Learner Guide Develop and Implement a Business Plan BSBMGT617 Table of Contents BSBMGT617/01 Develop Business Plan 1.1 Review and evaluate pre-existing strategic, business and operational plan, if available 1.2 Analyse and interpret business vision, mission, values and objectives 1.3 Consult with key stakeholders 1.4 Review market requirements for the product or service, profile customer needs and research pricing options 1.5 Develop performance objectives and measures through consultation with key stakeholders 1.6 Identify financial, human and physical resource requirements for the business 1.7 Consider any permits or licences that may be required for new activity 1.8 Write business plan 40 Key Points ‘True’ or ‘False’ Quiz 42 BSBMGT617/02 Monitor Performance 2.1 Communicate business plan to all relevant parties and ensure understanding of performance requirements and timeframes 2.2 Ensure skilled labour is available to implement plan 2.3 Test performance measurement systems and refine, if necessary 2.4 Ensure timely reports on all key aspects of the business are available, user-friendly and balanced in terms of financial and non-financial performance 2.5 Report system failures, product failures and variances to the business plan as they occur 59 Key Points ‘True’ or ‘False’ Quiz 61 BSBMGT617/03 Respond to Performance Data 3.1 Analyse performance reports against planned objectives 3.2 Review performance indicators and refine if necessary 3.3 Ensure groups and individuals contributing to under performance are coached, and provide training where appropriate 3.4 Review system processes and work methods regularly as part of continuous improvement 69 Key Points ‘True’ or ‘False’ Quiz Summary 72 Bibliography BSBMGT617 Develop and Implement a Business Plan1 ELEMENT 1: Develop Business Plan Performance Criteria Element 1 1.1 Review and evaluate pre-existing strategic, business and operational plan, if available 1.2 Analyse and interpret business vision, mission, values and objectives 1.3 Consult with key stakeholders 1.4 Review market requirements for the product or service, profile customer needs and research pricing options 1.5 Develop performance objectives and measures through consultation with key stakeholders 1.6 Identify financial, human and physical resource requirements for the business 1.7 Consider any permits or licences that may be required for new activity 1.8 Write business plan BSBMGT617 Develop and Implement a Business Plan2 Element 1: Develop Business Plan Develop Business Plan Review and Evaluate Pre-Existing Strategic, Business and Operational Plan You should regularly review your progress, identify how you can make the most of the market position you’ve established and decide where to take your business next. You will need to revisit and update your business plan with your new strategy in mind and make sure you introduce the developments you’ve noted. It’s easy to focus only on the day-to-day running of your business, especially in the early stages. But once you’re up and running, it can pay dividends to think about longer-term and more strategic planning. This is especially true as you take on more staff, create departments within the business, appoint managers or directors and become distanced from the everyday running of the business. Reviewing your progress will be particularly useful if you feel: Uncertain about how well the business is performing Unsure if you’re getting the most out of the business or making the most of market opportunities Your business plan may be out of date, e.g. you haven’t updated it since you started trading Your business is moving in a direction different to the one you had planned The business may be becoming unwieldy or unresponsive to market demands. It is also useful if you have decided that your organisation is ready to move on to another level. Setting the Direction A clear business strategy will help to answer any concerns and show practical ways forward. Questions you might want to ask include: What’s my direction? To answer this you need to look at where you are now, where you want to go over the next three to five years and how you intend to get there. What are my markets – now and in the future? Which markets should I compete in, how will they change and what does the business need in order to be involved in these sectors? How do I gain market advantage? How can the business perform better than the competition in my chosen markets? 3BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan What resources do I require to succeed? What skills, assets, finance, relationships, technical competence and facilities do I need to compete? Have these changed since I started? What business environment am I competing in? What external factors may affect the business’ ability to compete? How am I measuring success? Remember, measures of performance may change as your business matures. It’s doubtful whether you will be able to answer these questions on your own – involving your professional advisers, your fellow directors and your senior staff will all help to make your review more effective. Analyse and Interpret Business Vision, Mission, Values and Objectives A good starting point for your review is to evaluate what you actually intended to do your strategic plan. The strategic planning is an organisation’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to provide an informed and effective evaluation, the Strategic Planning Committee and the Board should undergo training in evaluating the strategic plan. Next, annual planning should be started early – like the day after the previous review. Data should be gathered on an ongoing basis by compiling activities and outcomes from quarterly reports, board documents, board meeting minutes, and action plans. The overall goal of evaluating a strategic plan is to determine how well it has been implemented (including, who, what, when, where, and how activities were accomplished). The process should include two phases: 1. Ongoing monitoring of trends that may be impacting the progress, or lack of progress, towards goals. This will include identifying individual goals and objectives that are progressing well according to the plan, and those that are falling short, and suggesting any actions or adjustments that may be needed for the plan to succeed. 2. A final evaluation after the plan is concluded to determine overall success and impact. Evaluation procedure should include: Who is responsible for reporting, gathering, and evaluating data How data is collected What data needs to be collected BSBMGT617 Develop and Implement a Business Plan4 Element 1: Develop Business Plan A timeline for completion Quantitative and qualitative measurements The ongoing monitoring effort should answer: ○○ Are the activities being implemented as planned? Why or why not? What is facilitating or impeding implementation? ○○ Did all activities fit within the plan objectives? ○○ Are there goal areas, objectives, or strategies that are receiving less attention than others? ○○ What do the results indicate as to how to improve? ○○ Is there a need to change the plan? The final evaluative report should focus on: What did we do (i.e. performance)? How well did the plan perform? Which goals and objectives were met? What actions were successfully implemented? How well did we do (i.e. quality)? Were the goals and objectives relevant to the ongoing needs of the organisation? Was it adaptable in the face of change? Did it matter (i.e. impact)? Did the plan meet the needs of the organisation? What was the measurable impact upon stakeholders? Business Goals To remain successful it’s vital that you regularly set time aside to ask the following key strategic questions: Where is the business now? Where is it going? How is it going to get there? Often businesses are able to work out where they want to go but don’t draw up a roadmap of how to get there. If this happens, a business will lack the direction needed to turn even carefully laid plans into reality. At the end of any review process, therefore, it’s vital that work plans are prepared to put the new ideas into place and that a timetable is set. Regularly reviewing how the new plan is working and allowing for any teething problems or necessary adjustments is important too. Today’s business environment is exceptionally dynamic and it is likely that you will need regular reviews, updates and revisions to your business plan in order to maintain business success. 5BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan Continuous Improvement In addition, a simple planning cycle can greatly enhance your ability to make changes in your business routine if necessary. Good planning helps you anticipate problems and adapt to change more easily. Conduct a Competitor Analysis When you have been running your business for a while, you will probably have a clearer idea of your competitors. Gathering more information may cost time, money and effort, but there are many benefits to knowing more about what your competition is doing. What you need to know The type of competitor information that will be really useful to you depends on the type of business you are and the market you’re operating in. Things you want to know about your competitors include: Who they are What they offer How they price their products What the profile and numbers of their customers are compared to yours What their competitive advantages and disadvantages are compared to yours What their reaction to your entry into the market or any product or price changes might be. You will probably find it useful to do a SWOT (strengths, weaknesses, opportunities, threats) analysis. This will show you how you are doing in relation to the market in general and your closest competitors more specifically. A SWOT analysis helps identify the strengths, weaknesses, opportunities and threats in a given situation. In this case we are looking at sales potential. The SWOT Analysis will allow you to visualise both external and external factors that can have an impact on your business in a very simple way. This tool can help you examine the external factors which affect your business, opportunities and threats, and the internal factors, strengths and weaknesses. There are three main ways to find out more about your competitors: What they say about themselves This can be found in sales literature, advertisements, press releases, shared suppliers, exhibitions, websites, competitor visits, organisational accounts. BSBMGT617 Develop and Implement a Business Plan6 Element 1: Develop Business Plan What other people say about them You could find out more about their sales people and customers, or look at local directories, the Internet, newspapers, analysts’ reports, market research companies. Commissioned market research If you need more detailed information, you might want to commission specific market research. Review Your Financial Position Businesses often fail because of poor financial management or a lack of planning. Often the business plan that was used to help raise finance is put on a shelf to gather dust. When it comes to your business’ success, therefore, developing and implementing sound financial and management systems (or paying someone to do it for you) is vital. Updating your original business plan is a good place to start. When reviewing your finances, you might want to consider the following: Cash flow This is the balance of all of the money flowing in and out of your business. Make sure that your forecast is regularly reviewed and updated. Working capital Have your requirements changed? If so, explain the reasons for any movement. Compare this to the industry norm. If necessary, take steps to source additional capital. Cost base Keep your costs under constant review. Make sure that your costs are covered in your sale price – but don’t expect your customers to pay for any business inefficiencies. Borrowing What is the position of any lines of credit or loans? Are there more appropriate or cheaper forms of finance you could use? Growth Do you have plans in place to adapt your financing to accommodate your business’ changing needs and growth? 7BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan Assess Your Business Efficiency Many new businesses work in a short-term, reactive way. This offers flexibility – but can cost time and money as you move from getting the business going to concentrating on growing and developing it. The best option is to balance your ability to respond rapidly with a clear overall strategy. This will help you decide whether the actions you take are appropriate or not. At this stage you should ask yourself if there are any internal factors holding the business back, and if so, what can you do about them? Consider the various aspects of your business in turn. Premises ○○ What are your long-term commitments to the property? ○○ What are the advantages and disadvantages of your current location? ○○ Do you have room to grow, or the flexibility to cut back if necessary? ○○ If you move premises, what will be the cost? Will there be long-term cost savings and improvements in efficiency? Facilities ○○ If you manufacture products, how modern is your equipment? ○○ What is the capacity of your current facility compared to existing and forecast demand? ○○ How will you fund any improvements? ○○ How do you compare with your competition? Information technology ○○ What management information and other IT systems do you have in place? ○○ Will these systems cater for any proposed expansion? ○○ Will they really make a difference to the quality of product or service your business provides? If they don’t, can you change them to make sure they do? ○○ Do you make best use of technology such as wireless networking and mobile telephony to allow for more flexible working? People and skills ○○ Do you have the right people to achieve your objectives? ○○ Do they know what is expected of them? ○○ Do you operate a training and development plan? ○○ Do you pay as well as the competition? ○○ Do you suffer from high staff turnover? Are staff motivated and satisfied? BSBMGT617 Develop and Implement a Business Plan8 Element 1: Develop Business Plan Professional skills ○○ Do you have the right management team in place for growth? ○○ Do you have the skills available that you need in areas such as human resources, sales and IT? ○○ Do your staff need new or improved skills or to be retrained? Revisiting Your Markets A business review offers you the opportunity to stand back from the activity outlined in your plan and look again at factors such as: Changes in your market New and emerging services Changes in your customers’ needs External factors such as the economy, imports and new technology Changes in competitive activity. Asking your customers for feedback on your business’ performance will help to identify where improvements can be made to your products or services, your staffing levels or your business procedures. At the same time, it is important to remember that while reviews of this kind can be very effective, they can give your business the flexibility it needs to beat off stiff competition at short notice. It is important to think through the implications of any changes. In the new phase of your business you’ll need to plan your finances and resourcing carefully at all times. Conduct a Customer and Market Analysis When you started your business, you probably devised a marketing plan as part of your overall business plan. This would have defined the market in which you intended to sell and targeted the nature and geographical distribution of your customers. From that strategy you would have been able to produce a marketing plan to help you meet your objectives. When you’re reviewing your business’ performance, you’ll need to assess your customer base and market positioning as a key part of the process. You should update your marketing plan at least as often as your business plan. Next you need to evaluate what you actually do – your core activities, the products that you make, or services that you provide. Ask yourself what makes them successful, how they could be improved and whether you could launch new or complementary products or services. 9BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan It’s useful to address these questions: How effectively are you matching your goods and services to your customers’ needs? If you’re not quite sure what those needs are, you could carry out further market or customer analysis. Which of your products and services are succeeding? Which aren’t performing as planned? Decide which products and services offer both a high percentage of sales and high profit margins. What’s really behind the problems of a product or service? Consider areas such as pricing, marketing, sales and after-sales service, design, packaging and systems during your review. Look for ‘quick wins’ that give you the breathing space to make more fundamental improvements. Are you reviewing costs frequently? Are you keeping a close enough eye on your direct costs, your overheads and your assets? Are there different ways of doing things or new materials you could use that would lower your costs? Consider ways in which you can negotiate better deals with your suppliers. Answering these questions will give you the basis on which to improve performance and profitability. Expert Input You may find at this stage in your business’ development that you need external skills to help you with the changes you have to make. In this case you might consider: Employing skilled consultants in areas where you cannot afford to develop in-house skills Appointing an experienced non-executive director who can provide a regular, impartial assessment of what you are doing Using a management consultant to help you identify how you can strengthen or change your management structure to grow the business. BSBMGT617 Develop and Implement a Business Plan10 Element 1: Develop Business Plan Business-Analysis Models There are a number of useful business-analysis models that may help you think more strategically about your business. SWOT Analysis A SWOT analysis is a tool for identifying internal strengths and weaknesses in your business as well as external opportunities and threats. As you go through the tool and think about how you can use it, you will see that it’s not just for looking at the business as a whole, but as a starting point for developing strategies for sale teams, service departments and individuals. ○○ Strengths The best place to start when you are looking to develop a sales plan is to understand what your sales team is good at. You want to take advantage of what you do well and build on it. So let’s take a look at your strengths. 1. What is it that your sales team does better than anyone else in the market? 2. What do your current customers see as a benefit they get from working with your sales people? 3. What strength does your current product line offer that your competitors can’t? 4. Do you have unique sales processes, products, or services that set you apart? These are sample question you may want to answer, but try to come up with questions of your own. You want to ask about your USP (unique selling proposition) that you see as a strength or your ability to service your accounts with one day service. When you look to uncover your strengths, ask others within your organisation to come up with strengths they feel the organisation has and don’t forget to ask for help outside the organisation. Talk with you current customers and ask what they like about your organisation, talk with vendors, or anyone else that can help give you a clear picture of your organisation’s strengths. ○○ Weaknesses Every sales team has them and you need to identify them early and take action. It is pointless to sit back and hope things will get better or that weaknesses will miraculously disappear. They don’t. You have to face them, gain an understanding of why the weaknesses exist and look for ways to strengthen them. So write them down. 1. What does the competition see as your biggest weakness? 2. What do your current customers see as a weakness in your sales style, product, or service? 3. 4. When you look at your ‘Lost Sale’ report, why did you lose those sales? What is it that you try to avoid? 11BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan Understanding your weaknesses provides you with a road map of the areas within your organisation you must work on, and areas that you must limit exposure to until they are strengthened. Remember that your strengths and weaknesses are both internal factors that you as a sales manager could have direct control over. Once you understand what they are take every action possible to build on your strengths and eliminate your weaknesses. ○○ Opportunities Opportunity is usually all around us, but in the hustle of day-to-day business we walk right past it. It can come when a competitor stumbles, a new technology appears, the perfect new manager walks past your door, or a new law impacts on your customers. So let’s look and see what opportunities you see. 1. What do you see as a good opportunity that will strengthen your organisation? 2. In what segment of your market are clients consistently making purchases? 3. What high margin products or services can you expose to a broader market? 4. 5. Have you noticed a change you can exploit in your market? Is there a market you can enter with greater profits potential? As you look at opportunity it’s important that they move hand-in-hand with your strengths. It’s not a good opportunity if it doesn’t fit your organisation. ○○ Threats Threats like opportunities are external factors that have a major impact on your business. As you manoeuvre your business around the challenges of the market place you have to understand where danger exists or you will find yourself in trouble. So what are the threats to your business? 1. Does more that 25% of your sales revenue come from less than 10% of your customer base? 2. 3. 4. 5. What reoccurring challenges do your sales people face? Is there a competitor that consistently beats you in the marketplace? How much bad debt are you carrying? Are sales meeting expectations? Threats, like opportunities, are external factors that you must constantly look for, examine and find ways to deal with them. The SWOT Analysis is one of the best tools you can use to help sales managers develop a true understanding of where you are and where you need to be, before you try to take things to the next level. This exercise is also a great way for you and your team to develop consensus and a way to understand exactly where your organisation stands before starting to chart a new course. BSBMGT617 Develop and Implement a Business Plan12 Element 1: Develop Business Plan SWOT Example Strengths What is working well? What is making a difference? What value do we bring to our customers? What do we do really well? What differentiates us from our competitors? Weaknesses What is not working as well as it could? What is not making a difference? What processes need to be improved? What hinders our sales? What do our customers dislike? Opportunities What needs to be improved or changed? What should we stop doing? What should we start doing? What is missing that we need to be doing? Threats What is threatening our business? Are there customer or technological threats? What are the economic threats that could impact on us? What financial threats could impact on us? Costs? Revenues? Debt? Cash flow? “Progress has little to do with speed, but much to do with direction.” Author Unknown 13BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan Porter’s Five Forces relating to Competition Michael Porter has identified five forces that determine the intrinsic long-run attractiveness of a market or market segment. The marketing manager seeking to develop an edge over competitors can use this model to better understand the industry context in which the organisation operates. From ‘The Five Competitive Forces That Shape Strategy’ by Michael E. Porter, Harvard Business Review, January 2008 1. Segment Rivalry A segment is unattractive if it already contains numerous, strong, or aggressive competitors. It’s even more unattractive if it’s stable or declining, or if competitors have high stakes in staying in the segment. These conditions will lead to frequent price wars, advertising battles, and new-product introductions and will make it expensive to compete. For example, pharmaceutical organisations when a patent expires on a drug 2. New Entrants The most attractive segment is one in which entry barriers are high and exit barriers are low. (Few new firms can enter the industry, and poorly performing firms can easily exit.) When both entry and exit barriers are high, profit BSBMGT617 Develop and Implement a Business Plan14 Element 1: Develop Business Plan potential is high, but firms face more risk because poorer-performing firms stay in and fight it out. When both entry and exit barriers are low, firms easily enter and leave the industry and the returns are stable and low. The worst case is when entry barriers are low and exit barriers are high. Here firms enter during good times but find it hard to leave during bad times and the result is chronic overcapacity and depressed earnings for all. Examples include airline companies. 3. Substitute Products A segment is unattractive when there are actual or potential substitutes for the product. Substitutes place a limit on prices and on profits. If technology advances or competition increases in these substitute industries, prices and profits are likely to fall. Examples include vitamin producers. 4. Bargaining Power of Buyers A segment is unattractive if buyers possess strong or growing bargaining power. The rise of retail giants has led some analysts to conclude that the potential profitability of packaged-goods organisations will become curtailed. Buyers’ bargaining power grows when they become more concentrated or organised, when the product represents a significant fraction of the buyers’ costs, when the product is undifferentiated, when buyers’ switching costs are low, when buyers are price sensitive because of low profits, or when they can integrate upstream. To protect themselves, sellers might select buyers who have the least power to negotiate or switch suppliers. A better defence consists of developing superior offers that strong buyers cannot refuse. Examples include woolworths and Coles. 5. Bargaining Power of Suppliers A segment is unattractive if the company’s suppliers are able to raise prices or reduce quantity supplied. Suppliers tend to be powerful when they are concentrated or organised, when there are few substitutes, when the supplied product is an important input, when the costs of switching suppliers are high, and when the suppliers can integrate downstream. The best defences are to build win-win relationships with suppliers or use multiple supply sources. Oil organisations who are at the mercy of the limited amount of oil reserves and the actions of oil-supplying cartels such as OPEC. Critical Success Factor Analysis Critical Success Factors (CSF), also known as Key Result Areas (KRA), are the areas of your business that are absolutely essential to its success. By identifying and communicating these CSFs, you can help ensure your business is well-focused and avoids wasting effort and resources on less important areas. By making CSFs explicit and communicating them with everyone involved, you can help keep the business and project on track towards common aims and goals. 15BSBMGT617 Develop and Implement a Business Plan Element 1: Develop Business Plan As a common point of reference, CSFs help everyone in the team to know exactly what’s most important. And this helps people perform their own work in the right context and so pull together towards the same overall aims. CSFs are strongly related to the mission and strategic goals of your business whereas the mission and goals focus on the aims and what is to be achieved, CSFs focus on the most important areas and get to the very heart of both what is to be achieved and how you will achieve it. Here are the steps: 1. Establish your business’ mission and strategic goals. 2. For each strategic goal, ask yourself ‘what area of business activity is essential to achieve this goal?’ The answers to the question are your candidate CSFs. 3. Evaluate the list of CSFs to find the absolute essential elements for achieving success – these are your Critical Success Factors. As you identify and evaluate candidate CSFs, you may uncover some new strategic objectives or more detailed objectives. So you may need to define your mission, objectives and CSFs repeatedly until you clearly define your intention. 4. Identify how you will monitor and measure each of the CSFs. 5. Communicate your CSFs along with the other important elements of your business strategy. 6. Keep monitoring and revaluating your CSFs to ensure you keep progressing towards your aims. Indeed, whilst CSFs are sometimes less tangible than measurable goals, it is useful to identify as specifically as possible how you can measure or monitor each one. To make sure you consider all types of possible CSFs, you can use Rockart’s CSF types as a checklist. ○○ Industry These factors result from specific industry characteristics. These are the things that the organisation must do to remain competitive. ○○ Environmental These factors result from macro-environmental influences on an organisation. Things like the business climate, the economy, competitors, and technological advancements are included in this category. ○○ Strategic These factors result from the specific competitive strategy chosen by the organisation. The way in which the organisation chooses to position themselves, market themselves, whether they are high volume low cost or low volume high cost producers, etc. ○○ Temporal These factors result from the organisation’s internal forces. Specific barriers, challenges, directions, and influences will determine these CSFs. BSBMGT617 Develop and Implement a Business Plan16 Element 1: Develop Business Plan Let’s look at an example. Consider a retail store ‘Bodgy Brothers’ Bakery’, whose mission is: ‘To become the number one bakery in Small Town by selling the highest quality, freshest bakery, from oven to customer in under 4 hours on 85% of our range and with 98% customer satisfaction.’ The strategic objectives of Bodgy Brothers’ Bakery are to: ○○ Gain market share locally of 25% ○○ Achieve fresh supplies of ‘oven to customer’ in 4 hours for 85% of products ○○ Sustain a customer satisfaction rate of 98% ○○ Expand product range to attract more customers ○○ Have sufficient store space to accommodate the range of products that customers want. In order to identify possible CSFs, we must examine the mission and objectives and see which areas of the business need attention so that they can be achieved. We can start by brainstorming what the Critical Success Factors might be: ObjectiveCritical Success FactorsIncrease competitiveness versus otherGain market share locally of 25%local storesAttract new customersAchieve fresh supplies of ‘oven toSustain successful relationships withcustomer’ in 4 hours for 85% of productslocal suppliersSustain a customer satisfaction rate ofRetain staff and keep up custo
