Student Workbook BSBMGT617 Develop and implement a business plan 1 st Edition 2015 Part of a suite of support materials for the BSB Business Services Training Package
Acknowledgement Innovation and Business Industry Skills Council (IBSA) would like to acknowledge Impact Training and Development Solutions for their assistance with the development of the resource for BSBMGT617A. BSBMGT617A writers: Tracey Badior and Joanna Hull BSBMGT617A industry reviewers: Nicole Johnston and Glen Corcoran Revised by IBSA for BSBMGT617 (2015) Copyright and Trade Mark Statement 2015 Innovation and Business Industry Skills Council Ltd All rights reserved. Apart from any use permitted under the Copyright Act 1968, no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, or otherwise, without written permission from the publisher, Innovation and Business Industry Skills Council Ltd ( IBSA ). Use of this work for purposes other than those indicated above, requires the prior written permission of IBSA. Requests should be addressed to Product Development Manager, IBSA, Level 11, 176 Wellington Pde, East Melbourne VIC 3002 or email sales@ibsa.org.au. Innovation and Business Skills Australia, IBSA and the IBSA logo are trade marks of IBSA. Disclaimer Care has been taken in the preparation of the material in this document, but, to the extent permitted by law, IBSA and the original developer do not warrant that any licensing or registration requirements specified in this document are either complete or up-to-date for your State or Territory or that the information contained in this document is error-free or fit for any particular purpose. To the extent permitted by law, IBSA and the original developer do not accept any liability for any damage or loss (including loss of profits, loss of revenue, indirect and consequential loss) incurred by any person as a result of relying on the information contained in this document. The information is provided on the basis that all persons accessing the information contained in this document undertake responsibility for assessing the relevance and accuracy of its content. If this information appears online, no responsibility is taken for any information or services which may appear on any linked websites, or other linked information sources, that are not controlled by IBSA. Use of versions of this document made available online or in other electronic formats is subject to the applicable terms of use. To the extent permitted by law, all implied terms are excluded from the arrangement under which this document is purchased from IBSA, and, if any term or condition that cannot lawfully be excluded is implied by law into, or deemed to apply to, that arrangement, then the liability of IBSA, and the purchaser s sole remedy, for a breach of the term or condition is limited, at IBSA s option, to any one of the following, as applicable: (a) if the breach relates to goods: (i) repairing; (ii) replacing; or (iii) paying the cost of repairing or replacing, the goods; or (b) if the breach relates to services: (i) re-supplying; or (ii) paying the cost of re-supplying, the services. Published by: Innovation and Business Industry Skills Council Ltd Level 11 176 Wellington Pde East Melbourne VIC 3002 Phone: +61 3 9815 7000 Fax: +61 3 9815 7001 Email: reception@ibsa.org.au www.ibsa.org.au ISBN: 978-1-925379-18-1 Stock code: BSBMGT6171W First published: September 2015 1 st edition version: 1 Release date: September 2015
Table of Contents Introduction...1 Features of the training program...1 Structure of the training program...1 Recommended reading...1 Section 1 Develop a Business Plan...3 What skills will you need?...3 Why develop a business plan?...4 Review existing strategic, business and operational plans...5 Analysing and interpreting the organisational vision, mission and values...8 Consult with key stakeholders...9 Reviewing market requirements... 14 Develop performance objectives and measures... 22 Identify resource requirements... 31 Permits and licence requirements... 44 Section summary... 45 Further reading... 45 Section checklist... 46 Section 2 Write a Business Plan... 47 What skills will you need?... 47 The structure of a business plan... 48 Section summary... 73 Further reading... 73 Section checklist... 73 Section 3 Monitor Performance... 74 What skills will you need?... 74 Performance measurement systems... 74 Testing performance measurement systems... 79 Effective reporting... 83 Types of reports... 87 Reporting failures and variances... 94 Section summary... 96 Further reading... 96 Section checklist... 96 Section 4 Respond to Performance Data... 97 What skills will you need?... 97 Analysing performance reports... 98
Analysing trends... 101 Reviewing performance indicators... 105 Managing underperformance... 108 Continuous improvement... 114 Reviewing systems and processes... 115 Completing the analysis... 118 Section summary... 124 Further reading... 124 Section checklist... 124 Glossary... 125 Appendices... 128 Appendix 1: Completed Business Plan... 128
Student Workbook Introduction Introduction Features of the training program The key features of this program are: Student Workbook Self-paced learning activities to help you to understand key concepts and terms. The Student Workbook is broken down into several sections. Facilitator-led sessions Challenging and interesting learning activities that can be completed in the classroom or by distance learning that will help you consolidate and apply what you have learned in the Student Workbook. Assessment Tasks Summative assessments where you can apply your new skills and knowledge to solve authentic workplace tasks and problems. Structure of the training program This training program introduces you to the skills and knowledge required to run a business operation and develop and implement a business plan. Specifically, you will develop skills and knowledge in the following topic areas: 1. Develop a business plan 2. Write a business plan 3. Monitor performance 4. Respond to performance data. You facilitator may choose to combine or split sessions. For example, in some cases this training program may be delivered in two or three sessions, or in others, as many as eight sessions. Recommended reading Some recommended reading for this unit includes: Business.gov.au, Starting a business, viewed August 2015, <http://www.business.gov.au/business-topics/starting-abusiness/pages/default.aspx>. Bangs, D., and Schaper, M., 2003, The Australian business planning guide, Allen & Unwin, Crows Nest. Barrow, P., 2001, The best-laid business plan, Virgin Books, London. Finch, B., 2006, How to write a business plan, Kogan Page, London. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 1 of 144
Introduction Student Workbook Please note that any URLs contained in the recommended reading, learning content and learning activities of this publication were checked for currency during the production process. Note, however, IBSA cannot vouch for the ongoing currency of URLs. Every endeavour has been made to provide a full reference for all web links. Where URLs are not current we recommend using the reference information provided to search for the source in your chosen search engine. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 2 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan Section 1 Develop a Business Plan This section covers the skills and knowledge required to develop a business plan. Scenario: DIY Realty DIY Realty is a new business formed by Tim Smith and Nathan Miles. They have identified the need for a new real estate model that facilitates the sale of real estate without the need of an agency, or agent. The premise of DIY Realty is to eliminate the so called middle man, so that a greater margin is obtained for the vendor as a result of the sale. Tim and Nathan have identified the need to develop a business plan to obtain a loan to start up their new business idea. They have already identified their mission, strategic plan and operational plan goals. Tim and Nathan believe that developing a business plan will help them to: clarify their goals determine realistic targets and objectives evaluate their strengths and weaknesses in the market, to maximise the potential of the organisation. Tim and Nathan both understand that having a good idea does not necessarily translate into guaranteed business success. Anyone lending them money or investing in their company will want to see evidence that the business is viable, has a long-term plan, can utilise resources and any manage potential threats to achieving their goals and objectives. What skills will you need? In order to develop a business plan, you must be able to: review and evaluate pre-existing strategic, business and operational plans, if available analyse and interpret business vision, mission, values and objectives consult with key stakeholders review market requirements for the product or service develop performance objectives and measures identify financial, human and physical resource requirements for the business consider any permits or licences that may be required for new activities. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 3 of 144
Section 1 Develop a Business Plan Student Workbook Why develop a business plan? A business plan is a document used by managers to communicate a business idea, and obtain approval or financial support that will allow the idea to be implemented. A business plan serves four critical functions: 1. Allows managers and business owners to research and plan business goals and strategies from a realistic and considered basis, and to focus their energies and resources appropriately. 2. Ensures that all aspects of business planning, including risks and market conditions, are factored in to provide clarity and direction for the organisation. 3. Provides managers or business owners with a document they can use to communicate with key stakeholders or third parties such as banks, shareholders, employees or investors. 4. Documents performance goals and objectives which can be measured and used to benchmark actual performance against planned performance criteria. Even if organisations are not seeking external financing or trying to attract investors, a business plan can be used within the organisation as a focus for planning, monitoring and reviewing business performance. Below are some examples of internal and external uses of business plans. Internal Implementation of a new system, process or piece of equipment that requires a financial investment. To achieve growth targets. To increase market share. To ensure the ongoing profitability of the organisation. External To seek investors in a new business venture or existing business. To secure funds from a financial institution to purchase a business. To assist you with running your own business. To obtain a grant or regulatory approval. A business plan generally follows a specific format (to be explored in more detail in Section 2), including: the business objectives how and when these objectives will be achieved the resources required to achieve objectives. 1 1 B. Finch, 2006, How to write a business plan, Kogan Page, London, pp. 2 3. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 4 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan Reflection: Principles of business planning Use the link below to access the business planning fact sheet developed by the South Australian Department of Trade and Economic Development. This fact sheet provides useful information regarding the principles of business planning: Government of South Australia, Starting your business, Department of State Development viewed August 2015, <http://www.statedevelopment.sa.gov.au/industry/smallbusiness/ starting-your-business>. Review existing strategic, business and operational plans Prior to developing a business plan, managers must review and evaluate their organisation s existing strategic, business and operational plans to ensure that the objectives of the plan are aligned with the organisation s goals. Strategic plans are the road map for an organisation and its employees. They incorporate the values, vision and mission of the organisation, and detail the strategies and actions required to achieve the organisation s goals. Strategic plans typically look ahead three to five years. Operational plans are the how to for achieving strategic business goals. They detail the specific actions of how an organisation s strategic goals will be achieved. The information contained in existing strategic, business and operational plans that will be reviewed and analysed may include: Actions plans A detailed breakdown of specific activities, timeframes and responsibilities for achieving planned goals and objectives. When developing a business plan, you need to be aware of business activities, timeframes and resources required, including human and financial resources. Reviewing action plans will provide details on these areas and ensure that the business plan is realistic and an accurate representation of the organisation. Business goals Business goals document the organisation s desired outcomes. This is what the business hopes to achieve as a result of their activities and actions. When developing a business plan, understanding business goals is critical, as the plan must support the business goals and document how the organisation plans to market, finance and act in order to achieve the business goals. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 5 of 144
Section 1 Develop a Business Plan Student Workbook Competitor analysis Most organisations are competing with similar businesses to attract market share. When analysing competitors, you need to consider their strengths and weaknesses in comparison to your own business, as well as marketing strategies, product/service offers and points of difference. When developing a business plan, having a well-researched and realistic understanding of your competitors will ensure you set realistic measures, and focus your business activities and resources appropriately. When using the business plan as a basis for attracting funding or investors, you will need to demonstrate how you will combat the threat of competitors, and that your business has analysed market opportunities to achieve the desired business goals. Financing arrangements or financial targets Analysing financial arrangements such as available capital, leasing arrangements, interest payment schedules or other financial implications means that the business plan will be realistic and practical. You will need to demonstrate that the business plan has realistic financial goals or targets based on analysis of the organisation s current and planned financing arrangements. Management arrangements and/or personnel requirements When developing a business plan, it is important to have a clear understanding of roles and responsibilities, and how the organisation is structured. In order to achieve business plans and goals, you must understand how the management of the business is organised, who has the responsibility and accountability to take action. You must also describe how the business will achieve its goals by analysing personnel requirements, such as the need to recruit additional staff or to restructure existing management or personnel arrangements. Marketing approaches Analysing marketing approaches involves looking at how your organisation currently markets its products or services, and whether that approach is effective in achieving the goals of the plan. For example, if the organisation currently uses word of mouth or local advertising and the goal is to expand the business, it would be appropriate to consider other marketing approaches to reach a broader population segment. Product/service research and analysis This type of research and analysis involves looking at the demand for, or market performance of, products/services to ensure that the business plan is realistic in setting goals and objectives. Many organisations commission research into trends, sales patterns, growth markets or customer wants and expectations, in order to make business decisions about the direction of their organisation. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 6 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan Learning activity: Review existing strategic, business and operational plans 1. Why must you review existing strategic, business and operational plans when developing a business plan? 2. What information do these plans provide that is important to the development of your business plan? 3. What are some of the potential consequences for managers who fail to review existing strategic, business and operational plans? BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 7 of 144
Section 1 Develop a Business Plan Student Workbook Analysing and interpreting the organisational vision, mission and values In the example below, the organisation has documented its vision, mission, value and objectives. It is important to analyse this type of information in order to ensure that the business plan represents not only the short-term financial goals of the organisation, but also the broader goals for long-term growth and how they position themselves in the marketplace. For example, some organisations may place a high value on sustainability and environmental responsibility. When this is documented in the company s vision, mission or values, it must be taken into account when planning how the business will operate, what resources they will utilise and what market segment will be targeted for the organisation s core values. Other organisations may focus on customer service excellence as a point of difference and, as such, would need to document how they will incorporate exceptional customer service strategies as part of the long-term business plan. Scenario: DIY Realty Mission The mission of DIY Realty is to exceed customer expectations by providing them with effective direction relative to the manner which best facilitates the sale of their property. Strategic plan goals The objectives of DIY Realty Pty Ltd are: 1. Profit To generate sufficient profit to finance future growth and to provide the resources needed to achieve the other objectives of the company and its owners. 2. Growth To grow the business at a rate that is both challenging and manageable, leading the market with integrity and reputable advice. 3. Corporate citizenship To provide an ethical service to the local community that maximises earnings from property sales for the vendor. Operational plan goals DIY Realty will succeed via a unique marketing strategy that will result in responsive and quality advice that will generate repeat customers through word of mouth. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 8 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan Learning activity: Review vision, mission and values From your analysis of the example above, write a vision for DIY Realty. What do you believe are the elements most important to the company vision? Consult with key stakeholders When developing a business plan, it is essential to consult with key stakeholders to ensure you have all the information you need to complete the plan. Key stakeholders may include: senior management teams business partners or financiers customers shareholders staff technical experts or advisors. Identifying stakeholders A stakeholder map records who your stakeholders are and their level of power, influence and interest. It also helps to determine who you need to focus on to ensure the successful development and implementation of your business plan. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 9 of 144
Section 1 Develop a Business Plan Student Workbook In order to identify stakeholders, you need to think of all the people who are affected by the activities detailed in your plan, who have influence or power over it, or an interest in its successful or unsuccessful development and implementation. Stakeholders may include individuals representing the groups below: management co-workers team members customers shareholders alliance partners suppliers lenders government agencies general public community groups media. Once you have identified the stakeholders, you may find you have a long list of people who are affected by your work. The level of power, interest and influence of these people with regards to your business plan will vary, which is why it is important to complete an assessment to determine the level of consultation required for each stakeholder identified. To complete this assessment, you should map out your stakeholders on a power/interest grid as per below. High Power Low Keep satisfied Monitor (Minimum effort) Manage closely Keep informed Low Interest High A stakeholder s position on the grid indicates the actions you should take with them: High power, interested people: These are the people you must fully engage with, and make the greatest effort to satisfy. High power, less interested people: Put enough work in with these people to keep them satisfied, but not so much that they become bored with your message. Low power, interested people: Keep these people adequately informed and talk to them to ensure that no major issues are arising. These people can often be very helpful with the detail of your project. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 10 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan Low power, less interested people: Again, monitor these people but do not bore them with excessive communication. 2 Scenario: DIY Realty DIY Realty has completed the following power/interest grid to identify key stakeholders and determine the consultation effort required. High Power Low Keep satisfied Regulatory bodies Monitor Customers Manage closely Business partners Bank Keep informed Network contacts Low Interest High Learning activity: Consult with key stakeholders Review the stakeholder power/interest grid completed by DIY Realty. In the space below, detail whether you agree or disagree with the stakeholder positioning on the grid, and include your reasoning. Keep satisfied Regulatory bodies 2 Mind Tools, Stakeholder Analysis, 2010, Stakeholder analysis, viewed August 2015, <http://www.mindtools.com/pages/article/newppm_07.htm>. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 11 of 144
Section 1 Develop a Business Plan Student Workbook Manage closely Business partners and bank Monitor (minimum effort) Customers Keep informed Network contacts The consultation process Once you have identified your key stakeholders and assessed the level of focus you need to apply to each, you can commence the consultation process. Consultation can involve any of the following: meetings or interviews brainstorming sessions focus groups feedback sessions email communications newsletters. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 12 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan You can use the power/interest grid to assist you in determining the appropriate method of consultation, as those who have been identified as high priority will require a more involved consultation method than those classified as low priority. Priority level Example consultation method Manage closely Keep satisfied Keep informed Monitor (minimum effort) One-to-one meetings Group meetings Interviews Focus groups Brainstorming sessions Feedback sessions Feedback session Email communications Newsletters Email communications Newsletters Using the right consultation method for the right group of people is crucial, not only for obtaining the required information but also for gaining support and buy-in from stakeholders that will ensure the successful development and implementation of your plan. Scenario: DIY Realty DIY Realty Pty Ltd has developed the following consultation program to manage their identified key stakeholders: Stakeholder Manage closely Business partners and bank Keep satisfied Regulatory bodies Keep informed Network contacts Consultation method Regular face-to-face meetings to discuss progress. Monitor (Minimum effort) Customers Face-to-face meeting to introduce idea and discuss any concerns or barriers. Written communications to keep informed on progress of idea. Face-to-face meeting to introduce idea and ask for feedback. Email communications to provide update. Customer newsletter to communicate new business concept. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 13 of 144
Section 1 Develop a Business Plan Student Workbook Learning activity: Consultation process Answer the questions below. 1. Why is it important that you consult with identified stakeholders? 2. How can the different consultation methods help to ensure the effectiveness of your consultation? 3. What are some potential impacts for managers who do not complete consultation when developing a business plan? Reviewing market requirements We have now discussed the need to consult with key stakeholders and to consider the needs and expectations of personnel within the organisation. Consultation is an ongoing process required when planning, implementing and reviewing business plans. The next stage of developing the business plan is to review the market requirements. 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 14 of 144 2015 Innovation and Business Industry Skills Council Ltd
Student Workbook Section 1 Develop a Business Plan When developing a business plan, it is important that you complete research and analysis of the market to ensure you fully understand what is required to successfully implement your business plan. This includes: researching and analysing market requirements for the product/service understanding your customer needs researching pricing options. The outcomes of this research will form the basis of an essential component of your business plan your marketing plan. Market requirements Researching market requirements involves understanding the needs and wants of the market in which you operate, or in the case of a start-up business, intend to operate in. Understanding your market involves asking the following three questions: What business are you in? Review your mission statement and be sure you are clear on what it is you are trying to achieve, and how your offering is different or unique to what your competitors are offering. If you cannot articulate what business you are in then it will make it very difficult to market what you are offering. Who are your target markets? You must identify who your target market is. Who is your ideal customer and what are their needs and wants? Knowing this information will help you to develop a product/service that meets a specific market need. It will also allow you to develop a marketing plan that caters directly to this need. What do your customers buy? What benefits do your customers think they receive from your product/service? Accessing and analysing data that demonstrates what your ideal customer buys and what benefits they perceive this product/service provides them with will inform your marketing plan. For example, if research data shows that customers purchasing refrigerators value a good energy rating, because it means the refrigerator is more cost-efficient to run, then it would be critical for a retailer selling fridges to include this information in their marketing plan. 3 3 D. Bangs & M. Schaper, 2003, The Australian business planning guide, Allen & Unwin, Crows Nest, pp. 21 22. BSBMGT617 Develop and implement a business plan 1 st edition version: 1 2015 Innovation and Business Industry Skills Council Ltd Page 15 of 144
Section 1 Develop a Business Plan Student Workbook Learning activity: Market requirements Review the information on DIY Realty and answer the questions below. Background DIY Realty is a new business formed by Tim Smith and Nathan Miles. They have identified a need for a new real estate model that facilitates the sale of real estate without the need of an agency, or agent. The premise of DIY Realty is to eliminate the so called middle man, so that a greater margin is obtained for the vendor as a result of the sale. Tim and Nathan have identified the need to develop a business plan to obtain a loan to start up their new business idea. They have already identified their mission, strategic plan and operational plan goals. Mission The mission of DIY Realty is to exceed our customer expectations by providing them with effective direction relative to the manner which best facilitates the sale of their property. Strategic plan goals The objectives of DIY Realty Pty Ltd are: 1. Profit To generate sufficient profit to finance future growth, and to provide the resources needed to achieve the other objectives of the company and its owners. 2. Growth To grow the business at a rate that is both challenging and manageable, leading the market with integrity and reputable advice. 3. Corporate citizenship To provide an ethical service to the local community that maximises earnings from property sales for the vendor. Operational plan goals DIY Realty will succeed via a unique marketing strategy that will result in responsive and quality advice to generate repeat customers through word of mouth. 1. What business is DIY Realty in? 1 st edition version: 1 BSBMGT617 Develop and implement a business plan Page 16 of 144 2015 Innovation and Business Industry Skills Council Ltd