CHAPTER 3- Business Plan.ppt

8/10/2019 CHAPTER 3- Business Plan.ppt

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THE BUSINESS PLAN

SESSION OBJECTIVES

At the end of the session, students

shou ld be able to:

understand the impo rtance of a

business p lan, and

prepare a bus iness p lan


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What Is a Business Plan?

A business plan is a written document which

described the proposed business or project to

be undertaken in a comprehensive manner.

It is also known as a working paper,

business proposal, project paper

or prospectus.


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Reasons For Preparing a BusinessPlan:

Opportunity for entrepreneur to assess thebusiness venture objectively, critically andpractically.

To study and evaluate the feasibility of the

business. To convince venture capitalists, investors and

bankers in order to raise capital and obtainsupport for the venture.

As a guideline for day-to-day management ofthe business.

To be able to distribute business resourcesmore effectively.


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Audiences of the BP

1. Entrepreneurs

2. Investors

3. Bankers4. Financial Assistance Providers

5. Suppliers

6. Customers

7. Employees


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Business Plan Format

1. Cover Letter

2. Title Page

* Tit le of the bus iness plan

* Name and add ress o f the bus iness

* Name of wri ters

* Date

3. Table of Con tents4. Execut ive Summary

5. Main Body of the Bus iness Plan

6. Append ices


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Main Body of the BusinessPlan

1. Introduction

2. Purpose

3. Background of the Business

4. Background of Partners/Shareholder

5. The Organization/ Admin Plan

6. The Marketing Plan

7. The Production/Operation Plan8. The Financial Plan

9. Justification


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Section 1: Introduction

a. Name of the business

b. Type of business

c. Industry overviewd. Location of the business

e. Date of commencement

f. Factors influencing choice ofbusiness

g. Business potential


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Section 2: Business Plan Purpose

2. Purpose

Each bus iness plan is prepared fo r a speci f ic pu rpose.

The entrepreneur sh ou ld c learly and specif ical ly state the

purpose for prepar ing the particu lar business plan.

Examples:

a. This bus iness plan is prepared by Syarikat Fair One

Sdn. Bhd. to obta in a term loan for the amount of

RM50,000 from SME Bank.

b. This bus iness plan is prepared by Syarikat Fair One

Sdn. Bhd. as a gu ideline in managing the business.


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Section 3: Background of theBusiness

a. Name of the business

b. Business address

c. Correspondence address

d. Telephone number

e. Form of business

f. Main activi ty

g. Date of commencement of business

h. Date of business registrat ion

i . Business registrat ion number

j. Name of bank

k. Bank account num ber

l . Equi ty con tr ibut ion


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Section 4: Background ofPartners/ Shareholders

a. Name in ful l

b. Ident i ty card number

c. Permanent address

d. Correspondence address

e. Telephone numberf. Date of bir th

g. Age

h. Marital status

i . Academic quali f icat ion

j. Courses attended

k. Ski l ls

l . Experiences

m . Current job/pos i t ion

n. Other/Previous business experiences


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Section 5: The Organization/Admin Plan

a. Int roduct ion to the organisat ion

b . Organizat ional chart

c . Table of job designat ion and number

of workers

d . Job Descr ipt ion

e. Remunerat ion table

f. L ist of o f f ice furn i ture, f ix tures and

f i t t ings

g . The adm inistrative budget


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Section 6: The Marketing Plan

a. Introduct ion to the product/services

b . Target market

c . Market s ize

d. Compet i t ion

e. Market share

f. Sales fo recastg . Marketing strateg ies

h. The market ing budget


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Section 7: TheProduction/Operation Plan

a. Process Flow Chart

b. Unit output/Hours of operation

c. Material requirement

d. List of direct workers* designation

* remuneration

e. List of machines and equipment

f. Plant/office layoutg. Location

h. Operation overhead

h. The production budget


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Section 8: The Financial Plan

a. Project Implementation Cost

b. Sources of Financing

c. Table of Depreciation

d. Loan Amortization Schedule

e. Hire Purchase Repayment Scheme

f. Cash Flow Proformag. Profit and Loss Proforma

h. Balance Sheet Proforma


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Section 9: Justification

Concludes and justify why the projectis worthy of finance


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Administration

Plan


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Introduction to the Organisation

Introduce the business by stating the business:

Mission- is a statement of the purpose or reasons for itsexistence

Objectives- more specific, stated in a shorter term and

have a definite time frame Business address

Location of the business

a. Physical location of project and proximity to roads,highways etc (Provide road map for exact location)

b. Building (type, structure, size and value)

c. Infrastructure (water, electricity, telephone)


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Organisational Chart

It is a schematic representation of the

organizational structure

It shows:

The hierarchy Span of control

Intra-relationship

Division of jobs and responsibilities


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Organisation Chart

Manager

Administrative

Officer

Marketing

Officer

Operations

OfficerFinance Officer


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List of Administration Personnel

Position No. of Personnel

Manager 1

Administrative Officer 1

Marketing Officer 1

Operations Officer 1

Finance Officer 1


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Schedule of Tasks andResponsibilities

Position Tasks and Responsibilities

Manager To plan, implement and control theoverall management of the business

To plan and monitor the strategicprogress of the business.

To be accountable for the overallperformance of the business

Administrative officer

S h d l f R ti f


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Schedule of Remuneration forAdministrative Staff

Position No. MonthlySalary(RM)

EPFContribution

(12%)

(RM)

SOCSO(2%)(RM)

Amount(RM)

Manager 1 2500 300 42.85 2842.85

AdministrativeOfficer

1 1200 144 20.15 1364.15

Marketing

Officer

1 1200 144 20.15 1364.15


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List of Office Equipment

Item Quantity Price/Unit(RM)

Total Cost(RM)

Office

Furniture

2 sets 2000 4000

PersonalComputer

2 sets 3000 6000

Air-Cond 1 set 2500 2500


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Administration Budget

Fixed assets Cost

Investment made to purchase of assets that will be usedin the organisation for more than 1 year.

Monthly Expenses Payments that have to be made every month as part ofmaintaining the business existence.

Other Expenses

Expenses that do not fall into the above categories. Expenses incurred once a year or on a periodic basis.


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Administration Budget

Fixed Assets

Expenses

(RM)

Monthly

Expenses

(RM)

Other Expenses

(RM)

Building xxxxx

Furniture & Fittings xxxxx

Renovation xxxxx

Rental* xxx

Utilities : water,

electricity, telephone

xxx

Salary xxx

EPF & SOCSO xxx

Rental Deposit xxx

Utilities Deposit xxx

Stationery xxx

Business Registration xxx


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Please prepare the following:

Introduction to organisation

Organisation Chart

List of Personnel

Schedule of task and responsibilities

Schedule of remuneration


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Marketing Plan


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Product or service description

Describe clearly the product or serviceoffered. Relate the proposed product/

service to target customer needs and

wants.


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Target market

State the customer's profile in the targetmarket area. Identify different market

segments that exist in the same market

area.

Target market is defined as the groups ofcustomers that have needs and wants

that can be satisfied by the businessthrough the supply of goods or services


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Market size

State the market size in units of product orunit of sales (in ringgit) or both.

Market size refers to the total potentialpurchase of the target market


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Competition

List at least three main competitors thatexist in the same market area. State their

strengths and weaknesses.

Competitors refer to other businesses thatoffer similar, substitute or alternative

products/ services to the same targetmarket.


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Competition

Example:

Competitors Strength Weakness

Co. A


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Market share

Compute the market share as apercentage of the market size. Product or

service information, customer needs and

wants as well as market competition must

be taken into consideration.

Market share refers to the estimated

potential sales of the business after takinginto consideration the market size and

competitors influences.


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Example:

Market Share Before Entry of Ramlan Ent.

Competitors Market share Sales per year

Gard Sales & Service 40% RM 90,000

Highlight 30% RM 67,500

Tan Chong 30% RM 67,500

Total 100% RM225,000


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Sales Forecast

Definition: expected purchases

from the identified target market.

It is quoted in unitsor in Ringgitfora period of a year or a month


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Sales Forecast

Month Units Sales (RM)January 0 0

February 100 1,000

March 350 3,500

April 400 4,000

May 400 4,000

June 350 3,500

July 400 4,000

August 600 6,000

September 600 6,000October 600 6,000

November 750 7,500

December 750 7,500

Total 5,300 53,000


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Marketing strategy

Discuss the strategies concerning thefollowing marketing mix:

Product or Service

Price

Place or Distribution

Promotion


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List of marketing personnel

Schedule of tasks and responsibilities


*Use the same format as in admin plan


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Marketing Budget

Fixed AssetsExpenses

(RM)

MonthlyExpenses

(RM)

OtherExpenses

(RM)

Van xxx

Pamphlets andbrochures

xxx

Commission xxx

Salary, EPF &SOCSO

xxx

Petrol xxx

Road tax andinsurance

xxx


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Product or service description

Target market

Market size

Competition Market share

Sales Forecast

Marketing strategy


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Operational Plan


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Operations process

State the key steps or phases in theoperations process towards producing the

product or providing the service.

Chief mechanic gets information from client on the problems with the vehicles

Discuss repair work with client

Preliminary inspection of the vehicle by mechanics

Get agreement from client on repair work to be done

Chief mechanics fill Job Order form

Pass the Job Order form to mechanic on duty


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Process Flowchart

It is schematic representation of theproduction/operation process from thestart until the product or service is sold ordelivered

It must show: The sequence (step by step)

Description of each process/activity


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Conventional Symbols

.

Symbol Activity Description

Operation Materials are being processed or

information being processed or the

process of planning and

calculatingTransporting Movement of materials from one

place to another.

Inspection Inspection on the quantity or

quality of the product.

Delay Process is delayed or materials

waiting for further process.

Storage Materials are stored in the storage

area or warehouse.


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Example

Capacity Planning/Production


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Capacity Planning/ProductionSchedule

Operations output

Unit of product per day, or

Hours of service

t i l i t


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Materials requirement

List down theraw materials or inventoriesrequired in the operations process.

Item Quantity

Required

Price per unit Total Purchase

Flour 100kg RM2/kg RM240

Butter 25kg RM10/kg RM250


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List of operations personnel

Schedule of tasks and responsibilities


*Use the same format as in admin plan

M hi d i t


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Machine and equipment

All machines and equipment must be listedtogether with the estimated price, number

of units and suppliers name.

Type Price PerUnit(RM)

Quantity Total Cost(RM)

Machine X 12,000 1 12,000Stove On loan/

rented

O ti l t l


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Operations space layout plan

Draw a floor plan of the operations spacelayout with the key items (e.g. store room,

exit doors and electrical points) that have

to be taken into consideration.

L ti


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Location

Specify the location where the businessoperations section is sited. State whether

the building is rented; built by the business

owners or purchased as a ready built

premise. If the premise is rented, state the

rental deposit and any renovation cost

incurred.

O ti B d t


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Operations Budget

List all the operations expenses involvedunder the following categories:

Capital Expenditure/Fixed Asset

Working Capital/Monthly Expenses Other Expenses

Pl th f ll i


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Operations process

Process Flowchart

Capacity Planning/ProductionSchedule

Materials requirement

Machine and equipment


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Financial Plan


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The Importance of A Financial Plan

To determine the amount of money to beinvestedthe project cost.

To identify and propose the relevantsources of fund.

To ensure that the initial capital is sufficient.

To appraise the viability before actualinvestment is committed.

As a guideline for implementation.

S f Fi i l I f ti


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Sources of Financial Information

Financial information is gathered throughbudgets.

Operational budget Administrative budget

Marketing budget Production budget

Financial budget Project implementation cost

Sources of fund Projected cash flow statements Projected profit & loss statements Projected balance sheet statements

Steps in Preparing a Financial


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Steps in Preparing a FinancialPlan

Step 1: Prepare the project implementation cost schedule.

Step 2:

Prepare the sources of fund to finance the projectcost.

Step 3: Prepare the projected cash-flow statements.

Step 4: Prepare projected trading, profit & loss statements

(for 3 years).

Project Implementation Cost


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Project Implementation Cost

Project implementation cost refers to the totalcosts (short & long-term costs) needed toimplement the proposed business/project.

Long-term costs refer to capital expenditurerequired to buy fixed assets (ex. land, building,machinery, equipment, furniture and vehicle).

Short-term costsrefer to expenditure to finance

day-to-day operation of the business (ex. rawmaterials/inventory, wages & salaries, utilitiesand other overheads.

Elements in Project Cost


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Elements in Project CostSchedule

Capital Expenditure Land

Building

Renovation

Machinery & Equipment

Furniture & Fixtures

Vehicle

Working Capital ( _xx month) Administrative

Marketing Operation

Elements in Project Cost


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e e s ojec CosSchedule

Pre-operational costs Business registration & licenses

Legal fees

Road tax & insurance

Stamp duties etc.

Deposits Rental

Utilities

Provision for contingencies

(2 to 5 percent)

Example: Project Implementation


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Example: Project ImplementationCost Schedule

RM RM

Capital ExpenditureBuilding 45,000Machinery & Equipment 23,000Furniture & Fixtures 7,000

Van 25,000Renovation 4,000104,000

Working Capital (1 month)Administrative 8,000Marketing 1,500

Operation 8,000 17,500Pre-operational costs 2,700Deposits 800Allowance for contingencies (10%) 12,500

Total cost 137,500

Exercise: Project Implementation


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Exercise: Project ImplementationCost Schedule for Gegak Gempita

RM RM

Capital ExpenditureEquipment 100

100Working Capital (1 day)

Administrative 10Marketing 5

Operation 160175

Preoperational Cost 160Deposits Rental 10 170

Grand Total 445

Allowance for contingencies (5%) 22.25Total cost 467.25

Sources of Fund


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Sources of Fund

Sources of fund refer to the source where

fund to finance the project cost is secured.

It can be internally or externally generated.

Sources of Fund


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Sources of Fund

Equity Contribution the total amount of funds contributed by the owner or the

partners in the business

inclusive of cash andpersonal assetcontributions by theowner(s).

Term Loan long and short terms funds obtained from financial providers

Hire-Purchase Scheme to a form of financing often used in the purchase of fixed

asset such as vehicle, machinery, and furniture and fittings

Others finance may include government grants, personal borrowings

from individuals and companies.

Example: Sources of Finance


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Example: Sources of Finance

Source RM

Equity ContributionCash 27,500Asset 45,000

Term Loan 45,000

Hire-purchase Finance 20,000

Total 137,500

Cash flow Projected Statements


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Cash-flow Projected Statements

It is projected statements of cash inflowsand outflows throughout the plannedperiod.

It shows the following:

Cash inflows Cash outflows

Deficit or surplus

Cash position (beginning & ending balances)

Elements in Cash-flow


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Statement

Cash Inflows Equitycash only

Term-loan

Cash sales Collection of receivables

Sales of asset



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Statement

Cash Outflows Operational expenditure

Marketing expenditure

Administrative expenditure Loan repayment

Hire-purchase repayment

Purchase of fixed assets

Pre-operational expenses

Miscellaneous expenses



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Statement

Cash Surplus or Deficit Inflows > Outflows = Surplus

Inflows < Outflows = Deficit

Cash Position Beginning cash + Surplus/

(- Deficit) = Ending cash

Note: The ending cash balance for aparticular month becomes the beginningbalance for the next consecutive month


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Example: Profit & Loss Account

Sales 240,000

Less: ExpensesAdministrative 96,000

Marketing 18,000Operational 96,000Financial:

Interest on term loan 4,500Interest on hire-purchase 1,600

Depreciation charges 11,800Pre-operational expenditure 2,700Total Expenditure 230,600

Net Profit 9,400

Balance Sheet Pro-formaS


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Statements

It is a projected statement which showsthe financial position of the company at

a specific point in time in terms of assets

owned and how those assets are

financed.

Projected statements are prepared for

the period of three (3) years.

Elements in a Balance Sheet


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Elements in a Balance Sheet

Fixed Assets List all fixed assets at its book value (Cost

Accumulated depreciation)

Current Assets

List all current assets (e.g. cash, stocks, accountreceivables, deposits etc.)

Equity

Equity contribution (cash + assets) plus net profit

(accumulated)

Long-term Liabilities

Term-loan (year end balance)

Hire-purchase (year end balance)

Example: Balance Sheet for


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Example: Balance Sheet forManufacturing & Trading Companies

Fixed AssetsMachinery & Equipment 18,400Furniture and Fixtures 5,600Renovation 3,200Van 20,000 47,200

Current Assets

Cash 40,900Closing stock for raw materials 3,000Closing stock for finished goods 3,000Deposits 800 47,700

Total Assets 94,900Equity

Capital 27,500Net profit 15,400 42,900

Long-term LiabilitiesTerm-loan 36,000Hire-purchase 16,000 52,000

Total Equity & Liabilities 94,900

Example: Balance Sheet for


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Service Companies

Fixed AssetsMachinery & Equipment 18,400Furniture and Fixtures 5,600Renovation 3,200Van 20,000 47,200

Current AssetsCash 40,900Deposits 800 41,700

Total Assets 88,900

Equity

Capital 27,500Net profit 9,400 36,900

Long-term LiabilitiesTerm-loan 36,000Hire-purchase 16,000 52,000

CHAPTER 3- Business Plan.ppt

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Transcript of CHAPTER 3- Business Plan.ppt