DEVELOPING A BUSINESS PLAN

Planning in plain and simple language is thinking ahead. In business, it is thinking ahead of objectives, strategies, financing, production, marketing, profit prospects, and growth possibilities.

Planning is :◦ What to do.◦ How to do it.◦ When to do it.◦ What to expect in the future.

Developing A Business Plan

Planning must be realistic. It must be based on available sources – human, financial, and physical resources.

Planning must be based on felt needs. The objectives of the entrepreneur should fit the needs of the people in a community.

Planning must be flexible. Resources, needs, and economic condition change. Planning should be adjusted to such change to be effective and relevant.

Planning must start with simple projects.

Principles of Planning

Unplanned stage. At the start of the business, the owner-manager is busy looking for funds, customers, materials, and equipment.

Budgeting – System stage. Eventually, the owner-manager realizes the need to develop and use a budgeting system.

Annual planning stage. The owner-manager drafts an annual plan. He can use either the top down planning or bottom up planning.

Strategic planning stage. As the business enterprise becomes bigger, a long range planning is needed.

Stages of Business Planning

The plan should state clearly its objectives. The plan should provide measures for satisfactory

accomplishment of the objectives in terms of quantity, quality, time and cost.

The plan should state the policies which should guide people in attaining the objectives.

The plan should indicate what department or unit will be involved in accomplishing the objectives.

The plan should indicate the time which should be allowed for each activity.

The plan should specify the required resources and their corresponding costs.

The plan should designate the officers who will held accountable for the accomplishment of the objectives.

Criteria of Effective Planning

SWOT. The chances of a product or service can be evaluated through the SWOT analysis.

Objectives. These should be specific and realistic. Such objectives can be daily, weekly, monthly and yearly.

Strategies. These are ways of accomplishing the objectives.

Time frame. In business, time is gold. An entrepreneur must be efficient in time management.

Components of Business Planning

Evaluate your personal resources and interest, and the resources of the community.

Analyze your market. Choose a proper business location. Prepare a financial plan. Prepare a production plan. Prepare an organizational plan. Prepare a management plan.

Steps in Business Planning

Planning can eliminate business risk because it carefully studied the competence, interest and resources of the entrepreneur against the needs of consumers, together with the presence of competitors.

Planning can minimize cost of production. Planning can detect the weaknesses of the

business operations.

Importance of Business Planning

ORGANIZING THE ENTERPRISE

When one starts to organize a business enterprise, it is presumed that he has conducted a feasibility or market study. That is, he knows his resources, the needs of the community and strengths of his competitors, and so forth.

However, what count most is the personal characteristics of the entrepreneur. Hardwork, determination, creativity, enthusiasm, and human relations can make the difference between success and failure.

More than one hundred years ago, a young man from Bavaria went to the United States as an immigrant. His objectives was to seek his fortune. Little success at first encouraged him to return to his country. But he decided to try prospecting for gold in California. At that time all roads led to California. Likewise, luck was not for him as a gold prospector.

However, the young man recognized the needs of his fellow gold prospectors for sturdy and durable work pants. Exploiting his talent for tailoring and using his last money, he put up his tailoring shop. Over the years, his business prospered. Until it became transnational in operations. The name of the young immigrant is Levi Strauss.

The Levi’s Story

He did not discover gold in California. But just the same acquired something worth more than gold. The Levi Strauss and Company has become largest apparel company in the world. Famous chain stores throughout the world sell Levi’s jeans. Annual sales have been recorded at $3billion.

Personal Satisfaction. They enjoy challenges and risk taking ventures.

Family involvement. They feel it is their responsibility to continue the business of their parents, specially if it is profitable.

Independence and power. They want to be the boss.

Social activities. They are people who are really born socializers. They love social activities.

Profit expectations. They go to business because this is the best way for them to become rich.

Why do you Go to Business?

An organization is a group of two or more persons who work together to attain a common set goals.

Organizing is a process of combining and coordinating resources and activities in order to accomplish efficiently and effectively certain objectives.

What is an Organization?

There are three most forms of business organization in a capitalist economy. These are the:

Sole or Single Proprietorship. Owned and usually managed by one person.

Partnership. It is an association of two or more persons who act as co-owners of a business.

Corporation. It is an artificial being created by operation of law, having the right of succession, and the powers, attributes and properties expressedly authorized by law or incident to its existence.

Forms of Business Organization

Advantages Disadvantages

• Ease & low cost of formation & dissolution

• Unlimited liability

• Retention of all profits •Lack of stability

• Independence & flexibility •Limited access to credit

•Tax advantage & less government regulation.

• Limited business skills and knowledge

Single or Sole Proprietorship

Advantages Disadvantages

• Easy to organize • Unlimited liability

• Availability of more capital & credit.

• Lack of stability

• Retention of profits • Management disagreement

• Better business skills & knowledge

• Idle investment

Partnership

Advantages Disadvantages

• Limited liability • Difficult to organize

• Easy to raise capital • Strictly regulated and supervised by the government

• Perpetual life • Some corporations are socially irresponsible

• Specialized management • Formal and impersonal employer-employee relationship

Corporation

The Cooperative Code defines a cooperative as a duly registered association of persons, with a common bond of interest, who have voluntarily joined together to achieve a lawful common social or economic end, making equitable contributions to the capital required and accepting a fair share of the risk and benefits of the undertaking in accordance with the universally accepted principles of cooperation.

The Cooperative: An Enterprise for the Poor

Credit cooperative Consumers cooperative Producers cooperative Marketing cooperative Service cooperative Multipurpose cooperative

Types of Cooperatives

Authority passes from the highest to lowest level. This is called line of authority.

Staff Authority is not a part of a chain command. Its job is to provide support, advice and expertise to line authority.

Both line and staff officers are needed for the efficient operation of the enterprise. The line managers make decisions while the staff managers assist in the making of decisions.

Line and Staff Authority

Financial. The entrepreneur must be knowledgeable about the financial aspects of business decisions.

Marketing. The entrepreneur must be well versed on the 4Ps of marketing: product, pricing, place & promotion.

Managerial skills. The entrepreneur must be able to identify the strengths & weaknesses of his personnel.

Overall personal decision-making process. The entrepreneur should have a thorough evaluation of what is to be attained by going into business, and what human and financial resources are available & necessary.

Entrepreneurial Considerations

Plan the business Select the appropriate form of business organization Scout for reasonable credit or financing Choose a good location Secure licenses/ permits for the business operation. Setup records for financial, physical and personnel

resources Insure the business if necessary. Promote the business Manage the business Do your social responsibility

Steps in Starting a New Business

MANAGING THE ENTERPRISE

All business organizations have resources and goals. Resources require proper allocation and efficient use. Goals must be effectively achieved. These and many more can made possible through good and just management.

Without efficient and effective management, a business organization cannot survive.

Management is a process by which a cooperative group directs actions towards common process by which a cooperative group directs actions towards common goals.◦ Joseph Massie – Essentials of Management

Management is the process of coordinating the resources of the organization in order to achieve its primary goals.◦ Robert Hughes – Business

Management is both art and science.

Management Defined

The role of business management should not only to maximize profits for its stockholders, but also to help jobless.

It is the social responsibility of management to employ such resources for the good of the economy and society.

Role of Management

Material resources. These are tangible, physical resources which are used for production.

Financial resources. These are funds. Human resources. It is the people who plan

and implement business activities. Information resources. Correct and

complete information is vital to the success of any business organization. Without information, it is impossible to formulate good plans and programs.

Production Resources

Establish goals of the enterprise and develop plans to attain goals.

Organize people and other resources to achieve goals.

Lead and motivate people towards the goals of the enterprise.

Maintain sufficient control system to ensure that the enterprise is moving well towards its goals.

Basic Functions of Management

Efficient and effective managers possess skills that are vital in performing their functions.

Technical skills Conceptual skills Interpersonal skills Diagnostic skills Analytic skills

Characteristics of Successful Managers

Risk is a part of business. It can be both within the control or beyond the control of the entrepreneur.

Types of non-criminal business risk:◦ Fire◦ Natural Calamities◦ Personal Liabilities◦ Economic problems◦ Business interruptions◦ Loss of key personnel

Risk and Insurance Management

There are business risk which are criminal in nature. Such risk are personally planned or intended. These are:

Burglary Robbery Shoplifting Employee theft

Other Business Risks

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