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Chetan Shah and Ricarda Micallef
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will make money through risk andinnovation
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http://images.google.co.uk/imgres?imgurl=http://images.businessweek.com/ss/06/08/personal_reflections/image/02_richard_branson.jpg&imgrefurl=http://images.businessweek.com/ss/06/08/personal_reflections/source/2.htm&usg=__fbUu2IVRQL5AvbANX3Vqf02qceU=&h=400&w=309&sz=69&hl=en&start=2&um=1&tbnid=J1qbaYPGZaZbUM:&tbnh=124&tbnw=96&prev=/images?q=richard+branson+picture&hl=en&sa=X&um=1 -
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Why prepare a business plan? Consolidation of ideas Inspire credibility A document for future reference A document to track progress A document to keep focus To identify the aim & value of the plan To secure financial and resource commitment for a
business start-up Identify and address risks Appreciate any health and safety aspects of the plan
A business plan is an internal and external CONTROL andSELLING document
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What is a Business Plan?
The business plan is a forward-looking risk controldocument
What and where are the risks ? Are the strategies are in place to minimise the risks?
The business plan converts the opportunity intoreality
A plan can be used at any stage of the businesscycle
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Types of Business plans:
Summary: for internal financing (1015 pages)
Traditional: for extensive financing (2040 pages)
Operational: blueprint for company operations (50100pages)
Detailed, final plan for public floatation (200+ pages)
Initial flyer to attract investors (no more than 200 words)
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Consistent content kindles credibility:
Executive Summary Tell them what you are going to tell them
Body Tell them
Summary
Tell them what you told them
NBremember your audience and your desired outcomes
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Business plan should include Executive summary
Background and description of the business concept
Market research & analysis
The marketing plan
The economics of the business Operations plan
Management team
Critical risks, problems and their mitigation
The financial plan/offering
Summary
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Executive summary
Readable summary of Description of the business concept
Opportunity & the strategy
The target market & competitive advantages The economics, profitability, projections & returns
The management team
What is being requested
Think about what you want to bring to Dragons Den.
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Background and description of the business concept:
What is the business?
Who are the customers?
How does the product or service appeal to the customer?
What is special about the service or product?
What is the competition and what is your competitiveadvantage?
How will the market be protected from new entrants?
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Target market and projections The Industry & the market
Who are the customers?
Demographics
How will the product be positioned?
Technology trends
How will you reach & service the customers?
Market structure?
The size & growth rate of the market segments
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The competitive advantages
What are they?
Do they exist or have to be created?
It may be the Product itself, Market conditions, or
competitor Vulnerabilities Is the advantage Sustainable?
How can it be protected?
Are there strategic alliances?
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The management team
Who- Chairman, Directors,
The relevant knowledge, experience & skills of thelead entrepreneur & team members
Previous accomplishments Management experience
People management skills
Previous successful ventures
Financial management skills
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The Management Team
The management team is critical to delivery
Most deals will be done in the first 5 minutes
First impressions are key
Are the senior management team likeable externally? Do they instil confidence?
Personnel problems are the dominant headache in anybusiness
Are they credible? Have they adequately predicted the risks and have theyaddressed the risks adequately?
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How will you keep the project on track? How will you monitor progress?
When monitoring progress consider: Competitive rivalry how much competition is there
and how good is it? Bargaining power of suppliers
Bargaining power of customers Threat of new entrants Threat of substitutes
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Tools to help with risk management:
PESTLE
SWOT
Risk Management Plan
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PESTLE analysis.
Helps you to identify the environmental influences that could affectthe strategic development of the business
Political Economic
Social Technological Legal Environmental
Identifying PESTLE influences is a useful way of summarising the
external environment in which a business operates..
but must be followed up by consideration of how a businessshould respond to these influences
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You are buying an existing pharmacy business
Conduct a PESTLE analysis to define theenvironmental factors which might influence your
strategy for the business moving forward?
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PESTLE analysis
Political Economic SocialTaxation (corporate;
consumer)Economic growth Income distribution (change
in distribution of disposable
income)International trade regulation Drug reimbursement Demographics (age structure
of the population, gender,
family size and composition,
changing nature of
occupations)Competition regulation Social benefits (minimum
wage, unemployment
benefits, grants)
Labour / social mobility
Healthcare policies Taxation (disposable income,capital investment,
corporation tax)Lifestyle changes (e.g. home
working, single households)
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PESTLE analysisTechnological Legal EnvironmentalRate of innovation Consumer protection Environmental regulation
R&D productivity Employment Law Pollution controls
Rates of technological
obsolescence
Competition Law Carbon tax
Internet DTC marketing Package disposal
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Define Strengths, Weaknesses, Opportunities, Threats of the
business opportunity
In general, Strengths and Weaknesses are internal factors
In general, Opportunities and Threats are external factors
Strengths WeaknessesOpportunities Threats
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Prepare a SWOT analysis for buying asingle practice pharmacy in Hatfield
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Actions on the basis of SWOT:
Protect and exploit the Strengths andOpportunities
Create an action plan to address the Weaknesses
Focus on Threats could undermine yourbusiness
Risk management plan to address each Threat
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Identify risks from PESTLE and SWOT analyses
Rank risks according to: Likelihood Impact:
Impact
LL H
H
Likelihood
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Actions on the basis of RMP:
Define a plan to address each risk which is eitherhigh likelihood, high impact or both
Risks should be eliminated > mitigated >managed
Focus on high likelihood, high impact risks
Prioritise - could undermine your business
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Revenues are the food,
Profit is the drink,
Cash is the oxygen
Cash is King
92% of start ups that fail in the first 3 years
do so because of poorly managed cash flow
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Robert Peston, BBC website blog, 2009
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Investment is an essential input into yourBusiness Control Loop
Need for capital investment and workingcapital and a slush fund for perceived andunknown risks
Must predict cash flow and plan forshortfalls
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Build a forward-looking spreadsheet model topredict cash flows in and out of the businesseach month
Clearly state your assumptions
Be pessimistic (worst case)!
Be realistic (dont try and fool yourself)!!
Use it to conduct scenarios and test sensitivity
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Target Market and Projections
The size & growth rate of the market segments
Sales estimates and market share?
Pricing strategy?
How are you going to grow the business?
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Economics, Profitability and Return
Gross & operating margins Expected profitability Durability of the profits Time to breakeven & positive cash flow Key financial projections Return on investment Operating & cash conversion cycle Need a 5 year plan
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Sales Government grants
sponsorship
Licensing
Internal
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Wages & Salaries Recruitment Costs
Staff Training costs & Welfare
Outside services- Payroll, HR, PR, waste disposable, utilities
Consumables
Travel & Entertainment
Lab/Office Rental
Equipment & Maintenance
Equipment Depreciation
Telephone
Printing and Stationary
Postage & Carriage
IT equipment and expenses
Marketing & Advertising
Professional Fees & Accountancy
Insurance Banking costs
Contingencies
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What is the Deal? How much money is required? Cash for equity What return is offered for the investor? What exit is proposed? Added value of investor? Think Dragons Den
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15% of a company worth 100m ismore than 100% of a company
worth 2 million
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What next?
Design the roll-out
Share your plan judiciously
Take ownership
Revisit and revise Learn from mistakes
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Issues
Tailor plan to primary audience
Consider having more than one version
Know your risks and their mitigation
Data must be accurate and convincing Make sure forecasted and past performance are
aligned
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Managing the business
Project Management
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Why do projects fail? Poor project specification
Unrealistic time scales
Time scales that are too long
Inappropriate staff
Failure to manage user expectations Failure to manage the change required
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What is a project?
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What? Provides a visual summary of a project
Allows identification of key milestones and critical path
Excellent project planning tool
How?
http://www.jiscinfonet.ac.uk/InfoKits/infokit-related-files/gantt-chart-pic -
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Critical path analysis? Minimum time to complete the project (or an individual task) Uses 2 key dates
Earliest start date
Latest finish date (last date which causes no delay)
For example
Task cant start to day 7 and must finish by day 11
This allows 4 days however task itself takes 2 days Provides a float of 2 days
Critical event on a critical path is when the float is zero
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Project management
PRINCE (which stands for Projects in Controlled Environments) is a common tool usedfor project planning
Benefits of using PRINCE:
A controlled and organised start, middle and end
Regular reviews of progress against plan
Assurance that the project continues to have a business justification
Flexible decision points
Management control of any deviations from the plan
The involvement of management and stakeholders at the right time and place duringthe project
Good communication channels between the project, project management, and therest of the organisation
A means of capturing and sharing lessons learned A route to increasing the project management skills and competences of the
organisation's staff at all levels
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Prepare and launch a business plan
Perform risk analysis
Appreciate the need for financial controls
Understand project management and the systemsinvolved