An easy and logical approach to business planning

1. TRACKER
Unit of measure
7 steps in business plans
Incorporating the winning strategies
Arriffin Mansor
© 2008
1 Footnote
SOURCE: Source 11

2. TRACKER
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7 steps to business planning
1. Determine economical size of your business in terms of variable
costs, fixed, volume and targeted profit.
2. Determine the minimum amount of working capital required based
on the operating and trading strategies.
3. Determine the minimum amount of fixed assets required based on
the size and capacity of the business.
4. Arrive at the amount of equity and loan financing required based on
the working capital and fixed asset. The debt equity ratio should
not the exceed that of the market.
5. Determine the targeted return on equity based on the Du Pont
business structure format. Ensure compliance with growing healthy
business.
6. Estimate the cash flows from the beginning of the performance
period to the end.
7. Estimate the income statement and balance sheet of the business.
1 Footnote
SOURCE: Source 22

3. TRACKER
7 steps business plans include workbook and excel
Unit of measure
templates
Computer aided approach
Work book approach
Prepared templates and models that
Systematic and efficient learning
make learning effective and efficient.
Learning are not bogged down to
Background Reading References calculations. More focus on strategic
Formats or forms are provided decisions.
Enable sensitivity and simulation
Sequential fill up the blanks answers analysis where impact study are
highlighted
Documentary evidence of learning Take back templates for work
mistakes applications with little modification
1 Footnote
SOURCE: Source 3

4. TRACKER
7 steps in business plans
Unit of measure
•
1 Costs volume profit analysis
•
2 Working capital required.
•
3 Fixed Asset Strategies
4
 Equity and Loan leveraging
5
• Du Pont ROE format.

6 Cash flow projections

7 Financial statements
1 Footnote
SOURCE: Source 4

5. TRACKER
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Step 1 : Cost volume profit analysis
• Determine the suggested product
prices (external)
• Determine the volume of sales that
could be generated from the
targeted market.
• Separate fixed from variable costs
(internal)
• Arrive at the profit margin.
• Are you happy with the targeted
1 Footnote profit?
SOURCE: Source 5

6. TRACKER
Unit of measure
STEP 2 WORKING CAPITAL
• Cash (days sales)
• Stocks (days purchase)
• Debtors (days sales)
• (Creditors (days
purchase) )
Preference should be given to working capital rather than fixed asset investment
1 Footnote
SOURCE: Source 6

7. TRACKER
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STEP 3: FIXED ASSET INVESTMENT
1. Asset could preferably be leased or rented.
2. Control is good enough. There is no need to own.
3. Alternatively own assets through bank loans or
financing.
4. Internal rate of return and net present value is the
tool used in long term investment ( more than 1
year)
1 Footnote
SOURCE: Source 7

8. TRACKER
Unit of measure
STEP 4 : EQUITY AND LONG TERM
LOANS
• Financing the business through equity
or loans or a combination of both.
• The mix between equity and loans is
called leveraging.
• In Malaysia, the bank is willing to give
you RM2 for every RM1 you invested
as equity.
1 Footnote
SOURCE: Source 8

9. TRACKER
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STEP 5: TARGETED RETURN ON
EQUITY
• Set the business goal in term of return
on equity (ROE)
• Structure the business based on the Du
Pont format.
• Ensure all KPIs comply to a healthy
growing company.
• Ensure that your strategies are
incorporated in the fundamental
structure.
1 Footnote
SOURCE: Source 9

10. TRACKER
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STEP 6: PROJECTED CASH
FLOWS
• Project inflows and outflows for
the business
• Detailed cash flows for the
initial period with summary for
the subsequent period.
• Show material items such as
loan receipts and repayment
• Ensure liquidity at all times
1 Footnote
SOURCE: Source 10

11. TRACKER
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STEP 7: CONSTRUCT THE FINANCIAL
STATEMENTS
• Based on all the previous steps the
income statement and balance
sheet could now be constructed.
• The balancing items could be the
borrowed loans and equity.
• Ensure that the financial statements
are in consistent with your stated
strategies.
1 Footnote
SOURCE: Source 11

12. TRACKER
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A business plan is
the collective
involvement and
commitment of the
members of a team.
1 Footnote
SOURCE: Source
workshops on business plans 12

13. TRACKER
Unit of measure
7 STEPS IN BUSINESS PLANS
1 COSTS VOLUME • Set the right costs and volume of business
PROFIT ANALYSIS • Set the right pricing strategies
WORKING
2 • Winning trading and operating strategies
CAPITAL
FIXED • Minimum Fixed Asset Strategies
3
ASSETS • Rent lease or LT loans
EQUITY • Own or borrowed funds
4 • Leveraging or gearing ratio
LT LOANS
5 ROE CHART • Return on equity as ultimate objective
• Realistic assumptions
6 • Ensure liquidity at all times
CASH FLOWS
• Loan repayment calculations
1 Footnote FINANCIAL • Income Statement and Balance Sheet
7 • Comply with basic key performance indicators
STATEMENTS
SOURCE: Source 13
13

14. The fundamental structure is now
complete. The descriptive frills
can be completed by looking at
the check list.
7 steps in business plans 14

15. 7 steps in business plans
Cost volume profit
analysis
INCOME
STATEMENT
WORKING
Balance CAPITAL
Sheet
Liquidity
management F/A Land &
Buiding
& loan repay
(3) Furniture
and fittings
Plant and
Machinery
Equity
and
CHECKING THE Loan
OBJECTIVE Leveraging
(4)
7 steps in business plans 15

16. Thank you
Questions welcome