Blueprints Business Planning - Case Study Example

ANALYSIS: BLUEPRINTS BUSINESS PLANNING PTY LTD’S BUSINESS PLAN Table of Contents 1.0. Executive summary………………………………………………………………………..3 2.0. Introduction………………………………………………………………………………..4 3.0. Analysis of the plan: strengths and weaknesses…………………………………………..4 3.1. Marketing section………………………………………………………………….5 3.2. Industry analysis………………………………………………………………..…7 3.3. Operations and production………………………………………………………..7 3.4. Financial projections………………………………………………………………7 3.5. Implementations timetable…………………………………………………….…..8 4.0. Proceed or not decision……………………………………………………………………8 5.0. Reservation and alternative strategies……………………………………….. …………..9 5.1. Reservations…………………………………………………………………..…..9 5.2. Alternative strategies…………………………………………………………….10 6.0. Conclusion………………………………………………………………………...……..10 7.0. References……………………...………………………………………………………...12 1.0. Executive Summary The proposed business plan for Blueprints business planning does not adequately capture all the essential elements of a business plan that would aid decision makers in determining the viability of the venture. The report identifies the various strengths and weaknesses of the business plan. The analysis of the business plans leads to the conclusion that the business should not be implemented as outlined in the business plan due to severe flaws. Subsequently, recommendations on alternative strategies that can be employed before the project proceeds include a thorough review of the industry analysis and marketing section, change of business name, revision of the implementation timetable and financial forecast sections. Analysis: Blueprints Business Planning Pty Ltd’s Business Plan July 2011 To June 2012 2.0. Introduction A business plan should consist of various elements that include a title page, executive summary, and background. Other major elements include the marketing, operations and production, financial projections, implementation time-table and appendixes. The business plan may also vary in some of the elements depending on whether the business plan is aimed at securing finance or for business planning. The sample business plan for the proposed business by the name Blueprint Business Planning prepared by Jessie contains all the major sections. The plan also contains some strengths and weaknesses that would necessitate that some alternative strategies are adopted for going into the business. 3.0. Analysis of the plan: strengths and weaknesses 3.1. Executive summary The executive summary and company descriptions are the first sections in the business plan. According to Barringer (2009, 25) the executive summary and the company description are arguably the most crucial sections as they capture readers interests. The name of a business is also important since it is the first thing other people associate the business with. The selected name for the venture was Blueprint planning Pty ltd. The name does not adequately capture the range of consultancy services including training that are offered by the firm. This is one of the major weaknesses for the firm. Barringer (2009, 27) posits that the executive summary is a short overview of the entire plan and therefore should provide a reader with everything that needs to be known regarding the new venture. Some of the sections included in the executive plan include a summary of the introduction, company description, industry analysis, market analysis, marketing plan, management team and the company structure, operations and development plan, and the financial projections. The Blueprints business planning Pty limited plan executive section consists of the business idea and goal, marketing, operations and finance sections. The executive section thus fails to capture the entire elements of the marketing plan as required. 3.2. Marketing section analysis The marketing section contains market and industry analysis marketing plan. The market analysis section describes the firms target market, competitors and customers and ways that the firm would compete in the market, potential market share and sales (Barringer, 2009, 30). In the proposed plan, the marketing plan adequately identifies the competitors and that include management consultants focused on SME training, accountancy practices that also act as advisers to the target segment of small firms, publicly funded support agencies and commercial training providers (Schaper et al, 2008, 180). The numbers of known competitors within the various categories are also identified. 3.3. Industry analysis The industry analysis section of the business plan focuses on the broad business domain that a firm operates (Barringer, 2009, 31). Based on the proposed marketing plan, an industry analysis section places the services offered under the generic management consulting services industry. A major weakness of the Blueprints business planning Pty limited business plan is the fact that the industry analysis does not sufficiently capture the various aspects of the industry. Whereas it captures the industry characteristics such as lack of regulation and the industry trends such as a focus on larger corporations, it fails to provide the growth rate and sales projection. Such projections are a critical component that would aid in determining the viability of the business in the long-term. Strength of the section includes the identification of a niche in the industry that exists among small to medium range businesses. Identification of trends, which is crucial in identifying potentially underserved and profitable market segments, is captured in the proposed plan through the pointer that most services are provided at larger corporations since the micro-enterprises are viewed as too small to afford these services (Schaper et al, 2008, 180). (Barringer (2009) argues that the industry analysis section should contain an indication of the growth in sales for the firms in an industry as this may help the firm construct its major forecast and justify its numbers. The proposed plan does not adequately provide the growth in sales for the firms in industry making it difficult to justify the proposed forecast in other section of the business plan. Another crucial aspect of industry analysis is the industry structure. Barringer (2009, 23) asserts that the industry size and growth rates are basically inconsequential no matter how positive they are where the structure is not attractive for a start up. Subsequently, a business plan should identify the existing industry structure in terms of fragmentation and concentration of the industry underlying the competitive industry. The business plan industry analysis section has outline of the structure indicates that most firms target larger organizations and the industry is concentrated. Accordingly, due to the concentration of the industry, the firm is best suited to identifying niche entry in the lower segments that are underserved (Markman & Phan, 2011, ). Another weakness is lack of key financial ratios and other ratios that may provide some insight into the industry. Such information not only provides an insight into the attractiveness and structure of an industry but is also a crucial reference point for the firm’s non financial and financial projections (Barringer, 2009, 25). For instance, by identifying the industry net profit earnings, the firm will need to justify projections on earning when they are higher or lower than the industry. 3.4. Operations Section The operations section of a business plan identifies how a product or service is produced and how a business is run (Barringer, 2009, 40). according to Greene (2010) an operations section of the business plan should highlight the management of the business on a day to day basis and these includes lease and rental agreements, equipments, personnel and hiring procedures, insurance and so on. In the proposed business plan, such issues as insurance and security issues, location of business premises and rental agreements, council and government rules, and ability to access the target market are addressed besides the issue of equipment required. Location is a critical factor for the success of the organization and subsequently firms should consider the implications of their choice of location (Greene, 2010, 42). The section adequately captures most of the factors that should be considered in the operations. Other aspects that are adequately captured include the legal and licensing requirements including operating laws and licenses, management details and the organizational structure and staffing. The managerial details including the qualifications of the staff, which is a major consideration by financiers is also included. 3.5. Financial projections section analysis The financial projections section is the final part of the business plan. The section uses plans developed in other sections and expresses them in financial terms (Barringer, 2009, 87). One of the major weaknesses in the section is the assumption that the firm will make profit immediately in the first year of operation, which is not supported by guaranteed sales from other projections in other sections. In addition, the book sales that assumes a gross cost of goods of 60%, which for example would translate to a $20 gross profit on sales price of $50 is also not supported by comparisons from industry analysis. Without adequate information on the gross profit on sales within the industry, the firm is not able to justify its profit margins. 3.6. Implementation timetable One major weakness of the implementation timetable is that it does not reflect the activities that support the financial projections as outlined in the rest of the business plan. For instance, whereas in the first month, there are projections for profitability, this is not supported by the activities reflected for July in the implementation timetable. 4.0. Decision to proceed or not to proceed The directors should not proceed with the project as outlined in the business plan. Various reasons that are captured in the analysis section form the basis for the conclusion that the project should not proceed. Among the most crucial reasons include inadequate industry analysis that would aid in adequately positioning the business against its competitors. From the Blueprints Business Planning Pty Ltd, there are no projections on the gross profits in the industry. This thus makes it difficult to justify the gross profits identified in the financial analysis section, which should help determine whether the firm’s profit margins exceed the industry, are lower than industry or similar to industry levels. An explanation in case of lower or higher profit margin in comparison to industry levels ought to be provided (Barringer, 2009, 68). In case the projected gross profits exceed the industry average, there should be an explanation on what specific advantages the firm has over competitors that would allow the firm to charge higher or get higher gross margins on sales. Since this is not shown in the financial section and considering that the industry and market analysis does not provide the industry figures, it remains difficult to determine the viability of the project as positioned and thus the major reason why the project should not proceed as outlined in the plan. 5.0. Recommendations: Reservations or alternative strategies 5.1. Reservations Considering the importance of growth rate and sales projections in the industry analysis section in helping the firm determine the viability of the section, thorough analysis of the growth rate and sales projection in the industry is a necessary component of the business plan. The growth rate in percentage, the size of the industry in dollars and the future sales projections are crucial components of an industry analysis (Barringer, 2009, 65). This is also crucial since the sales forecast that is provided in other sections of the business plan should be based on objective figures that can only be determined through an undertaking of the sales and growth rate projections in the industry. Projections in the industry are also a critical component that would aid in determining the viability of the business in the long-term. Lack of such projection therefore makes it difficult to ascertain the viability of the business in the long-term as there is no basis of supporting its continued profitability of lack of in future. The approach of serving the small to medium sized business is based on the industry analysis suggesting concentration at the segment serving larger organizations. Although it is suggested that there is minimum competition, with the competition landscape suggesting existence of 123 management consultancies, 20 public agencies, 3000 accountants and 34 commercial training providers besides other competitors outsides against a target market of 200,000 potential small enterprises indicate that there is a significant market potential. Additionally, based on the implementation timetable for the project, the activities scheduled for the month of July includes the application of home business license, opening an account, among other things but marketing only starts in the second month. The projections for sales in the first month are thus not supported by the activities as outlined in the implementation timetable. 5.2. Alternative strategies Using tools such as porter analysis, the general attractiveness of the industry should also be noted (Barringer, 2009, 38). These should involve identifying the most salient features that impact on the industry. For instance, there is a low barrier to entry in the industry and as such, this would impact on the attractiveness and future earnings from the industry. Considering the importance of location in determining and shaping the success of a business (Green, 2010, 45), the firm should be located in a location where it would be easily accessible to the clients. This may require that the firm seeks for rental space within a business environment and not in a residential area. The financial analysis should be based on comparisons with figures obtained from the industry analysis (Barringer, 2009, 68). In case the projected gross profits exceed the industry average, there should be an explanation on what specific advantages the firm has over competitors that would allow the firm to charge higher or get higher gross margins on sales. Since this is not shown in the financial section and considering that the industry and market analysis does not provide the industry figures, it remains difficult to determine the viability of the project as positioned. 6.0. Conclusion From the foregoing, the business plan is not only inadequately prepared but also fails to capture the various elements that should guide in decision making. Despite some strength, the business plan contains numerous weaknesses that are severe enough to warrant the projects discontinuity. However, the plan can be revised to address the weaknesses and reservations through new strategies that would aid in better identification of the opportunities and a more accurate assessment of the industry and financial projections. References Barringer, Bruce. 2009. Preparing effective business plans. An entrepreneurial approach. New York: Prentice Hall. Greene, Cynthia. 2010. 21st century business: Entrepreneurship. New York: Cengage Learning. Kaplan, J, Warren, C. 2009. Patterns of entrepreneurship management. New York: Wiley. Markman, G., & Phan, P, 2011. The competitive dynamics of entrepreneurial market entry. Northampton: Edward Elgar Publishing. Schaper, M., Volery, T., Weber, P., Lewis, K., 2011. Entrepreneurship and Small Business’, 3rd Asia-Pacific ed., Wiley. Read More