Business Plan: Creating and Starting The Venture

For Fashion Entrepreneurs

Business Plan
Document that can convince the reader that the business can produce enough revenue to make a satisfactory profit and therefore attractive as an investment opportunity

Business Plan
The business plan is a written document prepared by the entrepreneur that describes all the relevant internal and external elements and strategies for starting a new venture. It is an integration of functional plans such as marketing, finance, manufacturing, sales and human resources.

Who should write the plan?

The business plan should be prepared by the entrepreneur. The entrepreneur may consult with many other sources in its preparation, such as lawyers, accountants, marketing consultants and engineers

Who is it for?
Self Investor/Venture capitalists Equity Key employees Significant others (suppliers, bankers)

Scope and Value of the Business Plan Who Reads The Plan?
The business plan may be read by employees, investors, venture capitalists bankers, suppliers customers, advisors, and consultants the entrepreneur himself There are three perspectives which should be considered in preparing the plan : Perspective of the entrepreneur Marketing perspective Investors perspective

Scope and Value

The business plan is valuable to the entrepreneur, potential investors or even new personnel who are trying to familiarize themselves with the venture, its goals and objectives. It helps in determining the viability of the venture in a designated market It provides guidance to the entrepreneur in organizing his or her planning activities It serves as an important tool in helping to obtain financing.

Many reasons to build one

BP should sell the writer/reader on the business:
Writer: so that you can go out and do it, Reader: to invest in it

Confidence of knowing the issues Improve chances of success

Many Purposes in real life

Bank Financing Strategic alliances Large contracts Key employees Mergers and Acquisitions Management team motivation

Investment by Venture Capitalists

Principles of Business Plan

No right way: plans can differ based upon business types Be creative but set a limit Concise and focused Captures personality of business leader Include negatives and issues

Presenting The Plan

It is often necessary for an entrepreneur to orally present the business plan before an audience of potential investors. In this typical forum the entrepreneur would be expected to provide a short (perhaps 20minutes or half-hour) presentation of the business plan.

Information Needs
Before committing time and energy to preparing a business plan, the entrepreneur should do a quick feasibility study of the business concept The information, obtainable from many sources should focussed on marketing (segmenting, targeting, and positioning), finance (list of all possible expenditures, demand forecast, revenue), and production (location, manufacturing operations, raw materials, equipment, labor skills, space, overhead) . Internet can be a valuable resource.

Sections of Business Plan

Cover Page: contact name and information Table of contents Executive summary The company: past, present and future The market The Product/service

Sections of Business Plan

Sales and Promotion Financial projections
Profit and loss Balance sheet Cash flow

Components of the Plan

Executive Summary (2-3 pages) Company Description (0.5-1 page) Products and Services (2-4 pages) Markets (1-2 pages) Technology (2-3 pages) Competition/Competitive Advantage (1-2 pages) Business Model/Key Customers (2-3 pages) Operations (1-2 pages) Management (1 page) Financial Projections (1 page) Financing and Use of Proceeds (0.5-1 page)

Executive Summary

Parts of a business plan

DECIDING TO GET INTO BUSINESS 2. ANALYZE YOURSELF a. Honestly analyze personal strengths and weaknesses: business experience and education. b. Personal shortcomings are best dealt with and should be candidly acknowledged at this very preliminary stage. c. Learning from mistakes is costly

3. CHOOSE A PRODUCT OR SERVICE

a. It is grossly unwise to choose something that is little known (needed) b. Identify the interplay between absolute confidence and absolute knowledge of a particular sector in the industry c. Pick a product or service that: i. You have lots of information about. ii. Will grow faster than the economy in general iii. You can get excited about and transform that excitement into profits iv. Boldly passes the test of uniqueness (w.r.t. to practical judgement) v. USP and FAB with the target customers and competitions frame of reference

4. RESEARCH MARKETS
Who are my customers, Where do they live and shop, How they buy, At what price, What makes them buy, How much do they earn, etc..

a. Get to know all relevant facts and figures i. The target market strength, growth rate and approachability ii. Competition b. The research process: i. Defining the need for facts ii. Finding facts iii. Analyzing facts iv. Taking appropriate action c. Source of information: i. Chambers of commerce ii. Journals iii. Studies done earlier iv. Consultants

5. FORECAST SALES REVENUES

a. Estimation of market share based on reasonable assumptions taking into account the number and size of competitors and the amount of time it will take them to achieve their goals. b. Express this market share in form of sales revenues as follows: i. First year monthly ii. Second year quarterly iii. Third year annually c. Market potential has to be accurately estimated

FORECAST SALES REVENUES

d. Accuracy in these forecasts is important Based on these planning following expenditures are done: i. Buying/leasing long lived assets buildings, equipment, land and other fixed assets ii. Inventories and supplies taking into account the lead times iii. Hiring of workforce

6. CHOOSE SITE
a. Climate b. Hometown? c. Suppliers d. Customers e. Financial support f. Geological hazards (earthquake zones) g. Possible terror stricken areas h. Proximity of parking lots/centrality i. Catering maps (serviceability of clients)

7. DEVELOP PRODUCTION PLAN

a. Scale of operations b. Processes required to convert raw mat finished products i. Create flowchart of the transformation process ii. Minimize manual handling iii. Make best use of the workforces time iv. Maintain flexibility for expansion c. Quality control

8. DEVELOP MARKETING PLAN

a. How to create profitable customers b. Distribution channels and servicing activities c. Advertising and sales promotions d. Selling strategies e. Pricing f. Packaging

9. DEVELOP ORGANISATIONAL PLAN

a. Staffing i. Job profiles ii. Recruitment policies b. Reporting structures c. Personnel management plan

10. DEVELOP LEGAL PLAN a. Form of business venture: sole proprietor, partnership b. Personal preference, tax benefits and personal wealth c. Seeking legal advice

11. DEVELOP ACCOUNTING PLAN

a. Measure of magnitude and direction b. Should have a record and book keeping system before and not after the venture starts i. Ensure a high degree of accuracy ii. Handle information at a low cost iii. Turn reports quickly and periodically iv. Minimize theft and fraud

12. DEVELOP INSURANCE PLAN a. Protection from unforeseen events b. Prospective severity of losses c. How to treat these risks

13. DEVELOP FINANCIAL PLAN

a. Translate all the above plans into money (common denominator) i. Cash budgets
1. 2. 3. 4. ii. iii. How and when money is required Process-wise details How it will be spent How soon can it be repaid (to investors) Income statements and Balance sheets - How to finance assets Profitgraphs Break-even chart

14. WRITE COVERING LETTER

Other sections: technology based

Management team: people who fund other people value management skills above ideas Risk factors: shows that you know what could go wrong and plan to avert it

Packaging the Plan

It is a living document No right/wrong way: the need of reader is essential What are the challenges/ questions that can be raised by reader: answer these.

Packaging the Plan

Include supporting materials Dont make unsupported statements Designate an outside reviewer/ reader that can critique plan