1. BUSINESS PLAN
A business plan must provide answers to
following questions:
 What you intend to do/how you intend to do it/
when you intend to do it?
 How much do you want to borrow?
 When you will be able to repay the loan?
 Will you be able to pay the interest?
 Could your business survive a setback in its
plans?
 What security is available for lending?
 Will you be able to sell your product?
 Is the business proposal commercially viable?
 Will the business be profitable?

2. WHAT DOES A BUSINESS PLAN
INCLUDE?
 Summery of the Project/ Project at a
Glance
(The purpose of the business, legal form of the
organization, the location, resource requirements,
volume of business, a brief note on market,
customers and about the promoter(s) and, financial
highlights)
 General Information
(About the business and promoter's qualification,
training and experience relevant to the project,
form of business entity, location, management
plan, etc.)
Cont…

3. WHAT DOES A BUSINESS PLAN INCLUDE? …
Contd.
 Market Potential and Plan
(A note on marketing strategy, potential customers,
competition, market size and future prospects,
pricing, advertising & promotion, etc.)
 Details of the Proposed Project
(Requirement of fixed capital and working capital,
the cost of project and means of finance)
 Manufacturing Process
(Step-by-step description of the manufacturing
process, plant capacity, expansion plans and
quality control procedures etc.)
Cont…

4. WHAT DOES A BUSINESS PLAN INCLUDE? …
Contd.
 Production Programme/ Sales Revenue
(Plant capacity, capacity utilization, quantity
produced/sold, and sales realisation)
 Cost of Manufacturing
(Cost of raw materials, utilities, manpower, repairs
and maintenance, selling and distribution
expenses, administrative expenses, interest on
loans availed, depreciation and any other
expenses)
Cont…

5. WHAT DOES A BUSINESS PLAN INCLUDE? …
Contd.
 Profitability Projections
(Sales, cost of manufacturing, tax liabilities,
repayments, retained profit/loss, break even point,
Debt Service Coverage Ratio (DSCR), Internal
Rate of Return (IRR)
 Project Implementation & Other Information
(Project implementation Schedule, Security offered,
other details if any.)

6. PROJECT COST: AN ESTIMATE OF
FUNDING REQUIREMENTS
(PROJECT COST COMPONENTS)
I. LAND AND SITE DEVELOPMENT
 COST OF LAND
 LAND RELATED LEGAL CHARGES
 LEVELLING AND FILLING COSTS
 APPROACH/INTERNAL ROAD COSTS
 FENCING/COMPOUND WALL COSTS
 COST OF GATES
Cont…

7. PROJECT COST COMPONENTS ….Contd
II. BUILDING AND CIVIL WORKS
 FACTORY BUILDING
 OFFICE GODOWN, ETC.
 WELL, TANK, SILOS, GARAGE AT PROJECT
SITE
 SEWER AND DRAINAGE
 ARCHITECT FEE
III. PLANT AND MACHINERY
 PRICE OF MACHINERY
 EXCISE-TAX, FRIEGT, PACKAGING, TRANSIST
INSURANCE, OCTROI, ETC.
 STORES AND SPARES BOUGHT ALONG WITH
THE MACHINERY
 FOUNDATION AND INSTALLATION COST
Cont…

8. PROJECT COST COMPONENTS ….Contd
IV. OTHER FIXED ASSETS
 FURNITURE
 OFFICE EQUIPMENTS
 MISCE. TOOLS & EQUIPMENTS
 VEHICLES
 EQUIPMENTS, CABLING FOR POWER
DISTRIBUTION
 EQUIPMENT AND PIPING FOR WATER SUPPLY
 LABORATORY EQUIPMENTS
 WORKSHOP EQUIPMENTS
 FIREFIGHTING EQUIPMENTS
 EFFLUENT COLLECTION, TREATMENT AND
DISPOSAL ARRANGEMENTS
 BOILER
 DIESEL GEN. SET Cont…

9. PROJECT COST COMPONENTS ….Contd
V. TECHNICAL KNOWHOW
VI. PRELIMINARY AND PRI-OPERATIVE
EXPENSES
 LEGAL CHARGES
 FEASIBILITY REPORT
 CAPITAL RAISING
 SALARY AND ADMINISTRATIVE COST DURING
IMPLEMENTATION PERIOD
 RENTS, TAXES, ETC. DURING
IMPLEMENTATION PERIOD
 TARVEL COST DURING IMPLEMENTATION
PERIOD
 INTEREST DURING IMPLEMENTATION PERIOD
 MORTGAGE EXPENSES IN RESPECT OF
LOANS Cont…

10. PROJECT COST COMPONENTS ….Contd
VII. WORKING CAPITAL MARGIN
VIII. CONTINGENCY & ESCALATION
(@ 10% OF I - IV)
 BIS, POLLUTION BOARD & EXPLOSIVE LICENCE,
ETC.
 STATUTORY DEPOSITS
 PROCESSING FEES OF MFIs

11. IMPLEMENTATION SCHEDULE: AN ILLUSTRATION
(Months)
TASK 1 2 3 4 5 6 7 8 9 10
Study of business
plan √
Subm. Of term
loan application √
Term loan sanction
√
Arranging land
√ √ √
Civil works √ √ √ √ √
Arranging utilities
√ √
Placing order for
machinery √
Installation of
machinery √ √
Recruitment of
manpower √ √
Trial run √
Commercial
production √

12. PROJECT APPRAISAL
IT IS AN ASSESSMENT OF A PROJECT IN TERMS OF ITS
VIABILITY AND FEASIBILITY. IT IS AN ANALYSIS OF
COST AND BENEFIT OF A PROJECT OVER THE PROJECT
LIFE.
1. ECONOMIC APPRAISAL
2. FINANCIAL APPRAISAL
3. TECHNICAL APPRAISAL
4. MARKET APPRAISAL
5. MANAGERIAL APPRAISAL
6. ENVIRONMENTAL APPRAISAL

13. PROJECT APPRAISAL
ECONOMIC APPRAISAL
i. PAYBACK PERIOD
ii. AVERAGE RATE OF RETURN ON INVESTMENT
iii. NET PRESENT VALUE
iv. INTERNAL RATE OF RETURN
v. BENEFIT-COST RATIO
vi. LEVEL OF CAPACITY UTILISATION OR BREAKEVEN
ANALYSIS

14. PROJECT APPRAISAL
FINANCIAL APPRAISAL
i. REQUIRED FINANCIAL RESOURCES
a. FIXED ASSETS
b. CURRENT ASSETS
c. NECESSARY WORKING CAPITAL
ii. AVAILABILITY OF FINANCIAL RESOURCES
a. REQUIRED BORROWING
b. POTENTIAL SOURCES OF FUNDS
c. COST OF BORROWING
d. REPAYMENT CONDITIONS
e. OPERATION COST ANALYSIS
f. FIXED COSTS
g. VARIABLE COSTS
h. PROJECT CASH FLOW
i. PROJECT PROFITABILITY

15. PROJECT APPRAISAL
TECHNICAL APPRAISAL
i. CRUCIAL TECHNICAL SPECIFICATIONS
a. DESIGN
b. DURABILITY
c. RELIABILITY
d. PRODUCT SAFETY
e. STANDARDIZATION
ii. ENGINEERING REQUIREMENTS
a. MACHINES
b. TOOLS
c. TECHNOLOGY
d. WORK FLOW
Cont…

16. PROJECT APPRAISAL
TECHNICAL APPRAISAL …Contd.
iii. PRODUCT DEVELOPMENT
a. BLUEPRINTS
b. MODELS
c. PROTOTYPES
iv. PLANT LOCATION
a. LAND AND SITE AVAILABILITY
b. PROXIMITY TO MARKET
c. PROXIMITY TO SOURCE OF RAW MATERIAL
d. AVAILABILITY OF SUPPORT SERVICES
e. SCOPE FOR EXPANSION
f. GOVERNMENT RESTRICTIONS/INCENTIVES
g. INFRASTRUCTURE
h. ACCESSIBILITY
i. AVAILABILITY OF WORKFORCE

17. PROJECT APPRAISAL
MARKET APPRAISAL
i. MARKET POTENTIAL
ii. UNDERSTANDING OF CUSTOMERS
iii. DIFFERENTIATION
iv. MARKET SEGMENTATION
v. POTENTIAL DEMAND
vi. DEMAND-SUPPLY GAP
vii. MARKET TEST REPORT
viii. SALES PRICE PROJECTIONS
ix. PROPOSED CHANNELS OF DISTRIBUTION
x. PRODUCT PROMOTION STRATEGY
xi. PRODUCT LIFECYCLE ANALYSIS
xii. COMPETITION AND COMPETITOR’S ANALYSIS

18. PROJECT APPRAISAL
MANAGERIAL APPRAISAL
i. PERSONAL BACKGROUND OF THE PROMOTERS
ii. THEIR EXPERIENCE, SKILL AND KNOWLEDGE BASE
iii. FINANCIAL LEVERAGE WITH THEM
iv. CREDITWORTHINESS OF THE PROMOTERS
v. ORGANISATIONAL SETUP AND RESPONSIBILITIES
AT VARIOUS LEVELS
vi. AVAILABILITY OF MANAGERIAL RESOURCES
ENVIRONMENTAL APPRAISAL
i. ENVIRONMENTAL RISK
ii. POLLUTION CONTROL PLAN
iii. COMPLIANCE WITH GOVERNMENT REGULATIONS

19. MAJOR FINANCIAL RATIOS USED IN PROJECT
APPRAISAL
1. DEBT- EQUITY RATIO (1:3)
= TOTAL DEBTS / [OWNER’S CAPITAL +
SUBSIDY]*100
= TOTAL DEBTS/EQUITY + RESERVES (IN THE CASE
OF A LTD. CO.)
2. CURRENT RATIO (2 BUT NOT > 1.33)
= CURRENT ASSETS / CURRENT LIABILITIES
3. DEBT SERVICE COVERAGE RATIO (2 OR MORE BUT NOT
> 1.5)
= [NET PROFIT AFTER TAX + DEPRECIATION +
INTEREST ON TERM BORROWINGS] / ANNUAL
REPAYMENT + INTEREST ON BORROWINGS] Cont…

20. MAJOR FINANCIAL RATIOS USED IN PROJECT APPRAISAL …
Contd
4. RETURNS ON INVESTMENT (HIGHER THAN THE
HIGHEST RATE OF INTEREST)
= NET PROFIT BEFORE INTEREST AND TAX /
INVESTMENT
5. RETURN ON EQUITY (HIGHER THAN THE OTHER
INVESTMENTS)
= NET PROFIT AFTER TAX / OWNER’S CAPITAL
6. NET PROFITABILITY RATIO ( > OR = TO INDUSTRY
AVERAGE)
= NET PROFIT / SALES*100
7. OPERATING RATIO
= COST OF GOODS SOLD + OPERATING EXPENSES / NET
SALES * 100

21. MISTAKES ENTREPRENEURS
COMMIT WHILE LAUNCHING OF A
VENTURE
I. LACK OF A THOROUGH STUDY OF
MARKET POTENTIAL FOR PRODUCT
AND VENTURE UNIQUENESS
II. LACK OF ALL ROUND MANAGERIAL
ABILITY AND OBJECTIVE EVALUATION
OF BUSINESS
III. WASTEFUL AND INAPPROPRIATE INVESTMENTS
CONTD…

22. IV. CAPACITY UTILISATION ESTIMATES:
GROSSLY UNREALISTIC
V. INADEQUATE UNDERSTANDING OF
TECHNICAL REQUIREMENTS
VI. INAPPROPRIATE MARKETING/
DISTRIBUTION STRATEGY, OVER- RELIANCE
ON ONE CUSTOMER, LOW SALES AND
WRONG PROMOTIONAL STRATEGY
VII. INADEQUATE ARRANGEMENTS FOR
KEEPING ACCOUNTS
CONTD…

23. VIII. WRONG ESTIMATION OF CAPITAL
REQUIRED LEADING TO OVER OR
UNDERCAPITALISATION
IX. CASH FLOW PROBLEMS AND
INADEQUATE WORKING CAPITAL
X. NEPOTISM IN RECRUITMENT AND
INCOMPETENT ADVISORS AND POOR
HRD AND IRs
XI. INAPPROPRIATE PRICING STRUCTURE
XII. IGNORANCE OF LEGAL ISSUES AND
TAXATION
XIII. SELECTING A WRONG LOCATION

25. BUSINESS PLAN FORMAT
1.0 GENERAL
Name of the Firm: ____________________________________
Project:_______________________________________
Location:______________________________________
Type of Organisation: Proprietary/Partnership/Pvt. Ltd.
Address: ___________________________________________
Name of the Chief Promoter(s):
______________________________________
BACKGROUND OF THE CHIEF PROMOTERS
Cont…

26. BUSINESS PLAN FORMAT
2.0 DETAILS OF THE PROPOSED PROJECT:
Mfg./Servicing
2.1 LAND AND BUILDING
Sr.No. Particular Area Total Value Remarks
Required
1. Land
2. Building
Total:
2.2 MACHINERIES/EQUIPMENTS
Sr. Description Nos. Required Rate (Rs.) Total Value (Rs.)
No
Total:
Cont…

27. BUSINESS PLAN FORMAT
2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing
2.3 MISC. FIXED ASSETS
Sr. Particulars Nos. Required Rate (Rs.) Total Value (Rs.)
No
Total:
2.4 PRELIMINARY AND PRE-OPERATIVE EXPENSES
Sr. Particulars Amount (Rs.) Remarks
No
1. Interest during
implementation
2. Establishment Expenses
3. Start-Up Expenses
Misc. Expenses Total
Cont…

28. BUSINESS PLAN FORMAT
2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing
2.5 WORKING CAPITAL
Sr. Item Dura- Total Value (Rs)
No. tion
IYear IIYear IIIYear
1. Raw-Material Stock
2. Semi-finished Goods
3. Stock
4. Finished Goods Stock
5. Sales on Credit
Production Expenses
Total
Cont…

29. BUSINESS PLAN FORMAT
2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing
2.6 TOTAL COST OF THE PROJECT
Sr. Particulars Total Value
No (Rs.)
1. Fixed Capital
(Total of item No.2.1, 2.2,2.3)
2. Working capital margin
(Total of item No. 2.5)
3. Preliminary & Pre-operative Expenses
4. (Total of item No. 2.4)
Cost escalation & Contingencies
Total
Cont…

30. BUSINESS PLAN FORMAT
2.0 DETAILS OF THE PROPOSED PROJECT: Mfg./Servicing
2.7 MEANS OF FINANCE
Sr. No Particulars Amount (Rs.) Remarks
1. Own Investment
2. Term Loan
3. Working Capital Loan
4. Any Other Source
Total:
Cont…

31. BUSINESS PLAN FORMAT
3.0 MARKET POTENTIAL
3.1 Present Demand and Supply of the Product
3.2 Competition
3.3 Target Clients/selected Market Area
3.4 Marketing Strategy (USP)
4.0 MANUFACTURING PROCESS
4.1 Technical Know-how Availability
4.2 Step-by-Step Description of the Manufacturing
Process
from Raw Material to Finished Goods [Attach Process
Flow Chart]
Cont…

32. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE
5.1 No. of Working Days Per Annum -
5.2 No. of Working Shifts (8hrs) per Day -
5.3 Installed Capacity (annual) -
5.4 Utilized Capacity (%): -
I - Year -
II - Year -
III - Year -
Sr. Items(s) Quantity Capacity
No Produced Utilisation
Per Year (%)
Cont…

33. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE …Contd
5.5 SALES REVENUE
Year Items(s) Quantity Rate per Sales
Sold/Year Unit (Rs) Realisation
(Rs)
Total:
5.6 RAW MATERIAL (ANNUAL REQUIREMENT)
Sr. Items(s) Quantity Rate Total
No (Rs) Value(Rs)
Total :
Cont…

34. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE …Contd
5.7 UTILITIES
Sr. Particulars Annual Remarks
No Expenditure(Rs)
1. Power/Electricity
2. Water
3. Coal/Oil/Steam
4. Any other item
Total
5.8 REPAIRS AND MAINTENANCE
Sr. Particulars Amount(Rs)
No
Cont…

35. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE …Contd
5.8 MAN POWER (Salaries/Wages)
Sr. Particulars No. Wages/Salaries Annual
No per Month Expenses
(Rs.) (Rs)
1. Skilled
2. Semi Skilled
3. Unskilled
4. Office Staff
5. Any Other
Total
Cont…

36. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE …Contd
5.9 SELLING AND DISTRIBUTION EXPENSES
Sr. Particulars Amount(Rs) Remarks
No
1. Publicity Expenses
2. Travelling
3. Freight
4. Commission
5. Misc.
Total
5.10 ADMINISTRATIVE EXPENSES
Sr. Particulars Amount(Rs) Remarks
No
1. Stationery & Printing
2. Post/Telephone/Telegrams
3. Entertainment Expenses
4. Misc.
Total
Cont…

37. BUSINESS PLAN FORMAT
5.0 PRODUCTION SCHEDULE …Contd
5.11 INTEREST
Year Outstanding Interest Installment Balance
Loan (Rs) (Rs) (Rs)
Amount
(Rs)
5.12 DEPRECIATION
Sr. Type of Asset Cost of Expected Life Depreciatio
No. Asset n

38. BUSINESS PLAN FORMAT
6.0 PROFITABILITY PROJECTIONS
Sr. Particulars Amount
No. (Rs.)
1-Year 2-Year 3-Year 4-Year 5-Year
A. Sale Realisation
B. Cost of Manufacturing/
Servicing
i) Raw Materials
ii) Utilities
iii) Salaries/Wages
iv) Repairs & maintenance
v) Selling & Distribution
vi) Expenses
vii) Administrative Expenses
viii) Interest
ix) Rent
x) Depreciation
xi) Misc. Expenses
Total
C. Gross Profit/Loss (A-B)
D. Income-tax
E. Net Profit/Loss
F. Repayment
G. Retained Surplus

39. BUSINESS PLAN FORMAT
DEPRECIATION RATES
Assets WDV SL
Rates Rates
1. Buildings which are not for 10% 2.3%
Residential purposes
2. Plant & Machinery (Other than 33.33% 8.33%
Under item 3 & 4)
3. Aero planes, vehicles used for 50% 19%
Hire-business, moulds and
Equipments for air/water
Pollution control and solid
waste control

40. BUSINESS PLAN FORMAT
DEPRECIATION RATES …Contd
Assets WDV SL
Rates Rates
4. Wooden parts in artificial silk 100% 100%
Manufacturing machinery,
Cinematograph films, bulbs
Of studio lights, energy saving
Devices (specialized boilers &
Furnaces), instrumentation &
Monitoring energy flows, waste
Heat recovery equipments, co-
Generation systems, electrical
Equipments, burners, flour mills,
Gas cylinders, glass melting furnaces,
Rolling-mill rolls, wooden match
Frames, mineral oil production &
Generation equipment, mine & quarry
equipments, salt work, renewed energy
devices.
5. Furniture and fittings used 10% 2.3%

41. BUSINESS PLAN FORMAT
SUPPLEMENTARY INFORMATION
1. The plot size is (40X20) 800 sq. meters
2. Commercial banks provide loans up to a limit of 70% in the case of
raw materials, stores, consumables and packaging materials.
3. All the income-expenditure and related statements are to be
worked out for 8 years.
TAX COMPUTATION: SALIENT POINTS:
1. You can carry forward losses to the next year for offsetting them
against profits in the following year.
2. There are tax incentives for setting up a new enterprise in backward
areas. There are two major deductions allowed:
i. Under Section 80 HHA of IT Act: 20% remission for all new
enterprises set up in central government recognized industrially
backward districts.
ii. Under Section 80 I: 20% remission for all new enterprises for a
period of 10 years. For example, if PBT is RS. 100/-, an amount
of Rs. 20/- will be tax deductible and the taxable profit will be
only Rs. 80/-.

42. COMMON ERRORS IN BUSINESS PLAN
FORMULATION
a. Capacity Utilisation Estimates: Grossly Unrealistic
b. Capacity Computation: A Miscalculation
c. Market Survey: A Neglected Task
d. Machinery Selection: Serious Error
e. Technology-Oriented Products: A Shaky Arrangement
f. Project-Pruning and Resource-Straining: Exceeding the
Safe Limits
g. Accommodating in SSI Limits
h. Project Cost: An Under Estimation
i. Selecting the Location: Dangerous Temptations
j. Selling Price: Unfounded Optimism
k. Cash Flow in Initial Years: A Poor Detail