FOUNDING A NEW VENTURE: THE BUSINESS PLANNING PROCESS

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FOUNDING A NEW VENTURE THE BUSINESS PLANNING
PROCESS

• JEAN CLARKE
• LEEDS UNIVERSITY BUSINESS SCHOOL

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AIMS OF THE LECTURE

• Understand difference between Push/Pull
  factors
• Understand SWOT analysis
• Conduct a SWOT analysis in groups
• Understand the importance of the business
  planning process
• Understand how plans can help you get funded
• Understanding that planning is an important
  process both for new and growing businesses
• Group Exercise - develop your own business plan

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FOUNDING A BUSINESS VENTURE PUSH AND PULL
FACTORS (Chell, 2001)

• Push Factors
• Unemployment
• Redundancy
• Social marginalisation
• Pull Factors
• Having an innovative idea
• Wanting to be your own boss
• Desiring Independence
• New businesses must be based on
• Need for goods or service in market place?
• Skills and competencies of founder to deliver?

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SWOT ANALYSIS

• One tool which may be used to systematically
  examine the above questions is a SWOT Analysis
• Strengths attributes of organisation will help
  the business venture
• Weaknesses attributes of organisation that may
  hinder the business venture
• Opportunities external conditions that are
  favourable for the business venture
• Threats external conditions that are
  unfavourable for the business venture

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UNDERSTANDING YOUR STRENGTHS AND WEAKNESSES

• What are your own strengths and weaknesses?
• Are you good at leadership and communication?
• What are the strengths and weaknesses of your
  product/service?
• How good are your people and your facilities?
• What do you lack currently that you will need if
  you are to grow?
• What will be the critical problem areas if you
  grow?
• Do you have money of your own to put into your
  business?

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UNDERSTANDING THE OPPORTUNITIES AND THREATS

• Are market tastes changing?
• Is the market growing?
• Are people moving away from your product/service?
• Are there changes in the social, legal, economic,
  political or technological environment that will
  affect your project?
• How easy is it for competitors to come into your
  industry?

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SWOT ANALYSIS Strengths, Weaknesses,
Opportunities, Threats
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GROUP TASK

• Sabeer Bhatia and Hotmail
• Students should have read short case study before
  class
• Divide into groups of five individuals
• Do SWOT analysis on case study Sabeer Bhatia
• Nominate one individual to present to class and
  discuss difference between presentations

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IMPORTANCE OF PLANNING IDEA DEVELOPMENT (Delmar
and Shane, 2003)

• Important precursor to action in new ventures
• Helps firm founders make decisions
• Balance resource supply and demand
• Turn abstract goals into concrete operations and
  steps
• Reduces likelihood of venture disbanding
• Accelerates product development and venture
  organising activity

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IMPORTANCE OF PLANNING SURVIVAL

• A business doesnt plan to fail, it fails to
  plan
• Successful firms do more planning than similar
  failed firms (Perry, 2001)
• Entrepreneurial firms plan more than small
  businesses (Matthews and Scott, 1995)
• Rapidly changing environments need plans the can
  change and are flexible

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IMPORTANCE OF PLANNING ESTABLISHING AIMS

• Aims of both you and your business
• Planning how to get there
• Develop strategies to achieve objectives how to
  statements
• Develop a marketing plan
• Develop a financial budget what financial
  resources are needed, profit and cash flow
  forecasts, etc.
• Lifestyle business or growth business? (Carland
  et al, 1984)

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FORMAT FOR BUSINESS PLAN (Chell, 2001)

• Overview/Summary
• The Company and its Industry
• The Products/Services
• Markets
• Marketing
• Design and Development (If Applicable)
• Manufacturing and Operations
• Management

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FORMAT FOR BUSINESS PLAN CONT.

• Financial Requirements
• Financial Highlights, Risks and Assumptions
• Detailed Financial Plan (Quarterly for 3-5 years)
• Appendices e.g. Technical Data on Products,
  Details on Patents Etc, Order and Enquiry Status,
  CV of Key Managers, Audited Accounts

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GETTING PLANS FUNDED (Chell, 2001)

• For new start-ups plan is likely to be simpler
  and not include all elements
• Can vary in length from 10-50 pages but average
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• Shifting from idea to production major step!
• Investors often emphasise production facilities,
  control over management processes and achieving
  high standards (Chell, 2001)
• Emphasise these aspects in business plan

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GETTING PLANS FUNDED (MacMillan and Narasimha,
1987)

• Financial Forecast Attractive yet Credible
  unrealistic plans go unfunded
• Accompany financial projections by set of
  comparative rations for similar firms
• Strike a balance - Plans where marketing,
  finance, production and management are over or
  under-reported dont get funded
• Watch for financial over-reporting mindless
  production of spreadsheets hinders process
• Sell your idea not your ratios!

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PLANNING AS PROCESS (Chell, 2001)

• Once a business starts to grow planning will
  occur at different levels and to different time
  scales
• Strategic Plan
• Policies
• Procedures
• Single-use plans
• Projects

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PLANNING AS PROCESS CONTPLANNING LEVELS
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PLANNING AS PROCESS CONT. (Chell, 2001)

• Planning fundamental management process doesnt
  stop once business is funded
• Important to understand tools to plan
  systematically
• Forecasting
• Scenario planning
• Benchmarking
• Participative planning
• Staff planners

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GROUP TASK BUSINESS PLAN

• Divide into groups of 5 individuals
• Come up with an idea for a business, this does
  not have to be an original idea but rather you
  see a need for it in the market place e.g. slight
  variation, movement into new market etc
• Develop business plan based on Chells (2001)
  format
• Do not attempt a financial section this would
  require more time than available
• Present business plans to class