Business Plan Guidelines

for a

Significant new commercial initiative

Sept 2006

Business Plan Guidelines

for a significant new commercial initiative

These guidelines should be read in conjunction with FlindersUniversity’s Risk Management policy and procedures.

For the purpose of these guidelines it is assumed that your initiative has met the significant commercial initiative test and approval has been given to develop a business plan.

Test - Is the initiative a significant commercial venture or initiative?
Ventures or initiatives which are:

  • commercial (i.e. related to business, as established by Criterion A); and
  • significant (i.e. important, notable, material and of consequence, as established by Criterion B) should prima facie be referred to Council for approval.

Criterion A:

Where capital is to be laid out on any work and there is a risk of profit or loss, it is a commercial venture or initiative.

Criterion B:

The commercial venture or initiative is significant if any one of the following apply.
(i) University’sreputation - the potential risk to the University’s reputation is significant
(ii) University assets (other than cash) - If the University is required to make available staff and/or equipment and/or infrastructure and/or intellectual property, to a notional value of greater than $250,000 per annum

(iii) Cash investment - If the University is required to make a commitment of greater than $250,000 in total, across the expected duration of the commercial venture or initiative
(iv) Potential liability
If the University is potentially liable to underwrite an initiative at a cost greater than $250,000

(v) Ownership
If the University ownership interest is 20% or more
(vi) Annual revenue
If the annual net revenue is expected to exceed $250,000 per annum
(vii) Offshore initiatives
If the offshore initiative is not within the scope of the Policy on the Development of Offshore Programs
(viii) Other imperatives
If, in the Vice-Chancellor’s judgement there are important internal or external factors which should be brought to the attention of Council.

Executive Summary

Write this section last!Try to keep it to 3 pages or 4 pages.

  • You need to paint the picture fast – so be brief and concise
  • Give a concise overview of the proposed business
What will your business undertake? What market segment will you occupy?
Major competitors are? Broadly your customers are?
  • What future benefits will be achieved for the business and for the University?
  • How will the proposal fit with the University's strategic directions, goals and objectives?
  • Identify the significant areas of risk associated with the proposal and an indication of how they will be managed
  • Make it enthusiastic and professional

zz means information is required.

Some useful tips

First paragraph -

  • The proposal is designed to [attract, achieve, produce, develop, create]
  • The proposal is a [commercial, educational initiative, community, other?] that seeks to ….

Alignment with FlindersUniversity strategic directions

  • The proposal supports the following FlindersUniversity strategic directions

Market

  • The target market is [growing at.., mature, has strong competition, young, niche that will specialize in, capital intensive]
  • There are [number] major competitors who control [this segment, etc]
  • The ease of entry into this market is [not difficult because, difficult because..,]
  • The product or service will appeal to [type of customers] that are [stable, volatile, etc]

Growth Potential

  • The forecast sales are listed in Appendix [ ]. In summary [sales and profit performance, student growth, fees, etc.] are as follows: zz

Government, Loan borrowing needs or other support for the Plan

  • Describe the nature and extent of the borrowing or support.

Value adding to University Revenue and Related Entities

The proposal will develop strong educational relationships with commercial educational providers; and [zz]

  • Further develops FlindersUniversity as a major educational precinct in Adelaide’s southern region

Management and Governance

The executive team managing this [business, activity], their backgrounds, qualifications and appear in appendix zz.[Optional]. Governance and organizational structure is listed at appendix [zz]

Introduction or Background

This is optional. In this section give the reader some back ground material of why the business idea came to fruition [need], who originated the ideaor a rationale behind the plan. It can be series of bullet points or narrative.

Example –

Research into [ ] has established that there is a clearly identified gap in technology services for the [ ] sector. Only one company operates in this market and there client base is at the high end of that industry sector. Messes [x] and [y] from the [ ] faculty proposed and have received in principle support to [ ], etc.

Glossary and Abbreviations

Include here definitions, acronyms and abbreviations.

The Business and its Industry Sector

[This is the broad picture; more detailed information to be included under Industry and Competitor Analyses]

What will your business undertake? Describe your industry. Is it a growth industry? What changes do you foresee in your industry, short term and long term? How will your business be poised to take advantage of them?

Description of Business

Name of Business

Location of Business

Mission Statement

Many organisations have a brief mission statement explaining their reason for being.
It should be capable of standing alone as to what the business is all about. By example, “Eradication of Cancer” is a powerful message that can be widely used by the organisation. If the Mission Statement needs further explanation then forget it and start again.
Examples of mission statements:
FlindersUniversity – “Think, Learn, Lead Link”
AdelaideUniversity –
“To be an Australian leader in research and teaching of excellence, unequalled in the positive impact our University has on the lives of our students, staff and alumni as well as the local, national and international community”.
“Entrepreneurial and innovative educational training programs”
“Leading Provider of Children’s Games”
The choice of “To” as the opening word is considered by many as unnecessary. By example - “To create”.

Business philosophy[Optional] or as FlindersUniversity states it “Our Foundations”

You may wish to describe your business philosophy here. It must be in keeping with that of FlindersUniversity.
Examples:
  • Care by respecting living things and living lightly by not wasting energy materials
  • Ethical by
  • Cooperate by helping others learn and work with our local community
  • Show consideration by[ ]
A philosophy or guiding principles can become a ‘noose around the corporate neck’ as outside parties can use it against you for non-compliance with the principles.

Business Goals or Objectives

Goals or Objectives are one and the same: FlindersUniversity uses the term ‘Goal’ as the high level of its aims followed by the next level, ‘Objectives’. Objectives are qualitative statements about what you want the business to achieve. Refer to FlindersUniversity’s Flinders Way on page 16 as examples.
Note they do not have measurable components. This is developed and stated in KPI’s. That is, ‘Be a leading provider of quality programs rather than ‘Be a leading provider of 15 quality Commerce Programs by 2008’.
State your objectives for the business - can be more than one to achieve the Mission. Objectives are best stated by starting with a verb.
Examples are unrelated objectives to show different forms and for assistance what the mission could be to drive that objective.
Mission might be - / An Objective might be -
Community engagement / Provide Community based programs
Economic Growth / Create innovative research capability in the southern region
Eradication of Cancer / Provide Health Care in [zz] field
Leaders in geographical & environmental software / Develop geographic information systems

Strategies

Quantitative progress statements [markers] along the way to goal achievement.
Examples
  1. Build opportunities for student engagement in University research
  2. Monitor learning and teaching by regular evaluation of [zz]
Strategies are then supported by tasks under each strategy.
However it is best to present strategies, tasks and required resources, performance indicators within a separate document called Strategic Implementation Plan. This will allow you to refer to this plan on a regular basis rather than the Master Business Plan. That can remain unchanged for the years set by the Plan. For assistance with this latter component call Financial Services Division on zz.
An example of the headers to an Implementation Plan appears below. Note each objective has its own set of strategies, tasks and performance indicators.
Strategic Implementation Plan
OBJECTIVE:Provide Community based programsPRIORITY 1
No / Strategy / Actions/Tasks
/

Responsibility

Who Timeline /

Performance Indicators

/

Status

/

Comments

Corporate Structure

The following sets out relevant facts about different types of entities.

Sole Proprietor / Partnership / Company / Incorporated Association
Simple and low cost to set-up / Simple and inexpensive to set-up / Relatively complicated and expensive to form / Simple and low cost to set-up
Legal requirements are minimal / Legal requirements at a minimum / Highly regulated by government / Legal requirements at a minimum
Owner has total control / Control shared / Controlled by directors and ultimately, shareholders / Members of the Association control its affairs
Limited record-keeping and reporting required / Limited record-keeping and reporting required / Demanding record-keeping and reporting requirements / Limited record-keeping and reporting required. Depending on its turnover the Association may need to appoint an auditor
Easily discontinued / Can be difficult to dissolve / Can be difficult to dissolve / Some difficulties in dissolving and the Constitution must establish how its assets will be dissolved
Owner retains all profits / Profits split between partners / Profits can be retained / Profits cannot be distributed
Owner makes all decisions / Partners can disagree / Decisions made by board / A board of executive appointed by the members manages the affairs of the Association
Unlimited legal liability / Partners jointly and individually liable / Limited liability of shareholders / Liability is limited to unpaid member ship fees
Ownership can be transferred (usually as a whole) / Transfer of ownership is somewhat complicated / Transfer of ownership simpler / Its assets and liabilities may be transferred but the entity cannot
Tax at marginal personal rate / Can have tax advantages by spreading income / Undistributed profits presently taxed at 30% / Tax at concessional rates for non-member income. Income relating to the affairs of members is exempt income
Limited range of expertise and advice required / Specialisation of partners is possible / May have wider range of expertise in-house / Limited range of expertise and advice required
Inability to raise capital / Limited capital available / Easier to raise capital / Not permitted – only membership fees, fundraising and some commercial ventures that are taxable

As produced by the Small Biz Centre and Incorporated Associations column added.

A number of other factors have to be considered in choosing the right legal structure -
  • purpose of the business and its duration
  • cost and complexity of the desired structure
  • availability of funds
  • kinds of assets the business will acquire and the control exerted by owners and managers
  • whether votes and control will need to be divided among several parties and who is entitled to any assets upon winding up
  • taxation issues
  • powers to be exercised by each business member or group
  • whether the members’ interests should be transferable or saleable and on what conditions
  • whether the business should be independent of the members, with its own legal capacity to sue and be sued, buy or sell property, etc and the liability of the members
  • the requirements to ensure grant opportunities
Please refer to Financial Services Division for advice on the best form of corporate structure for the proposed business. The University also has policy and procedures covering investment in entities that must be followed. Please refer to FlindersUniversity’s web site under Policies and Procedures.

SWOT Analysis

Strengths
(What are we good at that will drive the business?) / Weakness
(In what areas are we not strong?)
Opportunities
(What opportunities are there for the future?)
  • Exploitation of intellectual property
  • Diversification of the product or service mix
/ Threats
(What are the threats to our Business - competitors, technology, equipment and other deficiencies?)

What factors will make the business succeed? [strength]

What background experience, skills, and strengths do you and your team bring to this venture? [strength but also a possibly weakness]

What do you think your major competitive strengths will be? [strength] and those of your competitors [threat]

Marketing Research

Why market research?

No matter how good your product or service, the business may suffer or fail unless its products or services are properly marketed. However, to achieve that requires effective market place research. If you know what the market place has on offer, market trends and benefits to the consumer/client then your marketing plan should enable you to fully compete. Two options are generally followed.

Market research options

Primary market research is to gather your own data. For example, use the yellow pages to identify competitors, undertake surveys or focus group interviews to learn about consumer preferences. UseFlindersUniversity resources, other research material and your own research expertise to gather that information.

Other researchincludes published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in FlindersUniversity and/or public libraries, industry associations, chambers of commerce, Universities, vendors who sell to industry sectors and government agencies.

Start with the library or discuss with other Faculties, Universities or business associations.

Be careful not to disclose too much information in your inquiries.

In your marketing plan, be specific and provide back up statistics and sources. Importantly, the marketing plan will also be the basis for income projections.

Products and Services

Describe your products and/or services (technical matters, drawings, photos and brochuresbelong in an Appendix). Use bullet points to list products or services.

Describe the target market to buy or use your products or services. (State it briefly here but include a more thorough explanation in the Marketing section depending on the breadth of products or services to be provided).

What are your competitive advantages or disadvantages? For example, level of quality or unique or proprietary features, price differentiation and why?

What other product or service featuresare planned for the future?

Product Differentiation
In the section above you described your products and services as you see them. The danger is that you have not assessed your customer's point of view?
Features and Benefits
For each product/service:
  • Describe the most important features. That is, what will the product do for
the customer?
  • For each produce/service, describe its benefits. That is, what will the product do
for the customer?
Note the difference between features and benefits, and think about how they may affect sales. What will you offer after the sale to increase the benefit and make your customer stay and be satisfied or use your services again?
Examples:
A manufactured car that provides transport and lasts a long time is made with certain materials and to a certain design; those are its features. Its benefits include pride of ownership, lifestyle support and reputation [high trade in value e.g. a BMW car]. You build features into your product [e.g. reverse warning device] so you can sell the benefits.
An AOU provides research capability to improve a specified product – features of the service; the follow up service - value adds to the advice and reputation of FlindersUniversityand is the benefit.

Customers

Identify your targeted customers, their characteristics, geographic and demographic considerations. Are there customer groups within your target market?

If selling the service or product through another party such as a University associated entity, health provider,distributor or wholesaler, analyse their competencies as well as the needs of end consumer.

Will you have more than one customer group? If so, identify the most important and for each consumer group, construct a demographic profile:

  • Age
  • Gender
  • Location
  • Income level
  • Social class/occupation
  • Education
  • Other (specific to your business)
For business customers, the demographic factors might be:
  • Industry (or portion of an industry)
  • Location
  • Size of firm
  • Quality/technology/price preferences
  • Other (specific to your business)

Industry Analysis

Include here facts about your chosen industry sector. Who are the operators and how long they have been in the market?

What is the total size of your market and consider state, national and international perspective?

What is the current demand in target market? Strong, weak, flat, etc.

Trends in target market - growth trends, trends in consumer preferences, and trends in product development. Is the market innovative, creative, growing or mature?

What percent share of the market will you seek to achieve?

What is the growth potential and opportunities for the business?

Barriers to entry

What barriers to entry do you face in entering this market with your new entity? Some typical ones are:

  • High capital costs
/
  • High production costs

  • High marketing costs
/
  • Consumer acceptance/brand recognition

  • Training/skills
/
  • Unique technology/patents

  • Unions
/
  • Transport costs

  • Tariff barriers/quotas
/
  • Scarcity of product

How will you overcome the barriers?

How could the following affect your organisation?

  • Change in technology
/
  • Changing economy

  • Government regulations
/
  • Change in your industry

Ease of entry

Consider the ease of competitors to enter your chosen industry sector. By example, a Lawn Mowing business is at the risk of low start up cost by a new competitor.

Competition

Describe your competitors, their products and services compared to your chosen products or services. For major competitors comment on why they have market dominance i.e. price, advertising, better product, etc.