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 -
generation
Idea
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
Analysis-
The
Customer
The
Analysis
An Example

Part 2 – Marketing Strategy and the

Finances
The Marketing
Strategy-
Positioning
Packaging
Pricing

The
Finances-
Some 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
group-
to-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
Mean : improvement / refinement of features – cheaper, better, faster, more user-
sExample friendly
: DOS to Windows; Mechanical Watch to Quartz Watch; Modem to ADSL modem;
sTV to Flat Ordinary
Screen TV; Desktop PC to laptop PC to Tablet PC; Propeller engine to Jet
engine.
II)
Extension
Mean : Adding some extra
sExample features.
: Toothbrush with built in Toothpaste; pen with a torchlight; the changing face of
sphones; Memory
mobile sticks with MP3 players; Wristwatch with calculators; Cinema Multiplexes;
Day
care centers with tuitions; Swiss
knife.
III)
Specialization
Mean : Creating your own niche out of a large
sExample field.
: Low cost airlines (Ryan Air, EasyJet, Air Deccan); Boutique financial advisory
sSuper-specialty
services;
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 people’s perception of the reality
and
what has become actual
reality.

What is the meaning of all this exercise?

Well, let’s 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
apart 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
agood 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 competitor’s 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
product’s 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 Individuals (Professionals)
30 Retailers & Wholesalers
25
Un-Organized Business
20
15 SME's
10 Large Organizations
5
0
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.
Websit
eA 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 serv icing
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 doesn’t 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-
based-
launch, 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
2. etc.
Pre Operative
Expenses
These expenses are incurred until the actual commercial production doesn’t start.
These
expenses include the employee pays amongst the various expenditures required before
we
actually start getting the
3. returns.
Contingencie
sThese 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 lev
4. el.
Working Capital Margin (liquid
assets)
Here we basically define the costing for a cycle – raw
materials
Sources

1. Credito
rOne who loans (credits) money to you. The terms are simple and are agreed upon
2. mutually.
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
3. investment.
Promoter
sThis is partner money. Even share holders come under this
4. category.
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:
Particular Year 1 Year 2 Year
sSales 500.00 975.00 2000.00 3
Operating Expenses 134.28 150.04 168.05
Earning before Int. Dep. Tax (EDEBIT) 365.72 824.96 1816.95
Interest (Int.) 4.80 4.22 3.72
Depreciation (Dep.) 18 18 18
Profit before Tax (PBT) 342.92 802.74 1795.23
Income Tax @ 33% 113.16 264.90 592.43
PAT 229.76 537.83 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 v arious open B-Plan competitions that we have at the national and the
international
levels
.

Article
By:
Karandeep
Singh