Developing the

business plan
Glossary of terms:
1. Blue print – a design or pattern that can be used as basis for
making something.
2. Direction - a statement that shows a person hat should be done
and how it should be done.
3. Exit strategy – a means of living a current situation after a set
objective has been realized, or a strategy to lessen or make less
severe a failure like in business.
4. Financial trend – the direction and momentum of a market, price,
economy, or other measure.
5. Investors – a person who allocates money on a business with the
with the expectation of financial gains.
6. Organizational structure – the position of people in a
business enterprise and the functions they perform.

7. Project feasibility – an assessment conducted on a proposed

business to determine if its technically feasible and profitable.

8. Rate of return of investment (ROI) – gain or loss of an

investment

9. Ration analysis – a quantitative analysis of information

contained in a company’s financial statements.
• What Is a Feasibility Study?

A feasibility study is an analysis that takes all of a project's

relevant factors into account—including economic, technical,
legal, and scheduling considerations—to ascertain the
likelihood of completing the project successfully. Project
managers use feasibility studies to discern the pros and cons
of undertaking a project before they invest a lot of time and
money into it. Feasibility studies also can provide a company's
management with crucial information that could prevent the
company from entering blindly into risky businesses.
Parts of a project feasibility study
1. Management Study – it is concerned with the administrative line
up that will be responsible for executing or implementing the
project. It is also in this part that important matters are decided
upon such as the most appropriate form of business organizations
with considerations to taxation, tax exemption privileges, and
other requirements of the project.
2. Marketing study – it describes the future market demand for the
product and competitive position in relation to selling price and
quality concerned, projected consumption of the product and
marketing studies that will ensure the success of the product.
3. Technical study- it considers what kind of technology is
available. It answers the question, “is it possible to do or to
manufacture? It is in this aspect where manufacturing process,
plant capacity, machineries required, plant location and layout.

4. Financial study – this part shows the various assumptions

made in all project cost and rate of return of the project being
proposed.

5. Taxation study – this part is concerned with the project design

that will minimize taxation expenses.
A business plan
• is a written document that describes your business. It covers
objectives, strategies, sales, marketing and financial forecasts.
• serves as your blueprint for how you will operate your business.
While you need to have a business plan to seek investors or get a loan
for your company, the plan is actually for your benefit. It provides a
step-by-step guide as you start a new business or grow your current
company, and it directs every decision you make going forward.
A business plan helps you to:
• clarify your business idea
• spot potential problems
• set out your goals
• measure your progress
Purpose of the business plan:
1. It defines the business
2. It sets the goal
3. It shows investors the viability
of the business
1. It is used to attract business partners.
2. It shows the organizational structure
3. It prepares the business for uncertainties.
 Benefits of a business plan:
1. An opportunity to test out a new idea to
see if it holds real promise success.
2. A clear statement of your business mission and
vision.
3. A set of values that can help you steer your
business through times of trouble.
4. A blueprint you can use to track your
performance and make midcourse corrections.
5. Benchmarks you can use to track your
performance and make midcourse corrections.
6. A clear-eyed analysis of your industry, including
opportunities and threats.
7. A portrait of your potential customers and their
buying behaviors.
8. A rundown of your major competitors and your
strategies for facing them.
9. An honest assessment of your company’s
strengths and weaknesses.
10. A roadmap and timetable for achieving your
goals and objectives.
11. A description of the products and services you
offer.
12. An explanation of your marketing strategies.
13. An analysis of revenues, costs, and projected profits.
14. A description of your business model, or how you plan to
make money and stay in the business.
15. An action plan that anticipates potential detours or hurdles
you may encounter.
16.A handbook for a new employees describing who you are
and what your company is all about.
17.A resume you can use to introduce your business to
suppliers, vendors, lenders, and others.
Basic components of a business plan:
I. Summary of the project:
the first part of the business plan is a summary of the project
which includes the name of the business and location of the factory
and head office. It also gives a brief history of the business, vision-
mission, nature and kind, type of organizations, the org chart and
officers and their qualifications.
II. Economic Analysis
presents information about the market, demand, supply, and
competitive position.
A. Market: areas of distribution, methods of distribution, mode
and cost of transpo
b. Demand - it describes market demand which includes
consumptions for the past five-year period to be covered
which should give an adequate basis for the projected
demand, projected consumptions for the next five years, and
target consumers of the business (housewives, students,
elderly, etc.)
C. Supply – it gives a detailed description of the supply of
materials for the past 5 years broken down according to
source, whether local or imported.
D. Competitive position – it describes the competitive of the
business like selling price, projected sales and others.
III. Technology feasibility – includes products, manufacturing process of
the products, plant size and production schedule, machinery and
equipment, plant location and layout, building and facilities, raw
materials, utilities, waste disposal, production cost and labor
requirements.
A. products – this part presents the product descriptions and
specifications including weight, size, physical, mechanical, and chemical
properties, product function, and quality assurance.
B. Manufacturing Process: discusses the process description flow
charts indicating the step by step material energy and labor
requirement and the normal duration of the process, alternative
process to be adopted and reasons for adopting the process,
technological assistance used, contracts and processed being
developed.
C. Plant size and production schedule - this part presents the rated
annual and daily plant capacity per shift per day, total operating
days per year and factors in determining capacity, expected
production volume for the next five years.

D. Machinery and equipment – this part describes the machinery

and equipment specifications with their capacities, list of machinery
and equipment to be purchased, place of origin, local or imported,
supplier quotation including guarantes, delivery dates, payment
terms and other important arrangements.
E. Plant location and layout – it describes the plant location map,
desirability of location in terms of proximity to the source of materials
and markets, availability of and internal arrangement with
transportation facilities and utilities.

F. Building and facilities – building types and cost of constructions, floor

area, land improvements such as roads, drainage facilities, perimeter
fence, and costs.

G. Raw materials – descriptions and specifications of raw materials with

regards to overall properties or characteristics, current projected cost
Of materials, terms of payment, short and long term contracts (if
any) continuity of supply, current and prospective sources, and
annual materials consumption and materials balance.

H. Utilities – discusses electricity, fuel and water supply indicating

the uses, quantity required, utilities balance, availability, sources,
reliability of the source, alternative sources and costs involved.

I. Waste disposal - descriptions and quantity of waste materials to

be disposed of, waste disposal technology and cost, clearance
from proper authorities and compliance to legal requirements.
J. Production cost – detailed breakdown of production
costs indicating the elements of cost per unit output.

K. Labor requirements – detailed breakdown of the direct

labor and supervision needed for the manufacture of the
products with compensation and fringe benefits to be
paid.
IV. Financial Statement:
A. For existing projects
B. For new project
the following should be included:
(1) Total project cost (fixed and working capital)
(2) Initial capital requirements
(3) pre-operating cash flows relative to the project time table
(4) Financial projection for five years
(5) Supporting schedules to the financial projection which includes:
A. collection of sales period
B. Inventory level
C. Purchases and expenses payment period
 D. Production cost

E. Financial analysis showing return on equity, breakeven

volume, and price analysis
Assignment:

Copy notes #5 and we will going to have a quiz on Thursday (25

items). Open notes but with your own copy. No Notes #5 no quiz.