Business plam

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LEARNING OUTCOMES :To define what the business plan is, who prepares it, who reads it, and how it is evaluated.To understand the scope and value of the business plan to investors, lenders, employees, suppliers, and customersTo identify information needs and sources for each critical section of the business plan.To enhance awareness of the ability of the internet as an information resource and marketing tool.To present examples and a step by step explanation of the business plan.To present helpful questions for the entrepreneur at each stage of the planning process.To understand how to monitor the business plan

DEFINITION:It is a document prepared by and entrepreneur that describes,The set of business goals,reason for viability,Functional plans for achieving the goals,relevant external and internal elements involved.It is an integration of functional plans and also contains background information about the organization and team.Business plan is not absolute but iterative.

SET OF BUSINESS GOALS;It gives idea about,Product being madeTarget consumerMarket sizeProduction quantity and qualityREASONS FOR VIABILITY;Why are these goals achievablePotential customerAvailability of potential capitalAvailable suppliersMarket demand

FUNCTIONAL PLANS FOR ACHIEVING GOALS;Road map, guidance or structure in each particular area of business such asMarketingFinancing etcIt is a constant monitoring process(requires review).These plans will be discussed in the body laterIt also addresses both short term and long term decision making at least for the first three years of operation

EXTERNAL AND INTERNAL ELEMENTS;Business plan is influenced by these factorsExternal elements include,Legal issues and regulationsMarketing trends (bulls and bears)Customer needsCompetitionPolitical/economical environment

Internal elements include,Control over manufacturingControl over marketing etcPersonal skills


The business plan should be prepared by the entrepreneur.The entrepreneur may consult with many other sources, such asLawyersAccountantsMarketing consultantsEngineersMentorsThese sources can be provided by the services of ;Small Business Administration (SBA)Service Core of Retired Executives (SCORE)Small Business Development Centers (SBDC)Other sources may beBusiness partnersInternetFriends and relatives

Entrepreneurial Assessment is Necessary!!Tohelp determine whether to hire a consultant or to make use of other resources,the en- trepreneur can make an objective assessment of his or her own skills

SCOPE & VALUES OF BUSINESS PLANGood business plan should satisfyPossible readers and their requirements(investors, employees, bankers, venture capitalists, suppliers, customers, advisors, and consultants)Perspectives to be consideredentrepreneurial perspectiveMarket perspective (should be customer driven)Investors perspective (based on finance)


The depth and detail in the business plan depend on the size and scope of the proposed new venture.Differences in the scope of the business plan may depend whether the new venture is a service,involves manufacturing, Overall future of businessViability of venture in marketGuidance to managing and organizing functional planPowerful tool to obtain financingWho is our customer and competitor etc

PREREQUISITES (INFORMATION AND DATA REQUIRED)Steps followed,Define goals and objectivesBusiness plan must reflect reasonable goalsStrategy of achieving the goalsFeasibility studyQuick feasibility study of the business concept to see whether there are any possible barriers to successInformation should focus on:Market OperationsFinancial aspects

Market Information :


For a defined market we gather information about,Market potentialSize of marketCollect market data(from market associations and sources)Market competitors

Figure 7.1 - An Upside-Down Pyramid Approach to Gathering Market Information

OPERATIONAL INFORMATION;Depending on nature of business, the entrepreneur may need information on the followingLocationManufacturing operationsRaw materialsEquipmentLabor skills/expertiseSpace (land building etc.)OverheadResearch should be made by keeping targeted readers in mind.



For gathering financial information the pre requisite is the budget of enterprise.Budget includesList of expenditureList of revenue and fundsForecasted based on market dataNow the financial information required is Available equityRequired balanceSourcesAvailable sourcesSelection of best sourcesIndustry benchmarks can be used in preparing the final pro-forma statements in the financial plan

INFORMATION SOURCES;Different information resources includeFriendsInternet An entrepreneur can access:Popular search engines.Competitors Web sites.Social networks, blogs, and discussion groups.In addition to websites, the entrepreneur can also investigate newsgroups to gather information anonymously from experts and customers on competitors and market needs.RelativesMentorsProfessional support systemCustomers and distributors etcGeneral observation

EVALUATION ;Business plan should meet the needs of readers (evaluators)Business plan should reflect,Strength of management or personnelStrength of product or serviceStrength of available resources

Entrepreneur makes plan by keeping viewpoint of CustomerInvestorInvestors focus on Payback timeCollateral equity

4 CS OF CREDITLenders and investors usually focus on Character of entrepreneurEntrepreneur credit history(focused more by investor than lender)Cash flowEntrepreneur ability to meet debt and interest paymentCollateralSecurity given to banks or lenders Contribution of equityAmount invested by investor, payback time etc

Presentation Of Plan

PRESENTATIONIt is an oral presentationIts purpose is to convey our idea to audience(investers) in limited time frameTime frame is usually 20-30 minutesThe entrepreneurs are expected to sell their business concept in this short time periodSome investors describes these presentations as elevator plansTypically the focus is on why this is a good opportunityan overview of the marketing program (addresses how the opportunity will convert to reality).The results of this effort (sales and profits). Concluding remarks might reflect the recognized risks and how the entrepreneur plans to address them.

Example Forums held by different institutions e.g. MITBenefits of these forums areFinancial rewards in case of winingIdentification of draw backs and customer needs


WRITING THE BUSINESS PLAN;It is the much time consuming phase of new venture.(may take hundreds of hours)Time taken depends on experience & knowledge of entrepreneur.QUALITIES;It should,Be comprehensiveFulfill aspects and purposes of business Convey a complete picture fo business to targeted people (investers,customers,employees)


Body consists of following.Introductory pageExecutive summaryEnvironmental and industry analysisDescription of ventureProduction planOperational planMarketing plan Organizational planAssessment of riskFinancial plan appendix

INTORDUCTORY PAGE;It is a title or cover page giving a brief summary.

CONTENTS;Its contents are,Name & address of company / businessName & address of principles (entrepreneur/partners)Nature of business(one short paragraph)Statement of finance neededStatement of confidentiality

It reflects nature of business and financial needs.

EXECUTIVE SUMMARY;This section of business plan consist of 3-4 pages and is written at the end.PURPOSE;should stimulate the interest of potential reader( investors, customers etc.)QUALITIES;It should,Be attractive enough to compel reader for further reading.Highlight the key point in business.(entrepreneurial background)Should contain supportive evidence (market suveys,contracts)


ENVIRONMENTAL ANALYSIS;It is assessment of external uncontrollable variables that may impact business plan.Some variables are,Economy (trends in GNP, income per capita)Culture (nature of native population)Technology (technology development, competitors, trends of customer)Legal concerns (product specs, distribution and promotion)Though controllable but know how of these factors helps in making a good business strategy.

Table 7.5 - Critical Issues for Environmental and Industry Analysis

INDUSTRY ANALYSIS;It should be conducted to find industry trends like,INDUSTRY DEMAND;It shows trends in market (bulls and bears)No of competitorsPossible changes in customer needsCOMPETITORS;Mostly threat to an entrepreneur is from large corporation. So necessary to identifycompetitors(internet, customers, advertisements, journals)Their weakness and strengths

DESCRIPTION OF VENTURE;It provides a complete overview of products, services and operations of new service.It includesMission statementIt defines nature of business in one statementKey factors to provide clear description (product, services,location,size of business etc.)Description of venture is function of nature of business. Venture may be Product manufacturingService providing

Table 7.6 - Describing the Venture

Production PlanManufacturing process (amount subcontracted)Physical plantMachinery and equipmentNames of suppliers of raw materials

MANUFACTURER Nature of product ( what will be made)Quantity of productionHigh productionLow productionServices to customers (warranty, maintenance, parts supply)

PRODUCTION PLAN Contd.SERVICE PROVIDERNature of service (Hospital, transport,