For the soap-making example, make a production schedule based on the data given in the process flow chart. Find out how long each
step takes in minutes or hours. In the soap example, you may have noticed that the curing period is long. You may have to prepare the
mixture for all the 960 bars of soap in advance. Once you have computed the length of period required for one production cycle (960
bars), you will be able to determine the number of cycles you can do in a week, a month, and a year. This information will help you to
decide whether to concentrate on the business or consider it as a part-time project.
In the case of the laundry shop, the production schedule should indicate how many washing jobs can be done in one day, week, month,
and a year given the estimated amount of time that were identified to complete one washing job,
number of washing machines, dryers, flat irons, and ironing tables, as well as the number of workers in the shop.
* Labor requirement: This comes in the form of direct labor and indirect labor. Direct labor refers to the people who are actually involved
in making the product or completing the service. In the soap business, this will be the mixer. Indirect labor refers to the people who
perform tasks that do not have anything to do directly with making the product or completing the service. They are the production
helpers, quality control inspector, supervisor, etc.
The decision to hire people will depend on your choice on whether to operate the soap-making business full time or part time. Let us
assume that you want to go full time. The type of people you will need to help you and their number will be dictated by your production
schedule. You could have some use for a table like this:
* Inventory schedule: Inventory refers to the stock of materials, supplies, and spares required for making the product or completing the
service. The inventory record will keep you informed of the date of purchase, quantity
purchased, cost, date released for production, quantity issued, and remaining balances. Keeping track of these items will ensure that
you do not only have the materials you need to make the product or complete the service on short notice but also to prevent you from
keeping obsolete or expired materials in your stock.
You can devise something similar to the chart below for this purpose.
* Total production cost schedule: This is a summary of the costs involved to produce your product or complete the service. It is
composed of the direct materials cost, direct labor cost, and the supplies, utilities, depreciation of machines and equipment, and
indirect labor costs, collectively known as manufacturing overhead cost.
Use the charts below to help you compute your total production cost.
E. Organizational aspect.
This refers to the details of putting the business together. It involves getting the people, setting up systems and procedures, acquiring
the machines and equipment, and registering the enterprise. It includes coming up with a timetable of activities to do until the enterprise
formally opens for business.
You start by defining your vision for the enterprise and setting up your goals and objectives. Then decide on the form of ownership,
whether it will be a sole proprietorship, a partnership, or a corporation. If you have a group, you may also choose to form a cooperative.
Show the organizational structure by means of an organizational chart arranged according to the four functional areas: marketing,
production, finance and administration. Below is an example of an organizational chart.
The organizational chart is useful for indicating the hierarchy or the levels of authority and communication in a company. It identifies
who is responsible for whom and who reports to whom. It also visually presents how the various job assignments are classified among
the staff.
This chart shows that the owner is a hands-on manager. He may have some staff to assist him but he is on top of the business and
makes all decisions.
Besides the organizational chart, you have to describe the duties and responsibilities that go with the positions, the number of people
you will need, the qualifications of those who will carry out each task, and the corresponding salaries and benefits, in the organizational
plan.
An important part of the organizational plan is the Gantt Chart. This is a list of all the activities you are to do prior to launching the
business and the timeframe for accomplishing them. Preparing the Gantt Chart is a useful exercise that allows you to have a view of
the pre-operating activities and their cost implications. These activities include writing of the business plan, negotiation for financing,
construction or improvement of the building, acquisition of machinery and equipment, recruitment (and training, as applicable) of
personnel, registration of the business etc. Your Gantt Chart could look like the one below.
F. Financial aspect.
Just as money is very important to any business, this section is critical to any business plan. This component will let you know how
much you will need to put up the business, where you will get the money to finance it, and keep it going. Vital to this component is an
estimate of how much you will need to operate the business for at least a year up to, probably five years, especially if you will borrow
from a bank, how you are going to use the loan, how much profit the business will earn, how you are going to repay the bank loan, and
some other information. While you usually go to a doctor only if you are ill, it is nonetheless advisable that you see your doctor regularly
for a checkup. In the same manner, you should know the financial status of your business regularly (preferably once a month) and not
just whenever you experience cash flow problems. The financial plan can be both a tool for prognosis for a healthy business and
diagnosis for one that is experiencing difficulties.
The financial plan translates into monetary terms what you have learned after completing the first three major components of your
business plan. In doing the marketing plan, you learned things related to sales generation, whereas in the production and
organizational plans, you learned about things related to expenses. The financial plan translates all of this information into monetary
figures, and from these data you will be able to assess whether the profit that you expect the business to earn is greater than the cost
of setting it up and operating it.
In the soap business for example, you expect to realize a monthly sales of P24,000 or P288,000 within a year. After computing your
expenses, deduct this amount from your total sales. If you get a positive number, it could mean that the business is profitable. This is a
very simplistic way of measuring the profitability of a business. There are a lot of other factors to consider and methods to use for
evaluating a business plan. Chapter 10 will discuss this in more detail.
One of the financial schedules you are to prepare for the financial plan is the total project cost schedule, which is composed of items
relating to the total fixed assets, the working capital, and the pre-operating expenses. Examples of fixed assets are land, building,
vehicle and equipment. Working capital, on the other hand, refers to funds you need to pay for expenses related to production,
marketing, and organization within a short period or until the revenues start coming and the business will be able to finance its own
operation. Pre-operating expenses, meanwhile, consist of the fees you incur when you register with the government and consultancy
fees you pay to a consultant or researcher who prepared the feasibility study. You include your sources of funds. The money may come
from your own pocket and from fellow owners of the business or equity contributions, if any. It may also come from relatives, friends,
banks or financial institutions. External sources of funds are referred to as creditors.
In the soap-making business, the blender, weighing scale, computer and printer are considered your fixed assets. If you put up a stall
or improve a part of your house for the business, the costs for putting up the stall and house improvement are also considered your
fixed assets. Your working capital will consist of the money you will need to buy the direct and indirect materials, pay your direct labor,
take care of overhead costs, and sell the soap. If you loaned from the bank or from an informal source, the interest will also form part of
your working capital. If you will train your workers, hire a consultant, or do some research these expenses, and the fees you will pay for
business registration will be part of your pre-operating capital.
A financial plan includes the preparation of the following financial statements: income statement, which presents the net result of a
companys revenues, minus expenses, over a given period; balance sheet, which is a financial snapshot of your business at a given
time that tells you how much your assets and liabilities are, as well as the net worth of your business; and cash flow statement, which
shows the sources and uses of cash for your business over a certain period.
You are not expected to acquire the skill of preparing financial statements after reading this. You can ask somebody to prepare these
statements for you. A well-experienced bookkeeper or an accountant can easily do the task. The more important thing is for you to
understand how to use the financial plan, particularly the financial statements, to come up with good business decisions.
Source: Your Guide to Starting a Small Enterprise -dti.gov.ph