business planning, project management, introduction to financial control

7/30/2019 Business Planning, Project Management, Introduction to Financial Control

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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

business planning, project management, introduction to financial control

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