BUSINESS PLANNING PROCESS

MEANING OF BUSINESS PLANNING PROCESS

A Business plan is an essential written
document that provides a description
and overview of your company's future

All Business should have Business Plan

Is designed to guide the entrepreneur

through the first year of operations.
Business Plan Meaning
i. A good business plan guides you through each stage of
starting and managing your business.
ii. Business plan as a roadmap for how to structure, run, and
grow your new business.
iii. It’s a way to think through the key elements of your business
iv. Can help you get funding or bring on new business partners.
v. Investors want to feel confident they’ll see a return on their
investment.
vi. Your business plan is the tool you’ll use to convince people
that working with you — or investing in your company — is a
smart choice.
 Process of Business Plan

• Introductory Page :-
• Cover Page that provides a brief summary of the business Plan Contents
• The Name and address of the Company
• The Name of the Entrepreneur (s), telephone number, fax number, email id,
address and website address if available
• A Paragraph describing the company and the nature of the business.
• The Product information, production programme and schedule
• The Marketing and Sales plan
• The amount of Financial needed
• A Statement of confidentiality of the report.
 Business Plan –
Executive Summary
Executive Plan is prepared after total plan is written.

The Executive summary should stimulate the

interest of the potential investor.

Investors uses the summary to determine if the

business plan is worth reading.

It should highlight in a concise and convincing

manner the key points in the business plan.
 Measuring Business Plans Progress
• Plans are for 12-month schedule
• It would be divided then into 4 quarters
• Decision should be made whether goals and objectives are on
schedule
• Inventory Control, Production Control, Quality Control, Sales Control,
Disbursements
• Updating the Plan
 Outline of a Business Plan
Introductory page
Executive
▪ Name and
Summary
Address of
▪ 2 to 3 pages Organization
Business
Industry
Production
length Description of Plan
▪ Name and Plan
Address of ▪ Highlights Analysis Venture ▪ Form of Assessment of
▪ Business ▪ Product(s) ▪ Mfg Process Marketing Ownership Risk
Principals
Concept ▪ Future ▪ Service(s) ▪ Physical Plan ▪ Identification of ▪ Evaluate
▪ Nature of
Plant ▪ Partners & Weakness of
Business ▪ Data that outlook and ▪ Size of Pricing
Principles
support trends Business ▪ Machinery ▪ Distribution
Business
▪ Statement of ▪ Authority of ▪ New
▪ and
Financial ▪ Opportunity Analysis of ▪ Office ▪ Promotion Principles Technologies
competitors Equipment
Neded would be Equipment ▪ Product ▪ Management ▪ Contingency
pursued ▪ Market and Personnel ▪ Name of Team
▪ Statement of Forecasts Plans
the Background
confidentiality ▪ Marketing Segmentation ▪ Background ▪ Controls ▪ s of
suppliers of ▪ Roles and organization
of report Strategy ▪ Industry of the raw responsibilities
▪ Financial Forecasts Entrepreneurs of members of
Results materials
organization
▪ Legal
Documents

Financial Plans
▪ Proforma Income Statements - Cash Flow Projections Appendix (Backup Material)
▪ Proforma Balance Sheet - Break Even Analysis Letters - Market Research Data
▪ Sources and Application of funds Leases or Contracts, Price Lists from suppliers
 Why Business Plans Fail
• Goals sets by the entrepreneur are unreasonable
• Goals are not measurable
• The Entrepreneur has not made total commitment to the business
• The Entrepreneur has no experience in the planned business
• The Entrepreneur has no sense of potential threats or weakness to
the business
• No customer need was established for the proposed product or
service
 Advantage and Disadvantage of Business Plan
Advantages Disadvantages
❖ Enables owners of new or existing business to ❖ Uncertainty of what will happen in the future makes it
review their ideas and see if it will provide a harder to predict your statistics e.g. the no. units sold of
profitable future the product
❖ Reduces risk- guide for business for what to do ❖ Lack of experience. Usually people who make their plans
and when lack very much experience and are not as effective when
❖ Allows business to measure success against planning.
plan; make changes if need be ❖ Change. Business plans need to be reviewed and
❖ Help ensure finance is available e.g. bank updated regularly.
loans, lenders will see if business is organized ❖ Does not guarantee business success. -Plan quality may
❖ Helps to set objectives in order to achieve aims be low due to lack of experience from the people who
❖ Helps set up a business successfully wrote it.
❖ Helps to co-ordinate actions- plan should be ❖ Takes time and effort which may be expensive, especially
set out to for how an objective is going to be for small businesses.
achieved. ❖ New opportunities can be missed if they are not in the
plan.
MARKETING PLAN
Marketing Research
• Define the purpose or objectives
• Gathering Data and Secondary
Sources
• Gathering information from
Primary Sources
• Analyzing an Interpreting the
Results
Understanding Marketing Plan
• Where have we been
• Where do we want to go in (Short Term – Long
Term)
• How do we Get there
• Management should understand that marketing
plan is a guide for implementing decision making
and not a generalized superficial document.
• In order to develop a plan, it is necessary to
formally document and describe as many marketing
details
• Budgets
 Steps in Preparing a Marketing
Plan
• Defining the Business Situation – Review –
Situation Analysis
• Define Target Market – Opportunities and
Threats
• Characteristics of the Customer
(Geography,Demographic,Pyschographic)
• Buying Situations - Desired Benefits –
product features, Usage, Buying conditions
• Considering Strength and Weakness
• Establishing Goals and Objectives
Defining Marketing Strategy and Action Programs
• Product or Service to be marketed
• Customer Service
• Pricing
• Distribution
• Promotion
• Coordination of planning process
• Designating responsibility for Implementation
• Budgeting the Marketing Strategy
• Implementation of the Market Plan
• Contingency Planning
 PRODUCTION AND OPERATION PLANS

Production planning is the planning of Operational planning is the process of creating a

production and manufacturing in a company detailed plan to implement an organization's
or industry strategic plan
PRODUCTION PLAN
• Production planning is the future of production.

• It can help in efficient manufacturing or setting up of a production

site by facilitating required needs.

• Different types of production methods, such as single item

manufacturing, batch production, mass production, continuous
production. etc. Each type have their own type of production
planning.

• Production planning can be combined with production control into

production planning and control, or it can be combined with
enterprise resource planning.

• A production plan is made periodically for a specific time period,

called the planning horizon. It can comprise the following activities:
PRODUCTION PLAN
It comprise the following activities: -

• Determination of the required product mix and

factory load to satisfy customers needs.
• Matching the required level of production to the
existing resources.
• Scheduling and choosing the actual work to be started
in the manufacturing facility
• Setting up and delivering production orders to
production facilities.
 PRODUCTION PLAN
▪ The production planner or production planning department
needs to work closely together with the marketing
department and sales department.
▪ They can provide sales forecasts, or a listing of customer
orders.
▪ The work is usually selected from a variety of product types
which may require different resources and serve different
customers.
▪ Therefore, the selection must optimize customer-independent
performance measures such as cycle time and customer-
dependent performance measures such as on-time delivery.
PRODUCTION PLAN CRITICAL FACTOR

The accurate estimation of the productive

capacity of available resources,

The Production planning should always take

into account :- “material availability,
resource availability and knowledge of future
demand"
 OPERATION PLANS

It involves breaking down a strategic plan into

a roadmap for daily and weekly actions.

The goal is to ensure that the organization is

executing its strategy effectively.

Operational planning is the process of creating a

detailed plan to implement an organization's
strategic plan
OPERATION PLANS
Operational planning (OP) is the process of implementing
strategic plans and objectives to reach specific goals.

It involves breaking down a strategic plan into a roadmap for

daily and weekly actions.

The goal is to ensure that the organization is executing its

strategy effectively.
OPERATION PLANS
❖ An operational plan describes the specific steps in any given
strategic planning model and explains how and what
portion of resources will be put into operation during a
given operational period.

❖ It involves breaking down a strategic plan into a roadmap

for daily and weekly actions.

❖ The goal is to ensure that the organization is executing its

strategy effectively.
 OPERATION PLANS
Operational plans should contain :-

❖ Identifying clear objectives to be achieved

❖ Details that are aligned with the strategic plan

❖ Ensuring staffing and resource requirements

❖ Performance Management.
ORGANIZATION PLAN
• DEVELOPING A MANAGEMENT TEAM
• LEGAL FORMS OF BUSINESS
• OWNERSHIPS
• COSTS OF STARTING A BUSINESS
• CONTINUITY OF BUSINESS
• TRANSFERABILITY OF INTEREST
• CAPITAL REQUIREMENTS
• MANAGEMENT CONTROL
• DISTRIBUTION OF PROFIT AND LOSSES
• TAXES
DESIGNING AN ORGANISATION
• ORGANIZATION STRUCTURE
• PLANNING MEASUREMENT AND
EVALUATION SCHEMES
• REWARDS
• SELECTION CRITERIA
• TRAINING
• EXPANSION OF BUSINESS
BUILDING A SUCCESSFUL ORGANIZATION
• TASKS NEEDED TO BE PERFORMED, ROLES, IMPORTANT
FUNCTIONS
• JOB DESCRIPTION
• JOB SPECIFICATIONS
• THE ROLE OF BOARD OF DIRECTORS
– Reviewing operational and capital budgets
– Developing long term strategic plans for growth and expansion
– Supporting day to day activities
– Resolving conflicts amongst owners of shareholders.
– Ensuring the proper use of assets.
– Developing a network of information sources
 FINANCIAL PLAN
• Many Ventures that are on a fast growth path find there
is always a shortage of cash even though the business is
making profit.

• Many new ventures experience cash flow issues in the

few years of the startup.

• These issues are the result of a multitude of reasons,

can involve investment in inventory, production
equipment, marketing costs and research to name a
few.
 FINANCIAL PLAN
• Many Ventures that are on a fast growth path find there
is always a shortage of cash even though the business is
making profit.

• Many new ventures experience cash flow issues in the

few years of the startup.

• These issues are the result of a multitude of reasons,

can involve investment in inventory, production
equipment, marketing costs and research to name a
few.
 FINANCIAL PLAN
• The Financial plan provides the entrepreneur
with a complete picture of how much and
when funds are coming into the organization.
• Where funds are going,
• And how much cash is available, and the
projected financial position of the firm.
• It provides basis for budgeting control.
 FINANCIAL PLAN
• The Entrepreneur is responsible for all budgets
• Entrepreneur should prepare operating budgets
and capital budgets.
• A sales budget may be prepared by Sales Manager,
Production budget may be prepared by Production
Manager.
• First Develop a sales budget, that is an estimate of
sales by month. The key element is the budget is
projected sales.
• From the sales budget the entrepreneur will then
determine the cost of this sales.
 FINANCIAL PLAN
A SAMPLE MANUFACTURING BUDGET FOR FIRST THREE MONTHS
JAN FEB. MAR.

1 Projected Sales (units) 5000 8000 12000

2 Desired ending inventory 100 200 300
3 Available for Sale 5100 8200 12300
4 Less Beginning inventory (Opening 0 100 200
Stock)
6 Total Production Required 5100 8100 12100
 FINANCIAL PLAN
A SAMPLE OF OPERATINGG BUDGET FOR THE FIRST THREE MONTH
Expense Jan Feb. March.
1 Salaries 23.2 23.2 26.2
2 Rent 2 2 2
3 Utilities 0.9 0.9 0.9
4 Advertising 13.5 13.5 17
5 Selling Expenses 1 1 1
6 Insurance 2 2 2
7 Payroll Taxes 2.1 2.1 2.5
8 Depreciation 1.2 1.2 1.2
9 Office Expenses 1.5 1.5 1.5

Total Expenses 47.4 47.4 54.3

Figures in lakhs
FINANCIAL PLAN
• OPERATING AND CAPITAL BUDGETS
• PROFORMA INCOME STATEMENTS
• PROFORMA CASH FLOW
• PROFORMA BALANCE SHEET
• BREAK EVEN ANALYSIS
• PROFORMA SOURCES AND USES OF
FUNDS
• SOFTWARE PACKAGES
FINAL PROJECT REPORT WITH FEASIBILITY STUDY
The fA feasibility study :-

Is a detailed analysis that considers all of

the critical aspects of a proposed project
in order to determine the likelihood of it
succeeding.
FINAL PROJECT REPORT WITH FEASIBILITY STUDY

The final report provides a summary of the project

performance.
It can include information such as: -
- Summary level description of the project or phase.
- Scope objectives, the criteria used to evaluate the
scope, and evidence that the completion criteria
were met.
FINAL PROJECT REPORT WITH FEASIBILITY STUDY

The final report provides a summary of the project

performance.
It can include information such as: -
- Summary level description of the project or phase.
- Scope objectives, the criteria used to evaluate the
scope, and evidence that the completion criteria
were met.
FINAL PROJECT REPORT WITH FEASIBILITY STUDY

Module 5 of Entrepreneur Development

Syllabus

Provides for Finance, Account, Costing

Aspect of Business

Cost, Volume, profit and breakeven

analysis, Margin of Safety and degree of
operating leverage
Capital Budgeting for comparing projects
or opportunities.
Introduction to Financial Statements
Profit and loss Statement.
Balance sheet – Cash Flow, all
important part of Final project Report