A business plan must provide answers to following questions: What you intend to do/how you intend to do it/ when you intend to do it?How much do you want to borrow?When you will be able to repay the loan?Will you be able to pay the interest?Could your business survive a setback in its plans?What security is available for lending?Will you be able to sell your product?Is the business proposal commercially viable?Will the business be profitable?Can the business cope with the effects of inflation? BUSINESS PLAN

Summery of the Project/ Project at a Glance (The purpose of the business, legal form of the organization, the location, resource requirements, volume of business, a brief note on market, customers and about the promoter(s) and, financial highlights)WHAT DOES A BUSINESS PLAN INCLUDE? General Information (About the business and promoter's qualification, training and experience relevant to the project, form of business entity, location, management plan, etc.) Cont

Market Potential and Plan (A note on marketing strategy, potential customers, competition, market size and future prospects, pricing, advertising & promotion, etc.) WHAT DOES A BUSINESS PLAN INCLUDE? Contd. Details of the Proposed Project (Requirement of fixed capital and working capital, the cost of project and means of finance) Cont Manufacturing Process (Step-by-step description of the manufacturing process, plant capacity, expansion plans and quality control procedures etc.)

Production Programme/ Sales Revenue (Plant capacity, capacity utilization, quantity produced/sold, and sales realisation) WHAT DOES A BUSINESS PLAN INCLUDE? Contd. Cost of Manufacturing (Cost of raw materials, utilities, manpower, repairs and maintenance, selling and distribution expenses, administrative expenses, interest on loans availed, depreciation and any other expenses) Cont

Profitability Projections (Sales, cost of manufacturing, tax liabilities, repayments, retained profit/loss, break even point, Debt Service Coverage Ratio (DSCR), Internal Rate of Return (IRR) WHAT DOES A BUSINESS PLAN INCLUDE? Contd. Project Implementation & Other Information (Project implementation Schedule, Security offered, other details if any.)

LAND AND SITE DEVELOPMENT COST OF LAND LAND RELATED LEGAL CHARGES LEVELLING AND FILLING COSTS APPROACH/INTERNAL ROAD COSTS FENCING/COMPOUND WALL COSTS COST OF GATES PROJECT COST: AN ESTIMATE OF FUNDING REQUIREMENTS(PROJECT COST COMPONENTS) Cont

BUILDING AND CIVIL WORKS FACTORY BUILDING OFFICE GODOWN, ETC. WELL, TANK, SILOS, GARAGE AT PROJECT SITE SEWER AND DRAINAGE ARCHITECT FEE PROJECT COST COMPONENTS .ContdCont PLANT AND MACHINERY PRICE OF MACHINERY EXCISE-TAX, FRIEGT, PACKAGING, TRANSIST INSURANCE, OCTROI, ETC. STORES AND SPARES BOUGHT ALONG WITH THE MACHINERY FOUNDATION AND INSTALLATION COST

OTHER FIXED ASSETS FURNITURE OFFICE EQUIPMENTS MISCE. TOOLS & EQUIPMENTS VEHICLES EQUIPMENTS, CABLING FOR POWER DISTRIBUTION EQUIPMENT AND PIPING FOR WATER SUPPLY LABORATORY EQUIPMENTS WORKSHOP EQUIPMENTS FIREFIGHTING EQUIPMENTS EFFLUENT COLLECTION, TREATMENT AND DISPOSAL ARRANGEMENTS BOILER DIESEL GEN. SET OTHER ASSETS PROJECT COST COMPONENTS .ContdCont

TECHNICAL KNOWHOW LEGAL CHARGES FEASIBILITY REPORT CAPITAL RAISING SALARY AND ADMINISTRATIVE COST DURING IMPLEMENTATION PERIOD RENTS, TAXES, ETC. DURING IMPLEMENTATION PERIOD TARVEL COST DURING IMPLEMENTATION PERIOD INTEREST DURING IMPLEMENTATION PERIOD MORTGAGE EXPENSES IN RESPECT OF LOANS TRAIL PRODUCTIONPROJECT COST COMPONENTS .ContdCont PRELIMINARY AND PRI-OPERATIVE EXPENSES

WORKING CAPITAL MARGIN BIS, POLLUTION BOARD & EXPLOSIVE LICENCE, ETC. STATUTORY DEPOSITS PROCESSING FEES OF MFIs PROJECT COST COMPONENTS .Contd CONTINGENCY & ESCALATION (@ 10% OF I - IV)

IMPLEMENTATION SCHEDULE: AN ILLUSTRATION (Months)

PROJECT APPRAISAL IT IS AN ASSESSMENT OF A PROJECT IN TERMS OF ITS VIABILITY AND FEASIBILITY. IT IS AN ANALYSIS OF COST AND BENEFIT OF A PROJECT OVER THE PROJECT LIFE. ECONOMIC APPRAISALFINANCIAL APPRAISALTECHNICAL APPRAISALMARKET APPRAISALMANAGERIAL APPRAISALENVIRONMENTAL APPRAISAL

PROJECT APPRAISAL ECONOMIC APPRAISAL PAYBACK PERIODAVERAGE RATE OF RETURN ON INVESTMENTNET PRESENT VALUEINTERNAL RATE OF RETURNBENEFIT-COST RATIOLEVEL OF CAPACITY UTILISATION OR BREAKEVEN ANALYSIS

PROJECT APPRAISAL FINANCIAL APPRAISAL REQUIRED FINANCIAL RESOURCESFIXED ASSETSCURRENT ASSETSNECESSARY WORKING CAPITAL AVAILABILITY OF FINANCIAL RESOURCES

REQUIRED BORROWINGPOTENTIAL SOURCES OF FUNDSCOST OF BORROWINGREPAYMENT CONDITIONSOPERATION COST ANALYSISFIXED COSTSVARIABLE COSTSPROJECT CASH FLOWPROJECT PROFITABILITY

PROJECT APPRAISAL TECHNICAL APPRAISAL CRUCIAL TECHNICAL SPECIFICATIONS DESIGNDURABILITYRELIABILITYPRODUCT SAFETYSTANDARDIZATION ENGINEERING REQUIREMENTS MACHINESTOOLSTECHNOLOGYWORK FLOW Cont

PROJECT APPRAISAL TECHNICAL APPRAISAL Contd.PRODUCT DEVELOPMENT BLUEPRINTSMODELSPROTOTYPES PLANT LOCATION LAND AND SITE AVAILABILITYPROXIMITY TO MARKETPROXIMITY TO SOURCE OF RAW MATERIALAVAILABILITY OF SUPPORT SERVICESSCOPE FOR EXPANSIONGOVERNMENT RESTRICTIONS/INCENTIVESINFRASTRUCTUREACCESSIBILITYAVAILABILITY OF WORKFORCE

PROJECT APPRAISAL MARKET APPRAISAL MARKET POTENTIALUNDERSTANDING OF CUSTOMERSDIFFERENTIATIONMARKET SEGMENTATIONPOTENTIAL DEMANDDEMAND-SUPPLY GAPMARKET TEST REPORTSALES PRICE PROJECTIONSPROPOSED CHANNELS OF DISTRIBUTIONPRODUCT PROMOTION STRATEGYPRODUCT LIFECYCLE ANALYSISCOMPETITION AND COMPETITORS ANALYSIS

PROJECT APPRAISAL MANAGERIAL APPRAISAL PERSONAL BACKGROUND OF THE PROMOTERSTHEIR EXPERIENCE, SKILL AND KNOWLEDGE BASEFINANCIAL LEVERAGE WITH THEMCREDITWORTHINESS OF THE PROMOTERSORGANISATIONAL SETUP AND RESPONSIBILITIES AT VARIOUS LEVELSAVAILABILITY OF MANAGERIAL RESOURCES ENVIRONMENTAL APPRAISAL ENVIRONMENTAL RISKPOLLUTION CONTROL PLANCOMPLIANCE WITH GOVERNMENT REGULATIONS

MAJOR FINANCIAL RATIOS USED IN PROJECT APPRAISAL DEBT- EQUITY RATIO (1:3) = TOTAL DEBTS / [OWNERS CAPITAL + SUBSIDY]*100=TOTAL DEBTS/EQUITY + RESERVES (IN THE CASE OF A LTD. CO.) CURRENT RATIO (2 BUT NOT > 1.33)= CURRENT ASSETS / CURRENT LIABILITIES DEBT SERVICE COVERAGE RATIO (2 OR MORE BUT NOT > 1.5) = [NET PROFIT AFTER TAX + DEPRECIATION + INTEREST ON TERM BORROWINGS] / ANNUAL REPAYMENT + INTEREST ON BORROWINGS] Cont

MAJOR FINANCIAL RATIOS USED IN PROJECT APPRAISAL ContdRETURNS ON INVESTMENT (HIGHER THAN THE HIGHEST RATE OF INTEREST)

= NET PROFIT BEFORE INTEREST AND TAX / INVESTMENT RETURN ON EQUITY (HIGHER THAN THE OTHER INVESTMENTS) = NET PROFIT AFTER TAX / OWNERS CAPITAL NET PROFITABILITY RATIO ( > OR = TO INDUSTRY AVERAGE) = NET PROFIT / SALES*100 OPERATING RATIO = COST OF GOODS SOLD + OPERATING EXPENSES / NET SALES * 100

MISTAKES ENTREPRENEURS COMMIT WHILE LAUNCHING OF A VENTURE

I.LACK OF A THOROUGH STUDY OF MARKET POTENTIAL FOR PRODUCT AND VENTURE UNIQUENESS II. LACK OF ALL ROUND MANAGERIAL ABILITY AND OBJECTIVE EVALUATION OF BUSINESSCONTDIII. WASTEFUL AND INAPPROPRIATE INVESTMENTS

IV. CAPACITY UTILISATION ESTIMATES: GROSSLY UNREALISTIC V. INADEQUATE UNDERSTANDING OF TECHNICAL REQUIREMENTSVI.INAPPROPRIATE MARKETING/ DISTRIBUTION STRATEGY, OVER-RELIANCE ON ONE CUSTOMER, LOW SALES AND WRONG PROMOTIONAL STRATEGY VII.INADEQUATE ARRANGEMENTS FOR KEEPING ACCOUNTSCONTD

VIII.WRONG ESTIMATION OF CAPITAL REQUIRED LEADING TO OVER OR UNDERCAPITALISATIONIX.CASH FLOW PROBLEMS AND INADEQUATE WORKING CAPITALX.NEPOTISM IN RECRUITMENT AND INCOMPETENT ADVISORS AND POOR HRD AND IRsXI.INAPPROPRIATE PRICING STRUCTURE XII.IGNORANCE OF LEGAL ISSUES AND TAXATION XIII.SELECTING A WRONG LOCATION

1.0 GENERAL Name of the Firm: ____________________________________Project:_______________________________________Location:______________________________________Type of Organisation: Proprietary/Partnership/Pvt. Ltd.Address: ___________________________________________Name of the Chief Promoter(s): ______________________________________BACKGROUND OF THE CHIEF PROMOTERSBUSINESS PLAN FORMAT Cont

2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing 2.1 LAND AND BUILDING BUSINESS PLAN FORMATCont2.2 MACHINERIES/EQUIPMENTS

2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing 2.3 MISC. FIXED ASSETS BUSINESS PLAN FORMATCont2.4 PRELIMINARY AND PRE-OPERATIVE EXPENSES

2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing 2.5 WORKING CAPITAL BUSINESS PLAN FORMATCont

2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing 2.6 TOTAL COST OF THE PROJECT BUSINESS PLAN FORMATCont

2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing 2.7 MEANS OF FINANCE BUSINESS PLAN FORMATCont

3.0 MARKET POTENTIAL 3.1 Present Demand and Supply of the Product3.2 Competition3.3 Target Clients/selected Market Area3.4 Marketing Strategy (USP) BUSINESS PLAN FORMATCont4.0 MANUFACTURING PROCESS 4.1 Technical Know-how Availability 4.2 Step-by-Step Description of the Manufacturing Process from Raw Material to Finished Goods [Attach Process Flow Chart]

5.0 PRODUCTION SCHEDULE 5.1 No. of Working Days Per Annum -5.2 No. of Working Shifts (8hrs) per Day-5.3 Installed Capacity (annual)-5.4 Utilized Capacity (%):-I-Year-II-Year-III-Year-BUSINESS PLAN FORMATCont

5.0 PRODUCTION SCHEDULE Contd5.5 SALES REVENUE BUSINESS PLAN FORMATCont5.6 RAW MATERIAL (ANNUAL REQUIREMENT)

5.0 PRODUCTION SCHEDULE Contd5.7 UTILITIESBUSINESS PLAN FORMATCont5.8 REPAIRS AND MAINTENANCE

5.0 PRODUCTION SCHEDULE Contd5.8 MAN POWER (Salaries/Wages) BUSINESS PLAN FORMATCont

5.0 PRODUCTION SCHEDULE Contd5.9 SELLING AND DISTRIBUTION EXPENSES BUSINESS PLAN FORMATCont5.10 ADMINISTRATIVE EXPENSES

5.0 PRODUCTION SCHEDULE Contd5.11 INTEREST BUSINESS PLAN FORMAT5.12 DEPRECIATION

6.0 PROFITABILITY PROJECTIONS BUSINESS PLAN FORMAT

DEPRECIATION RATES AssetsWDVSL RatesRates

Buildings which are not for10%2.3%Residential purposesPlant & Machinery (Other than33.33% 8.33%Under item 3 & 4)Aero planes, vehicles used for50%19%Hire-business, moulds andEquipments for air/waterPollution control and solid waste control BUSINESS PLAN FORMAT

DEPRECIATION RATES ContdBUSINESS PLAN FORMATAssetsWDVSL RatesRates

Wooden parts in artificial silk100%100%Manufacturing machinery, Cinematograph films, bulbsOf studio lights, energy savingDevices (specialized boilers &Furnaces), instrumentation & Monitoring energy flows, wasteHeat recovery equipments, co-Generation systems, electricalEquipments, burners, flour mills,Gas cylinders, glass melting furnaces,Rolling-mill rolls, wooden match Frames, mineral oil production & Generation equipment, mine & quarry equipments, salt work, renewed energydevices.Furniture and fittings used10%2.3%

SUPPLEMENTARY INFORMATION BUSINESS PLAN FORMATThe plot size is (40X20) 800 sq. meters Commercial banks provide loans up to a limit of 70% in the case of raw materials, stores, consumables and packaging materials.All the income-expenditure and related statements are to be worked out for 8 years.TAX COMPUTATION: SALIENT POINTS: You can carry forward losses to the next year for offsetting them against profits in the following year.There are tax incentives for setting up a new enterprise in backward areas. There are two major deductions allowed:i. Under Section 80 HHA of IT Act: 20% remission for all new enterprises set up in central government recognized industrially backward districts.

ii.Under Section 80 I: 20% remission for all new enterprises for a period of 10 years. For example, if PBT is RS. 100/-, an amount of Rs. 20/- will be tax deductible and the taxable profit will be only Rs. 80/-.

COMMON ERRORS IN BUSINESS PLAN FORMULATION Capacity Utilisation Estimates: Grossly UnrealisticCapacity Computation: A MiscalculationMarket Survey: A Neglected TaskMachinery Selection: Serious ErrorTechnology-Oriented Products: A Shaky ArrangementProject-Pruning and Resource-Straining: Exceeding the Safe LimitsAccommodating in SSI LimitsProject Cost: An Under EstimationSelecting the Location: Dangerous TemptationsSelling Price: Unfounded OptimismCash Flow in Initial Years: A Poor Detail