PREPARING A BUSINESS PLAN

Transcription

1 WEEK 4 6 PREPARING A BUSINESS PLAN Students are now ready to write their formal business plan. The following literacy activities help to introduce students to the concept of the Business Plan and help them to understand what needs to be included. Teachers and students should be aware of the following extracts from the Clarifications of Standard Document before starting their business plan: There must be a formal business plan prepared before the activity takes place. Everything in the plan should be written in the future tense. The business plan is a key foundation of this standard (as it is for all businesses), and it needs to be the basis of what the students expect to transpire. It is vital that the business plan is formalised and approved prior to students moving onto the development, production and sales phases. Each team needs to plan for a directed product-based activity. This means that the teacher is able to give assistance and advice (i.e. direction) with the business planning. (Source: [ 32 ]

2 LITERACY ACTIVITIES Teachers may like to use the following literacy activities when introducing their students to the business plan. LITERACY ACTIVITY 1 MEMORY GAME Display the words on the board. Students have 2 minutes to study the words (no writing allowed). They then have to try and individually remember all words and spell them correctly. LITERACY ACTIVITY 2 GRAPHIC ORGANISER Print the key terms onto sheets of card (1 per group) and cut up each key term separately. Students are to lay the cards out on their table to correctly show the six sections of a business plan and what should be included within each section. They will need to refer to either the Business Plan outline in their assessment booklet or The Kangaroos business plan exemplar to help them. What have we done already? Look through The Kangaroos exemplar as a class and ask students to identify which parts of the Business Plan they have already completed. They will hopefully find the task of preparing a business plan less daunting if they realise they have completed some of the work already. They should have already prepared their mission statement, company goals, SWOT analysis, organisational chart, roles & responsibilities, market research and identified their suppliers. This work can now be typed up formally and included as part of the business plan. Students now need to decide who is responsible for writing the remaining sections of the business plan. [ 33 ]

3 MEMORY GAME close your books and put your pen down look at these key terms for 2 minutes now, open your books and try to write down all 10 terms 1 st student to write down 10 shouts out BUSINESS PLAN KEY TERMS MEMORY GAME Business Plan Executive Summary Introduction Marketing Plan Human Resources Operations Financial Forecasts Mission Goals SWOT Analysis [ 34 ]

4 Graphic Organiser Cards: BUSINESS PLAN EXECUTIVE SUMMARY INTRODUCTION MARKETING PLAN HUMAN RESOURCES OPERATIONS FINANCIAL PLAN Business Plan Highlights Business Idea Vision & Mission Market Research Goals Income Statement Roles & Responsibilities Timeline SWOT Analysis Target Market Marketing Mix Organisational Chart Coordination of the business Suppliers Production Process Quality Control Health & Safety Sources of Finance Financial Controls Break Even Analysis Methods of Communication Cash Budget [ 35 ]

5 BUSINESS PLAN CHECKLIST FOR STUDENTS Executive summary Overview of business idea Product description Unique Selling Point Business Plan summary Mission and Objectives Mission Statement Business objectives (SMART goals) Timeline Marketing Market research results SWOT Analysis Target market Marketing Mix People Organisation Chart Group members and roles Communication internal and external Finance Sources of finance Accounting Controls Cost Breakdown Breakeven analysis Cashflow Forecast Forecast Income Statement Operations/Production Suppliers Production Process Quality control Co-ordination of the business Health and safety [ 36 ]

6 EXECUTIVE SUMMARY Students need to write a clear description of their product idea including their unique selling point (what makes their product different to and better than the competition?) They also need to summarise the key points from each section of the business plan. This business plan summary is completed last, when all other sections of the business plan have been completed. MISSION AND OBJECTIVES Students should have already agreed on their mission statement and company objectives (goals). They now need to prepare a timeline showing what key tasks will be completed by the company each week. THE MARKETING PLAN Students should have already prepared their SWOT analysis and written up their market research results. They now need to describe their target market in more detail and develop a Marketing Mix for their product by identifying their 4 P s. MARKETING MIX PRODUCT PRICE TARGET MARKET PLACE PROMOTION FOR A BUSINESS TO BE SUCCESSFUL THEY MUST SELL THE RIGHT PRODUCT, AT THE RIGHT PRICE, USING THE RIGHT PROMOTION METHODS AND SELL IT AT THE RIGHT PLACE. [ 37 ]

7 Prepare the four marketing Ps for your group idea. PRODUCT: Describe your product and it main features. What is your product function? What is your Unique Selling Point? Who is your target market? What packaging will you use? PRICE: Identify your intended sales price. Justify why you chose this price You should consider: The cost per unit are you selling at a price above this to ensure profit? The price of your competitors products Market research results what are your customers willing to pay? Identify which pricing strategy(s) you are using PROMOTION: What promotion methods will you use to promote your product to your target market? PLACE: Where will you be selling your product? What are the advantages of this sales location? [ 38 ]

8 HUMAN RESOURCES Students should have already completed their My role in the Company sheet in Week 1 with an organisational chart and a write up of what each director does and why they are suited for their role. They now need to write up how they will communicate as a team (internal communication) and how they will communicate with people outside of the business, for example suppliers and customers (external communication). THE OPERATIONS/PRODUCTION PLAN Students should have already identified what resources and equipment they will need to make their product and where they will get these from. They now need to write up their: Production Process Quality Control methods Health & Safety Hazards How they will coordinate the running of their business PRODUCTION PROCESS Students need to identify how their product will be made. What steps are needed to be completed in what order to complete the production of their product? They may choose to write this up using a step by step approach or draw a Flow Diagram. QUALITY CONTROL Students now need to decide on their quality control methods. How will they ensure the product is produced to the highest possible quality? HEALTH & SAFETY Students will need to brainstorm what could possibly go wrong in terms of health & safety when producing the product and what they will do as a company to reduce this risk? Example: Rock n Roll is a student company making pet rocks. They are using nail varnish to paint the rocks and craft knives to cut up pieces of material for clothes. Health & Safety Hazard The smell of nail varnish may give directors headaches Directors may cut themselves when using craft knives How we will reduce this hazard Paint our rocks outside or in a well-ventilated room with both doors and windows open. Production director will be the only student to use the craft knife as he has experience of using one safely from taking technology in Year 10 COORDINATION OF THE BUSINESS Students need to identify what jobs need to be done in the lead up to Market Day and allocate each job to one or more company director with a deadline for completion. This shows that the students have planned how to operate their business. [ 39 ]

9 THE FINANCIAL PLAN To complete the Finance section of the Business Plan students will need to know: Their selling price How many units they expect to sell on Market Day The cost of all resources needed to make the product Other expenses that may need to be paid e.g. Table Hire and printing The Finance Section should include: Start-Up Capital How much start-up capital do we have? Where has this come from? Accounting Systems and Controls How will this money be kept safely? What procedures will be followed to ensure good accounting practices are being followed? For example, what procedures will be used for giving out money to buy resources and collecting in receipts for these purchases? Cost Breakdown Identifying all costs/ expenses incurred in running the business. This can be included as a separate table or as a table in Breakeven Analysis Break Even Analysis An accurate calculation of when the business will start to make a profit Financial Forecasts An accurate Forecast Income Statement showing the estimated Net Profit that will be made on Market Day Cashflow Forecast (Cash Budget) A weekly cash budget showing when income will be received and when payments will be made Encourage students to ask for help when preparing this section and in particular ask you to check a draft version to see if their calculations are accurate. Students are unlikely to achieve an Excellence for their business plan if their finances are not calculated accurately. Students may find it helpful to use the Excel file: Financial Plan EXEMPLAR with formulas found in the Teacher Resource Centre to help them. [ 40 ]

10 BREAK-EVEN ANALYSIS The break-even point is the point at which companies will start to make a profit. The break even calculation will differ depending on whether your company has any FIXED COSTS of production. FIXED COSTS are costs that need to be paid regardless of the level of production; costs that will be paid be paid even if the business produces nothing. Examples of fixed cost for Market Day could include: Table hire Printing of marketing materials. Example from THE KANGAROOS Business Plan Exemplar: NOTE: this example assumes that there are NO FIXED COST, therefore breakeven is calculated by: Total Cost Selling Price We are planning to make 40 burgers. Here are the main costs involved in making a Kangaroo Burger: Resources Cost Total Cost for 40 burgers Cost per burger (Total cost No. of burgers) Kangaroo Meat $10 for 8 pieces $ Cooking Oil No cost 0 0 Buns $3.99 for 12 $ Lettuce $1.99 per lettuce $ Tomatoes $3.00 for bag of 6 tomatoes $ BBQ Sauce $3.98 for 500ml $ Serviettes $2 for pack of 100 $ Total Cost $ Note: all marketing materials will be produced in class using resources provided by our teacher so we will not have to pay for Marketing Expenses. This cost breakdown shows that it will cost $2.05 to make one Kangaroo Burger. Our breakeven point is the point at which we start to make a profit. This is calculated by: Total Cost Selling Price = $81.92 $3.50 = We will need to sell 24 Kangaroo Burgers before we break even. [ 41 ]

11 In reality, Break Even is calculated using both FIXED and VARIABLE costs. FIXED COSTS costs that need to be paid regardless of the level of production; costs that will be paid even if the business produces nothing. Examples of fixed cost for Market Day could include: Table hire Printing of marketing materials. VARIABLE COSTS costs incurred in the production of the product e.g. materials or resources needed to make the product. If your business had both FIXED and VARIABLE COSTS students need to use the formula: Breakeven Point = Fixed Cost Selling Price - Variable Cost per Unit For example, if The Kangaroos had the following fixed costs: Fixed Cost Amount Table Hire $5 Printing $7 TOTAL $12 The Breakeven Point would then be calculated by: Fixed Cost 12 = = Selling Price - Variable Cost per Unit Therefore, they would need to sell 9 Kangaroo Burgers before breaking even. [ 42 ]

12 FINANCIAL FORECASTS If you sell all units made, what profit can you expect to make on Market Day? Forecast Profit = Total Revenue minus Total expenses Total Revenue = Selling Price x No. of units sold $ Total Expenses = Total Expenses (Fixed and Variable expenses) $ Net Profit = Total Revenue (A) - Total Expenses (B) $ A B NOTE: If you are not making a profit or need to increase your profit you could do one or more of the following: Increase the number of units sold Increase your selling price per unit Reduce your total fixed cost Reduce your variable unit cost This information can now be used to prepare a Forecast Income Statement Example: Forecast Income Statement for The Kangaroos for International Market Day 2014 $ $ Sales Revenue $ Less: Expenses Kangaroo Meat $50.00 Buns $15.96 Lettuce $3.98 Tomatoes $6.00 BBQ sauce $3.98 Serviettes $2.00 Total Expenses $81.92 NET PROFIT $58.08 [ 43 ]

13 CASHFLOW FORECAST This is used to show WHEN income will be coming into the business (Start-Up Capital and Sales) and when payments will be made from the business (to purchase resources and to pay for any other expenses). The cash budget should show that you will always have a positive cash flow (this means that you will always have enough money in your bank account to pay for your expenses) Example: Cash Budget for The Kangaroos Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week May May May 2 6 June 9 13 June June June Receipts Start-up Capital $82.00 Sales of Kangaroo Burgers $ Total Receipts $0.00 $0.00 $82.00 $0.00 $0.00 $0.00 $ Payments Kangaroo Meat $50.00 Buns $15.96 Lettuce $3.98 Tomatoes $6.00 BBQ sauce $3.98 Serviettes $2.00 Total Payments $0.00 $0.00 $0.00 $0.00 $0.00 $5.98 $75.94 Excess Receipts over payments plus Opening Bank Account Closing Bank Account $0.00 $0.00 $80.00 $0.00 $ $5.98 $64.06 $0.00 $0.00 $0.00 $82.00 $82.00 $82.00 $76.02 $0.00 $0.00 $82.00 $82.00 $82.00 $76.02 $ If the Cash Budget has been prepared accurately, the final Closing Bank Account figure should equal the forecast Net Profit + Start-Up Capital Example for The Kangaroos: Start-Up Capital = $82.00 Forecast Net Profit = $58.08 Closing Bank Account = $ ($82 + $58.08) [ 44 ]

14 HANDING IN THE BUSINESS PLAN Remember that, as in real life, the Business Plan should be completed before the business activity takes place. Whilst students may write their own individual sections according to their directorship roles, they should put the business plan document together and ensure the sections are linked and integrated before final completion. Students need to leave time to bring together their individual sections into one business plan. This should be laid out professionally (same choice and size of font for each section) and to achieve with excellence all areas of the business plan need to be integrated. Teachers will to set a firm deadline for completion of the business plan. Teachers should consider the following when setting this deadline: Be careful about extending your business plan deadline as students will need several lessons to get ready for Market Day. They will need to purchase resources, produce their product, prepare their marketing materials, carry out their promotions and plan their stall layout Do you want students to hand in a draft version of the business plan first from which you can give feedback before the final business plan is completed and handed in for marking? Do you want students to hand certain sections of the business plan in first for you to give feedback each week? Doc ID: SU [ 45 ] 2015 Young Enterprise Trust