The Business Plan

What is a Business Plan?

A business plan is a written document prepared by an entrepreneur describes all the relevant internal and external elements involved in starting a new venture.

Generally, Its is an integration of functional plans such as marketing, finance, manufacturing and human resource.

It is a ROAD MAP for a business.

Who should write the Plan?

The business plan should ne prepared by Entrepreneur himself. However, he/ she can consult with other experts of related fields e.g. Lawyers, Accountants, Marketing Consultants or Engineers etc.

Entrepreneur can also acquire necessary information from internet.

Internet also provide sample templates or outline for Plan write-up.

Who should write the Plan?In some cases Entrepreneurs hire consultants for the provision of appropriate expertise.

To determine whether or not to hire an external for Plan write-up, entrepreneur needs to make an objective assessment of his/ her own skills.

Skill Assessment

Skills Excellent

Good Fair Poor

Accounting/Tax

Planning

Forecasting

Marketing research

Sales

People management

Product Design

Legal issues

Organizing

Who reads the Plan?

A business plan may be read by;EmployeesInvestorsBankersVenture capitalistsSuppliersCustomersAdvisorsConsultants

Each of the above mentioned group reads the plan for a different purpose, so the entrepreneur must be prepared to address all their issues and concerns.

I n some ways, the business plan must try to satisfy the need of everyone, whereas in the actual market place the entrepreneur’s product will be trying to meet the needs of selected groups of customers.

Who reads the Plan?

3 Perspectives of Business Plan1. Perspective of EntrepreneurOwner of the venture, who can clearly

articulate what the venture is all about.

2. Perspective of the MarketEntrepreneur along with explain his product

must consider the market perspective. He should see and explain his product from customers eye.

3. Perspective of InvestorsThe business should show high potential for

outsiders for financial projection.

Information Needs

Before committing time and energy to preparing a business

plan, the entrepreneur should do a quick feasibility study of the

business concept to see whether there are any possible barriers to

success.

Market Information

Market Positioning

Market Objectives

Operation Information NeedsThe relevance of a feasibility study of the

manufacturing operations depends on the nature of the business; the entrepreneur may need information on the followingLocation– Accessibility to customers, suppliers & distributers

Manufacturing Operations– Machine & Assembly OperationsRaw Materials– Acquisitions

Equipment– Needed equipments, purchased or leased

Labor Skills– All unique skills needed, staff needed, pay rateSpace– Total space needed, owned or leased

Overhead– Items needed to support manufacturing, tools, supplies, utilities etc

Outline of a Business PlanI. Introductory PageII. Executive Summary III. Industry AnalysisIV. Description of VentureV. Production PlanVI. Operational PlanVII.Marketing PlanVIII.Organizational PlanIX. Assessment of RiskX. Financial PlanXI. Appendix

I- Introductory Page

a. Name and address of the businessb. Name(s) and address(es) of principalc. Nature of Businessd. Statement of Financing needede. Statement of confidentiality of report

This page sets out the basic concept that the entrepreneur is attempting to develop. Its give a glimpse of what the document is all about before one has started reading it formally.

II- Executive SummaryThis section should address a number of

issues like What is the business concept or model? How is this business concept or model unique? Who are the individuals starting this venture? How will they make money and how much?

(2-3 pages), This section of the plan is prepared after the total plan is written. Executive summary stimulates the interest of the reader (employee, supplier, distribute or investor) in the whole document.

III- Environment and Industry Analysis Future Outlook and trends Analysis of competitors Market Segmentation Industry and Market Forecast

Environment analysis— assessment of external uncontrollable variables that may impact the business plan.

Industry analysis— reviews industry trends and competitive strategies.

IV- Description of Venture Product(s) Service(s) Size of business Office Equipment and Personnel Background of Entrepreneur

This section should start with the mission statement of the venture. Gives in-depth information about size and scope of the business

V- Production Plan

Manufacturing Process (Amount subcontracted)

Physical Plant Machinery and Equipment Names of Suppliers of raw materials

The plan explains all the details regarding production e.g. if some or all of the processes are to be subcontracted, description of all subcontractor(s), including location, reasons for selection, cost, and any contracts that have been completed.

VI- Operational Plan Description of company’s operations Flow of orders for goods and/or services Technology utilization

This process goes beyond the manufacturing process and describes the flow of goods and services from production to customers.

It also includes inventory and storage of manufactured products, shipping, inventory control procedures and customer support service.

VII- Marketing Plan Pricing Distribution (Placement) Promotion Product forecast Controls

Describes market conditions and strategy related to how the product(s) and service(s) will be distributed, priced and promoted

VIII- Organizational Plan Form of ownership

Identification of partners or principal shareholders

Authority of principals Management-team background Roles and responsibilities of members of

organization

Describes forms of ownership (Sole proprietorship, partnership or corporation) and lines of authority and responsibilities of members of new venture.

IX- Assessment of Risk

Evaluate weakness(es) of business New technologies Contingency Plans

Assessment of risk identifies potential hazards and alternative strategies to meet business plan goals and objectives.

Potential Risks? – what if risk becomes reality? – alternative strategy?

X- Financial Plan Assumptions Pro forma income statement Cash flow projections Pro forma balance sheet Break-even analysis Sources and application of funds

Projections of key financial data that determine economic feasibility and necessary financial investment commitment.

XI- Appendix Letters Market research data Leases or contract Price lists from suppliers etc.

This section contains any backup material that is not necessary in the text of the document. Reference to any of the documents in the appendix should be made in the plan itself.

Using and Implementing the Plan

Measuring Plan Progress Inventory Control Production Control Quality Control Sales control Disbursement Control Website Control

Updating the Plan

Why Business Plans Fail? Goals set by entrepreneur are

unreasonable Goals are not measurable. The entrepreneur has not made a total

commitment to the business. The entrepreneur has no experience in the

planned business. The entrepreneur has no sense of potential

threats and weaknesses to the business. No customer need was established for the

proposed product or service.