Business Plan Workshop

Presented by Biruwa Ventureswww.biruwa.net

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Why Entrepreneurship?

Looking at a Problem as an Opportunity

Why start a business in Nepal?

• Nepal is a virgin market – unmet demand

• Nepal is full of problems – look at this as an opportunity

• More educated young people, fewer jobs

• Entrepreneurship is not work!

Risk vs. Reward• Starting a business is risky

• Linear returns vs. Exponential returns – socially, financially, personally…

• Be insane, never be scared of failure

“You won’t succeed, unless you try”

- Michael Jordan

Rise of an opportunity• Change is good for

business

– Social

– Demographic

– Economic

– Political

– Technological

– Industry/market

– New technology or innovation

An IdeaGenerat

e

AssessEvolve

The Business Plan

What is a business plan?

• It is NOT a report

• It is the PROCESS of finding out how to develop your business venture

• A business plan describes all the parts of the company necessary to make money

Why Write One?• Plots a course

– Helps you think long term

• Feasibility study– Is your idea viable?

• Become a better decision maker– Helps you anticipate

problems– Will increase your

knowledge

• Reality check– Identify strength and

weaknesses – where you will need help

• Implementation plan– Use it as a guide – Keeps you honest /

accountable– Creates a time line

• Selling tool– Use it to sell to your

potential investors, partners, customers and suppliers

Where to begin?

Business Plan Research• Where to start?

– Talk to other entrepreneurs, business leaders, professors, friends, etc.

– Secondary data• Newspaper, reports,

census, database, etc. – Primary Data

• Questionnaires, focus groups, product sampling, company data etc.

Business Plan Outline

1. Table of Contents

2. Executive Summary

3. Product Overview

4. Industry Overview– Industry trends– Rules & Regulations– Competitive analysis

5. Marketing Strategy– Target Market– Marketing Channel– Pricing Strategy

6. Operational Plan– Supply Chain– Production &

Distribution– Operations– Human resources

7. Financial Plan– Cost Estimates– Cash flow statement– Income statement– Balance sheet

8. Appendix

Executive Summary

• Complete this section at the end

• Why is it important?

– Will help capture interest and support of your readers

– Usually an investor will read this section of the document first and decide if it is worth spending more time on it

• What is it?

– Summary of business opportunity

– Usually around 2-pages

– Demonstrates your knowledge of the business

– Proves that any investment in the venture will yield good return

What to include in the Executive Summary?

• Introduce the business opportunity and vision for your business

• Marketing Highlights– Product/Service

distinctive features– Target market summary– Competitive analysis– Key marketing

strategies

• Operational Highlights– Critical legal issues– Supplier summary– Management team

overview

• Financial Highlights– Summary of finances

and projections– Equity investment of

owners

Case study: Microbrewery

• Create a brew-pub to serve the beer enthusiast market in Kathmandu

• Marketing Highlights– Distinctive taste

– Focus on experience, quality, taste

– Beer enthusiasts and budget conscious customers

– Large brewers (Gorkha Brewery, foreign beers, etc.)

– Strict government Regulation

The Product

Product: the Five W’s

• What you should know:

– Who are you selling to?

– What are you selling?

– Where do you sell?

– When do you sell?

– Why and how do you make money?

Product Description

• Why is it important?

– Communicating your product completely and concisely

– Fill gaps identified in the market

– Identify and use your Value Proposition

• What to include?

– What are your product’s/service’s unique feature?

– What are the value added features?

– How is your product different?

– History of the product in the market

Product Description (Microbrewery)

• We will deliver premium quality draft beer inside the bar and sell to beer enthusiasts at affordable prices

• Better tasting beer, variety, unique bar atmosphere

• More options for customers

• Different taste from competition, constantly changing - evolving

The Industry

Industry Trends

• Why is it important?

– Understand current economic and industry trends

– Identify if your product will meet customer needs

– Provides you strategic information to make your business competitive

– Assists you in determining the longevity of the market

• What to include?

– Changing Environment• Social; Economic;

Demographic; Environmental; Technological; & Political

– Past, present and future industry trends

– Key success factors in your industry

– Barriers to entry, size of industry

Industry Trends (Microbrewery)

• Large number of young professionals (20-35 years in age)

• Increasing disposable income

• Rising consumption of micro-brews in U.S. and Europe; New entry into Indian market

• Customers seeking variety

• Government action against larger corporations

• Dominant position of Gorkha Brewery in market (80% market share)

• Increasing market share of imported beer

• Rs. 31,00,00,000 worth of alcoholic products imported in Nov/Dec 2011

• Rs. 19,00,00,000 of liquor imports last fiscal year

Operating Regulations

• Why is it important?

– Includes all application government regulations required to operate your business

– You have to ensure that your business meets these regulations

• What to include?

– Filing dates

– Restrictions

– Industry specific considerations

– Permits required

– Qualification required

– Quality assurance

– Insurance

Operating Regulations (Microbrewery)

• Liquor permits / license

• Yearly licensing fees• Meeting quality

standards• Regular testing• Can you follow certain

international standards to assure customers?

Competitive Analysis

• Why is this important?

– Helps you differentiate your business

– Helps identify areas / customers not being targeted

– Helps you understand what the market likes of dislikes

– Identify threats

• What to include?

– Years in business

– Product/service description

– Product/service differentiation

– Customer profile

– Pricing

– Strengths/weaknesses

– Opportunity/threats to your business

Competitive Analysis (Microbrewery)

• Gorkha Brewery (80% market share)

– 50-50 Khetan Group and Carlsberg Group

– Large control in market

• Barriers to entry – financial, supply chain, distribution, legal

• Price in market higher than consumer preference - Rs. 200+ a bottle (higher – Rs. 300+ in restaurants)

• Create a brand (Sam Adams Beer)

The Marketing Mix

• What is it?

– Methods you choose to communicate with your target market

– It is a well-defined plan of action that includes timing, costs, and expected return of chosen promotional methods

• Why is it important?

– A new business should create awareness among customers to generate revenue

– The timing of promotional methods will have an direct impact on cash flow

Target Market

• Why is this important?

– Helps you forecast the sales and cash flow projection

– Determines whether there are enough customers in the market to make your business profitable

– Helps you make critical and focused marketing decisions

• What to include?

– Age range

– Income range

– Gender

– Location

– Average / frequency of purchase

– What need does your product fulfill?

– Who influences their purchasing decision

The Marketing Strategy

Target Market (Microbrewery)

• Young professionals: 20-35 yrs

• Medium to high income (Rs. 20,000 and above)

• Mainly male

• Do women prefer fruiter beers?

• Near work areas, offices

• Nepal 1.2 lt per annum (Kathmandu 3.5 lt) = total 3,21,00,000 lt

• Total market value of beer market in Kathmandu = Rs. 3,50,00,000 (Rs. 3.5 arab)

• Need for variety and affordable prices

The Marketing Mix - Channels

• Why is it important?

– A description of how and where you plan to sell your product

– You must match your location and distribution strategy based on buying patterns of your customers

– Always consider your customers preferences before making a move

• What to include?

– How to market?

– Different costs associated with marketing channels

– What is the marketing importance each of the channels?

– Potential for future growth

– Traffic flows at the potential location

– How will your method affect: sales, services, promotion, timing, economics?

The Marketing Mix – Channels (Microbrewery)

• Print vs. Social media

• Target areas near offices or existing bar areas like Thamel or Jhamisikhel

• Usually works near colleges (KU, Manipal)

• Sponsor events, get endorsements

• Need areas with heavy foot traffic

The Marketing Mix - Pricing

• Why is it important?

– This is how you will position yourself in the market against your competitors

– Price is a function of your costs, competition, and your customers

– This will determine your profitability

– An effective pricing strategy can help you enter the market quickly

• What to include?

– Know your costs: labor, cost of materials, overhead, profit margin

– Pricing considerations: Low, Medium, or High

– Customer’s perception of value

– Discounting (trade or volume)

The Marketing Mix – Pricing (Microbrewery)

• High capital equipment cost Rs. 8 lakh for equipment from China

• Government licensing fees

• Sell more, lower margins vs. Sell less, higher margins

• Price lower than Rs. 100 per pint (473 ml)

• Make premium brews for high end customers, make higher margin

The Operational Plan

Supply Chain

• Why is it important?

– Can you find necessary suppliers and equipment?

– Helps you identify suppliers that best fit your business needs

– Answers if you need backward linkages

– How much inventory will you need?

• What to include?

– Pricing

– Trade discounts

– Supply shortages

– Exclusive product rights

– References

– Back up suppliers

Supply Chain (Microbrewery)

• Chinese suppliers vs. local fabrication

• Regular maintenance

• Finding key ingredients for quality brew– Keeping supply local vs.

importing (question about quality)

– Malt extract (liquid or dried), Hops, Specialty grains, Yeast

• Maintain exclusive rights to ingredients

Production / Distribution Plan

• Why is it important?

– Outlines the method of production & distribution

– Ensures that you have considered all components of the production process

– Impacts your physical location, human resources, licensing, etc.

– The ability to protect your intellectual property, patents, trademark – impacts competitive advantage

• What to include?

– Production methodology

– R&D requirements

– Cost analysis (direct and indirect overhead)

– Time requirement

– Equipment and plant requirement

– Facilities description

– Leasehold improvements

– Warehousing requirements

– Sub-contracting arrangements

Sierra Nevada Brewing Co.

•Established in 1980 with $50,000 loan – produced 950 barrels of craft beer

•In 2010, it produced 786,000 barrels of beer

•6th largest brewing company in United States

Production / Distribution Plan (Microbrewery)

• State of the art-equipment, to maintain utmost sterility during production, cooling and storage

• Creating a recipe for great tasting beer; experiment, give free tasting

• First distribute at bar, consider bottling options and distribution at other retailers and bars

• 6-months to set up facility, 6-months to brew the first sellable batch

• Build storage facility to keep brews

Human Resources• What is it important?

– Forces you to do a skills inventory of yourself and develop a plan to “fill the gaps”

– You have limited time, do what you are best at and find help

– If there is a need to hire, factor that into the cost structure

– A strong management team is extremely important for potential investors

• What to include?

– Organizational structure and staffing plan (Full time & Part time)

– Salaries and benefits

– Job description

– Roles and responsibilities

– Service and employee contracts

– Future HR plans

– Business skills audit

Human Resources (Microbrewery)

• Need someone with brewing experience, take training overseas?

• Bar tenders also work as brewers; can share knowledge with customers

• Give training to brewers

• Find someone with distribution/logistics experience

• Account professional brewer into cost structure

The Financial Plan

Financial Statements

• Why is it important?

– Determines your business’ liquidity (Balance Sheet)

• Do you have enough current assets to meet your current liabilities?

• What is your debt to equity ratio?

– Provides overall profitability summary over a period of time (Income Statement)

• What to include?

– Balance sheet• Current assets, fixed

assets, other assets

• Current liabilities, long-term liabilities, shareholders equity

– Income statement• Sales/Revenue

• Expenses (variable and fixed)

• Profit/Loss

• Tax owed

Cash Flow Statement

• Why is it important?

– Shows the actual flow of money in the business

– Determines if the business is viable

– Helps you make purchasing and hiring decisions

– Tells you if you need a loan or cash injection

• What to include?

– Sources of cash: sales, loans, equity investments

– Uses of cash: expenses to be paid, start-up cost,

– Balance (Monthly receipts minus disbursements)

– Factors to consider: seasonality, return on promotions, payment items

Financial Estimates (Microbrewery)

• Start-up costs

– Build-out cost (Building, bar, tables, chairs, electrical, refrigerator, etc.) = Rs. 25 lakh

– Capital Equipment (brewing equipment, barrels, keg fillers, lab equipments, etc.) = Rs. 20 lakh

– Starting Inventory (barley malt, specialty grains, hops, yeast, water, etc.) = Rs. 15 lakh for first year

– Labor Cost (1 brewmaster, 3 bartenders, 1 manager, 3 waiters, 1 help) = Rs. 16 lakh for first year

• Total Start-up cost = Rs. 76 lakhs

Wrapping Up

DILBERT!

Building your Company

Idea Business Plan

Size of the

Opportunity

Customer Discovery

Customer Validatio

n

Theory Implementation

Source: Steve Blank – The Lean LaunchPad

CUSTOMER SEGMENTS

VALUE PROPOSITIONS

images by JAM

CHANNELS

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CUSTOMER RELATIONSHIPS

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REVENUE STREAMS

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KEY RESOURCES

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KEY ACTIVITIES

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KEY PARTNERS

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COST STRUCTURE

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customer segments

key partners

cost structure

revenue streams

channels

customer relationships

key activities

key resources

value proposition

images by JAM

Case Study & Presentation

• Executive Summary

• Product Overview

• Industry Overview

• Target Market

• Marketing Strategy– Marketing Channel

– Pricing Strategy

• Supply Chain

• Rules & Regulation

• Production & Distribution

• Human Resources

• Financial Estimates– Cost Estimates

– Breakeven analysis

– Cash flow statements