business planning tool for smes - · pdf filethat each business plan should be tailored to ......

Business planning tool for SMEsNovember 2017

Business Planning tool for SMEs

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Important: you must read the following before continuing

Introduction and disclaimer

IntroductionObjective

This business planning tool has beendesigned specifically for established Small toMedium size Enterprises (“SMEs”) seekingto raise finance. This business planning toolcan be used as a guide for an SME. Howevereach business is unique and it is advisablethat each business plan should be tailored tothe specific funding requirements yourbusiness has.

Key points in a business plan would include:

• A concise Executive Summary whichcaptures the reader’s attention andinterest; and

• The body of the business plan shouldemphasise the strengths and weaknessesof the business, the competitors, the risks,the financial performance/ position andhow the funding will be used to grow thebusiness.

It should be emphasised that the financialforecasts and the underlying assumptions arekey to the business plan. The business planshould outline how the management teamwill deliver the plan if the funding isobtained. Good practice for a managementteam would be to prepare a corporatestrategy, this could be used as a basis for thebusiness plan (if available). It is importantthat the business plan you form, reflects thetype of business you have, along with thesector your business operates in.

It is important that the business plan covers awide range of areas as noted in this businessplanning tool. When writing the businessplan, the writer should be mindful that thedocument should be concise and well-presented clearly demonstrating how thefunding would benefit the business and thelikely returns the investor will get. We wouldrecommend that any detailed informationshould be provided as appendices.

On the pages overleaf is a suggested outlineof a business plan for an SME seekingfunding.

Disclaimer:

We do not accept any liability for theinformation or consequences of any actionstaken based on the information containedwithin this business planning tool. Youshould not rely solely on any informationcontained within this business planning toolin relation to a specific issue or decisionwithout taking advice from an appropriatelyqualified professional adviser. We take noresponsibility for the accuracy ofinformation contained within this businessplanning tool and we do not make anyrepresentations or warranties in respect ofsuch information.


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Contents

Page

1. Executive Summary 5

2. Business Overview 6

3. Products and Services 6

4. Market analysis 7

5. Marketing and Sales 7

6. Management team / employees 8

7. Operations 8

8. Financials 9

9. Financials and Assumptions 10

10. Research and development 11

11. Funding 11

12. Appendices 12

Business PlanningTool

This Business Planning Tool is designed specifically forestablished SMEs seeking funding.

This tool outlines the key information components thatinvestors look for when evaluating investment opportunities.

It is important to note that the Business Plan should be wellpresented so potential investors can understand the business,the key issues, the reason for the financing and ultimatelyenable them to determine if they are interested in making aninvestment in your business.


5

Executive Summary

The aim of the Executive Summary should beto capture the readers’ initial interest,encouraging them to want to find out moreabout your business and your plans.

The Executive Summary should be factual and itshould present the company in a balanced form.

It is important that the Executive Summary ispresented in a clear and concise way andtherefore it is suggested to be 2-4 pages inlength. This section should include thefollowing:

Summary details of the business in terms of:

Ø key personnel

Ø business products/services

Ø key financials.

• How has the business grown since it wasestablished?

• Who owns the company and who managesthe business?

• The strengths of the business, whether in itsmanagement, products or market sector?

• The major risk factors facing the business?

• How much money does the business want toraise and why?

• How will funding help your business togrow?

• The critical points of the financialprojections, such as maximum fundingrequirements or break-even points.

Executive Summary

Continued…

• High level summary projections for thenext 2/3 years and include assumptionsused.

The closing points in the ExecutiveSummary should outline the key reasons forthe required funding and the impact thefunding will have on your business. Ifpossible you should explain the method andtimescale envisaged for investors to make areturn on their investment.


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Business Overview & Products and Services

Business Overview

This section should describe exactly what services orproducts your business provides and briefly explainthe background, history and ownership of thecompany. Detail any unique selling points of yourbusiness in comparison to your competitors. Otherkey points to include in this section are detailedbelow:

• Business name

• Address

• Contact details

• Year your business was established

• Names of the director/(s) and shareholder/(s)

Provide a description of the business to include:

• High level description of products/servicesoffered

• Experience within the industry you operate in

• Details around key suppliers and credit terms

• Mission statement

• SWOT analysis

• Long term objectives

A SWOT analysis identifies the strengths andweaknesses of the business and its products/services,along with the opportunities and threats which existin the marketplace. Below is a template for the SWOTanalysis:

Products and Services

This section should detail the products / servicesprovided by your business and your marketcompetitive advantages. This section should alsoinclude the following:

• The benefits and features of theproducts/services provided by your business.

• The unique selling points of the products/services.

• Advantages and disadvantages of the products/services offered.

• Any planned future developments for products/services and the timeline around this process.

• Describe any patents, trademarks, that any of yourproducts or services have.

If the product is based on new/emerging technology,the plan should also indicate:

• Stage of development e.g. beta version under trial.

• Whether and what type of additional research anddevelopment is required to produce marketableproducts.

• Why the proposed technology will be adopted

• The time to market and route tocommercialisation.

• The technical risk, and how easily the technologycould be replicated or substituted.

• The regulatory requirements that would need tobe satisfied; cost, duration and associated risksinvolved.

Strengths:-[x]-[x]

Weaknesses-[x]-[x]

Opportunities-[x]-[x]

Threats-[x]-[x]


7

Market analysis & Marketing and sales

Market analysis

This section could start with general detail regardingthe industry and estimated current market position.(A PESTLE is a good business analysis tool and canbe a useful way of looking at a business oropportunity, from an external perspective. Thecategories within the PESTLE include: Political,Economic, Social, Technological, Legal andEnvironmental). Further details of what should beincluded in this section are set out below:

• Provide an overview of the market in which youoperate including the trends and an analysis of thelevel of competition.

• Outline who your target market is and yourcustomer demographic (to include the size of yourtarget market).

• Outline how you differentiate yourself from yourcompetitors.

• What are the competing products and services?

• Profile of key players (business size, turnover,profitability, etc) and their estimated market share.

• Advantages and disadvantages of competitors.

• Provide a comparison of how the price charged byyour competitors compares to your prices.

• What are the main risks facing your business?

• What safeguards are in place to protect againstthese threats?

Marketing

This section should address the business model thatis currently adopted in terms of Business toConsumer (“B2C”) or Business to Business(“B2B”). Further details of what should be includedin this section are set out below:

• Provide a description of your overall marketingand sales strategy. Include how you plan to retaincustomers and how you envisage obtaining newcustomers.

• Provide detail about customer buying behaviourand key purchasing criteria.

• Provide details of your distribution strategy whichcould include: details on distributors, online sales,advertising and the level of anticipateddirect/indirect sales as a result of this strategy.

• Details of key customers with whom the businessis trading or is planning to trade with.

• Provided details of the businesses’ pricing policyand strategy.

• Provided details of any planned promotionactivity which is anticipated to gain customers.

Sales

• Detail the current order book (or pipeline statusif pre-revenue) and describe any seasonalvariations which may occur.

• Provide a breakdown of projected new customersthat will drive the growth in the business.

• Describe your major customers’ business andtheir percentage share of turnover. It is necessaryto balance the available opportunities and therisks arising from over dependence on a limitednumber of customers.


8

Management team/employees & operations

Management team/employees

This section should detail the key personnel in thebusiness. The following information should beprovided:

Key Personnel

• [ Enter name of person 1 ]

- Position occupied within the business:

- Previous relevant experience:

- Personal background and education credentials:

- Track record:

• [ Enter name of person 2 ] (if applicable)




- Track record:

• [ Enter name of person 3 ] (if applicable)




- Track record

Detail further key personnel if required.

• Further detail on key managementpersonnel/organisational charts could be includedas appendices.

• Provide a description of the employees in terms ofnumbers in each department and details of averageremuneration per department.

Management team/employees continued…

This section may also include an outline ofmanagement and staffing requirements, successionarrangements, staff turnover levels, the availabilityof employees and any special skills or qualificationsrequired. If a particular gap is identified in themanagement team, for example a finance or businessdevelopment director, this section should commenton the situation.

Operations

This section should outline what eachsection/division in your business does, this willdepend on the type of business you have.

Key areas this section might include are:

• Production process (if relevant).

• Key operational activities.

• Details of Human Resources, Marketing andFinance departments.

The Operations section should also address specificsupply-related issues:

• Describe the principal suppliers, their locationand financial position.

• Detail whether essential suppliers aremultisourced and outline protections in placeagainst delays or inadequate quality.

• Detail reliance on imports or commodities whichmay be subject to exchange rate fluctuations orchanges in world markets, and the steps taken tominimise these exposures.


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[Insert business name]| Profit & Loss AccountForecast

€000s Year 1 Year 2 Year 3 Current year Year 1 Year 2

RevenueCost of SalesTotal Gross ProfitOverhead expensesOther Operating IncomeEBITDADepreciationAmortisationEBITInterest payableProfit before taxationTaxationProfit after taxationKPIsTurnover %Gross Margin %Overhead expenses %EBITDA %

Historical Projected

[Insert business name] | Balance Sheet SummaryForecast

€'000 Year 1 Year 2 Year 3 Current year Year 1 Year 2

Fixed AssetsTangible AssetsWorking capitalStocksTrade debtorsTrade creditorsPrepayments / other debtorsOther creditors / accrualsTaxation creditorsNet working capitalCash / debtCashBank Loan / Overdraft

Other itemsDirectors accountIntercompanyNet assetsOrdinary share CapitalP&L ReservesOther reservesShareholders funds


Financials

Financials

In this section it is important to set out the KeyPerformance Indicators (“KPIs”) of where youexpect your business to be over the next few years(for example: turnover %, gross margin %,overhead expenses % and EBITDA %), these canbe compared to prior year actuals to gain anunderstanding of the business.

The financial analysis should include summaryprofit and loss figures, balance sheet and cashflowstatements) showing the historical accounts andthe forecasts.

The section should comment on the financialhistory and projections with salient featureshighlighted.

Note:

The above balance sheet, the profit and loss accountopposite and the cash flow statement shownoverleaf, are example templates only. If requiredfurther line items should be added/deleteddepending on your business.

In addition the profit and loss accounts, cash flowstatements and balance sheets must be integrated.


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[Insert business name] | Cash Flow SummaryForecast

€'000 Year 1 Year 2 Year 3 Current year Year 1 Year 2

EBITDAMovement in working capital(Increase)/Decrease in trade debtors(Increase)/Decrease in stocks(Increase)/Decrease in prepaymentsIncrease/(Decrease) in trade creditorsIncrease/(Decrease) in other creditorsIncrease/(Decrease) in accrualsTaxation paymentsNet cash from operations

Financing/InvestmentLoansInterest and chargesCapexTotal Financing

Opening cash balanceCash flowsClosing cash balance


Financials and Assumptions

Financials continued

Assumptions

The key assumptions should be detailed inrespect of the projected results for the financialstatements. Some of the key assumptions thatshould be included are detailed below:

• Sales - detail the market size, pricing strategyand the percentage of the market youanticipate to attain. Forecast/ projectedvolumes, average pricing and growth ratesshould be include where appropriate.

• Cost of sales - include materials/ productioncosts, identify where efficiencies are and howcost saving could be achieved.

• The assumed gross margin percentage shouldbe illustrated and any variance from thehistorical experience should be explained.

Assumptions continued

• Overheads - detail how these would change as thebusiness grows. Key areas include staff numbers andsalaries, rent agreements and other large expenses.

• Potential risks/ downside and impact on financials(sensitivities could be applied to the forecasts toshow the impact).

• Explain the assumptions used in the cashflowprojections in particular credit taken by customers,stock and work in progress levels, credit taken fromsuppliers, discounts given and taken etc.

• Detailed taxation assumptions, in particularcorporation tax, VAT, PAYE, PRSI.

• Cover any other significant items within the profitand loss account or cash flow projections (e.g.distribution costs, research and development, repairsetc).

• Investment in fixed assets (if relevant).

• Give details of assumptions made regarding inflation,movement in interest rates, foreign exchange ratesetc.

• Explain the funding assumptions (e.g. type,availability and timing, grants used, interest rate,dividends etc).

• Key assumptions underpinning the headline revenueand EBITDA (earnings before interest, taxes,depreciation and amortisation) forecasts should beoutlined. Management's plans to monitor and reporton performance should also be included.

• Detailed financial analyses should appear asappendices.


11

Research and development & funding

Research and development

If relevant include this section and provide detailsof the following:

• The level of ongoing Research and Development(“R&D”) to include target release dates of newdevelopments (if applicable).

• Any current or pending patents, IntellectualProperty (“IP”) or copyrights.

• Costs incurred in respect of R&D (if once offor continuing). Detailed analysis can be includedin the appendices.

• If relevant, note how funding would assist thefuture development of your product or service,in order to meet changes in market demands(both domestic and international markets).

Funding

In this section it would be important to detail thefollowing points set out below:

• How much funding is required? (include thetiming of funding requirements)

• How will this funding be used to grow thebusiness?

• How will this funding be used to develop thebusiness over a period of three years?

Funding continued…

• This section should also provide commentaryon the potential exit strategy envisaged forequity investors.

• The majority of exits for growing businessesare through the sale of all or an element ofthe business to another organisation in theindustry (trade sales), e.g. sale of a provenmedical device to a medical business.

• Prospective acquirers and joint venturepartners should be detailed.

• The table below could be used to detailexisting and potential sources of funding:

Sources of fundinga. Partnersb. Directorsc. Other shareholdersd. Bank loanse. Grantsf. Other

Application of fundinga. Buildingsb. Equipmentc. Staffd. Marketinge. R&Df. Other

AppendicesThe appendices should include additional information which is relevant for the business plan.Examples might include:

- Organisational structure (ie. entity structure)- Lease agreements- Further marketing information- Further R&D details- Further costing analysis in relation to the funding- CVs of key managers- Market studies, articles from trade journals etc- Product literature and technical specifications- Details of patents, Government approvals, industry standards etc- Professional references- Historical record (previous three years) or if not practical the latest audited accounts- Latest management accounts- Financial forecast (e.g. profit and loss account, cashflow statement, balance sheetassumptions etc) for three to five years- Glossary of terms.

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