ENTREPRENEURSHIP Teacher Zie

WHAT IS A BUSINESS PLAN FOR?

To guide entrepreneurs throughout the process in entering a business endeavor.
To guide the entrepreneur on which strategies would be most beneficial for the
enterprise to take.
A business plan has many masters: First, it serves the entrepreneur who must set a
navigational course. Second, it serves investors and cautious financiers. Third, it serves
the managers and staff of the organization so that they will know the strategies and
programs of the enterprise.
THE PURPOSE OF A BUSINESS PLAN
For the entrepreneurs starting a new venture, a business plan has three basic objectives.
1. To identify the nature and the context of the business opportunity that is, why does such an
opportunity exist?
2. To outline the approach, the entrepreneur plans to use to exploit the opportunity
3. To recognize factors that will determine whether the venture will be successful.

The business plan also goes by other names, depending on its intended audience. Presented to
a banker, it may be called a “loan proposal”. A venture capital group might call it the “venture
plan” or “investment prospectus”. Other audiences might be potential partners or top
managers, suppliers and distributors, lawyers, accountants, and consultants.
THE CONTENT AND FORMAT OF A BUSINESS PLAN
KEY FACTORS FOR SUCCESS
1. the opportunity should reflect the potential and the attractiveness of the market and industry.
2. Critical resources include not just money, but also human assets(suppliers, accountants, lawyers,
investors, etc.) ad hard assets (accounts receivable, inventories, etc.). An entrepreneur should think
of ways to minimize the resources necessary for startup.
3. The entrepreneurial team must possess integrity and breadth and depth of experience
4. The financing structure how a firm is financed(debt versus equity) and how the ownership
percentage is shared by the founders and investors will have a significant impact on an
entrepreneur’s incentive to work hard. The goal is to find a win-win deal.

The context or external factors of an opportunity includes the regulatory environment, interest
rates, demographic trends, inflation and other factors that inevitably change but cannot be
controlled by the entrepreneur.
 BUSINESS PLAN FORMAT
I. Introduction
II. Executive Summary
III. The Business Proponents: Organizers with their Capabilities and Contributions
IV. The Target Customers and the Main Value Proposition to the Customer
V. The Market, Market Justification based on the Industry Dynamics and the Macro Environmental Factors Affecting the
Opportunities and Threats in the Market, the Size, Potential and Realistic Share of the Market
VI. The Product and Service Offerings
VII. The Enterprise Strategy and Enterprise Delivery Systems: Business Competitiveness
VIII. The Financial Forecasts and Expected Returns, Risks, and Contingencies
IX. Environmental and Regulatory Compliance
X. The Capital Structure and Financial Offering: Returns and Benefits to Investors, Financiers and Business Partners
COVER PAGE
Every business plan should have a cover page that includes the following information.
1. The company name, address, telephone and fax numbers, and email address, if it is available. The easier it is for the
reader to contact the entrepreneur, the more likely the contact will occur.
2. The name and position of the contact person, who should be one of the firm’s top executives. The person designated as
the contact person should be prepared to answer questions about the plan..
3. The date the business was established and the date of this particular version of the business plan.
4. The name of the organization from which funding is being sought. The full name, correctly spelled, should be used
5. The copy number of the plan. For two reasons, first is security. The entrepreneur must know how many of the plans are in
circulation and who has them. Eventually, all of them should be returned. The second reason is exclusivity, it is not good
practice to have dozens of copies of the plan circulating in the financial community. Financiers like to consider
opportunities that are not being concurrently considered by others. If the plan is over circulated, it could acquire a
negative reputation of being “shopworn”
6. The company’s logo and tagline. Every firm should have a logo. A logo is a design, picture, or ideograph chosen to
represent the company. The association of the company name with a pictorial design give the reader two ways of
remembering your company and its products.
THE BUSINESS CONCEPT AND BUSINESS MODEL
Business concept contains the essence of the enterprise in a concise but powerful
manner. It stresses the value of the product offering to the target customers who
would most likely buy it.
The product concept must then be translated into a business model. A business model
is a formula on how the enterprise exactly plans to make money out of the business.
1. How will the business raise revenues? What critical factors will cause the revenues to
materialize?
2. What will be the costs of the enterprise products and other costs of doing business? How will
these costs be managed to ensure comfortable profits? What critical factors will drive the costs?
How can these factors be controlled?
3. What will be the major investments of the enterprise? Why will these investments give the
enterprise a competitive edge?
4. How will the enterprise finance the investments? How will the enterprise fund its growth?
THE BUSINESS GOALS: VISION, MISSION,
OBJECTIVES, AND PERFORMANCE TARGETS
The business goals show the future and long-term prospects of the enterprise. It is composed of
the vision, mission, objectives, key result areas, and performance indicators of the enterprise.

Case Example: Double Happiness

Vision: “To establish a commanding presence and market leadership as a food chain servicing
major bus terminals in Central Luzon within the next five years.”
» The business goals are communicated by articulating the basic purpose of setting up the enterprise in a
mission statement.
Mission: “To provide quality food and passenger convenience services that would generate
sufficient profits for the stockholders and improve the lives of its employees.”
» The vision and mission statement must then be translate into measurable end results, more popularly called
objectives.
 »Objectives must be more specific than the vision and mission statement. It must be SMART. S- Specific M-
Measurable A- Attainable R- Realistic T- Timebound

Double Happiness Objectives:

1. To establish a strong market presence in Central Luzon
2. To earn good financial returns for its owners
3. To delight customers with high quality food and services
4. To make Double Happiness a happy and rewarding place to work in

»The objectives should then be translated into key result areas or KRAs. KRAs are the qualitative manifestations
that the objectives are being achieved.
 KEY AREAS OF DOUBLE HAPPINESS
Objectives Key Result Areas

1. To establish a strong market presence in Central Luzon 1.a Number of food outlets in major bus terminals in Central Luzon
1.b Sales volume attained
1.c Market share in Central Luzon
2. To earn good financial returns for its owners 2.a Amount of net profits realized for the next five years
2.b Return on equity(ROE)
2.c Return on assets(ROA) or Return on investments (ROI)
2d. Return on sales (ROS)

3. To delight customers with high quality food and services 3a. Growth in sales per outlet
3b. Percentage of repeat customers
3c. Number of customer commendations or complaints
3d. Awards and recognition given by the community or the government
for excellent service
3e. Customer survey rating to ascertain customers’ degree of delight
4. To make Double Happiness a happy and rewarding place to work in 4a. Compensation and benefits of managers and workers are above
industry rates
4b. Management and employee turnover
4c. Number of job applicants compared to other similar establishments.
 »Key result areas must be rendered into quantified performance measurements, otherwise called performance
indicators. These performance indicators or PIs serve as the aspirational scorecard of the enterprise managers
and the motivational results of the investors.

Key Result Areas Performance Indicators

2014(now) 2015(One Year Later) 2020(5 Years Later
1a. Number of food outlets in 3 5 20
major bus terminals in Central
Luzon
1b. Sales volume attained Php7 million Php13 million Php60 million
1c. Market share in Central 2% 3% 12%
Luzon
2a. Amount of net profits Php1 million Php2 million Php10 million
realized for the next five
years
2b. Return on equity(ROE) 30% 40% 60%
2c. Return on assets(ROA) or 15% 20% 30%
return on investment(ROI)
2d. Return on sales(ROS)
14% 15% 16%
Key Result Areas Performance Indicators
2014(now) 2015(One Year Later) 2020(5 Years Later
3a. Growth in sales per outlet 20% 20% 20%
3b. Percentage of repeat 30% 40% 50%
customers
3c. Number of customer 4 out of 20;1 out of 20 6 out of 20; 1 out of 50 10 out of 20;1 out of 100
commendations; number of
customer complaints
3d. Awards and recognition None One by Bulacan Chamber Two by Central Luzon Provinces
given by the community or the
government for excellent
service 4.5(on a scale of 1 to 5)
3e. Customer survey rating to 3.5(on a scale of 1 to 5) 4(on a scale 1 to 5)
ascertain customers’ degree of
delight

4a. Compensation and Same as industry 5% above Industry 15% above Industry
benefits of managers and
workers are above industry
rates
4b. Management and 3 out of 10 per year 2 out of 10 per year 1 out of 10 per year
employee turnover
4c. Number of job applicants 10% more job applicants 20% more job applicants 30% more job applicants
compared to other similar
establishments
EXECUTIVE SUMMARY
Executive summary contains everything that is relevant and important to the business audience.
It is a synthesis of the entire plan. It must contain the major argumentations of the business
proponent on why the business will work and succeed. It should provide the business plan
audience all the arguments on why they should participate in the business venture.

The executive summary should then introduce and highlight the good qualities of:
1. The business proponents and their partners
2. The enterprise organization and its capabilities
3. The technology providers and their expertise and experience
4. The suppliers and all the major service providers
It should likewise describe the products/services of the enterprise, their features and
attributes, and why they are the right ones to deliver to the customers.

The Executive Summary should then proceed to discuss and justify the Enterprise Strategy and
Enterprise Delivery System.
 Enterprise Strategy builds and develops the game plan for attaining competitiveness.
 Enterprise Delivery System is the entire process of converting input(resources) into output and these output into
outcomes.

It should then render all the major institutional, market, operations, and organizational strategies previously
cited into financial strategies and forecasts.
Investment requirements should be presented along with the summaries of the projected
income statements, balance sheets, cash flows, and funds flow, and their analyses and
conclusions. Yields and returns, along with risks and contingency measures, should round up
this section.

The ES should also contain a section on the environmental and regulatory compliance of the
proposed business, as well as the more proactive programs to become a more responsible
corporate citizen.

It should present the capital structure of the proposed business and show how this structure
will respond to the investment programs and financial forecasts of the enterprise.

However, the Executive Summary can only be written last in order to capture the findings and
insights of the other parts, but for presentation purposes, it is placed in the first part of the
business plan.
THE BUSINESS PROPONENTS
The third section of the business plan contains information about the business proponents or stakeholders. There are
four types of stakeholders:
1. Resource mobilizers and financial backers
2. Technology providers and applicators
3. Governance and top management
4. Operating and support team
If the business plan readers are the resource providers, then they will want to know who else are on board to share the
burden of raising money to see the whole thing through.
If the business plan readers are the technology providers, they will want to know if there will be sufficient funds to pay
for the technology.
If the business plan readers are the governance and top management team, then they will want to know what
strategies and performance indicators are being proposed.
If the business plan readers are the implementing, operating, and support teams they will want to know what
programs, activities, tasks and resources would be in place.
THE TARGET CUSTOMERS AND THE MAIN VALUE
PROPOSITION
The business proponent must be very precise about the target audience or target
customers.
 Target customers must be of sufficient size, sufficient paying capacity, and have sufficient interest to
purchase the products being offered by the enterprise.

Main Value Proposition is the unique selling proposition of the enterprise.

Knowing where the target customers are exactly concentrated, the business plan
should then pinpoint what the customers buy, how they buy, when they buy, where they
buy, and what convinces them to buy. These information should then be used to justify
the exact locations and marketing channels to be employed by the enterprise.
MARKET DEMAND AND SUPPLY, INDUSTRY DYNAMICS
AND MACRO ENVIRONMENTAL FACTORS
The business plan should estimate the total market supply and demand for the product
offerings of the product offerings of the enterprise. The business plan should then determine
the major critical factors that influence this market demand and supply.

The market analysis and forecasting exercise should lead to a quantification of the current
and prospective size of the market. Both current and potential consumptions should then be
dissected.
The business plan should discuss the relevant industry dynamics:
 Who are the competing enterprises in the industry and what are their comparative advantages and
disadvantages? What business models and strategies are they employing?
 Who are the suppliers in the industry and what are their capabilities and bargaining power?
 What are the channels of distribution being used by the industry? How effective are these channels?
BOTH THE INDUSTRY PLAYERS AND THE MARKET ARE AFFECTED BY THE MAC RO ENVIRONMENT, WHICH INCLUDES
THE SOCIAL, POLITICAL, ECONOMIC, ECOLOGICAL, AND THE TECHNOLOGIC AL (SPEET) FORCES. THE BUSINESS
PLAN SHOULD DISCUSS THE MAJOR TRENDS AND CHANGING PATTERNS IN TH E MACRO-ENVIRONMENT, WHICH
WOULD HAVE SIGNIFICANT IMPACTS ON THE RELEVANT INDUSTRY AND THE BEHAVIOR OF CONSUMERS.

Social environment includes the demographics and cultural dimensions that govern the relevant
entrepreneurial behavior. The structure, social status, and dynamics of the population at
large,as well as the people’s beliefs, tastes, mores, customs and traditions dictate the major
parameters of market behavior.
Political environment defines the governance system of the country or the local area of
business. It includes all the laws, rules and regulations on allowable and disallowable business
practices.
Economic environment is mainly driven by supply and demand forces. It is the same factor that
drives the interest and foreign exchange rates to fluctuate with the movement of the market
forces.
Ecological environment includes all natural resources and the ecosystem that defines the
habitat of man, animals, plants and minerals.
Technological environment makes or breaks competing participants in any industry. New
scientific and technological discoveries often lead to the launce and commercialization of new
products with superior attributes or to rendering the old ones obsolete.
PRODUCT/SERVICE OFFERING: DESCRIPTION,
EVOLUTION, AND JUSTIFICATION
This section of the business plan is the product/service offering that should contain a
description, evolution, and justification of the product/service offering.

It must be described by highlighting the features and attributes that would most
appeal to the target customers. The business plan should also prove that the
products/services would be accepted and carried by the distribution channels.
ENTERPRISE STRATEGY AND ENTERPRISE
DELIVERY SYSTEM
The business plan should expound on the Enterprise Strategy(ES) by mapping the
competitive landscape and by situating the enterprise and its competitors as to their
strategies and chosen positionings.
The Enterprise Delivery System starts from the Input(resources mobilized), proceeds to
the Throughput(the transformation process where input are converted to output), and
produces the Output(the products/services). The Output are then marketed to the
customers (in case of goods) or experience by the customers (in the case of services).
Customer satisfaction level, profits generated, and the performance of people from
the transaction are the Outcomes of the EDS.
Input Throughput Output Marketing Desired Outcomes

• Harnessing of
human, money
and physical
• Conversion of • Positioning
resources • Customer satisfied
input into output • Product
• Resources • Sales volume
and the • Goods produced • Packaging
mobilized attained
transformation or services • Place
Money • Profits generated
process within the delivered • People
Men • People
factory or service • Promotion
Machines performance
shop • Price
Materials
Methods
Management
FINANCIAL FORECASTS: EXPECTED RETURNS,
RISKS, AND CONTINGENCIES
The important return calculations are the following:
1. Return on sales
2. Return on assets or investments
3. Expected return on stockholder’s equity
ENVIRONMENTAL AND REGULATORY COMPLIANCE
The business plan must articulate the laws, rules, and regulations governing the
business, and the industry that the enterprise is in. It should ascertain that all the
necessary permits, licenses, and authority to use proprietary intellectual capital had
either been secured or would definitely be secured.
The business plan should also assure the reader that all the necessary local
government ordinances and barangay ethics would be followed by the enterprise.
CAPITAL STRUCTURE AND FINANCIAL OFFERING:
RETURNS AND BENEFITS TO INVESTORS, FINANCIERS
AND PARTNERS
The tenth section of the business plan contains the capital structure and financial
offerings of the enterprise including some discussions on who are the investors, the
financiers, and the partners of the enterprise.
Finally, the business plan must appeal to its target audience. It must highlight for them
the main features of the business plan that they are looking for.
PERFORMANCE TASK WITH GROUP
Prepare an initial outline of how you want your business plan to look like. This assumes that you already
have a business endeavor that you would want to endeavor that you would want to enter into. In order to
prove its business viability, the next chapters will show you how to do the step-by-step process of
discerning whether the business idea you have will be worth your while.

Feel free to add contents to your initial outline as you go about the next chapters of this class. The rest of
the discussion will go through the entire process of establishing an enterprise. The insights that you will
gain will definitely be a good input in competing your business plan.

As you continue your entrepreneurial journey with the aid of this class, keep this outline handy and be
prepared to change and adjust the contents accordingly, based on what you are going to find out in the
next challenges that await you.