How to build Your Business Plan

Khawla AlShurafa
16, February 2008
Why Three Apples?
Why Three Apples?
 Why Three apples

Business
Plan
Three
Basics
What is more important
Plan or Planning?
Workshop Papers

Financial
Plan

PEST
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
 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
If you dont know where youre
going, it doesnt matter which
road you take.
. . .anonymous
Strategic Management Model
Strategy Formulation

Vision & Mission

External Opportunities & Threats

Internal Strengths & Weaknesses

Long-Term Objectives

Alternative Strategies

Strategy Selection
Refresh
Write Your Dream
In Life?
In

?
To accomplish great things, we
must not only act, but also
dream; not only plan, but also
believe
Key Terms

Vision Statement
What do we want to become?

Mission Statement
What is our business?
 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

 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.
Refresh
 MenaItech Vision

To provide the highest quality and

most comprehensive enterprise level
HR solutions that fit the MENA
regions requirements, utilizing the
latest technologies and best HR
business practices
 Mission

Peter Drucker: -- Think through

the overall mission of a
business. Ask the key question:
What is our Business?
 Mission Statement

Purpose/reason for organization

Promotes shared expectations
Communicates public image
Who we are; what we do; what
we aspire to
 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.
Long-term Objectives

Mission-driven pursuit of specified

results more than one year out
 Long-term Objectives

Essential for ensuring the firms

success
Provide direction
Aid in evaluation
Create synergy
Focus coordination
Basis for planning,
motivating, and
controlling
Strategies

Means by which long-term objectives

are achieved
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
 The Organization Life Cycle

Introduction Growth Maturity Decline

stage stage stage stage

concentration Integration Diversification Retrenchment

Industrysales
Revenue

0
Industryprofits

Time
STRATEGY FORMULATION

Identify
Mission

Derive
Objectives

Identify
Alternative Strategies

Evaluate
Alternatives

Select
Preferred Alternatives
 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

Strategies

Some Examples
Geographic expansion
Diversification
Acquisition
Market penetration
Retrenchment
Liquidation
Joint venture
Annual Objectives

Short-term milestones that firms must

achieve to attain long-term objectives
Policies

Means by which annual objectives will

be achieved
Strategy Implementation

Annual Objectives

Policies

Employee Motivation

Resource Allocation
 Strategic Management
achieves a firms success
through integration

Management Marketing
Finance/Accounting Production/Operations
Research & Development MIS
Strategy implementation

Most difficult stage

Mobilization of employees &
managers
Interpersonal skills critical
Consensus on goal pursuit
 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
Strategy Evaluation

Internal Review

External Review

Performance Metrics

Corrective Actions
Strategy Evaluation

Final Stage of Strategic Management

Subject to future modification

Todays success no guarantee of future
success
New & different problems
Complacency leads to demise
 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.
 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

Refresh
Organization Environment
Societal-environment

Economic Legal
Task-environment

Internal:
Culture
Structure
Resources

Competitors
Distributors
Social Physical

Technological
Opportunities and Threats
(External)

Largely beyond the control of a single

organization
Opportunities & Threats
(External)

Analysis of Trends:
Economic
Social
Cultural
Demographic/Environmental
Political, Legal, Governmental
Technological
Competitors
 Environmental Scanning
(Industry Analysis)

Process of conducting research and

gathering and assimilating external
information
Strengths & Weaknesses
(Internal)

Controllable activities performed

especially well or poorly
 Strengths & Weaknesses
(Internal)
Typically located in functional areas of the firm
Management
Marketing
Finance/Accounting
Production/Operations
Research & Development
Computer Information Systems
Culture
Structure
Assessing the Internal
Environment

Financial Ratios

Performance Metrics
Internal Factors
Industry Averages

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

 Analysing the environment -
Five Forces Analysis

Five forces analysis helps the marketer to

contrast a competitive environment.
 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?
 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
 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
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.
 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.
 Financial Analysis

Financial Ratios are Important

Ration Analysis

Liquidity ratios
Profitability ratios
Activity ratios
Leverage ratios
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
 Altmans 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.
Altmans Bankruptcy Formula

Z<1.81 significant credit Problem

Z>3.00 Healthy Organization

1.81<Z<3.00 ?????????????????
Refresh
 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

SBUs growth & Percent of total sales

Wal-Mart
Wal-M Stores Sams 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
 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

 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
 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)
Business Plan
What we think, know, or believe in is,
in the end, of little consequence. The
only consequence . . . is what we
do..
(Haines, 1995)
 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.
 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
 PLAN YOUR PLAN

Believe it or not, part of planning

your plan is planning what you'll do
with it
 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?
 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?
Refresh
 Job Interview
 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?
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
 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
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
 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

 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

 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

 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

 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
 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
 Customers

Identify your target market and develop a

customer profile.

Demographic profile

Lifestyle patterns

Expectations
 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
 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
 Marketing Plan

This section of the business plan describes the companys

marketing goals and objectives and how they will be
achieved.

Overall Market Strategy

Pricing

Sales Tactics

Advertising and Promotion

Packaging

Marketing Plan Outline

 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

 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

 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
 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
 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

 Financial Plan

Important Assumptions
Key Financial Indicators
Break-even Analysis
Projected Profit and Loss
Projected Cash Flow
Projected Balance Sheet
Business Ratios
 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.
 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.
 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.
 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
 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.
 You're Action Plan is SMART,
How?

Specific

Measurable :

Achievable:
Realistic:

Time specific :