The Business Plan

Nature and scope of Business plan , Writing Business Plan, Evaluating Business plans, Using and implementing business plans. Marketing plan, financial plan and the organizational plan, Launching formalities

Nature and scope of Business plan

A business plan is a formal statement of a set of business goals. It may also contain background information about the organization or team attempting to reach those goals

What is Business Plan?

The business plan is a written document prepared by the entrepreneur that describes all the relevant internal and external elements and strategies for starting a new venture. It is a integration of functional plans such as marketing, finance, manufacturing, sales and human resources.

Planning
Planning is a process than never ends for a business. It is extremely important in the early stages of any new venture when the entrepreneur will need to prepare a preliminary business plan. As the venture grow up to mature business, planning will continue Plan may be short term or long term, strategic or operational.

Who should write the plan?

The business plan should be prepared by the entrepreneur. The entrepreneur may consult with many other sources in its preparation, such as lawyers, accountants, marketing consultants, and engineers.

Scope and Value of the Business

The business plan may be read by employees, investors, bankers, venture capitalists, suppliers, customers, advisors, and consultants. There are three perspectives should be considered in preparing the plan :
Perspective of the entrepreneur Marketing perspective Investors perspective

Scope and Value

The business plan is valuable to the entrepreneur, potential investors, or even new personnel, who are trying to familiarize themselves with the venture, it goals, and objectives.
It helps determine the viability of the venture in a designated market It provides guidance to the entrepreneur in organizing his or her planning activities It serves as an important tool in helping to obtain financing.

How do Potential Lenders and Investors Evaluate The Plan?

Four Cs of Credit:
Characters Cash flow Collateral Equity of Contribution Marketable Payback period Risk Feasibility, etc

Another

Presenting The Plan

It is often necessary for an entrepreneur to orally present the business plan before an audience of potential investors. In this typical forum the entrepreneur would be expected to provide a short (perhaps 20-minutes or half-hour) presentation of the business plan.

Information Needs
Before committing time and energy to preparing a business plan, the entrepreneur should do a quick feasibility study of the business concept to see whether there a any possible barriers to success. The information, obtainable from many sources should focus on marketing (segmenting, targeting, and positioning), finance (list of all possible expenditures, demand forecast, revenue), and production (location, manufacturing operations, raw materials, equipment, labor skills, space, overhead) . Internet can be a valuable resource.

Outline of a Business Plan

Introductory Page
Name and address of business Name(s) and address(es) of principal(s) Nature of business Statement of financing needed Statement of confidentially of report

Outline
Executive Summary Three to four pages summarizing the complete business plan
What is the business concept or model? How is this business concept or model unique? Who are the individuals starting this business? How will they make money and how much?

Outline
Environmental and Industry Analysis
Future outlook and trends Analysis of competitors Market segmentation Industry and market forecasts Product(s) Service(s) Size of business Office equipment and personnel Background of entrepreneurs

Description of Venture

Outline
Production Plan
Manufacturing process (amount subcontracted) Physical plant Machinery and equipment Names of suppliers of raw materials

Operational Plan
Description of companys operations Flow of orders for goods and/or services Technology utilization

Outline
Marketing Plan
Pricing Distribution Promotion Product forecasts Controls Form of ownership Identification of partners or principal shareholders Authority of principals Management-team background Roles and responsibilities of members of organization

Organizational Plan

Outline
Assessment of Risk
Evaluate weakness of business New technologies Contingency Plans

Financial Plan
Pro forma income statement Cash flow projections Pro forma balance sheet Break-even analysis Sources and applications of funds

Outline
Appendix (contains backup material)
Letters Market research data Leases or contracts Price lists from suppliers.

Using and Implementing The Business Plan

The business plan is designed to guide the entrepreneur through the first year of operations. Implementation of the strategy contain control point to ascertain progress and to initiate contingency plan if necessary. Business plan not end up in a drawer somewhere once the financing has been attained and the business launched.

Measuring Plan Progress

Entrepreneur should check the profit and loss statement, cash flow projections, and information on inventory, production, quality, sales, collection of accounts receivable, and disbursements for the previous month.
Inventory control Production control Quality control Sales control Disbursements

Updating the Plan

The most effective business plan can become out-ofdate if condition change. If the change are likely to affect the business plan, the entrepreneur should determine what revisions are needed. In this manner, the entrepreneur can maintain reasonable targets and goals and keep the new venture on a course that will increase probability of success.

Why Some Business Plans Fails?

Goals set by the entrepreneur are unreasonable. Goals are not measurable The entrepreneur has not made a total commitment to the business or to the family. The entrepreneur has no experience in the planned business. The entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service.

Marketing plan
Written Statement Of Marketing objectives, strategies and Activities to be followed in Business Plan

Marketing Research for the New Venture Who will buy the product or service ? What is the size of the potential market ? What price should be charged ? what is the most appropriate distribution channel ? What is the most effective promotional strategy to reach and inform potential customers ?

Four Steps In Market Research

Step One: Defining the Purpose or Objectives

Step Two:

Gathering Data from Secondary Sources

Step Three:

Gathering Information from Primary Sources

Step Four: Analyzing and Interpreting the Results

(a) Defining the purpose or objectives

Sit down & Make a list of the information that will be needed to prepare the marketing plan.
Ex: E may think there is a market for his product but is not sure who the customers will be So ask people what they think of the product or service and if they would buy it & background demographics How much potential customers would be willing to pay for the product or service Where the potential customers would prefer to purchase the product or service Where the customer would expect to hear about or learn about such a product or service

(b) Gathering data from secondary sources

Newspaper articlesLibraries: Government agenciesTrade magazines: dept & Chamber of commerce Internet

Dept & Chamber of Commerce

Local Banks/ Dept of Labor Local Media

(c ) Gathering information from primary sources Data collection procedures

Observation: record customers buying behaviors

interviewing: telephone- Mail- personal focus groups: 10-12 potential customers Questionnaire: sample questionnaire

(d) Analyzing and interpreting the results

Can be hand-tabulated or entered on a computer Results should be evaluated and interpreted in response to the research objectives Data can be cross-tabulated in order to provide more focused results.
Example: Entrepreneur compare results of Q by different Age, Occupation, Location- fine tuning can provide valuable insights particularly regarding the segmentation of the market

Understanding the Marketing Plan

Designed to provide answers to three basic questions:
Where have we been?(operational plan) History of marketplace Marketing Strengths & Weaknesses of the firm Market Opportunities & Threats Where do we want to go (in the short term)?
This addresses marketing Objectives & Goals- in next 12 months

How do we get there? This discusses Marketing strategy implementationwhen it will occur- who will be responsible for monitoring

Characteristics of the Marketing Plan

A marketing plan should:
Provide a strategy. Be based on facts/assumptions Be simple and short. Be flexible. Specify criteria for control.

Steps in Preparing the Marketing Plan

Define the business situation. Define the target market: opportunities and threats. Consider strengths and weaknesses. Establish goals and objectives. Define marketing strategy.

Financial plan
Provides with complete picture of how much & when funds are coming into the Organization- Where funds are going- How much cash is available & projected financial position of the firm

Financial plan
Helps new venture with most common problem- lack of cash Explain to potential investor
Plans to meet financial obligations How would he pay off debt or provide good ROI

3 Years of projected financial data to satisfy any outside investors First year should reflect Monthly data

This presentation is bought to you by

Rajesh