Cover Sheet

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YDC E-Challenge The Business Plan 14th March
2009
Roger T. Marshall Managing Director Persimmon
Capital Limited roger.marshall_at_persimmoncapital.co
m.hk (852) 3105-1580
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Some General Points

• No universal applicable format
• Let it be your own work and thoughts not the
  consultants
• It is a selling document not a textbook to
  teach your business
• Presentation is critical
• Keep it Simple - it needs to be an enjoyable read

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The Purpose

• Let people understand your business, dreams,
  aspirations an element of vision is important!
• Attract Support
• Investors Bankers
• Suppliers
• Customers
• Employees
• Government
• Must be relevant to the audience you are
  addressing

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Some helpful observations

• A good business plan is one in which the
  entrepreneurs have asked themselves all the tough
  questions before the potential investors do
  (Allan Stephen, Greenfields Venture Capital)
• The biggest mistake I see is no clearly defined
  objectives about where the business should be in
  three months, six months from now (Allan
  Stephen)
• A battle plan is only good until the fighting
  starts (General Karl von Clausewitz)
• You have to always reevaluate the idea, take a
  step back and look at where its going (Caron
  Tauri, Founder, Carich New Zealand)

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The Start of a long road.

• Business Plan(ning) is a continuous exercise in
  business
• If you want to start your own company because
  youre interested in flexible hours, forget about
  it. Youre never not working
• (Tom Neir, Founder, Pacific Coffee Co)

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The Index

• 1. The Executive Summary/Overview
• 2. Business description
• 3. The Market
• 4. Marketing and Selling
• Competition
• Technology
• Strategy
• 8. Operations
• 9. Management/Board of Directors
• 10. Funds required
• 11. Financial data
• 12. Appendices

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Vmedia - an example
Products
8 page summary
Distribution
A lot of information on the market place, the
market for the product and the environment
IP
Competition
People
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Leisure Capital
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The Body of a BP - 1

• Executive Summary
• what is the business proposition?
• strategy and market potential
• business model
• major milestones
• financial results
• product/service development
• the investment proposal
• Fifteen minutes of fame

Leisure Capital
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The Body of a BP - 2

• Business description
• What .
• Where.
• And to whom?
• And what is the objective?
• Does it have focus?

China Heart Group
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Leisure Capital
Objective
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The Body of a BP - 3

• The Market
• What is the industry ?
• Size and growth of the market
• Trends of the industry
• Target Markets
• Customers, penetration, share .
• Modern business is very complex so think about
  how an industry works and which segment you will
  play in it

China Heart Group
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The Body of a BP - 4

• Marketing Strategy
• Segmentation
• Relationship with supply chain
• Partners development, manufacturing
• Selling activities
• New/existing customers
• Distribution network/partners
• Critical wins

Eton International
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Leisure Capital
China Heart Group
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The Body of the BP - 5

• Competition
• Analysis of competition
• What distinguishes your business?
• Market share
• Pricing

Eton International
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The Body of a BP - 6

• Technology
• What technology required?
• Is the technology proprietary? If not, how will
  use of the technology be secured?
• R D activities
• Regulatory requirements

Separate Solutions
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The Body of a BP - 7

• Strategy
• Given the macro analysis, what is the business
  model?
• Performance targets
• Positioning of the business
• Expectations of competition
• Other business relationships

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The Body of a BP - 8
China Heart Group

• Operations
• Procurement
• Capacity
• Critical parts and process
• Availability of people
• Costs

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The Body of a BP - 9

• Management
• Key managers
• Options/incentives
• Advisers
• Board of directors
• Non-executives
• Governance

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Leisure Capital
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The Body of a BP - 10

• Funds required and their uses
• Present requirement
• Future requirement
• Use of proceeds
• Debt vs equity

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Leisure Capital
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The Body of a BP - 11

• Financial data
• Financial statements projections
• Full explanations on assumptions
• Sensitivity Analysis
• Capital/Working capital budget
• Cashflow projections (month by month)

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The Body of a BP - 12

• Other useful attachments
• CV of key managers
• Company brochure/product specifications
• Market study
• Independent assessment of technology/products
• Patents
• Audited financials

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Financial projections

• Purpose
• Methodology
• Analysis
• Interpretation

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Leisure Capital
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Financials - purpose

• Define critical metrics
• Analyse the business from a financial perspective
• Understand the resources required e.g. people,
  capacity
• Validate the investment argument
• Put flesh on the bones

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Financials - methodology

• Assumptions
• Detailed workings
• An interactive model
• Sensitivity analysis
• Ratio analysis
• Valuation
• Evaluation of returns

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Financial Analysis (1)

• Bottom up approach
• What are the key metrics of the business?
• Normally revenue driven
• Volume and price
• Capacity issues
• Costs normally follow the revenue model
• Variable and fixed
• revenue? of outlets/sales staff
• Establishment costs fixed
• Depreciation

Beijing International Hospital
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Financial Analysis (2)

• An interactive model enables you to analyse
  different scenarios (i.e. what if revenues are
  20 below forecast?)
• Ratio analysis enables you to see at a glance the
  pattern of the business (i.e. is the gross margin
  going up or down?)
• Balance sheet ratios also important - working
  capital is also critical to the development of
  the business

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Financial Analysis (3)

• Financial forecasts consist of
• the financial model
• Profit and Loss Account
• Balance Sheet, and (most importantly)
• Cashflow Statement
• The cashflow statement ensures that you know when
  you will run out of money!
• The cashflow helps you identify the funding
  required i.e. debt rather than equity

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Beijing International Hospital
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Evaluation

• What are the expected returns from investment?
• What are the returns on
• assets
• equity
• capital employed
• etc?
• Annualised return - IRR
• Cash on cash return
• Valuation measures

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The proposition

• What are you asking for?
• How much money do you want?
• What of the business are you offering?
• What is the structure of the offering?
• Valuation
• Exit - how is the investment to be realised?

Beijing International Hospital
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Leisure Capital
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Other Issues

• The changes to the business..
• Additional governance
• More formalisation
• Need to work with others
• You may lose 51 control
• Confidentiality issues
• Telling your employees, suppliers, customers
  etc..

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Hints

• Length - maximum 25 pages, with 3-4 pages for the
  exec summary
• Write good English/Chinese
• Attention to layout - make it easy to
  follow/enjoyable to read
• Draw conclusions
• Use appendices if necessary

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Summary

• Keep the length down
• The executive summary is key
• The financials must be comprehensive - provide
  plenty of statistical information
• Importance of presentation - multimedia?
• It is a selling document