07 May IDENTIFY THE FUNDING REQUIREMENT
The Business Plan
Essessment should establish what your business plan is about
1. Name of the venture
2. Identify what product or service you are selling
3. Specify any unique or distinctive aspects to your product
4. Introduce the marketing aspects very briefly
5. Indicate the choice of trading vehicle
6. Identify the funding requirement
7. Very briefly, deals with how you have approached the assessment structurally (including the concept of academic justification)
For this section you have about 10% of the total word-count to play with – about 300/350 words
DO NOT
waste time or word-count with
• “Executive summary”
• “Mission statement”
• “Vision and values”
or employ fancy typefaces or colours – although you may choose to use bold to indicate the specific subject you are addressing
DO
Use paragraphing to effect – so begin a new paragraph every time that you deal with a new concept. For instance, the introduction should contain a maximum of 7 paragraphs (see above) and probably no fewer than 4 (see the groupings above)
The Business Plan
Two parts – the cash flow (numerical) and the narrative (verbal)
Cash flow
Start the Business Plan section with the cash flow – it makes no difference whether you incorporate it into the body of the document or have it as a separate appendix. Use the cash flow structure as the basis for your narrative, proceeding down through the cash flow and explaining each component as necessary.
If you use an appendix approach, identify which appendix it is and say what it is in a very brief one-sentence summary – “The numerical cash flow is at Appendix A and shows a three year cash flow which indicates that by the end of the forecast period annual sales of £xxxx are achieved producing a cumulative deficit/surplus by the end of the forecast period of £xxxx”
The cash flow should also indicate briefly how sensitive the overall plan is to changes in some of the major factors, using the cost concepts developed in L11.
The Narrative
Using the cash flow as the basis for the narrative enables you to lead the reader through the business plan in a logical and coherent way. Take each section sequentially:
• describe how the income line is built up and what happens to it over the forecast period
• describe the make-up of costs and how they change over time
• indicate issues of seasonality and their effect
• describe how your business’s cash demands will alter with changes in demand and changes in payment terms
You must also explain other points:
• the trading vehicle chosen and the rationale for that choice
• the way in which your business will be funded – pay particular attention to issues raised in Lecture 4. A mere statement that you will obtain funding ‘from the bank’ will be insufficient.
You should expand upon the description of the unique or distinctive issues your products or services have, that you touched upon in the introduction, to explain why your business will attract custom.
You should justify the assumptions behind each line that you think requires justification – eg unit sales x unit price; how you have built up costs; what the inflation factors are if you have used them; how you have phased payments to suppliers and from customers (bear in mind, for instance, the issues of credit card sales covered in Lecture 11). This may require you to use separate appendices. If you do, make sure they are labelled and that they show in figures what you are describing in words.
You should pay particular attention to details of the market research that you undertook to prepare the basis of your forecasts – sources of information (which should be identified if specific) or the conceptual basis on which you constructed forecasts if you have had to synthesise information or forecast by using capacity constraints.
You can summarise some of the information in separate appendices – eg “Appendix B/C/D shows the trend in income over the forecast period by a 5% quarterly change in unit prices from period 8 onwards applied to a steady increase in unit sales from period 6”
or
“Appendix B/C/D shows the change in unit costs over the forecast period, particularly the effect brought about by the ability to buy raw materials in larger quantities as sales demand increases from forecast period 10”
or
“Appendix B/C/D shows staff costs and how they have been built up and particularly the effect on costs of employing two extra members of staff after forecast period 8.”
You should identify the basis on which you have included certain items of cost – eg what capital expenditure you have made; why you have purchased certain items in the time-frames chosen. Identify what happens to your stock position (if this is significant) – especially if the business expands. Think about the consequential effect on your cash utilisation – payments to suppliers and from customers – and how this might be flexed (see Lecture 11)
Your forecasts should be as realistic as you can make them and sufficiently comprehensive to indicate that you have considered the issues of how cash flow may be affected by sales; debtor and creditor movements; inflation changes; seasonality; volume changes and so on.
Indicate, as appropriate, how you will be supporting – if you do – your specific decisions with academic references (“see Critical evaluation”) and then make sure that you follow these up in the Critical Evaluation section
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