Business Plan Seminar

The Video Transcription

Hello and welcome to today’s’ seminar on business plans. My name is David Murray of MFC Accountants. We’ve over 25 years’ success in preparing business plans. Today, I’m going to show you how to write a business plan for industry or construction. We’ll cover both topics in today’s seminar.

Business plans are vital if you wish to get a bank loan, wish to apply for a grant, wish to encourage investors. It’s absolutely essential that you have a business plan that people can understand and it covers all the issues.

There are only 2 basic, overriding principles in respect of business plans:

1. It must be short and concise and cover all aspects of the business.
2. It should be written in granny language so that your granny can understand.

You don’t truly understand your own business unless you can put it into granny language. There are very few bankers or investors who would support a business when after reading their business plan they don’t understand the business. It’s a basic.

Chapter 1 – The Executive Summary

This should be the first chapter in the business plan. However, it will be the last one to be written. We shall come back to this later on in this seminar. The executive summary should be a short, concise, overall summary of the business.

There should be a note from each of the subsequent chapters in the executive summary and it’s important that the executive summary is capable of being a stand-alone document. Senior managers tend to only read the executive summary and that’s also why it’s vitally important to get it right.

The executive summary should have overall highlights of the business without getting into too much detail. The length of the executive summary should be ideally between 1 and 2.5 pages. It should be enough to excite the reader that they want to read the whole business plan. There should be one short note at the start of the executive summary of explaining the overview of the business. It’s very important that you explain in the executive summary the need that you’re satisfying. Every business is satisfying a need for its customers and filling a gap in the market.

Chapter 2 – The Company Overview

This should be the shortest chapter in the business plan. There should be a mission statement of what the business is about, included in this chapter but it should be no more than 1 or 2 sentences. We don’t want the Magna Carta. Ownership of the business should be detailed in this chapter. Should illustrate the very shareholdings in the business. The location of the business should be in this section. And there’s a useful tip. If you put in a map, it engages the audience because they look at the map and say “Oh, I know such and such around the corner from there” and it engages them with your business plan. You should also have a brief history of the company from its origins to date. And there should be a note on the professional advisers, who they are and their experience, etc., in this chapter.

Chapter 3 – Products and Services

1. Describe in detail what you are doing.
2. Explain the problem that you are solving in the competitive landscape.
3. Identify the primary pain point for customers.
4. If you cannot pinpoint the exact problem that you are solving for customers then you might not have a viable business plan.
5. Detail your solution for the customer problems.
6. Detail each element of the production process or the manufacturing process or the service process.
7. If possible, include pictures or photos for each stage of the manufacturing process, etc.
8. Detail each element of the service process, etc. that you are supplying.

Chapter 4 – Marketing and Sales

This chapter is broken into 3 sections:

Section A – Competition

• Detail your competitors. Everyone has some competitors. The biggest mistake we see with promoters is that they come to us and say “Our product, our service is so unique that we have no competitors. All we have to do is to get the product into the market and we’ll go from strength to strength.” There’s always an alternative – horses rather than cars, 2 bed apartment rather than 3 bed semi. There’s always an alternative and, as a consequence, there’s always competition.
• Detail the competitive advantage that your business has.
• Sourcing and fulfilment – detail where your products come from, how they’re delivered to you and how you deliver them to your customers.
• Technology – describe the technology involved in your business, state your secret sauce without revealing the Coca-Cola formula.

Concentrate on your initial products in this Marketing and Sales chapter. State what future products and services you hope to provide to show where the business is thinking of going. But do not over-elaborate on this section. You have to jump the first hurdle first to get to the last hurdle.

Section B – Target Market

• Potential customers – identify how many potential customers there are for your business and also state how many customers are sufficient for your business.
• Identify target market segments and not just “We are a shoe company, everybody has feet. Therefore, everybody in the world is a potential customer”.
• Do not expand too much on very long-range plans.
• Identify for the reader whether your target market is growing or contracting.
• Identify a customer for each market segment. Sort of a super buyer persona for each segment – helps to develop the marketing approach to attract such customers to your business.
• Include market research and market analysis in this section, whether it’s market research specifically carried out by yourself or from alternative research sources.

Section C – Marketing & Sales Plan

In this section we’ll detail how you propose to reach your target market segments.

• Include a pricing plan in this section – low budget, high-value luxury brand or combination of both.
• It’s very important to understand to whom you are marketing. As mentioned earlier, the super buyer persona helps. If you do not truly understand your customer, then it’s very difficult to design an effective marketing plan.
• Detail the position your company, product and service will have in the marketplace. Price sends a strong message to consumers but it needs to match their requirements and expectations of the product and service. There are two overall messages in sales and marketing:
  1. Turnover is vanity profit is sanity.
  2. A good salesman is not someone who sells a hundred million a year but it’s a salesman who sells at a good margin. Any fool can give it away.

Chapter 5 – Management

There should be a biography of senior management included in this chapter. It should be a short biography of each of the senior management.

Do not have all the senior management at C levels – Chief Executive Officer, Chief Financial Officer, Chief Operating Officer. It’s important to allow people to grow into titles rather than allocate them all out on the first day.

Provide an organisation chart in this chapter. Identify any gaps in management either now or likely in the future in this part of the business plan.

Include a schedule of employees now or required and these can be referred back to more detailed appendices detailing out same.

The experience of the managing team is crucial to the success of the business. Most would rather invest in a mediocre idea with a first class team rather than a blockbuster idea with a mediocre team. And keep that in mind in relation to the business and a relation to the business plan.

Chapter 6 – The Financial Details of the Business Plan

1. There should be a summary of the projection.
2. There should be monthly projections for the first year of operations.
3. Three-year projections – suffice – in the first business plan.
4. The sales forecast should be detailed and explained. And I don’t mean “1% of 1 billion market, therefore we’ll easily achieve 10 million sales”. Nobody believes that anymore.
5. There should be profit and loss account projections detailing out the profit and loss accounts.
6. There should be detailed cash flow forecast for the business plan.
7. There should be detailed pro forma balance sheet at the end of each year’s projections included in the business plan.
8. There should be an explanation of the utilisation of the funds being applied for or requested what exactly the business will do with these particular funds.

The schedule of appendices to be included in the main business plan report

1. There should be profit & loss projections included in an appendix.
2. There should be cash flow projections included as a separate appendix.
3. There should be pro forma balance sheets for the end of each year of the projections.
4. There should be a schedule of the financial assumptions utilised in preparing the financial projections.
5. There should be more detailed management CVs included in an appendix to the main report.
6. There should be detailed sales forecast by market, by product, by whatever is required in the business.
7. There should be details of sales orders or contracts agreed or about to be agreed which underpin the business plan.
8. There should be a schedule of plant and equipment, etc., furniture, computers that are required for the business over the first 3 years.
9. There should be a summary of the main potential customers for the business included as an appendix.
10. There should be a schedule of the professional advisers who are going to be engaged by the business.

Schedule of appendices for a construction project

In addition to the 10 appendices detailed earlier we would also include specific appendices in respect of a construction project. These might be obvious to you but I’ll repeat them in either case.

• Include a full copy of the planning permission for the development project.
• Include a site location map as a separate appendix. As explained earlier in the seminar, people buy into maps. They would like to say “Oh, that’s where my auntie used to live, that’s where I used to drive by there when I was a young person”, etc. That helps them buy in and believe in your business plan.
• I would have a site layout plan also included to show where all individual buildings are located within the development.
• Again, people need to understand the development project so I would include site floor plans for each house, apartment or commercial unit included in the development.
• I would include also a schedule of specifications of finishes for each of the completed buildings in the development. This can be where most of the costs are within finishes.
• I would also include an independent sales agent report concentrating on the local competition, what properties are selling for in the area, the likelihood of you achieving your sales, values, etc.
• I personally include a very detailed spreadsheet of the construction cost of the project. This would be in more detail than what would be outlined in the profit & loss account projections, almost down by trade and development, etc. And I certainly don’t just put so much per square foot. That’s the lazy of way doing it. There will be little different idiosyncrasies between each development.
• I also detail out the development cost because that’s where projects tend to go wrong under underestimating of the development cost and a lot of them have to be done initially on a project. So I would detail out the development costs you know, be that the roads, the footpaths, the lighting, the sewerage, etc.
• And then finally I’d include in a detailed budget for the show house, what’s going to cost to complete the show houses or the number of show houses.

We come again to the executive summary as this is the most important section in the business plan.

• It should be short and concise.
• There should be a short note from each chapter.
• It should cover the key highlights without too much detail.
• It should be approximately 1 – 2.5 pages long, no more.
• It should be typed on good quality paper – 100 Gms – 120 Gms.
• It should have a one-sentence mission statement at the top of the section.
• And it should discuss your value proposition to the market.

When sending to bankers it’s useful to have 1 bound copy and 1 loose leaf copy to send to them.

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Download the “Business Plans/Seminar” PowerPoint Presentation below.