Business Plan & Guidance Notes July 2014 For more information please contact: Iheanyi Ibe Enterprise Support Officer Cardiff University Enterprise Centre for Skills, Enterprise and Volunteering (CSEV) Students Union Cardiff Telephone: 02920 781442 Email: enterprise@cardiff.ac.uk
A Guide to Business Planning Contents of this Guide What is the Business Plan? 3 The Objectives of the Business Plan 4 Contents of the Business Plan 5 The Executive Summary 6 Company Information 6 Introduction 7 Products and Services 7 Markets and Marketing 9 Management and Personnel 10 Future Developments 10 Finance 11 Appendices 12
What is the Business Plan? A Business Plan is a document which encapsulates the long-term objectives, medium term goals and short term forecasts of the business. It will include reference to past history and current operations; nevertheless it remains essentially a blueprint for the future. Although some degree of standardisation is desirable, in practice business plans will vary in content since each reflects the philosophy and the special circumstances and requirements of the particular business. It will refer to all aspects of the business, so the reader and those involved are clear as to the main objectives and how they are to be reached. Some points to bear in mind are: It should describe the company and project concisely and accurately. It should normally not be more than 15 pages long with a clear structured layout. Supplementary information and other supporting material should be included as appendices. The business plan will normally cover a three-year period and include detailed financial forecasts for this period. A longer forecast period (generally five years) will usually be necessary where equity finance is to be raised. Always include an Executive Summary it will allow the reader to obtain an overview of the project immediately. The complete business plan (excluding appendices) should be readable in half an hour. Whilst the primary purpose of preparing the business plan is frequently to assist in the raising of finance, the business plan is also an important management tool to be used by the board of directors to set objectives, and to monitor progress against those objectives on an ongoing basis. As stated above, there is no standard form of business plan, however this ensures that all aspects of the business are addressed, a clear and concise presentation is made.
The Objectives of the Business Plan A business plan will have the following objectives, in most if not all businesses:- To show money lenders/investors/grant funders that the business is viable and those they are likely to be repaid, either financially or in success, where a grant has been awarded. To use as a planned course & to alert when estimates do not go according to plan. To instil stakeholder confidence in the abilities of the management to run the business. To introduce the main income, expenditure and balance sheet items. To identify the resources required. To monitor performance against targets. To achieve these objectives, the business must present what is unique about the business and why it should succeed. Information should be presented to reinforce these opinions. The Business Plan will show: Where you are. Where you are going. How you propose to get there. What resources will be required. How much money will be made
The Contents of the Business Plan The following pages detail the content and suggested order of the business plan. Under each heading there are a number of questions that should be answered, UNLESS CLEARLY NOT APPLICABLE TO THE ORGANISATION, BUSINESS OR IDEA.
1.0 Executive Summary The executive summary is normally completed last, as it sums up the range of issues covered in the plan. It is essential to any business plan and should be included at the beginning. It is normally not more than one page long, but two is acceptable. The executive summary should be written as a piece of prose, but should contain the following Main reason for business plan e.g. raising of finance A brief description of the project (e.g. establishment or expansion of the business) A summary of the benefits of the project to the community, region and economy A table of financial highlights I.e. the turnover and pre-tax profits forecast for each year, and the actual results for the previous three years if applicable. Total cost of the project, including working capital Funding sought Case for grants (where applicable) 2.0 Company Information Company details Name Company Registration Number Date of incorporation Registered office address Head office address (if different) Telephone, fax and e-mail Website address
3.0 Introduction Mission statement (one or two short sentences will suffice) History An overview of how the business evolved and is there clear evidence of transfer of knowledge from your educational background Current stake in the business (full owner or shared amongst a group) Group structure (if applicable) Key personnel (names and job titles only at this stage) Premises (current/proposed). What is the size of the building and outside areas? Are they leased or owned? If leased, who are the landlords and what are the terms of the lease? Description of current operations, including current turnover, key customers, locations and staff numbers at each location. Background to project (i.e. why it is necessary) SWOT Analysis (Strengths, Weaknesses, Opportunities, Threats) Environmental Sustainability 4.0 Products and Services Clearly explain what it is the organisation is to do or provide. If it is a particularly complicated product or service, please explain as if the reader has no prior knowledge. Product/Service Description What products/services will be provided? Explain clearly what it is. Use diagrams if appropriate Unique features What makes the product/service special, or better than that offered by competitors? Product lifecycle What is the estimated life span of your product/service? Research and development Will there be future (new) product/service development? Describe the mechanisms for innovation and continuous improvement of a service as well as technological R&D activity Intellectual Property Rights What IPR (patents, trademarks, registered designs) does the company have rights to, who owns those rights, and under what terms are the rights exercised (e.g. royalty agreement, license, etc)
Production methods Describe briefly how the product/service is manufactured/delivered Health and Safety issues What are the major risks inherent in the production process? What steps does/will the company take to ensure the health and safety of its workforce and compliance with legislation? Costs of production Per unit of product (raw materials and conversion costs, including direct labour) or the direct costs of delivering the service. Include estimated cost of wastage, pilferage, etc. Suppliers List the principal suppliers of raw materials, components and/or goods for resale. (Consider terms and availability of supply). How quickly can they deliver from the time of placing the order? Capacity What is the production capacity within the constraints of physical space, machinery and personnel? Is it sufficient to meet peak demand? Stock holding policy What is the optimum level of each type of raw material stock in terms of day s production? What is the shelf life of the stock? How much finished goods stock will be needed to meet demand? How much storage will be required at times of peak demand? Is a JIT policy in force? Quality What standards apply? How will quality of raw materials and/or of finished goods/services be assured? What are historical levels of returns, complaints, etc.? Environmental considerations What environmental legislation or EU directives apply to the product, manufacturing process and/or disposal of waste? What is the overall cost of compliance? What additional equipment is required to ensure compliance? What use is made of recycled materials? Can the materials in the product itself be recycled at the end of its useful life? After sales service, including details of warranties given or to be given Distribution How will the product or service be delivered to the customer? Will third party carriers be used or will the company operate its own delivery fleet? What will be the average delivery cost per unit?
5.0 Markets and Marketing Evidence of understanding the market is essential in any business plan, and a clear, costed strategy must be established for reaching the intended customers. This section will show you know the market; will back up your arguments and show that you have done the necessary research. For existing businesses not expanding into new markets it is probably sufficient to provide evidence of levels of turnover, customer lists and any other supporting information. General description What market(s) are you in? Who are you intending to target? Where are the markets located geographically? How price sensitive is the market? Describe any seasonal changes. Overall market size Back this information up with evidence of original or third party research. Market trends Is the market expanding or declining? What external factors are likely to affect your business? Are there any likely developments in the market in the near or long term? Consider using a PESTLE analysis (Political Economic, Social, Technological, Legal, Environmental) Market position What is your current / anticipated market share? (The latter assertion should be backed up by original market research) Include a summary of the results of the market research, but add the main details/questionnaires as an appendix. Major/Potential customers Who are they? How much income will you receive from them per year? (Include any letters of support as appendices) Major competitors Who are they? What are their relative strengths and weaknesses? Competitive advantages I.e. how do you intend to overcome the competition? What is the Unique Selling Point (USP) of your product/service? Marketing strategy Describe how the company will reach its target market. What resources are required to carry this out? How much will it cost? Marketing structure Who will be involved in the marketing effort? Where will the sales force be located? How will they be incentivised and controlled? (Include diagrams and tables if required) Advertising & promotion How and where will you advertise? What other promotional activity will be carried out (e.g. exhibitions, videos, direct mail, and internet) and how much will this cost?
Selling methods E.g. retail, cold calling, e-commerce, party plan, telesales mail order,online. Give details as appropriate. Pricing strategy E.g. below competitors, market skimming, cost-plus pricing. Tabulate the actual/forecast unit prices for each main product or service. Sales volumes (current/forecast) Tabulate current sales volumes for main products/services. Forecast forward how many you expect to sell of each type each month over the next year (consider seasonal fluctuations and be prudent). Estimate sales growth in later years. Summarise and tabulate this information. Include further detail in appendix if required. 6.0 Management, team and Personnel The people in any business are its most important asset, and good management is vital. Venture capitalists and banks will look at the experience, qualifications and personal attributes of the directors and senior managers and base their investment decision on their judgement of the quality of the management team above any other single factor. It is important therefore that a clear description of each individual manager s career background and responsibilities is given, and that the management structure is properly explained (probably by means of a diagram) 7.0 Future Developments This section deals with the long range strategic direction of the company, and includes aspects beyond the horizon of the financial projections. Long range plans outline the company s strategic plan, including: Growth strategy How does the company intend to expand within Wales, the UK, Europe and worldwide (if applicable), e.g. by extending or moving premises, opening new factories or sales outlets, regional offices or alternatively by establishing strategic partnerships or agencies in other countries. Other growth strategies could include franchising or acquisition. Has consideration been given for the potential to collaborate or enter into joint venture with other organisations? Plans to develop new products or services Contingency plan For each significant threat listed under the SWOT analysis there should be a plan of how to counteract it. For instance if the company is heavily reliant on its IT systems, what would be done in the event of a total systems failure?
8.0 Finance Historic results Tabulate trading results and balance sheets for the previous three years (if applicable).state whether figures are from final/audited accounts, or from management accounts. Include a brief commentary on trends and any unusual items. Financial forecasts Summarise and tabulate forecast profit and loss accounts, cash flow forecasts and projected balance sheets for each year. Provide a brief commentary on each if required. What is the peak funding requirement? Fixed assets Tabulate and describe existing and proposed new fixed assets (classes and/or major items only). Outline depreciation policy. State if any significant disposals are planned. State terms of any insurance policies in force / proposed. Proposed funding Tabulate the components of the new funding proposed. Identify clearly any personal input from the directors. State whether any other finance has already been secured. Exit plan (equity finance only) How will the new shareholders realise their investment in the medium term? (Generally one of the following: trade sale, floatation, redemption at premium, guaranteed buy-back) Tax implications for business and investors (equity finance only) Exchange risks (where significant overseas trading or operations planned)
9.0 Appendices As a rule the appendices should give detail to back up or amplify information presented in the main body of the plan. No significant information should be provided in any of the appendices that are not referred to in the text. The list of items that follows is indicative rather than prescriptive, and is not exhaustive Business literature E.g. sales brochures, diagrams or drawings. Team CV's Policy documents Market analysis E.g. Mintel/Keynote reports, results of original market research, press articles, etc Letters of support From existing/potential customers, funders, trade associations, suppliers, etc Copies of key contracts E.g. sales contracts, agency agreements, lease of premises, IPR licensing agreements, and contracts with suppliers, etc. Copies of patents (or patent applications), registered designs and other IPR owned by the company Detailed project cost Itemised list of fixed assets to be acquired and other set-up or one-off costs Quotations (to back up major items listed above) Audited (or professionally prepared) accounts for last three years Management accounts covering period between latest accounts and most recent month end. Financial forecasts These should include monthly: Profit and loss accounts Cash Flow Forecasts Balance Sheets Assumptions underlying forecasts Other relevant documents