Table of Contents
- Content: 70 marks 7
- Spelling, Sentence Construction and Grammar: 10 marks 7
- Innovative and Creative Thinking: 10 marks 7
- Overall Presentation and Visual Appeal: 10 marks 7
The premise of this assignment is that you and your fellow group members already own a community pharmacy (you each have an equal share). You wish to implement a new service into your pharmacy to improve profitability. In order to implement this new service you will need to take out a loan. Therefore, you will need to demonstrate to a lender that this new business opportunity is perfect for your current pharmacy business, its demographic and target market, and that it will make money and improve your pharmacy’s profitability. The lender has asked you to prepare a business plan outlining how you intend to make the service generate income for the pharmacy and increase the pharmacy’s profitability. The professional service that you are to implement ideally should be multidisciplinary i.e. involves other health professional/s of your choosing. You will be provided with generic financial and other information as the starting point for your pharmacy – you must use the figures provided.
- Referencing Style: Vancouver
- Document Layout
The entire document, which incorporates the business plan template, should be set out in the order below – assignments not set out using this template will NOT be marked.
Cover Sheet (download template from Blackboard)
Table of Contents
Table of Tables (if you have any tables in your document) – on separate page
Table of Figures (if you have any figures in your document) – on separate page
Current Business Situation
New Business Opportunity/Idea
- Font Size: 12 point
- Line spacing: 1.5
- Word limit: refer table on page 4for the word limits for each section
The business plan needs to contain the following headings in the order set out below. Failure to include any of these headings will lose you marks.
- Executive Summary
- Vision and Mission Statements
- Current state of the business
- Current products and services
- New business opportunity/service and customer value proposition
- Strategies and sources of sustainable competitive advantage
- Customer acceptance
- Summary of financial forecasts
- Money required, timing and deal on offer
- Current Business Situation
- Description of current business, its market and market position
- Past financial performance
- New Business Idea/Opportunity
- Description of new business idea/opportunity
- Operational requirements
- Strategic Analysis
- General Environment Analysis: PESTDGP (Political, Economic, Socio-cultural, Technological, Demographic, Global and Physical) analysis
- Industry Environment Analysis
- Competitor Environment Analysis
4.4 SWOT analysis
- Stakeholder Analysis
4.6 Strategy for the next 12 months (timeline)
- Marketing Plan
5.1 Target Market including market segments, size and growth
5.2 Description of customers and customers’ needs
5.3 Product positioning and value proposition
5.4 Marketing Mix
5.5 After-sales service and customer care
5.6 Comparison with competition
5.7 Market Forecast
- Financial Forecasts & Data
6.1 Summary of performance ratios & comparison with industry benchmarks
6.2 Sales & financial forecasts
6.3 Assumption underpinning financial forecasts
6.4 Income Statement
6.5 Balance Sheet
6.6 Cash Flow Statement
6.7 Breakeven Analysis/Sensitivity analysis
6.8 Funds required, terms of finance, timing & breakdown of how proceeds will be spent
- Operational Plan
7.1 Physical location
7.2 Organisational chart
7.3 Resources (Current & Required for new service)
7.3.1 Physical resources
7.3.2 Human resources
7.3.3 Financial resources
7.3.4 Organisational resources
7.4 Scalability of operations
7.5 Quality control plans
7.6 Sources of supply of key elements
Last financial year: 1/7/2015 – 30/6/2016
Current financial year: 1/7/2016 – 30/6/2017
Next financial year: 1/7/2017 – 30/6/2018
|Section||Group or Individual Contribution||Mark Allocation||Word Limit|
|Executive Summary||Group||20 marks||500 words|
|Current business situation||Group||5 marks||150 words|
|New business opportunity/idea||Person 1||40 marks||1000 words|
|Strategic Analysis||Person 2||40 marks||1000 words|
|Marketing Plan||Person 3||40 marks||1000 words|
|Financial Plan||Person 4||40 marks||1000 words|
|Operational Plan||Person 5||40 marks||1000 words|
|Conclusion||Group||5 marks||150 words|
Please note: these word limits are maximum limits only. The more concise your plan, the more appealing it is to the reader. Therefore aim to come under these limits. The Financial Plan section should not require anywhere near this amount of words – much of the information required for this section is best presented in a table. Anything over the word limit will not be read.
Words in tables and figures do not add to the word limit but excessive words in tables defeat the purpose of a table and will impact on the mark for that section.
The content mark has two components, a group component and an individual component. The breakdown is set out below.
Individual Component: 40 marks
Group component: 30 marks
|Executive Summary||20 marks|
|Current business situation||5 marks|
|Total Group Marks||30 marks|
This is an individual mark based on your individual component
|Individual Content Mark||40 marks|
|Spelling, sentence construction & grammar||10 marks|
|Total Individual Marks||50 marks|
|Group Content Mark||30 marks|
|Innovative & Creative Thinking||10 marks|
|Overall Presentation & Visual Appeal||10 marks|
|Total Group Marks||50 marks|
|Total Marks for each student||100 marks|
Your individual score of 100 marks has a weighting of 50%.
Strategic business planning is about setting a direction for the company, a direction to which all employees of the firm from the CEO down, can become committed. It ensures every part of the business is in harmony, moving towards a clearer business purpose that will give it a competitive advantage and improve its performance. The strategic business planning process achieves focus. The written business plan is the articulated version of this process – the detailed roadmap of how the strategic plans will be actioned.
Regardless of whether you are just starting up a new business, or wishing to incorporate a new business idea into an established company, secured funding is usually required. Any investor or lending institution will invariably insist upon seeing a business plan before they approve funding. The business plan, as well as being a pre-requisite for obtaining finance, also provides a blueprint for successfully creating and running the new venture. A business plan describes the business’s vision and objectives, as well as the strategy and tactics that will be employed to achieve them. The strategic business planning process needs to be comprehensive and thorough to ensure that the resulting business plan has identified every contingency. It needs to firstly evaluate the business’s existing or intended position and the environment in which it operates, and then look at the existing or potential customers, competitors and suppliers.
In this fast-paced environment, the business planning process should be continuous and flexible to allow for quick decision-making and changes in strategic direction with feedback at every stage of the planning process. The business plan should be constructed in such a way as to be able to be modified or updated. The environment should be continually monitored, and when the signals are received that the market is changing, then tactics, strategies and operations need to be reviewed.
When writing a business plan the following questions should be asked:
- What is the ultimate objective of preparing the business plan?
- How will the business plan be used and by whom?
- To what level of detail should the plan be prepared: will the plan be used to examine high-level strategic issues or for actually running the business?
- What is the scope of the business plan: does it relate to the entire business, just one product or service or just one division or geographic region?
(The scope of this plan is the new service that is to be implemented.)
- For what time period should the business plan be prepared?
At the end of the day, the business plan should be attractive, impressive and as easy to read as possible!!
This should be attractive and appealing to the reader, list your pharmacy name, group members’ names and show your pharmacy’s logo.
DO NOT USE ANY NAMES, LOGOS OR PHOTOGRAPHS OF REAL PHARMACIES OR STAFF !!!!!
An executive summary is exactly that – a summary! It captures and presents succinctly the essence of the plan. The executive summary is neither a background nor an introduction – it is a summary of the key points of the entire plan. In essence it is, “telling them what you are going to tell them”. Many business plan reviewers e.g. bank managers, are time poor and inundated with many plans to read. Therefore, the executive summary should provide the reader with a good understanding of the plan’s concept (i.e. the business idea/service that you are intending to implement), finances and metrics. After reading an executive summary, a reader should have a relatively sound understanding of what will be presented in greater detail throughout the plan. On occasion, the executive summary may be used by itself as a means of gaining access to a reader. Some venture capitalists prefer to review a cover letter and summary document (e.g. an executive summary) prior to receiving a complete business plan. Therefore, all pertinent information in the business plan must appear in a succinct fashion in the executive summary.
While the executive summary appears at the beginning of a business plan, it should be written after the plan has been completed. It is only after the entire plan has been thought through in depth and written down that a concise summary can be written. The executive summary is always written last and contains information taken from other sections in the plan. It is a group component because it contains information taken from the various individual components. For the purposes of this assignment however, it is recommended that you come up with your Vision and Mission statements as the first thing you do before commencing on the main body of the business plan.
In addition to providing the reader with a quick overview/understanding of the business proposal, an executive summary should also grab the reader’s attention. Many lenders often don’t go past reading the executive summary and discard the business plan. Therefore it is imperative that your executive summary entices the reader to keep going (otherwise, you won’t get your money!). The tone of the executive summary should be business-like but should convey a sense of excitement and importance. The reviewer’s interest might be captured by the concept, the rate of return, or even the style with which the thoughts are conveyed. The Executive Summary should be preferably one – two pages in length – no more. It needs to be a succinct summary of the information contained in the main body of the business plan.
A new organisation generally starts with an entrepreneurial idea which leads to the creation of the vision and mission statement. On the other hand, an existing organisation should already have a defined vision and mission statement and these should be reviewed regularly to reassess whether the vision needs to be realigned to improve the performance of the organisation.Literature often confuses vision and mission but they are different.
Vision statement: Defines the direction of the organisation. “The best vision statements transcend product or market, level of service or performance criteria. They make sense of a corporation on a higher level. They explain what an organisation means to accomplish in terms of employees, shareholders and all other stakeholders. They define why employees want to come to work in the morning, why people apply to join the firm, why banks, accountants and suppliers want to be associated with it in the long run. They explain why competitors admire the company and why non-customers would switch to it with only a slight change of circumstances” (White, 2004). Great vision statements encompass an ideal that lifts the spirit and accords the organisation a special place in the business world. While a business must continually adapt to its competitive environment, there are certain core ideals that will remain constant and will provide guidance in the process of strategic decision-making. These unchanging ideals form the business Visionand are articulated in the Mission Statement. Normally, vision statements are one sentence or one paragraph – not lengthy.
The vision for a firm typically comes from the founder of a company and asks the question, “Where do we want to end up?” It points the firm in the direction of where it would like to be in years to come – it paints a picture of what the firm wants to be, and in broad terms, what it ultimately wants to achieve. An effective Vision statement is the responsibility of the leader who should work with others to form it. The vision is the foundation for the mission.
The mission answers the questions, ‘What do we do? What’s our purpose?’ It specifies the markets in which the firm intends to compete and the customers it intends to serve. It tends to be more concrete than the Vision and is usually longer.
The mission statement outlines how the vision is to be translated into reality i.e. how it is to be achieved.It communicates the business’s core ideology and visionary goals to clients and the general public. It consists of 3 components:
- Core values to which the business is committed
- Core purpose of the firm
- Visionary goals the firm will pursue to fulfil its mission.
Note: You do not use these headings in your mission statement, but incorporate them into one cohesive statement that is usually comprised of several sentences. Remember it is a statement!!
Example 1 – The Natural Step Organisation
Vision statement: Our vision is a good world in which human society thrives within
Mission Statement: Our mission is to enable the actors within society to use sustainability
as a set of design principles to innovate, succeed and co-create
vibrant futures together.
Example 2 – OXFAM
Vision statement: A just world without poverty. We envision a world in which people
can influence decisions which affect their lives, enjoy their rights, and
assume their responsibilities as full citizens of a world in which all
human beings are valued and treated equally.
Mission Statement: The purpose of Oxfam is to help create lasting solutions to the
injustice of poverty. We are part of a global movement for change,
one that empowers people to create a future that is secure, just, and
free from poverty.
- Total sales
- Average number of scripts per week
- GP Margin%
- Net Profit
- Net Profit Margin %
- EBIT Margin %
- Breakeven Sales
- Margin of Safety
- Sales to Breakeven Point Ratio
It needs to be in a descriptive format i.e. write the information in sentences rather than use dot points.
This is a brief description of what the pharmacy currently offers with regards to products and services.
This is a clear, succinct description of what your new service will be, any products that will be purchased in order for the pharmacy to deliver this new service, and how you think it will
improve/grow your current business (i.e. justification for why lender should lend you the money to implement this new service).
How will the introduction of this new service give your business sustainable competitive advantage over your competitors?
Do you think your current customers will accept/take up the service and how have you come to this conclusion? Do you think this new service will bring in new customers to your pharmacy?
Forecasts are predictions of the future. Under this heading include a brief sales and profit forecast of the business after the introduction of the new service (for the period 1/7/2017 – 30/6/2018). Information required:
Predicted financial figures after the implementation of the new service
- Projected (predicted) Total Sales
- New service: Predicted service income generated in first year & GP Margin% of new service
- Projected Net Profit
- Projected GP Margin% of business as a whole
- Projected Net Profit Margin %
- Projected EBIT Margin %
- Projected Breakeven Sales (Breakeven Point)
- Projected Margin of Safety Ratio
- Projected Sales to Breakeven Point Ratio
This information may be in the form of a table if you wish – whatever is the easiest way for readers to obtain this information. It should also be accompanied by a brief explanation of how you reached your projections or any assumptions made.
This section is a brief statement of how much money you wish to borrow, when you need it by, a brief description of what the projected monthly loan repayment might be, and how you will repay it.
In this section you need to state the suburb in which your pharmacy is located, briefly describe the suburb’s demographic, your pharmacy’s current customer base, and the pharmacy’s current market position i.e. do you have the major pharmacy market share in this suburb or are you competing against other bigger competitors e.g. a Chemist Warehouse, or a TW Chemist or Discount Drug Store for example.
Include here the GP Margin, the Net Profit Margin %, the EBIT Margin % and the GMROII (calculate from the figures provided) for the last financial years (1/7/2015- 30/6/2016 and 1/7/2016 – 30/6/2017).
This section is meant to clearly show the reader all the details of the new service and how it will be implemented.
List here what extra resources will be required – staffing, equipment, devices, products, extra space/rooms, training for staff etc and also include approximate costings eg salaries of extra staff etc as well as fixtures, fittings and extra equipment. Discuss any room requirements – is there already a room available (what renovations will be required?), will a room need to be built? Shopfitting costs?
[Refer to your Business Strategy lectures and lecture notes for this section]
In your assignment you will need to demonstrate an understanding of what’s happening in the Australian and global political and economic environments and how this could affect the business landscape and ultimately your business. For example, how is government policy affecting the Reserve Bank’s decisions regarding interest rates? what are the four big banks doing about interest rates? etcetcMost of the marks lost in this section are because the researcher fails to demonstrate how data they have found will impact on the pharmacy industry as a whole and then in turn on their pharmacy.
Political and Economic information are often intertwined as the Federal Government’s fiscal policies affect the money market. Therefore, for the political component look at government policies regarding health eg Community Pharmacy Agreement (now under the 6th Community Pharmacy Agreement). Economic scan – government fiscal/monetary policy and Reserve Bank – what’s happening with banks and lending rates and willingness to lend to small businesses. What’s happening with consumer confidence and spending as a result of current government policies?
How to complete Physical environment section of table (Physical environment = Ecological) analysis/Sustainability evaluation)
With acknowledgement worldwide that we humans cannot continue to consume the earth’s scarce resources at our current rate, one of the results being global warming and resultant climate change, such initiatives as the Earth Charter (http://www.earthcharterinaction.org/content/) and the UN Global Compact (http://en.wikipedia.org/wiki/United_Nations_Global_Compact) endeavour to encourage organisations and individuals globally, to change the way they live, socialise and do business. Increasingly, business organisations around the world are moving towards conducting their business operations more sustainably. There are three core pillars underpinning ‘sustainability’. These are economic, social and ecological. Sustainability argues for equity of economic, social and ecological resources. Its ultimate aim is to ensure that in the future we still have a planet with a diversity of fauna and flora and that all humans enjoy a lifestyle where there is no poverty and violence and all individuals are able to attain their full potential.
- a) Ecological/environmental considerations:
In this plan you need to consider the environmental footprint of your business and not just consider the usual things like recycling. Are the tablet bottles etc recyclable? Is your supply chain sustainable/ethical i.e. do the companies you deal with follow these principles? Consider these environmental issues for a start:
- Disposal of printer cartridges
- Energy consumption of pharmacy (computers & monitors etc)
- Water usage of pharmacy
- Pharmacy waste – recyclable paper waste, pharmaceutical waste – how do you dispose of unwanted medicines eg expired antibiotics mixtures? (is your pharmacy signed up for the RUM project?)
- b) Social/economic considerations:
- Is the pharmacy work environment a great place for staff to work – are your staff happy and developing to their full potential in their work environment?
- Products imported from third world countries – was child labour used?
A useful link to research how you can incorporate sustainability into your pharmacy is:
A good way to set out your findings for the PESTDGP scan is depicted on the next page:
Use dot points and keep words inside table to a minimum.
The industry analysis is determining the profit potential of the industry as a whole. Before lending you money a lender needs to be assured that the industry is profitable and that it is
a safe area in which to invest money. Therefore, you need to look at the reports uploaded on Blackboard – IBIS report Jan 2014, KordaMentha report Feb 2014, the Grattan Institute Report and any information from the Pharmacy Guild of Australia. The Australian Bureau of Statistics is also another source of useful information. What are the trends in the pharmacy industry in Australia? What are the big issues in the pharmacy industry at the moment? What has the King review suggested?
You need to look at:-
- Hours open
- Services offered
- Business strategy – cost leader or differentiator or no particular model
- Operational strength – do they have access to plenty of resources eg part of a chain/banner group? etc
- Their Strengths
- Their Weaknesses
- Opportunities for you
- Threats to you
- Possible changes in their strategy in the near future
Profiles should be drawn up of your main competitors and the current strategy or positioning should be analysed by looking at the statement the company makes about itself and how it communicates with customers. I would suggest setting out in a table with the criteria down the left hand column and your competitors along the top.
The SWOT analysis is carried out on your current business BEFORE implementation of the new business idea.
The analysis of strengths, weaknesses, opportunities and threats brings together the results of the analysis of the firm (internal) and the environmental analysis (external). The aim of the SWOT analysis is to achieve the optimum match of a firm’s resources with the environment in order to gain sustainable competitive advantage by:
- Building on a firm’s strengths
- Reducing weaknesses or adopting a strategy that avoids weaknesses
- Exploiting opportunities, particularly using the firm’s strengths
- Reducing exposure to, or countering, threats
The SWOT analysis is a snapshot of a business’s position and provides an input into the development of strategic options. It gives management an outline of the major issues affecting the industry and the business and identifies the basis for developing strategies. It makes managers aware of the challenges that face the business.
Stakeholders are all those people who affect, or can be affected by, the business. The stakeholder analysis needs to identify the primary, and possibly conflicting, expectations of all the different stakeholders of a business, as well as their power and influence on the operation of the business. Then, an order of priority amongst these stakeholders needs to be established so that any conflicts can be resolved through negotiation. Consider all the possible stakeholders of a pharmacy:
- Staff and their families
- Customers and their families or carers
- Professional bodies
- Government – Medicare, Australian Community Pharmacy Authority
- The community in which your pharmacy is situated etc
Draw up a timeline (a simple GANTT chart or timeline in EXCEL will be fine).
Check out the link below if you don’t know what a GANTT chart is.
There are free GANTT chart templates available on the web that are easy to use.
The marketing section is one of the most important sections of a business plan because it communicates clearly to the reader the nature of the intended business (or in this case, the nature of the intended professional service/s you wish to implement in your pharmacy) and how the owner intends to make it successful. Specifically, the purpose of the marketing section is to explain how a prospective business intends to manipulate and react to the market conditions in order to generate sales. Therefore for this business plan, this section will demonstrate to the reader how your pharmacy, with the implementation of this new service, will manipulate and react to the market conditions in order to generate sales. To develop a marketing strategy the market and potential customers must be analysed (marketing has a product/service focus). The market analysis and strategy are an important part of the marketing plan within the business plan.
History has shown that the marketing strategy is critical to a business’s success. Many companies with a desirable product have failed because of their marketing strategy, or lack of one, and/or their implementation strategy. Therefore, reviewers pay a great deal of attention to this section when evaluating a business plan. Many venture capitalists feel that some of the most important criteria for predicting the success of a new company are those factors that establish the demand for the product and service. With new technologies and social networking available to you, and your knowledge of how your generation obtains and passes on information, try and think of some innovative ways to market the new professional service and your pharmacy as a whole. If a real market need is not presented, all of the talent and financing in the world will not make a business successful in that industry.
Marketing strategy involves:
- identifying target markets
- tailoring marketing mixes that meet the needs and wants of each specific target market
- developing marketing mixes that reinforce the product’s desired positioning strategy in
This section must be written in a manner that is meaningful to a wide variety of people, from management teams to board members and from venture capitalists to bankers.
The marketing concept:-
The focus of understanding markets is the understanding of customers and buyer behaviour. To gain this understanding the following questions need to be asked:
- What market need does the business address?
- What products or services serve that need?
- Who buys the products/services?
- Why do customers buy?
- Who makes the buying decision?
- Where do customers buy?
Writing the Marketing Plan
The marketing plan should be both interesting and thought provoking. Therefore, try to be innovative and imaginative. The marketing plan cannot simply explain a concept; it must sell a prospective business idea as an attractive investment opportunity, a good credit risk – one that will make the reader quite comfortable about lending the pharmacy owners the money to implement the new professional service. Most importantly, the marketing plan must demonstrate a good ‘fit’ between the pharmacy’s demographic and the new business service.
This section of the marketing plan must establish a demand for the product or service described earlier, and should define both its market and the opportunity this market represents. In this section I would expect to see a summary of your market research. Market research is obtained from such sources as:
- The Intergenerational Report 2015 (Australian Treasury website)
- Australian Bureau of Statistics website (Census data)
- Websites documenting information on equipment for the professional service, including brochures e.g. for glucometers or even information on the benefits of the professional service on patient care
Your full market research should be included in an appendix at the end of the plan with just a brief summary of pertinent information in the actual marketing plan itself. Really useful information that the reader needs should be put into graphs such as pie graphs e.g. age distribution, income distribution, health status, education or work/job breakdown for the suburb.
Specifically, this section should define the target market for the pharmacy, and target market segments (i.e. those specific customers that the new professional service is being aimed at, the importance and nature of these segments and the sustainability of these market segments).
This describes the pharmacy’s customer profile and their pharmacy needs. This needs to be tied back to your service and the relevance to the demographic of the suburb in which your pharmacy is located. Remember, your pharmacy may not be tapping into the full potential of your suburb’s demographic because your pharmacy is not offering the right mix of products and services. Also, customers do not necessarily need to live in the suburb to visit the pharmacy e.g. inner city pharmacies that attract city workers and Day and Night pharmacies on main roads. With this new service you are aiming to attract more/new customers to your pharmacy.
Product positioning strategy seeks to present products (in this case, the professional service you are introducing) to customers in a way that gives products a certain image compared to competitive products. Consider for example, Gargoyles Performance Eyewear, which makes numerous high-end sunglasses (expensive). The sunglasses are aimed at skiers, bikers, water-sports enthusiasts, basketball players and others sports enthusiasts. The large range of target customers and the relatively high retail prices of these sunglasses reflect a product-positioning strategy aimed at transforming sunglasses from a utilitarian product to an important fashion item associated with sports-oriented, upmarket glamorous lifestyles. Retailers play a crucial role in establishing the positioning strategy of these products. To position sunglasses as such an exciting and glamorous product with the high prices to match, retailers must create the kind of atmosphere that supports the image. You need to consider these things when thinking about the professional service you wish to offer – customer demographic, type of atmosphere in pharmacy, fitout, furnishings, lighting (i.e. the servicescape) etc.
The value proposition is the bundle of benefits the product provides to fulfil customer needs and wants. E.g. the value proposition of a bottle of Coca-Cola may include the refreshing taste of the beverage itself, the product’s temperature, the convenience of purchase locations, product price and the carefully constructed brand identity associated with the Coca-Cola name.
The marketing mix comprises four key areas of decision-making – product, place (distribution), promotion and price – also known as the four Ps. Key to developing the appropriate marketing mix is the positioning strategy selected for the product/service. The Marketing Mix (4Ps) reinforces the positioning strategy that you have selected for your particular service. The marketing mix is a tool to position products or services in the target market. All elements of the marketing mix together constitute the “offer” to the consumer. Consider the following:
- List price
- Credit terms
- Repeat purchase
- Payment method
- Direct marketing
- Sales promotion
- Joint promotion
- Loyalty programmes
- Public relations
- Opening times
In this section you are required to outline strategies for retaining customers and developing customer loyalty. The service and support of a pharmacy’s services are often critical to a business’ success. An example is the weight loss market and the smoking cessation market – after the initial sale of the shakes/patches we need to follow up with our customers giving them encouragement or perhaps changing their regime to more specifically tailor the regime to their specific needs. Also, identify if there were any problems with the products purchased and if so, dealing with these in a timely and professional manner. The pharmacy needs to have documented standard operating procedures to cover these. Follow up service and support can become an income-earning stream in itself.
This section is different to the competitor analysis in the strategic analysis. In the marketing plan we are looking at competitors from a marketing perspective. We examine our competitors’ current positioning strategies and determine how these will affect ours. What are their promotional and pricing strategies? Are they positioning themselves as cost leaders or differentiators? Are they part of a banner group? Do they effectively use branding?
Market demand is a crucial variable upon which an investment decision rests. If it cannot be demonstrated that sufficient demand exists, then it is pointless continuing with that business idea. Therefore, market forecasting should always be carried out early in the business planning process. This section is NOT the same as the sales forecast – it is forecasting demand for your service.
In this section the following ratios need to be calculated for:
- current financial year – before implementation of service – (1/7/2016 – 30/6/2017)
- Previous financial year 1/7/2015 – 30/6/2016
Then, a comparison should be made to industry benchmarks and trends in the pharmacy’s figures calculated over however many years are available to you.
[These benchmarks will be provided for you.]
Benchmarking is useful both for business planning and to develop strategic objectives:
- Bankers and other financial investors will evaluate a firm’s business plan against known numbers from the firm’s competitors
- Competitor benchmarks can provide inputs for your business plan if you are unsure of what values to use
- Benchmarks identify a best of class competitor and provide you with a target for improvement e.g. if a competitor achieves higher annual sales per retail outlet this higher number can become an objective in your firm’s strategic business plan.
We use three types of benchmarks:
- Industry benchmarks: in the real world, community pharmacy owners who are members of the Pharmacy Guild of Australia are supplied each year with the Guild Digest which contains industry benchmarks state by state. For the purpose of this assignment these benchmarks have been given to you.
- Own business trends: if available, previous financial years’ financial ratios should be retained and compared to identify trends.
- Other industry benchmarks if available
- Ratios to assess Profitability
- Gross Profit Margin (expressed as a %)
- Net Profit Margin (expressed as a %)
- EBIT Margin %
- Expense Ratios (expressed as a %) e.g. wages, administrative expenses, advertising expenses (administrative expenses = total expenses)
- 2. Ratios to assess Performance
- Asset Turnover Ratio
- GMROII (Gross Margin Return on Inventory Investment) – pharmacy industry average ~ 300% (assume 30/6/2014 stocktake figure is the average inventory for the year)
- 3. Ratios to assess Operating Efficiency
- Stockturn (Inventory Turnover)
- Ratios to assess financial stability
(a) Short- term liquidity
- Current Asset Ratio
- Quick Asset Ratio
(b) Long-term solvency
- Debts to Assets Ratio
The best way to present this data is in a table and put the calculations themselves into the appendices.
In this section you need to provide an estimation of sales for the next financial year 1/7/2017 – 30/6/2018
– for the purposes of this assignment use a projected growth of 5%. You need to show that projected growth will cover the repayment of the loan. Refer back to financial management tutorial from CSB475.
Once you have made the sales forecast you can then calculate predicted financial ratios using these projected figures. (Calculate these once you have completed the projected Income Statement in Section 7.4)
The ratios you need to calculate here are:
- Projected Gross Profit Margin (expressed as a %)
- Projected Net Profit Margin (expressed as a %)
Then include a brief discussion (1-2 lines) on the changes from the ratios calculated in 7.1.
In calculating your ratios what assumptions have you made about the business environment?
This section requires three income statements -for the previous financial year and the current financial year.Set out as per financial management lectures and tutorials from last semester. Then you have to prepare a projected income statement after the implementation of your new service for the period 1/7/2017 – 30/6/2018.
Since the Balance sheet is a snapshot, only one is required – for the current financial year (as at 30/6/2017). Use the example provided to set out your statement correctly.
Only one required: produce a projected cash flow statement for the next financial year (1/7/2017 – 30/6/2018). Use the Excel template provided on blackboard to set out your statement correctly. Don’t forget to include loan repayments.
[Refer Financial Management lecture notes]
- Breakeven Sales
- Margin of Safety ratio
- Sales to Breakeven Point Ratio
for 1/7/2017 – 30/6/2018
In this section simply state what funds are required, when you need them and then in a table show how the total amount of funds will be spent. You need to also explain the terms of finance. This refers to the interest rate for the business loan that you have used for all your projected figures. You need to state what interest rate you used and how you derived this interest rate (e.g. you checked the interest rates on business loans at all the major banks and have based your interest rate on Bank XXX’s figures or an average of banks a,b,c rates etc).
The operational plan explains how the business will actually carry out its activities. It describes the allocation of resources and it uses inputs from the marketing plan to scale operations in order to deliver what is set out in the marketing plan and it includes information about all stages of primary value chain activities as well as support activities. It includes most operational and capital expenditure items and the quantification of physical items, such as office space, plant and machinery. The operational plan is the main cost driver.
One set of fundamental issues that a business plan must address in the operational plan is how the business will create its products and services. Questions that must be answered are:
- What resources will be required for the new service – human resources, equipment, medications?
- What processes in the pharmacy will be needed to operate the new service? (How will the new service fit into the current workflow processes of the pharmacy?)
- How will suppliers and vendors be used?
The operational plan explains how a business is structured, what resources are required and how these resources are employed to achieve the firm’s strategic objectives.
This requires simply a brief description of the location of the pharmacy and a tie-in to how the professional service will be delivered. This section also needs to cover leasing arrangements – is the lease long-term so there is no chance landlord will not reassign lease to business (thereby preventing the business paying back loan funds). Or, do the pharmacy owners own the actual building? If the pharmacy needs to expand due to increased growth, is there physical capacity in the leased premises for expansion?
This chart details the organisational structure which reflects the responsibilities of all staff and takes into account all the elements of the value (vertical) chain. It identifies the departments, lines of reporting (identifies the responsibilities, power and information flows i.e. outlines the corporate governance), span of control and staff numbers.
In order to prepare the organisational chart, the pharmacy owner must address several issues:
- Identification of both the company’s immediate needs and those needs that will become important as the business evolves
- Identification of the type of individuals required to address such responsibilities
- Attention must be given to interrelationships among staff and how tasks will be assigned to them
Care needs to be taken when developing the organisational chart so that there is consistency between this chart and the rest of the business plan (e.g. if your professional service needs two pharmacists your chart needs to reflect this). Strategies and methods mentioned elsewhere in the plan should be embodied in this chart. Mention needs to be made of how new activities will be organised and how the organisation will be developed in the future.
This section provides a description of the physical infrastructure of the firm. It comprises all major assets, new assets that have to be acquired, and their function and physical location. Such assets include office space, production facilities, IT and support systems, vehicles and any other facility used by the firm.
This section is about the people stuff. It involves having the right team to deliver the professional service effectively, but also the right team to create a pharmacy environment that customers are going to want to keep coming back to. Not only does the leader (pharmacy owner) need to be a visionary but the team behind him/her needs to be able to share the vision and execute it. Vision without a team to back you up and make it happen is a failure waiting to happen. The entrepreneur is usually the catalyst who brings it all together, and equally importantly recognizes the need for good people, properly screened and trained and with incentives for the future.
This section describes all aspects of Human Resource Management including:
- List of staff – names, qualifications, experience and expertise
- Roster ensuring appropriate staffing to cover shifts, holidays and illness (one simple spreadsheet will suffice – do not spend a lot of time on this section)
- Span of control, i.e. how many managers per staff – what are lines of reporting
- Salary levels (not required for this assignment)
- Training needs analysis for current and future needs
- Recruitment – do new staff need to be recruited for the implementation of this new service?
This section briefly mentions how much cash is at bank, and the current business debt. You will need to liaise with the person writing the Financial Plan to complete this section.
These are the systems and processes in place that would be contained in the pharmacy’s Procedures Manual – covered under the Quality Care Pharmacy Program and in an electronic format if pharmacy uses eQCPP.
Examples of processes/procedures include:
- hiring of equipment
- what to do with owing scripts
- procedure for scripts which are waiting on stock to come in from supplier
- rosters and process for distributing to staff
- information transfer (not training)
In this section of the plan you need to demonstrate to the lender that the pharmacy is well managed with good processes in place. For this assignment you do not need to go into great detail and include a procedures manual or list procedures. Merely draw reader’s attention to their existence.
Can this service be replicated in another pharmacy if successful and profitable? In preparing an operational plan it is often important to consider the impact of growth on operations. Will the pharmacy need to increase in size in the near term? Will more equipment e.g. computers, software be required? And most importantly, will further rounds of funding be required as a result?
To answer this section you need to understand ‘quality’ and what a ‘quality’ process involves and this understanding needs to be conveyed to the reader of your business plan to demonstrate that you take quality seriously and that this section is more than just ‘window dressing’. Quality control is not just about how you store documents but is a mindset about how you run your business – as such I would expect your pharmacy to be accredited under the Guild’s Quality Care Pharmacy Program. You need to have an understanding of the program, why community pharmacies should be enrolled in the program, and what the standards cover. Briefly telling me your pharmacy is accredited will not be sufficient to pass this section. Quality also reflects the pharmacy’s commitment to sustainability.
This section explains where equipment/products/staff training will be obtained for any specific products that come with the professional service being implemented. The lender needs to know that these are readily available and that future business won’t be affected by customers’ inability to easily get replacement parts etc or pharmacy owners not able to continue to obtain equipment etc necessary for the delivery of the professional service.
Briefly discuss how your findings from the strategic analysis justify your choice of new business opportunity and then how your selected strategy ties in with your marketing plan to attract your potential target market for this new business opportunity. In this section you need to tie together the pharmacy’s demographic to professional service (new business opportunity/idea), potential target market, business strategy and marketing plan.
This section may contain graphs, tables, marketing research or other data to support your business case. Please ensure each appendix is labelled and the pages are numbered throughout the whole assignment.
This document sets out some basic information about the pharmacy that you own with your three business partners. For the implementation of the new service going forward you may extend the size of the pharmacy, get a new fitout, change the opening hours etc – it’s all up to you. These figures are your starting point as at 30/6/2017.
Pharmacy size: 210 m2
Mon – Fri: 8am – 7pm
Sat: 8am – 5pm
Average number of prescriptions dispensed weekly:
1/7/2015 – 30/6/2016: 1049
1/7/2016 – 30/6/2017: 1213
Total annual prescriptions dispensed:
1/7/2015 – 30/6/2016: 54,548
1/7/2016 – 30/6/2017: 63,076
As at 30/6/2017:
Cash at bank = $120,634
Delivery vehicle valued at $18,700
Fixtures and Fittings = $1,190,899
Accounts receivable = $7,952
Accounts payable = $163,457
Pharmacy loan = $1,086,325
Short-term deposit = $30,000
Long-term deposit = $100,000
Goodwill at cost = $1,200,000
|Expense||1/7/2015 – 30/6/2016||1/7/2016 – 30/6/2017|
|COGS||$ 2,362,950||$ 2,568,973|
|Salaries & Wages||$ 417,670||$ 435,426|
|Rent||$ 169,862||$ 176,793|
|Outgoings||$ 9,192||$ 9,467|
|Accounting Fees||$ 11,030||$ 15,307|
|Advertising||$ 45,591||$ 49,652|
|Bank Charges||$ 8,824||$ 8,419|
|Computer Expenses||$ 13,971||$ 10,332|
|Depreciation||$ 38,605||$ 39,032|
|Electricity, Water & other Utilities||$ 15,442||$ 15,905|
|Insurance||$ 11,030||$ 10,715|
|Interest Paid||$ 88,975||$ 92,223|
|Leasing Expenses||$ 6,986||$ 6,888|
|Motor Vehicle Expenses||$ 4,412||$ 4,592|
|Postage/Freight/Printing||$ 10,295||$ 9,949|
|Repairs & Maintenance||$ 5,147||$ 5,740|
|Subs & Registration||$ 9,927||$ 11,349|
|Superannuation (excluding proprietors)||$ 38,237||$ 40,180|
|Telephone||$ 6,618||$ 6,888|
|Training||$ 3,309||$ 1,913|
|Workers Compensation Insurance||$ 2,941||$ 3,444|
|Other Expenses||$ 95,226||$ 114,801|
|Proprietors’ Salaries||$ 100,000||$ 100,000|