2. LEARNING OUTCOMES :
To define what the business plan is, who prepares it, who reads it,
and how it is evaluated.
To understand the scope and value of the business plan to
investors, lenders, employees, suppliers, and customers
To identify information needs and sources for each critical section
of the business plan.
To enhance awareness of the ability of the internet as an
information resource and marketing tool.
To present examples and a step by step explanation of the business
plan.
To present helpful questions for the entrepreneur at each stage of
the planning process.
To understand how to monitor the business plan
3. DEFINITION:
It is a document prepared by and entrepreneur that describes,
The set of business goals,
reason for viability,
Functional plans for achieving the goals,
relevant external and internal elements involved.
It is an integration of functional plans and also contains background information
about the organization and team.
Business plan is not absolute but iterative.
4. SET OF BUSINESS GOALS;
It gives idea about,
Product being made
Target consumer
Market size
Production quantity and quality
REASONS FOR VIABILITY;
Why are these goals achievable
Potential customer
Availability of potential capital
Available suppliers
Market demand
5. FUNCTIONAL PLANS FOR ACHIEVING GOALS;
Road map, guidance or structure in each particular area of business
such as
Marketing
Financing etc
It is a constant monitoring process(requires review).
These plans will be discussed in the body later
It also addresses both short term and long term decision making at least for the first three
years of operation
6. EXTERNAL AND INTERNAL ELEMENTS;
Business plan is influenced by these factors
External elements include,
Legal issues and regulations
Marketing trends (bulls and bears)
Customer needs
Competition
Political/economical environment
Internal elements include,
Control over manufacturing
Control over marketing etc
Personal skills
7. WHO SHOULD WRITE PLAN
The business plan should be prepared by the entrepreneur.
The entrepreneur may consult with many other sources, such as
Lawyers
Accountants
Marketing consultants
Engineers
Mentors
These sources can be provided by the services of ;
Small Business Administration (SBA)
Service Core of Retired Executives (SCORE)
Small Business Development Centers (SBDC)
Other sources may be
Business partners
Internet
Friends and relatives
8. Entrepreneurial Assessment is Necessary!!
Tohelp determine whether to hire a consultant or to make use
of other resources,the en- trepreneur can make an objective
assessment of his or her own skills
9. SCOPE & VALUES OF BUSINESS
PLAN
Good business plan should satisfy
Possible readers and their requirements
(investors, employees, bankers, venture capitalists, suppliers, customers,
advisors, and consultants)
Perspectives to be considered
entrepreneurial perspective
Market perspective (should be customer driven)
Investors perspective (based on finance)
10. SCOPE & VALUES OF BUSINESS
PLAN contd;
The depth and detail in the business plan depend on the size and
scope of the proposed new venture.
Differences in the scope of the business plan may depend whether
the new venture
is a service,
involves manufacturing,
Overall future of business
Viability of venture in market
Guidance to managing and organizing functional plan
Powerful tool to obtain financing
Who is our customer and competitor etc
11. PREREQUISITES (INFORMATION AND DATA REQUIRED)
Steps followed,
Define goals and objectives
Business plan must reflect reasonable goals
Strategy of achieving the goals
Feasibility study
Quick feasibility study of the business concept to see whether there are any possible
barriers to success
Information should focus on:
Market
Operations
Financial aspects
13. MARKET INFORMATION;
For a defined market we gather information about,
Market potential
Size of market
Collect market data
(from market associations and sources)
Market competitors
14. Figure 7.1 - An Upside-Down Pyramid
Approach to Gathering Market Information
15. OPERATIONAL INFORMATION;
Depending on nature of business, the entrepreneur may need
information on the following
Location
Manufacturing operations
Raw materials
Equipment
Labor skills/expertise
Space (land building etc.)
Overhead
Research should be made by keeping targeted readers in mind.
17. FINANCIAL INFORMATION;
For gathering financial information the pre requisite is the budget of
enterprise.
Budget includes
List of expenditure
List of revenue and funds
Forecasted based on market data
Now the financial information required is
Available equity
Required balance
Sources
• Available sources
• Selection of best sources
Industry benchmarks can be used in preparing the final pro-forma
statements in the financial plan
18. INFORMATION SOURCES;
Different information resources include
Friends
Internet
An entrepreneur can access:
Popular search engines.
Competitors’ Web sites.
Social networks, blogs, and discussion groups.
In addition to websites, the entrepreneur can also investigate newsgroups to gather
information anonymously from experts and customers on competitors and market needs.
Relatives
Mentors
Professional support system
Customers and distributors etc
General observation
19. EVALUATION ;
Business plan should meet the needs of readers (evaluators)
Business plan should reflect,
Strength of management or personnel
Strength of product or service
Strength of available resources
Entrepreneur makes plan by keeping viewpoint of
Customer
Investor
Investors focus on
Payback time
Collateral equity
20. 4 C’S OF CREDIT
Lenders and investors usually focus on
Character of entrepreneur
Entrepreneur credit history(focused more by investor than lender)
Cash flow
Entrepreneur ability to meet debt and interest payment
Collateral
Security given to banks or lenders
Contribution of equity
Amount invested by investor, payback time etc
22. PRESENTATION
It is an oral presentation
Its purpose is to convey our idea to audience(investers) in limited time frame
Time frame is usually 20-30 minutes
The entrepreneurs are expected to “sell” their business concept in this short time period
Some investors describes these presentations as “elevator plans”
Typically the focus is on
why this is a good opportunity
an overview of the marketing program (addresses how the opportunity will convert to reality).
The results of this effort (sales and profits).
Concluding remarks might reflect the recognized risks and how the entrepreneur plans to
address them.
Example
Forums held by different institutions e.g. MIT
Benefits of these forums are
Financial rewards in case of wining
Identification of draw backs and customer needs
25. WRITING THE BUSINESS PLAN;
It is the much time consuming phase of new venture.(may take
hundreds of hours)
Time taken depends on experience & knowledge of
entrepreneur.
QUALITIES;
It should,
Be comprehensive
Fulfill aspects and purposes of business
Convey a complete picture fo business to targeted people
(investers,customers,employees)
26. BODY OF BUSINESS PLAN;
Body consists of following.
I. Introductory page
II. Executive summary
III. Environmental and industry analysis
IV. Description of venture
V. Production plan
VI. Operational plan
VII. Marketing plan
VIII. Organizational plan
IX. Assessment of risk
X. Financial plan
XI. appendix
27. INTORDUCTORY PAGE;
It is a title or cover page giving a brief summary.
CONTENTS;
Its contents are,
Name & address of company / business
Name & address of principles (entrepreneur/partners)
Nature of business(one short paragraph)
Statement of finance needed
Statement of confidentiality
It reflects nature of business and financial needs.
28. EXECUTIVE SUMMARY;
This section of business plan consist of 3-4 pages and is written at the end.
PURPOSE;
should stimulate the interest of potential reader( investors, customers etc.)
QUALITIES;
It should,
Be attractive enough to compel reader for further reading.
Highlight the key point in business.(entrepreneurial background)
Should contain supportive evidence (market suveys,contracts)
29. ENVIRONMENAL AND INDUSTRY ANALYSIS;
ENVIRONMENTAL ANALYSIS;
It is assessment of external uncontrollable variables that may
impact business plan.
Some variables are,
Economy (trends in GNP, income per capita)
Culture (nature of native population)
Technology (technology development, competitors, trends of
customer)
Legal concerns (product specs, distribution and promotion)
Though controllable but know how of these factors helps in making
a good business strategy.
30. Table 7.5 - Critical Issues for
Environmental and Industry Analysis
31. INDUSTRY ANALYSIS;
It should be conducted to find industry trends like,
o INDUSTRY DEMAND;
It shows
trends in market (bulls and bears)
No of competitors
Possible changes in customer needs
o COMPETITORS;
Mostly threat to an entrepreneur is from large
corporation. So necessary to identify
competitors(internet, customers, advertisements, journals)
Their weakness and strengths
32. DESCRIPTION OF VENTURE;
It provides a complete overview of products, services and operations
of new service.
It includes
Mission statement
It defines nature of business in one statement
Key factors to provide clear description (product,
services,location,size of business etc.)
Description of venture is function of nature of business.
Venture may be
Product manufacturing
Service providing
34. Production Plan
Manufacturing process (amount subcontracted)
Physical plant
Machinery and equipment
Names of suppliers of raw materials
MANUFACTURER
Nature of product ( what will be made)
Quantity of production
High production
Low production
Services to customers
(warranty, maintenance, parts supply)
35. PRODUCTION PLAN Contd.
SERVICE PROVIDER
Nature of service (Hospital, transport, courier service)
Location of offices etc.
Macro overview(Location and infrastructure in city)
Micro details
Parking, u turn
Office equipment and personnel
Manufacturing plants
Technology acquired
Introduction to business partner
Background
Legal issues
37. OPERATIONAL PLAN
It is one step beyond to manufacturing.
It describes the flow of goods or services
As the business may be
Product manufacturing
Service industry
Product MANUFACTURING
In this case points to be described are
Inventory/storage
Shipping
Inventory control procedure
Customer support service
38. SERVICE INDUSTRY
In this case the points to include in business plan are
Purchases of products
Shipment of products
Storage of products
Delivery to customer
Transaction mechanisms
Operational plan is greatly influenced by
location
Dealings of personnel's
39. MARKETING PLAN;
It describes market condition and strategy related to how the
products and services will be distributed, priced and
promoted.
PRICING;
It is influenced by
Culture
Per capita income
Distribution;
Distribution mechanism includes
Selection of different markets
Shipment methods/contracts
Feasible and customer attractive
40. Promotion;(way of product introduction)
Methods of promotion are
Electronic media
Print media
Sponsoring events etc.
PRODUCT FORECAST;
This section include
Sales of products
Product modification regarding market
Marketing plan should be reviewed accordingly with
time.
41. ORGANIZATIONAL PLAN;
It describes form of ownership and lines of authority and
responsibility of members of new venture.
New venture may be
Partnership
(includes terms of partnership)
Corporation
(includes name addresses, resumes of directors of
corporation)
A chart indicating the lines of authority and responsibility should be
provided
Organizational plans gives a clear view about
who will be controlling the organization
what would be responsibilities of members
42. ASSESMENT OF RISK
This section identifies the potential hazards and
alternatives strategies to meet the business plan
Risk should be assessed in the following way
Identify and indicate risk
Define their effect on venture
Strategies to minimize or overcome risk
These risk might rise due to
Competitors reaction
Weaknesses of management team
Advancement of technology in market etc.
43. FINANCIAL PLAN
This section includes projection of key financial data that determines the
economic feasibility and necessary financial investment commitment
It summarizes forecasted sales and expenses for at least first three years
(first year projection is provided monthly)
Forecasted product, administrative expenses and taxes are discussed
At last financial conditions are discussed
Assets of business
Investments of entrepreneurs and partners
Application of funds
Comulative profit or loss
Breakeven analysis
44. Appendix;
This section provides extra material to backup your
business plan
This includes
Letters from customers, distributors & subcontractors
etc.
Research data to support plan decisions
Leases, contracts and agreements etc
Price list from suppliers and competitors
45. Using and Implementing the
Business Plan
The business plan is designed to guide the entrepreneur through the
first year of operations.
The strategy should contain control points to ascertain progress and
to initiate contingency plans if necessary.
Without good planning employees will not understand the
company’s goals.
Businesses fail due to entrepreneur’s inability to plan effectively.
46. Using and Implementing the
Business Plan (cont.)
Measuring Plan Progress
Business plan projections are made on a 12-month schedule but the
entrepreneur should frequently check on:
Profit and loss statement.
Cash flow projections.
Inventory control.
Production control.
Quality control.
Sales control.
Disbursements.
Web site control.
47. Using and Implementing the
Business Plan (cont.)
Updating the Plan
Entrepreneurs must be sensitive to changes in the company, industry,
and market.
Determine what revisions are needed if changes are likely to affect the
business plan.
This helps entrepreneurs to:
Maintain reasonable targets and goals.
Keep the new venture on a course to high probability of success.
48. Why Some Business Plans Fail
Goals are unreasonable.
Objectives are not measurable.
Entrepreneur has not made a total commitment to the business or to
the family.
Lack of experience in the planned business.
No sense of potential threats or weaknesses to the business.
No customer need was established for the proposed product or
service.