract the target-set. To study the consumer base, you also need to study the demand of your competitors product (if there is one already).

The Analysis
An effective way of depicting this study is through the use of histograms, pie-charts and bar graphs. This will enable you to further divide your consumer base into sub-categories and study their role in the determining the demand for your product. Draw a projection of the variation in the consumer base with time. Determine whether this base will grow or stagnate. This also requires determining whether the demand would spread into new sectors of the population. Your ultimate goal in all this exercise is to determine whether your products market will grow or not. This will give an indication of the possible or the probable success of your venture. Another fact you need to define (as being part of your plan) is the time you have in mind that will enable you to capture the targeted market segment. This will also help in analyzing the ways in which you might need to change your product and present it in different forms as you plan the growth strategy. Use the three ways Enhancement, Extension and Specialization to attract newer customers.

An Example Y-axis represents the value in lacs

50 45 40 35 30 25 20 15 10 5 0

Individuals (Professionals) Retailers & Wholesalers Un-Organized Business SME's Large Organizations Customers

PART 2

Marketing Strategy & the Finances.

The Marketing Strategy
Once you have been able to identify the consumer/ customer set, you are in a position to draw out an effective strategy to market your product correspondingly. The issues that your strategy caters to are the Positioning, Packaging and the Pricing of the product. Keep in mind that for a successful launch, you need to visible first, then you need to be noticeable and finally, you need to be affordable.

Positioning
Your product could well be positioned as being an economical tool offering value for money. But, another issue that needs be covered is the place of sale. That itself will be able to position your product in true terms. For instance, take the example of a software tool that you intend to launch for different strata of the corporate world. The positioning could be done by having the following sources of distribution: Channel Partners: These could be local vendors, Chartered Accountants, Consultants etc. Website A separate company sales team. Hence, you need to make sure that you are able to establish a reach in the targeted customer set. For this, you will have to determine the steps in which you will carry out your launch. You mayt just begin with a local level launch graduating to the national and then the global in a span of a few years. But, to have a good estimate of resources that would be required, pre-plan all the launch-stages even before you execute the first.

Packaging
It just like the wrappings of the birthday presents. They not only generate some suspense and anxiety (along with an anticipation of being something really good) but even the type of packaging raises some

expectations. If the packaging seems expensive, we expect the gift to be expensive too. Hence, the way you package your product is essential for the initial response to your launch. A good packaging is considered done if you are put forward the answers to the following points in front of the public. Q1. Is your product robust? Q2. Is it something that actually makes work easier (not on paper but practically)? Q3. Is it affordable (value for money)? Q4. Is it easily available (with its servicing guaranteed)? Furthermore, you need to be able to relate to the target customer, making him feel that this product is actually made for him. But, make sure that you do not play with/ plan upon the emotion of the consumer. This actually is a negative that would hurt you badly in the long run if not earlier. An example of basing your strategy on the emotion of the consumer is the Sauna-Belt ads that you generally see. They package their products in such a way that the desperate have to come to them. Hence, people really emotional about being slim and loosing off their fat approach them enthusiastically. But, such type of portrayal doesnt do well for long.

Pricing
First of all if there is a competitor in the market already, keep track of its pricing policy. The policy may vary from region to region or from one strata of the society to the other. Also, there could be multiple versions of their product launched into different markets (catering to different customer-types). Hence, study all this and prepare your own plan based on such a strategy. However, if there is no competition and you have a virgin (unexplored) market in front of you, then there are various ways of deciding upon your pricing policy. Some of them are having a trial-basedlaunch, a simulated market for initial review or cheaper rates first-up. High price in the beginning will lead to low sales, but a lower price will guarantee that your product will at least get tested. It is really important to get reviews from your initial buyer. This will help you redesign the launch with the appropriate pricing policy. This is generally the case when you go for a trial based launch. The surveys give you directions for planning the details of the actual launch. Moreover, do keep some advertisement budget as well.

The Finances
Your market research so far would help you in building a sound execution plan. This in turn will help you determine the initial capital requirements. As you estimate this capital requirement, distribute the investments over a period of time. You never will be spending the capital all at once. Hence, make a proper investment plan as well categorizing the expected capital as being required immediately (for the initiation of the whole process), required after

the first phase of execution is over (and similarly for each successive phase) and finally the investments that would be required later (during the production cycle etc.).

Some Costs
Some general costs (cost of project) are given below. The first three points correspond to the fixed capital while the rest are called liquid assets. Hence, the various costs are: 1. Office Development For a professional outlook and easy approach, you need to have some official working place. The cost of setting-up such basic infrastructure also needs to be considered in the initial capital investments required. These include the premises rental, site development , hardware purchase and installation costs, office equipment and furniture etc. 2. Pre Operative Expenses These expenses are incurred until the actual commercial production doesnt start. These expenses include the employee pays amongst the various expenditures required before we actually start getting the returns. 3. Contingencies These are the margins you need to keep over you initial capital requirement estimate. These are required if our estimate proves to be wrong or we have the situation of the cost-overrun. This margin is kept from 5 20% of the estimate depending upon the inflation level. 4. Working Capital Margin (liquid assets) Here we basically define the costing for a cycle raw materials

Sources
1. Creditor One who loans (credits) money to you. The terms are simple and are agreed upon mutually. 2. Banks This is a source that should always be sought. The banks give two types of loans long-terms loans and/or Working Capital Loans. The terms differ as regards the fraction of the investment being contributed by the banks. In case of the long term loans, the ratio is 2:1 implying that you have to put in one-third of the investment and the rest will be given by the bank. While, in case of the working capital loan, the ratio is 3:1 implying that you have to put in jut one-fourth of the corresponding capital investment. 3. Promoters This is partner money. Even share holders come under this category. 4. Start-up Investors or Angel Investors These people fund your idea more than your business strategy. They will help you out in the initial stages if you are able to convince them of the potential your idea contains of being converted into a long-term viable business. They look for determination, dedication and most of all, passion. These people trust you and your idea.

5. Venture Capitalists (VCs) These are more shrewd (and more safe players) in the market. They will not fund you in the start of your venture, but when your venture has safely crossed the start-up stage and has overcome a few hiccups. They look for potential in the long-term and trust the business (including the strategy) more than anything else.

Year-Wise Profitability Projection

You need to draw a year-wise profitability projection of the sales trend expected (or planned). An example could be as follows: Particulars Sales Operating Expenses Earning before Int. Dep. Tax (EDEBIT) Interest (Int.) Depreciation (Dep.) Profit before Tax (PBT) Income Tax @ 33% PAT Year 1 500.00 134.28 365.72 4.80 18 342.92 113.16 229.76 Year 2 975.00 150.04 824.96 4.22 18 802.74 264.90 537.83 Year 3 2000.00 168.05 1816.95 3.72 18 1795.23 592.43 1202.81

Hence, all-in-all, you need to be aware of the expenditures at different stages of your venture, the sources of income (returns) and the sources of funding at different stages. All this needs to be studied in advance and forms an integral part of your plan.

Thus far was the summary of the two workshops that were held on B-Plan preparation by the EDC. We hope that the information proves to be enough for the initial development of a solid plan. These facts will not only help you participate in our own Intra-IIT B-Plan but will also benefit you in preparing the entries for the various open B-Plan competitions that we have at the national and the international levels.

Article By: Karandeep Singh