Comparison and Analysis of Two Business Plans: 2MBA Inc and SanaSana - Case Study Example

Assignment 1: Business Planning Name: Tutor: Course: Date: Table of contents 1.0 Brief description 2 1.1 Comparison and contrast of strong components 3 1.2 Three weakest components of each plan 5 1.3 Suggestions for improvement in the business plans 7 1.4 Challenges and solutions 9 1.5 Five lessons learnt on business planning 9 1.6 Demonstrated competencies 10 1.7 Recommendations 12 References 13 Axten, T. (2008). A business planning guide to developing a social enterprise, Senscot, http://www.forthsectordevelopment.org.uk/documents/New_BusPlanGuide.pdf. 13 Deeb, G. (2015). The 6 Key Components of Writing a Business Plan, Forbes, February 19, 2015, http://www.forbes.com/sites/georgedeeb/2015/02/19/the-6-key-components-of-writing-a-business-plan/. 13 Ehmke, C. & Akridge, J. (2009). The Elements of a Business Plan: First Steps for New Entrepreneurs, Purdue University. https://www.extension.purdue.edu/extmedia/ec/ec-735.pdf. 13 Lawrence, S. & Moyes, F. (2004). Writing a successful business plan, University of Colorado. http://leeds-faculty.colorado.edu/moyes/bplan/Plan/Writing%20a%20Successful%20Business%20Plan%202004v4.pdf. 13 MOOT Corp® Competition, (2000). The Super Bowl of Business Plan Competition, Business Week, http://www.businessplans.org/businessplans.html. 13 1.0 Brief description This report makes comparison and analysis of two business plans; 2MBA Inc and SanaSana (MOOT Corporation, 2000). The first business plan is 2MBA Inc. which stands for Manufacturing and Marketing Beverages Appliances, Inc. The company develops innovative equipment for preparation of beverages. The target market is corporate owners of major food brands. Led by a management of four, the company sells espresso style machine (La Barista) and Mobile Vending Unit (MVU). The major customer is Nestle who is in a long-term contract with the firm. The company is asking $ 1.5 million for 30% equity in the firm. The funds will be required to finance materials supply and MVU assembly, and to procure materials supplies and factory equipment. The firm is also investing in research and development for innovative products that will be available in the market in the next 6 years. The business plan has executive summary, the offer to potential investors, the products, the organization, strategic analysis, key strategic issues, organization plan, production plan, marketing plan and financial plan. The appendices section has internal environment analysis, SWOT analysis and critical risks and problems. It also has testimonials, action plan, product layout, reference sources and team member details, and financial analysis worksheets. The second business plan is SanaSana which is a Spanish B2B2C internet solution for health service providers, suppliers and payers. The company aims at providing Hispanic speakers with medical knowledge around the world. It has a management team of four and assures greater benefits for consumers and business partners. The business will have competitive advantage on content and community since it explains health information to Hispanic non-physicians. The target market is Hispanic consumers, technology, prominent Hispanic doctors and medical institutions. The business is a start-up seeking $2 million to finance the internet service in the first four months of operation. There are financial, legislative and operational risks expected in this business and exit scenarios include acquisition merger or initial public offering once it is listed. The SanaSana business plan has executive summary, business description, and market analysis, management team, operating strategies, financial projections and business risks. In the appendices section, the plan has attachments on health demographics, competitive landscape, detailed financial statement and future business offerings. It also consists of technical infrastructure implementation and internet usage and penetration. 1.1 Comparison and contrast of strong components Business plan Strong components Justification SanaSana Management team Both plans have presentation of the management team but SanaSana is most appealing to investors. To start with, the plan provides the credentials of the four managers in detail and is the first item in the executive summary. Second, the top management is diverse in skills and cultural background with excellent academic qualifications. They have experience from leading US companies in customer service, technology, marketing and business development. This shows that as a start-up, the company will not be learning and experimenting with limited capital but will be ready to focus on organizational establishment and growth. Business Model The business has just seen an industry opportunity and is building on installed software solution available in the internet for health services. It connects both businesses and customers unlike 2MBA Inc which is modeled for businesses only. This works like an online medical library for non-physicians where users pay online to use the service. Therefore, the business plan looks at adopting e-commerce within a community that has not yet enjoyed translation of health information. This will be a heavy repeat usage with unique advantage on content and community. Investors will be looking at recurring and large revenue for this kind of disruptive business to create value. Industry and competition The plan recognizes about six competitors such as health and language portals, insurance firms, government organizations and private physicians. However, these competitors are limited in terms of breadth and quality of information. The industry is fast growing given the high capitalization and alliances among competitors due to increasing population of Hispanic households in the US with internet access. However, 2MBA is selling to a mature and competitive market. The plan knows that investors prefer large and growing markets with limited competition and has ensured that the growing market opportunity meets with limited competition and disruptive business operations. 2MBA Inc Strongest components Justification Claw back strategy for investors Most business plans do not cushion the prospective investor (Deeb, 2015). Unlike the SanaSana business plan, 2MBA Inc has a strategy where investors are given a mandate claw back 20% from the management team equity if the business venture does not meet at least 90% of the key performance criteria. This serves to content investors who are doubtful of the venture or fear of losing their investments. The return on investment is also appealing given that the investment is able to give returns in the medium term (3 years). Sustained competitive advantage Being a producer of patented equipment, the business is likely to have good returns in the long-term. Investors are looking for companies with superior technology and physical resources that can use less cost to attain higher revenues. Compared to other mobile vending machines and competing coffee appliance, 2MBA Inc offers high quality, low maintenance, sleek design, and low cost and high speed production of coffee. Moreover, the business plan has broader product description and a strong team of committed people. The distribution channel is also well established at are at mature stages and by building strategic alliance with Nestle, most investors would find the deal more appealing. Detailed and elaborate financial plan Similar to SanaSana business plan, this plan has considered a number of assumptions that will be necessary to support revenue growth. It also provided a best case scenario where the investment can have positive cash flows annually. The plan has been analyzed using several financial ratios which stronger indication of growth in all. The investors can have a broader picture of business by observing cash flows, inventory management, and tax reconciliation. 1.2 Three weakest components of each plan Business plan Weakest components Justification SanaSana Cash requirements Unlike 2MBA that requires $1.5 million spread in two years, SanaSana is looking for investors who can invest $10 million equity into the company over the same period. Although sales and marketing investment is dubbed to increase revenues, investors will be looking for businesses with low cash need and lower burn rate. Therefore, it is unlikely that investors will accept this offer considering that there is no cushion in place if the worst happens. Limited market Given that the business plan targets Hispanic speakers, it is unlikely that the narrowed market can drive the sales needed. Moreover, few people may want to access medical knowledge and if they do, other translations are available online for free. 2MBA is also limited by the market because it targets Nestle for a 5 year contract. This is risky and catastrophic if the customer terminates the contract suddenly. However, 2MBA will have more business customers compared to SanaSana. Investor requirements Most investors would want to see a business that can multiply 10 times in the next five years. 2MBA has projected their cash flow to increase 8-fold in the next five years but SanaSana has increased theirs 2-fold in five years. This aspect discourages potential investors. 2MBA Inc Weakest components Justification Sales and marketing strategy The major customer is Nestle foods on a five-year contract. Other customers in the US will require more product information to understand the product. This will require testimonials on a larger extent if targeting a niche market. Moreover, the products can still be bought by individuals who may want to make their coffee at home. Both business plans are targeting niche markets which have narrow sales turnovers compared to the expected sales projections provided. Intellectual property Just as SanaSana is banking on unique internet solution for payers, providers and suppliers, 2MBA is relying on MVU Pty Ltd for patents agreed as inventory equity and royalty. The risk can have legal protractions when the inventor pulls out or demands for increased royalties. However, the aspect of intellectual property is critical in the US market and will help the company to have a sustained competitive advantage. External environment analysis Both business plans have dwelled on internal analysis based on SWOT but poorly considered the external situation of business operations. In 2MBA, it is critical to consider the politics and legislations such as taxes, inflation, income levels, purchasing power, and consumer culture. Although it has described technology as a component for competitive advantage it has not been exploited to increase sales. Therefore, both plans need to have considered the external business environment. 1.3 Suggestions for improvement in the business plans Executive summary: Both business plans have long executive summaries that can be misleading to the reader especially potential investors. Investors would like to see business plans that are brief and businesslike (Lawrence & Moyes, 2004). I suggest that the plans should have been half a page each with synopsis of the entire business plan. SanaSana has the longest executive summary that the reader cannot tell if they have started reading the main plan. This should be reduced and the table of cash projections in it removed to the appendices section. Market analysis: 2MBA has provided a detailed marketing plan in addition to strategic analysis but do not have facts that can arouse the confidence of the investor. The plan requires marketing strategies to include pricing strategies, discounts, and offers. On strategic analysis, there is need for detailed analysis to show how some external forces can affect business performance within the next five years. Moreover, SanaSana may have to employ tools such as PESTLE, VRIO and SWOT to analyze its market precisely. Funding requirements: 2MBA made an attempt to provide a best case scenario while SanaSana did not. They should work on providing worst case and best case scenario for investors to consider. The figures provided by 2MBA are a bit unrealistic and requires adjustments. Both have shown the amount of funding required by should have indicated in detail how they are going to spend the cash. Marketing and sales strategies: Both plans will need to rework on marketing and sales strategies because they are weak. The plans should identify niche marketing and consider how they will use language and new technologies to exploit the limited market (Ehmke & Akridge, 2009). For example, using mass market strategies for highly sophisticated coffee equipment may not work but visiting coffee bars in up market areas may work. Sponsorships and tradeshows should be scheduled and advertised in international TV stations like CNN to capture attention of international buyers such as those in Europe and Africa. Financials: Both business plans have their financial plans coming after clear objectives have been set and the market analyzed. Moreover, the projections have 3-5 year historical data but there was need to show graphs on breakeven analysis which would assist the investor to a quick image of returns. Accurate presentation of data is also required (Axten, 2008). 1.4 Challenges and solutions To start with, deciding on the criteria of choosing business plans to analyze was a challenge. This was because business plans are diverse but have common structure and organization. To properly identify the business plans to write, I categorized those dealing with products and the others on services. I then chose the best in each category and began the analysis. Secondly, there was no standard measure of comparing the strong and weak points of the business plans. This means that the components used for strengths and weaknesses were different for each business plan. To overcome, this challenge I listed all the strengths and weaknesses of business plans in general and determined points of divergence and convergence. Thirdly, business plans appeal to different investors in their own ways. This means that there could be many ways of looking at strengths and weaknesses of the business plans. To overcome this challenge, I ensured that each component had been met based on the minimum criteria. Lastly, the appendices in both business plans had additional information on financials and market analysis which could not be accessed. However, most of the information had been provided in the body of the business plan hence; made useful analysis of the executive summary. 1.5 Five lessons learnt on business planning The first lesson learnt was that executive summary of each business plan is important to investors, bankers and consultants. I learnt that it is essential to have a short executive summary with synopsis of the entire report. Secondly, I learnt that despite writing excellent business plans, there are still points of weaknesses that may put off potential investors. I realized that there is need to understand the mind of the investors before writing the plan and economize words to avoid lengthy reports. Thirdly, I learnt that every business plan should have executive summary, market analysis, company description, organization and management, product/service line, sales and marketing strategies, funding requirements and financials. Fourthly, I realized that a business plan helps the entrepreneur to have value and purpose not just being street smart or having intuition of business success. I learned that planning for growth is crucial because with a business plan, chances are good that one is able to sustain growth. Lastly, I learned that a business should have realistic sales and revenue projection based on sales and market power. I now understand that having a five year project is good but projecting 10-fold turnover in sales within five years is even desirable. 1.6 Demonstrated competencies Conceptual understanding of market analysis, financials and trends: I have known how to develop and interpret business plans in terms of internal and external environment analysis, consumer dynamics, and preparation of cash flows and profit and loss statements. I have a better understand of strategic planning too. By observing trends in the consumer market I now understand that business plans will help to harmonize various dynamics like inflation, employment rate, currency fluctuations and purchasing power. Knowledge of contextual factors influencing entrepreneurship and engineering discipline: I now understand and identify the interactions between people in political, legal, commercial, environmental, social and cultural and entrepreneurial systems. I am aware of principles relevant in engineering, enterprise management and business strategic planning. By analyzing and comparing various business plans, I have learned to coping skills needed to transform engineering ideas into viable business enterprises. For example, the use of SWOT analysis and product market analysis show convergence and significant relationships. Professional accountability and ethical conduct: I have demonstrated commitment to uphold code of ethics and established norms that govern disclosures and sharing of sensitive business information. I now understand due diligence, risk management and compliance processes. I understand the accountabilities of professional entrepreneur and intellectual property protection and rights. I now know that presenting reasonable and realistic figures in the business plan is professional desirable. Effective writing of communication of plans in professional and lay domains: I am proficient in writing, reading, speaking and listening in English using pictorial, textual, diagrams and graphic media suited to a given context. I know how to prepare high quality engineering documents like business plans, technical descriptions, and proposal and investigations reports. These plans have been written in concise business and professional English that can be easily understand. The key is to know and interpret business plans using Standard English language. Professional use and information management: I am now proficient in utilizing information using data and published works. This also applies to searching databases, indexes and secondary sources. I can critically assess the authenticity, reliability and accuracy of information and is aware of common control, tracking, and document identification procedures. I am competent in accessing professional information and how to interpret financial information to suit any circumstance and purpose. Professional conduct and orderly management of self: I can demonstrate commitment to performance evaluation and critical self-review based on basic means of tracking personal achievements and development needs. I understand that being a member of intellectual and professional community, I need to respect and adhere to standards and knowledge by contributing to their advancement and maintenance. I am committed to professional development and life-long learning. I also know how to manage processes and time effectively and giving priority to competing demand for achievement of organizational objectives and career goals. Besides, I can apply and think critically on appropriate intellectual and logical analytical criteria, decision making and judgment. In all circumstances, I have learned to present professional image including relations with clients, investors, bankers, consultants, technical and professional colleagues in a number of disciplines. 1.7 Recommendations As observed above, there are a number of recommendations to be made regarding business plan development; World class business plans should be used as best practice to help in developing winning plans that are desirable to potential investors Common or standard criteria should be used in developing business plans irrespective of product of service categories Business plans should be realistic and directed towards organizational goals Owner equity should be represented in the financial plan to show commitment and contribution of the owner into the business. Entrepreneurship should apply innovative engineering concepts and applications to create competitive products that border on competitive advantage Business plans should be developed to win average investors References Axten, T. (2008). A business planning guide to developing a social enterprise, Senscot, http://www.forthsectordevelopment.org.uk/documents/New_BusPlanGuide.pdf. Deeb, G. (2015). The 6 Key Components of Writing a Business Plan, Forbes, February 19, 2015, http://www.forbes.com/sites/georgedeeb/2015/02/19/the-6-key-components-of-writing-a-business-plan/. Ehmke, C. & Akridge, J. (2009). The Elements of a Business Plan: First Steps for New Entrepreneurs, Purdue University. https://www.extension.purdue.edu/extmedia/ec/ec-735.pdf. Lawrence, S. & Moyes, F. (2004). Writing a successful business plan, University of Colorado. http://leeds-faculty.colorado.edu/moyes/bplan/Plan/Writing%20a%20Successful%20Business%20Plan%202004v4.pdf. MOOT Corp® Competition, (2000). The Super Bowl of Business Plan Competition, Business Week, http://www.businessplans.org/businessplans.html. Read More