Business Plan Preparation

Introduction

Establishing an event company is more complicated than most entrepreneurs anticipate. Complexities associated with building rapport with vendors and clients, efficient utilization of resources evolving with the changing consumer tastes, anticipating and solving a problem even before it affects the event and the company’s reputation requires experience, knowledge and a solid business plan.

A business plan is a blueprint for any company’s future. It sets the direction for a business and ensures that the company is on the right track. It is also vital for securing finance. Business planning is an ongoing business activity, and the plan should be regularly reviewed to deal with the ever-changing business environment.

The present Article is divided into three sections. The first section discusses the concept of a business plan, its significance and its uses; the second section explains the process of making a business plan and the third section provides the format for writing a business plan.

 

What is a Business Plan?

A business plan is a comprehensive written document that defines the goals of a business and outlines the methods for achieving them. It serves as a roadmap that:

• Acts as a management and financial blueprint for starting an event company and for profitable operation after the company is established.
• Explains the functioning of business along with company details, such as services offered, clients, marketing strategy, human resources, infrastructure requirement, supplies, finance, etc.

Broadly speaking developing a business plan involves conceptualization and documentation of the final plan. It usually covers the overview of the event industry, proposed business structure, services to be offered, anticipated clients, competition, its competitive advantage, and relevant financial information to ascertain the viability of the business. Typically, the focus is on future projections.

A business plan comprises of the following components:

• Executive Summary is the summation of all elements and should be written once the document is complete.
• Company Summary comprises of a snapshot of the company i.e. the scope of work, type of business, owners, business expectations and recent sales / growth trends (if any).
• Products and Services section cover the services offered by the event company, thus, highlighting its area(s) of specialization to prospective clients.
• Industry and Market Analysis share the details of the market segment targeted by the company including customer segmentation, their needs, and a snapshot of competitive trends.
• Strategy and Implementation section covers company specific strategy in line with market dynamics, including the short and long-term implementation strategy.
• A Marketing Plan provides the details of pricing, communication, promotions and distribution of services offered by the company.
• The Operational Plan is the process backbone of the day-to-day operations. This section also includes the Standard Operating Procedures (SOPs) for various activities in the event company.
• The section on Management Team provides information about the company’s administration, senior functional members and partners, including their background and experience.
• Financial Summary covers the details of the sales forecasts, cost overheads, balance sheets and profit loss accounts spread over a short term (1-2 years), and medium to long term, i.e. 4-5 years. Cash flow projections are an integral part of the financial summary.

 

Benefits of a Business Plan

A business plan provides a framework to start and expand a company. The advantages of writing a business plan are discussed below:

• Provides an integrated view of the business: A business plan is an integrated document comprising of the various aspects of business – including analysis of the event industry, client base, details of event service, vendors for regular supply, marketing plan, etc. A good business plan must ensure that all these aspects are synchronized with each other to achieve the desired goal.
• Determines the financial requirement: This includes capital requirement, sources of finance and the predicted timeline to reach the break-even point.
• Capital Generation: A comprehensive business plan is created to convince investors to invest in a new venture or to move the business to the next level. Banks and investment funds often use the business plan to periodically monitor the progress of the business.
• Directing employees: A business plan is also used as a means to inform/motivate employees about the objectives of the company.
• Informing strategic partners: Strategic partners can also understand the company by studying its business plan. It may also be used as the basis for getting approvals from the company board and shareholders.
• Recruiting Senior-Level Management: Business plan acquaints the senior level management about the company objectives and strategy along with their role.
• Departmental uses: Departments within the company may use the business plan as the starting point for preparing the detailed marketing plan or human resource policy.
• Long-term planning: A business plan is used as a platform to test future scenarios. Assessment of current activities or near-term goals should be in line with the original strategy of the event company. This understanding is beneficial for long-term planning of the company.

 

Who Reads a Business Plan?

A business plan is a confidential document and should be given only to specific people. Parts of it are distributed depending on confidentiality and responsibility of the concerned people. A business plan serves two purposes – (I) it acts as an internal guide for the insiders and (II) an external statement of purpose for the outside readers. Inside readers are usually limited to the management team and board of directors. The outside readers mostly include funding agencies, suppliers/ vendors, or others with business interest. Inside and outside readers are discussed below:

Investors and Lenders: In many cases, the first outside readers of a business plan are its potential investors interested in investing in the company. Examples of some funding agencies are given below:

• Commercial banks
• Private investment funds
• Development funds
• Multilateral development institutions
• Private investors
• Technical assistance credits / grants

To convince these agencies, an entrepreneur must be clear about her / his company’s business strategies. The competitive advantage of an organization should be well stated and supplemented with financial data such as return on investment (RoI) and break-even points. Often the focus of money lenders is to gauge the creditworthiness of the company and guarantees or securities available to support a loan request.

Management Team: The core management team should be closely involved in the preparation and revision of the business plan. The business plan should forecast problems likely to be faced by the company along with the solutions. The financial section of a plan should be reviewed and revised periodically to monitor the progress.

Suppliers / Vendors: An established company ensures favorable payment terms with its suppliers, while a start-up event company may prefer flexible payment terms as the company is still seeking financial stability. In such cases, vendors often learn more about the company through the business plan, thus helping the supplier to negotiate favorable terms with the company.

 

Steps in Preparing Business Plan for an Event Management Company

A business plan is the first vital document for any enterprise. Its use is not only restricted to the initial phase of starting a business but extends to various stages of an established company. A business plan should, therefore, be revised periodically, after every three-to-five year. To prepare a business plan the following seven steps should be followed.

Step 1: Assessing The Situation: The first step towards preparing your business plan is to assess the external and internal environment and understand the ground realities.

• Assessment of Internal Environment: Internal assessment is all about self-examination. The position of the service offered by the company and availability of resources are examples of the internal environment. This stream of activities involves identification of Strengths and Weaknesses.
• Assessment of External Environment: Political, economic, social and competitor analysis are examples of external environment assessment. The external environment helps ascertain Opportunities and Threats for the company.

Step 2: Setting Goals and Objectives: Environmental assessment forms the basis of formulating the objectives for an event company. Objectives are written in broader qualitative terms. For example, the business must achieve higher market share by 2022. Goals, on the other hand, are more specific and can be quantified. For example, the event company should increase its profits by 15 per cent every year for the next three years. Objectives and goals vary from company to company and are usually based on different aspects of the business-like market share, event service branding, marketing, customer service, finance, etc.

Step 3: Crafting Business Strategies: After setting the objectives and goals of an event company, an entrepreneur must formulate the strategy to achieve them. For example, an entrepreneur could develop a different public relations (PR) strategy to achieve the company’s objective of gaining 40 per cent market share in sports events.

Step 4: Writing a Business Plan: Thorough knowledge and understanding of the event industry are essential for a well-written business plan document. This plan highlights all the aspects covered so far. Additionally, vision and mission, monitoring and evaluation of the business plan, sub-plans for critical sectors such as marketing, operations, human resource, information systems, etc. are included.

Step 5: Financial Assessment and Writing: The most difficult step in the process of making a business plan is the financial assessment of the business. Financial assessment is necessary as it acts as a benchmark for monitoring and evaluation later. Standard business templates can be used to prepare the financial plan for the company. For the same, many entrepreneurs also prefer availing the services of an accountant.

Step 6: Monitoring The Process: To monitor the process of setting up a company, action plans, monitoring systems and constant feedback should integrate into the business plan. Periodic monitoring ensures implementation of the action plans in line with the objectives of the company.

 

Format and Organization of a Business Plan

Before discussing the content of a business plan, it is important to consider some fundamental issues regarding its format and presentation. A business plan must look professional and should be a useful tool. Following points require special attention:

• The Cover Page: Every business plan must have a detailed cover page. The cover page is the first impression of an event company to its readers. It should look lucrative and professional. A well-crafted cover page is enough to attract the attention of financiers who receive numerous plans every day. Suitable graphics also make the cover page attractive.
• Table of Contents: This is a quick and an easy way to identify different sections of the document. The Table of Contents should enlist all the sections and subsections for better understanding.
• Number of Pages: Keep the plan short and crisp. A business plan usually works best when it is limited to 15-20 pages. Also, it should not exceed beyond 25-30 pages. Page number of every section should be given in the table of contents.
• Page Margins: The document should have wide page margins so that the reader can note down her/his comments and questions.
• Font type and size: Font selected should be professional and legible. Fonts such as ‘Times New Roman’, ‘Garamond’ and ‘Calibri’ could be used for preparing the document. Font size should neither be too small nor too large to read.
• Contact information: Name, contact address, phone number and e-mail should be given in the business plan.
• Appendix: May include samples of advertisements, marketing material and any other information that aids the presentation of your plan. Terms and acronyms which are not commonly used should be written in the document.
• Paper Quality: Good quality paper should be used. The document should be printed on the single side of the paper.
• Editing: Be certain to edit the document carefully. Spelling mistakes and grammatical errors do not make a good impression.
• Binding: Bind the document so that it lies flat when opened.
• Overall document presentation: The document should neither be over done with expensive binders etc. nor should it look cheap and messy. This can raise doubts about the substance of the document among those reading it.

 

Content and Structure of a Business Plan

The structure and content of a business plan are primarily divided into two sections: (1) The cover page and (2) The main document. A sample format of a business plan is given below. This format covers the structure and content for both the sections.

Cover Sheet

• Name of the business
• Name of the entrepreneur and address of the unit
• Name of services provided by the event company
• Telephone number and fax with area code
• Email and website add
• Constitution of the firm
• Educational qualification of the entrepreneur
• Work experience of the entrepreneur
• Proposed locations (if any)
• Name and address of the bank / financial institution the entrepreneur plans
  to deal with.

Main Document of the Business Plan

1- The Executive Summary: Executive summary is a brief synopsis of the entire business concept covering all important aspects of the plan. It is the business plan in miniature. It is a two-page document which determines the entrepreneur’s knowledge of the business opportunity and ensures that any investment in the venture will yield a good return. It should include the following:

• Introduction to business opportunity search
• About the company and its event services
• USP of the business
• Target market: growth and opportunities
• Competitive analysis
• Key marketing strategy
• Operational highlights
• Management summary
• Financial highlights
• Funding requirements

2- Introduction / Overview: The Introduction section of a business plan presents the overview of the event industry as a whole and the target market. For example, if your event company specializes in organizing promotional events for organizations, the introduction section will cover the scenario of activations industry locally and globally (if required).

3- The Company: This section provides the details of the company describing the business organization, location and premises, essential services and customers, critical data, constitution/ownership and management, human resources, and business strategy and vision. It gives the reader an outline of the business before reading the details.

4- Market Analysis: This section covers the details of the market analysis to ascertain the feasibility and appeal of the business. An estimate of the expected number of buyers should also be discussed. Convincing evidence should support the market analysis.

5- Service offered by the Event Company: This section includes service description, history, attributes, research and development, the process of organizing events, quality assurance and control, sourcing and intellectual property.

6- Marketing and Implementation Strategy: Marketing strategy covers the pricing strategy and various approaches for promoting the event company – such as newspaper advertisements, websites, word of mouth, etc. Implementation strategy of the company includes the sales and distribution approach.

7- Management and Organizational Structure: Management and organizational structure is an account of the work force in the company.

8- Business Risks: Business risks may be stated such as per unit price, competition, overall economic situation, government regulations, etc. These business risks may affect the profits and growth of the company.

9- Financial Projections:

• Income Statement
• Projected Cash Flow
• Balance Sheet
• Break Even Analysis
• Profitability Ratios

10- Appendices:

• Service literature
• Asset valuations
• Legal documents (for example, company registration)
• Curriculum vitae of key management persons
• Market research
• Other relevant and important information

 

Why Do Some Start-Up Event Management Companies Fail?

Good event companies deliver adequate services to their clients by organizing quality events and bringing creative and profitable ideas. However, many of them fail due to some common mistakes made by entrepreneurs. These common mistakes are discussed below:

Failure to Create a Large Clientele Base: Often entrepreneurs get busy with organizing events for initially acquired clients and forget approaching new ones, thus, affecting the business when regular clients are not availing the services.

Poor Managements Skills: Poor management is one of the main reasons for the company’s downfall. There is a big difference between being a good event planner and being a good entrepreneur (i.e. providing services to customers). New business owners often lack relevant business and management skills essential for running a business. Care must be taken to study, organize, plan and control all the operations regularly. A successful entrepreneur is also a good leader who creates a work climate that encourages productivity.

Undercharging: Never undercharge with an assumption that it will help create a larger client base. Don’t set prices so low that at the end of a project there are no profits after investing time and effort in organizing the event.

Insufficient Capital: Insufficient operating funds often lead to business failure. Entrepreneurs underestimate or overestimate the investment needed, resulting in forced termination of the firm. They may also have an unrealistic expectation of incoming revenues from sales.

Location: A good business location is critical to the success of a business and may enable a struggling business to ultimately survive and thrive, while a poor location could result in the downfall of even a best-managed enterprise. Some factors to consider are given below:

• Location of potential customers
• Traffic, accessibility, parking and lighting
• Location of competitors
• The history, community flavor and receptiveness to a new business at a prospective site.

Overexpansion: Overexpansion often happens when business owners confuse success with the rate of business expansion. It is often a cause of failure and bankruptcy. Focus on slow and steady growth is advised.

Disorganization: Clients hire an event company to organize for them. A disorganized office can leave a bad impression. It is also important that necessary equipment and processes are at the fingertips of the event manager as it will give confidence to the client.

No Website: These days a business website is one of the most basic requirements of any company. Every business should have a professional and well-designed website that provides users easy access to information related to the business and its services.