Small Business Planning PDF

5.0 Small Business Planning Lecture Objectives To learn about small business planning To understand important aspects of planning To learn about the tools of planning To learn to develop business plans 1  What is a Business Plan  A business plan is a docu...

5.0 Small Business Planning Lecture Objectives To learn about small business planning To understand important aspects of planning To learn about the tools of planning To learn to develop business plans 1  What is a Business Plan  A business plan is a document that sets out the basic idea underlying a business and related start up considerations  Firstly it identifies the nature and the context of business opportunity  Secondly it presents the approach the entrepreneur plans to exploit the opportunity  Thirdly it identifies factors that will determine the success of the business  Lastly it serves as a tool for raising financial capital 2  A business Plan  A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals.  A business plan lays out a written road map for the firm from marketing, financial, and operational standpoints.  Both startups and established companies use business plans. 3 An overview of a business plan 4  Business Plans Purpose  A business plan is a document demonstrating the feasibility of a prospective new business and providing a roadmap for its first several years of operation.  Business plans are an important part of creating new businesses, whether as a startup or an offshoot of an existing business 5  Importance of Business Plans  A business plan is a very important and strategic tool for entrepreneurs.  A good business plan not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed  It also helps them to achieve short-term and long-term objectives. 6  Who Needs A Business Plan  A business plan should be written whenever an individual is considering a new venture.  Knowing where you're going and how you will achieve your business goals is the most integral part of business planning.  Furthermore, if you're looking for financing or to attract investors you will need a way to relay your concept. 7  Understanding Small Business Planning Planning is the process of identifying the courses of actions that will be undertaken by the business in a particular period of time. It includes activities that lead to the definition of objectives and to determine appropriate strategies to achieve these objectives It enables the small business owner to think through the activities that will make the business to become successful The owners are made to be prepared for the unexpected events in the life of the business 8  The Need for Business Plan  To build a great company one needs an operating model that will be used to constantly refine and improve  Provides clearly articulated statement of goals and strategies for internal use  Serves as a selling document to be shared with outsiders 9 Purpose of Small Business Planning Small business managers plan for various reasons. The common ones being: 1. Human Resources 2. Financial Resources 3. Technical Resources Plans are necessary to set organizations objectives- a best way of reaching them. 10  Importance of Small Business Planning 1. Obtain and commit resources required for its objectives 2. Carry on activities that are consistent with its objectives and procedures 3. Monitor and measure progress toward its objectives 4. Take necessary corrective actions where possible when actual performance does not go according to plan 11  Business Plan  Business plan communicates goals and how it intends to achieve them and how customers will benefit from the products of the organization  Planning is a key ingredient in the success of a small business  A business plan helps to guide the decision making needed to operate a business  The first decision is to decide what sort of business to operate  The scope of business will also be dependent on the breadth and depth of products or services offered as well as the geographical region served.  A business plan often contains three major sections: the marketing plan, the management plan and the financial plan 12  Marketing Plan  Marketing is the process in which the decision of the business are based upon the goals of the organization. One of these goals is usually that of satisfying needs and wants of a target market  Part of the marketing plan is the marketing mix comprising of four basic components- product, price, place and promotion 13  Management Plan  The management plan considers the basic functions of management in the organization which are planning, organizing, leading and controlling.  This plan involves the determination of goals and objectives of the business including actual results sought by the business  A set of policies and procedures are determined that guides the identification of specific activities that will lead to these goals  Planning does not end with the creation of a business plan, however, it continues throughout the life of the business 14  Financial Plan  The financial aspects of the business must be planned  The financial plan includes several financial statements  One of these statements is the statement of financial requirements which identifies the projected expenses and assets created for a specific period  The expenses are then used to create the assets  Assets are items of value owned by the business 15  How Much Business Planning is Needed  An entrepreneur must decide with trade offs due to time and money  Factors that come into play: a) Management style and ability b) Preferences of management team c) Complexity of the business d) Competitive environment e) Level of uncertainty 16 Deciding the Content of Business Plan Four interdependent factors should be given thorough consideration  The people: description of persons starting and running the business  The opportunity: a profile of the business (what to sell and to whom at what price and economic outlook and its success factors  The context: the environmental variables  Risks and Rewards: assessment of what can wrong or right 17  Components of a Business Plan Components (Target Reader/Audience)  Executive Summary  Mission goals and objectives  Company and industry  Products  Market and competitors  Management  Marketing strategies  Operations: facilities, equipment and personal  Critical risks and problems  Financial Projections 18  Plan Implementation  To implement the plan, the entrepreneur organizes the personnel and other resources of the business  An organizational chart is created that shows the hierarchy of people working in the business  The third function of management- leading- alignment of employees with their jobs and providing the leadership and motivation required to get work done  Controlling: assessing performance against the plan 19  Goal Setting  A goal is the aim or the purpose for which the business is being established  The ultimate aim of any business is to make a profit  The goals are often derived from the mission statement and then developed and translated into objectives  The objectives are quantified and time bounded 20  SMART Goals The SMART acronym helps provide a well rounded goal statement  S Specific and significant  M Measurable, motivational, methodical, meaningful  A Action- oriented & achievable  R Realistic and relevant  T Time bounded & tangible 21  Setting Goals Effectively 1. Write it down 2. Goals are tools that gives you clarity, direction, motivation and focus 3. Make it positive and toward something you want 4. Balancing big dreams with small goals 5. Your small goals should be SMART 6. Use different types of goals 7. Make sure they are your goals 8. Strike the right balance 22  Mission  Discover your mission, vision and values for each life area  Define, organize and manage your dreams and goals  Break goals into smaller steps and create powerful action plans  Keep track of your progress for each goal  Use metrics to track/view your progress with graphical reports 23  SWOT Analysis For Goal Setting  SWOT: Strengths, Weaknesses, Opportunities, threats is a way to analyze and evaluate your current situation and the environment  Typically used for strategic planning in business settings, can be used in goal setting to help identify goals that will give the most benefits  It is a way of matching your internal capabilities, resources and liabilities with external factors being faced 24  Alignment of Goals  Start writing down your personal goals are for the business  SWOT can be used to identify the kind of persons required to team up to start the business  Goals chosen must match identified business  Personal goals must align with business goals 25 Performing SWOT Analysis: Strengths  Start identifying your strengths which represents your internal capabilities and resources in result areas  What are your competencies in this area?  What relevant skills, talents and talents do you posses?  What resources do you have at your disposal?  What specialized knowledge or expertise do you have access to?  Who can you ask for advice, support or help?  What special or proprietary tools can you use to develop?  What is already working well in this area? What related strengths does that reveal? 26  Weaknesses Weaknesses represents your internal liabilities  What is your main liability in this area?  List all relevant skills, abilities and talents that you would find helpful in this area and which ones are you good or proficient at?  List the specialized knowledge or expertise that you would find helpful in this area and ones you lack could be considered a weakness  Are there any resources (money, time, help) that you currently don’t have access to?  Your strengths and weaknesses give you an idea of your internal capabilities, resources and liabilitites. 27  Opportunities  Then identify your external opportunities for profit, growth and improvement  List the opportunities that you had been considering  What things could you improve in this result area?  Think of something that you could do that would significantly improve your situation in this area  What import goals can you pursue?  How can you take advantage of your strengths?  What opportunities would become available to you if you eliminate some of your weaknesses? 28  Threats  Identify your threats which represent external events, environmental factors or changes that could affect you negatively  Make a list of serious risks you are facing in this area if you continue along your current path  What obstacles or road blocks are impeding your progress?  What environmental factors are affecting you negatively?  Think about how current changes to your environment or circumstances could affect you negatively 29  Purpose of SWOT Analysis  Using SWOT Analysis to identify targets and strategies  To help identify the most beneficial targets and strategies to pursue right now based on your current situation  To identify strategies that will help you prepare for the future 30  Quadrants of SWOT Matrix The four SWOT quadrants provide different perspectives to help identify targets and strategies  SO Quadrant- opportunities to pursue  ST Quadrant: Threat to eliminate  WO Quadrant: Things to improve  WT Quadrant: Risk Mitigation & Avoidance 31  SWOT Possible Action Template Possible Actions Strengths Weaknesses Possible Actions Possible Actions Opportunities Threats Possible Actions 32 SWOT Analysis Template 33  Successes /Failure Analysis  SWOT helps to examine the current situation but not the past trends  A successful/failure analysis complements the SWOT Matrix and gives more insight into your strengths and weaknesses  Start listing all successes and/or achievements in the result area followed by failures or missteps. This will show you additional strengths and weaknesses based on the trends that they show you  SWOT is an important tool with the aim of defining whether or not a business objective is worth pursuing 34  Implementing SWOT Analysis  SWOT Analysis is comprised of four objectives  Strength component relates to beneficial attributes of employees of organization to utilize  Weakness are attributes harmful to successful achievement of objectives  Opportunities are external conditions that helps in achieving the aim  Threats are external aspects that can adversely affect completion of a project. 35  Action Plan  Program:  Project:  Project Objectives: Output Activities Performance Who When Indicators 36  Tutorial Questions Q1. How do you understand small business planning? Q2. Why is small business planning important? Q3. Discuss the main components of a small business plan Q4. Why is goal setting important for small businesses? Q5. What is the purpose of SWOT analysis? Q6. How does a business plan differs to that of an action plan 37