The Business Plan

What is a business plan?

● It is a document that describes the various external and internal elements

involved in starting a business or in expanding an existing venture.

● It integrates the different functional plans such as marketing, manufacturing,

finance and human resource management and the overall strategy of the
business.
Why write a business plan? Who reads it?

Business plans are important because:

1. It helps to determine whether a proposed or the existing business venture is

viable given its target market.
2. It guides the entrepreneur in mobilizing the resources needed by the business.
3. It serves as a tool in helping get financing for the business.
Value of the Business Plans to Selected Users
User of the Business Plan Why Business plan is important to this user?

Entrepreneur ● Serves as the roadmap for managing the business

● Identifies the resources needed to operate and grow the
business
● Allows the entrepreneur to anticipate potential business
risks

Lender ● Allows the lender to assess whether the entrepreneur

will be able to meet debt and interest payments.
● Provides information about collateral or tangible assets
that can be secured for the loan.

Investor ● Allows the investor to gauge whether projected returns

are acceptable
● Provides information about the character of the
entrepreneur and the capability of the venture’s
management team.
What information is needed for the major sections of the business plan?
Market Information Needs Operations Information Financial Information Needs
Needs

● General ● Location ● Rental rates

environmental trends ● Manufacturing or ● Cost of equipment
● Specific industry service operations ● Cost of utilities (e.g
trends ● Equipment and/or water, electricity)
● Local market condition furniture required ● Personnel costs
● Market potential ● Space requirements ● Distribution costs
(market size, ● Labor requirements ● Cost of insurance
untapped or ● Raw materials needed ● Registration and
underserved market) and potential suppliers license fees
● Demographic profile ● Utilities (e.g. water
of target market and energy
requirements)
Major Sections of a Business Plan
MAJOR SECTIONS TYPICAL CONTENT

Introductory page ● Business name and address

● Names and addresses of the business
owners/entrepreneurs
● Nature of the business
● Statement of financing needed
● Statement of confidentiality of the report (optional)

Executive summary ● Highlights of the business plan summarized in two or three

pages

Environmental and ● Conditions of the general environment

industry analysis ● Conditions of the specific environment
Major Sections of a Business Plan
Description of the business ● Product and/or services
● Size of the business
● Mission statement and core values
● Location of the business and its major physical assets
● Background of the business owners/entrepreneurs

Production plan ● Manufacturing process

● Physical plant
● Machinery and equipment
● Suppliers of raw materials
● Future capital equipment needs

Operations plan ● Description of the company’s operation

● Flow of orders for goods and services
Major Sections of a Business Plan
Marketing plan ● Pricing
● Distribution
● Promotion
● Sales forecast

Organizational plan ● Form of ownership

● Principal shareholders or partners
● Organizational chart/lines of authority
● Background of the management team
● Roles and responsibilities of management

Financial plan ● Assumption

● Pro forma balance sheet
● Pro forma income statement
● Cash flow projections
● Sources and uses of funds
● Breakeven analysis
Major Sections of a Business Plan
Assessment of risk ● Potential risks- internal or external
● Strategies for preventing or minimizing risks
● Response to risks should they occur

Timetable/ milestones ● Formal registration of the business

● Completion of product or service design
● Completion of prototypes
● Hiring of initial personnel
● Reaching agreements with suppliers and distributors
● Actual production
● Initial orders, sales and deliveries

Appendices ● Market research data

● Detailed financial projections
● Curriculum vitae of the management team
● Price lists from suppliers
● Profile of competitors
Introductory Page

It must contain the following:

1. Name and address of the company.

2. Name of the entrepreneur and his contact information
3. A brief description of the company and the nature of the business
4. The amount of financing needed.
Executive Summary

Key questions that the business plan must answer the following:

● What is the basic ideas for the new product of service? What makes it unique?
● How will the idea for this proposed venture be realized?
● Is the potential market big enough to make the business viable?
● How much revenue and income is the business expected to generate?
● Who are the people behind the business? Do they have the knowledge, skills,
and the experience required to develop the product or service idea and to run
the proposed venture?
Environmental And Industry Analysis

These environmental factors include the following:

● Sociocultural conditions- includes a description of shifts in the characteristics
of the population, including the rise of the Filipino middle class, lifestyle
trends etc.
● Technological Conditions- includes an assessment of the major
developments in science and technology that might have either a beneficial or
detrimental impact on the business or the entire industry.
● Economic conditions- growth of national and local economies measured by
Gross Domestic Product, inflations rates, foreign exchange rates, employment
trends.
● Politico- legal conditions- take into account of existing laws and regulations,
as well as future legislation that could directly affect the business.
● Supply and Demand- know whether his proposed business venture belongs to
industry that is rapidly growing, steadily growing, plateauing, or rapidly
declining.
● Competition- it is essential to “know the enemy” (the products and services
they offer, their major customers, their strength and weakness.)
Description of the Business

● Included in this section is the venture’s mission statement, which could serve
as a guide in decision-making.
● Other information that can be included are information about the product or
service, location of the business, its major physical assets, and some
background information about the business owner and its management team.
Production Plan

● If the new venture is a manufacturing concern, the entrepreneur must prepare

a production plan that describes the complete manufacturing process.
● The entrepreneur must include the following in production plan: a description
of the layout of the physical plant; the machinery and equipment needed to
perform the manufacturing operations.
Operations Plan

● It is included whether the business is manufacturing or service.

● For manufacturing business- describe the flow of goods and services
including purchases or raw materials, finished goods inventory control, and
distribution.
● For service business- describe the procedures in completing a business
transaction.
● Example for retail business- explain how it will purchase the various products
it will offer, how it will manage its inventory, and how it will keep track of
sales.
Marketing Plan

● Describes the target market.

● Describe how the product or service will be priced, promoted, and distributed
to its target market.
● Forecasted sales must be included in this section to provide an indication of
viability of the business.
Organizational Plan

● It is not enough for this section to provide a documentation of the venture’s

form of ownership, nor it is sufficient to have a nice organizational chart
(indicates the positions and job descriptions of the venture’s management
team.)
● Potential investors must be convinced that the individuals who will run the
business have the competence, character, experience, expertise needed to
ensure a successful business outcome.
Financial Plan

● This section determines the investment that must be poured into the
business, and indicates whether the business is an economically viable
undertaking.
Assessment of Risk

● Price cutting by competitors

● Operating costs that exceed initial estimates
● Failure to achieve sales forecasts
● Sudden unavailability or a steep increase in the price of raw materials
● Difficulties in raising capital
● Advances in technology that might render the new product obsolete
● Unforeseen environmental condition

Once the risks are identified, there must be a discussion on what strategies will be
employed to prevent and minimize risk.
Timetable /Milestones

Key milestones are the following:

● Formal registration of the business

● Completion of product or service design
● Completion of prototypes
● Hiring of initial personnel
● Agreements with suppliers and distributors
● Actual production
● Receipts of initial production
● Initial sales and deliveries
Appendices

● To ensure that the main body of the business plan is concise enough to
include only the most essential information, several items could instead be
appended to the document.
● Includes market research data, detailed financial projections, the full resumes
of the business founders and members, even the profile of the competitors.
Why do some business plans fail?

● Document is sloppy
● Executive summary is not coherent and is too long
● Unclear on why people would want to buy the product or service.
● Unclear on whether the product can be readily produced.
● Sales and financial projections are unreasonably optimistic.
● Inadequate description of the qualifications and experience of the
management team.
● Inadequate assessment of the potential threats to the business.
How to present a business plan?

● Tell a compelling story.

● Exhibit confidence and professionalism.
● Cover the basics.
● Adopt a cooperative attitude when answering questions.