The document provides guidance on developing an effective business plan. It discusses that the business plan should be written by the entrepreneur but they can consult experts. The business plan is valuable for the entrepreneur, investors, and new employees to understand the venture's goals and objectives. The business plan should include sections on the executive summary, industry analysis, description of the venture, production plan, operations plan, marketing plan, organizational plan, financial plan, and appendix. It stresses the importance of preparing a comprehensive plan that considers different perspectives and allows readers to fully understand the business concept.

1. Business Plan
Business plan
“Written document describing all relevant internal and external
elements and strategies for starting a new venture. It is often an
integration of functional plans such as marketing, finance,
manufacturing, and human resource.”
WHO SHOULD WRITE THE PLAN?
The business plan should be prepared by the entrepreneur; however, he
or she may consult with many other sources in its preparation. Lawyers,
accountants, marketing consultants, and engineers are useful in the
preparation of the plan. Some of these needed sources can be found
through services offered by the Small Business Administration (SBA), the
Senior Corps of Retired Executives (SCORE), small-business development
centers (SBDCs), universities, and friends or relatives. The Internet also
provides a wealth of information as well as actual sample templates or
outlines for business planning. Most of these sources are free of charge
or have minimal fees for workshop attendance or to purchase or
download any information.

2. SCOPE AND VALUE OF THE BUSINESS PLAN— WHO READS THE PLAN
The business plan may be read by employees, investors, bankers, venture
capitalists, suppliers, customers, advisors, and consultants. Who is expected
to read the plan can often affect its actual content and focus.
However, there are probably three perspectives that should be considered
in preparing the plan.
First is the perspective of the entrepreneur, who understands better than
anyone else the creativity and technology involved in the new venture. The
entrepreneur must be able to clearly articulate what the venture is all about.
Second is the marketing perspective. Too often, an entrepreneur will
consider only the product or technology and not whether someone would
buy it. Entrepreneurs must try to view their business through the eyes of
their customer
Third, the entrepreneur should try to view his or her business through the
eyes of the investor. Sound financial projections are required; if the
entrepreneur does not have the skills to prepare this information, then
outside sources can be of assistance

3. The business plan is valuable to the entrepreneur, potential investors, or
even new personnel, who are trying to familiarize themselves with the
venture, its goals, and objectives. The business plan is important to these
people because:
• 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.
WRITING THE BUSINESS PLAN
The business plan could take hundreds of hours to prepare, depending on
the experience and knowledge of the entrepreneur as well as the purpose it
is intended to serve. It should be comprehensive enough to give any
potential investor a complete picture and understanding of the new venture,
and it should help the entrepreneur clarify his or her thinking about the
business. Many entrepreneurs incorrectly estimate the length of time that an
effective plan will take to prepare. Once the process has begun, however, the
entrepreneur will realize that it is invaluable in sorting out the business
functions of a new venture

4. Outline of Business Plan
I. Introductory Page
A. Name and address of business
B. Name(s) and address(s) of principal(s)
C. Nature of business
D. Statement of financing needed
E. Statement of confidentiality of report
II. Executive Summary—Two to three pages summarizing the complete business plan
III. Industry Analysis
A. Future outlook and trends
B. Analysis of competitors
C. Market segmentation
D. Industry and market forecasts
IV. Description of Venture
A. Product(s)
B. Service(s)
C. Size of business
D. Office equipment and personnel
E. Background of entrepreneur(s)
V. Production Plan
A. Manufacturing process (amount subcontracted)
B. Physical plant C. Machinery and equipment D. Names of suppliers of raw

5. VI. Operations Plan
A. Description of company’s operation
B. Flow of orders for goods and/or services
C. Technology utilization
VII. Marketing Plan
A. Pricing
B. Distribution
C. Promotion
D. Product forecasts
E. Controls
VIII. Organizational Plan
A. Form of ownership
B. Identification of partners or principal shareholders
C. Authority of principals
D. Management team background
E. Roles and responsibilities of members of organization
IX. Assessment of Risk
A. Evaluate weakness(es) of business
B. New technologies
C. Contingency plans

6. X. Financial Plan
A. Assumptions
B. Pro forma income statement
C. Cash flow projections
D. Pro forma balance sheet
E. Break-even analysis
F. Sources and applications of funds
XI. Appendix (contains backup material)
A. Letters
B. B. Market research data C. Leases or contracts D. Price lists from suppliers
Environmental and Industry Analysis
environmental analysis
Assessment of external uncontrollable variables that may impact the business plan. Examples of these environmental factors are:
Economy. The entrepreneur should consider trends in the GNP, unemployment by geographic area, disposable income, and so on.
Culture. An evaluation of cultural changes may consider shifts in the population by demographics
Technology. Advances in technology are difficult to predict. However, the entrepreneur should consider potential technological
developments determined from resources committed by major industries or the U.S. government.
Legal concerns. There are many important legal issues in starting a new venture

7. • Production Plan
If the new venture is a manufacturing operation, a production plan is necessary.
This plan should describe the complete manufacturing process. If some or all of the
manufacturing process is to be subcontracted, the plan should describe the
subcontractor(s), including location, reasons for selection, costs, and any contracts
that have been completed. If the manufacturing is to be carried out in whole or in
part by the entrepreneur, he or she will need to describe the physical plant layout;
the machinery and equipment needed to perform the manufacturing operations;
raw materials and suppliers’ names, addresses, and terms; costs of manufacturing;
and any future capital equipment needs. In a manufacturing operation, the
discussion of these items will be important to any potential investor in assessing
financial needs.
• Operation plan
All businesses—manufacturing or nonmanufacturing—should include an
operations plan as part of the business plan. This section goes beyond the
manufacturing process (when the new venture involves manufacturing) and
describes the flow of goods and services from production to the customer. It might
include inventory or storage of manufactured products, shipping, inventory control
procedures, and customer support services. A non manufacturer such as a retailer
or service provider would also need this section in the business plan to explain the
chronological steps in completing a business transaction

8. • Organizational plan
organizational plan Describes form of ownership and lines of authority and
responsibility of members of new venture. The organizational plan is the part
of the business plan that describes the venture’s form of ownership—that is,
proprietorship, partnership, or corporation. If the venture is a partnership,
the terms of the partnership should be included. If the venture is a
corporation, it is important to detail the shares of stock authorized and share
options, as well as the names, addresses, and resumes of the directors and
officers of the corporation. It is also helpful to provide an organization chart
indicating the line of authority and the responsibilities of the members of the
organization
Updating the business plan
The most effective business plan can become out-of-date if conditions
change. Environmental factors such as the economy, customers, new
technology, or competition—and internal factors such as the loss or addition
of key employees—can all change the direction of the business plan. Thus, it
is important to be sensitive to changes in the company, industry, and market.
If these changes are likely to affect the business plan, the entrepreneur
should determine what revisions are needed.

9. • WHY SOME BUSINESS PLANS FAIL
Generally, a poorly prepared business plan can be blamed on one or
more of the following factors:
• Goals set by the entrepreneur are unreasonable.
• Objectives 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

10. Marketing plan
marketing plan
“ Written statement of marketing objectives, strategies, and activities to be followed in
business plan”. the entrepreneur should make every effort to prepare as comprehensive
and detailed a plan as possible so that investors can be clear as to what the goals of the
venture are and what strategies are to be implemented to effectively achieve these goals.
Marketing planning will be an annual requirement (with careful monitoring and changes
made on a weekly or monthly basis) for the entrepreneur and should be regarded as the
road map for short-term decision making
MARKETING RESEARCH FOR THE NEW VENTURE
Information for developing the marketing plan may necessitate conducting some
marketing research. Marketing research involves the gathering of data to determine such
information as 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, and what
is the most effective promotion strategy to inform and reach potential customers.
Marketing research may be conducted by the entrepreneur or by an external supplier
or consultant. There are also opportunities for entrepreneurs to contact their local colleges
or universities to identify faculty who teach marketing and are willing to have external
clients for student research projects.
There are following steps for marketing research:

11. Step One: Defining the Purpose or Objectives
The most effective way to begin is for the entrepreneur to sit down and
make a list of the information that will be needed to prepare the marketing
plan. For example, the entrepreneur may think there is a market for his or
her product but not be sure who the customers will be or even whether the
product is appropriate in its present form.
Step Two: Gathering Data from Secondary Sources
Secondary sources, offer a means of gathering information for the industry
analysis section of the business plan. There are many other market research
secondary sources that may be used to address the specific objectives of the
project identified in step one.
The most important purpose of reviewing secondary sources is to obtain
information that will assist the entrepreneur in making the best decisions
regarding the marketing of a product or service. Improvements in
information technology today make this a very effective source in gathering
information on customers, competitors, and market trends. Completion of
this task will also determine if more data are needed, in which case a
primary data gathering will then need to be planned.

12. Step Three: Gathering Information from Primary Sources
Information that is new is primary data. Gathering primary data involves a
data collection procedure—such as observation, networking, interviewing,
focus groups, or experimentation—and usually a data collection instrument,
such as a questionnaire. Observation is the simplest approach. The
entrepreneur might observe potential customers and record some aspect of
their buying behavior. Networking, which is more of an informal method to
gather primary data from experts in the field, can also be a valuable low-cost
method to learn about the marketplace. Interviewing or surveying is the
most common approach used to gather market information. It is more
expensive than observation but is more likely to generate more meaningful
information. The Internet is becoming an important resource for new
ventures to gather information both formally and informally. The informal
sources typically involve the use of Facebook, Twitter, or LinkedIn.
Step Four: Analyzing and Interpreting the Results
Depending on the size of the sample, the entrepreneur can hand-tabulate
the results or enter them on a computer. In either case, the results should be
evaluated and interpreted in response to the research objectives that were
specified in the first step of the research process. Often, summarizing the
answers to questions will give some preliminary insights.

13. Outline of marketing plan
Plan Situation analysis
Background of venture
Strengths and weaknesses of venture
Market opportunities and threats
Competitor analysis
Marketing objectives and goals
Marketing strategy and action programs
Budgets
Control
CHARACTERISTICS OF A MARKETING PLAN
The marketing plan should be designed to meet certain criteria. Some important
characteristics that must be incorporated in an effective marketing plan are as
follows:
• It should provide a strategy for accomplishing the company mission or goal.
• It should be based on facts and valid assumptions

14. • An appropriate organization must be described to implement the
marketing plan.
• It should provide for continuity so that each annual marketing plan
can build on it, successfully meeting longer-term goals and objectives.
It should be simple and short. A voluminous plan will be placed in a
desk drawer and likely never used. However, the plan should not be so
short that details on how to accomplish a goal are excluded.
• The success of the plan may depend on its flexibility. Changes, if
necessary, should be incorporated by including what-if scenarios and
appropriate responding strategies.
• It should specify performance criteria that will be monitored and
controlled. For example, the entrepreneur may establish an annual
performance criterion of 10 percent of market share in a designated
geographic area.

15. Marketing Mix
marketing mix
Combination of product, price, promotion, and distribution and other marketing
activities needed to meet marketing objectives.
Product
Quality of components of materials, style, features, options, brand name,
packaging, sizes, service availability, and warranties.
Price
Quality image, list price, quantity, discounts, allowances for quick payment, credit
terms, and payment period.
Promotion
Media alternatives, message, media budget, role of personal selling, sales
promotion (displays, coupons, etc.), use of social networking, Web site design, and
media interest in publicity.
Channel of distribution
Use of wholesalers and/or retailers, type of wholesalers or retailers, how many,
length of channel, geographic coverage, inventory, transportation, and use of
electronic channels

16. Organizational plan
• Organizational plan
organizational plan Describes form of ownership and lines of authority and
responsibility of members of new venture. The organizational plan is the part of the
business plan that describes the venture’s form of ownership—that is,
proprietorship, partnership, or corporation. If the venture is a partnership, the
terms of the partnership should be included. If the venture is a corporation, it is
important to detail the shares of stock authorized and share options, as well as the
names, addresses, and resumes of the directors and officers of the corporation. It is
also helpful to provide an organization chart indicating the line of authority and the
responsibilities of the members of the organization.
LEGAL FORMS OF BUSINESS
There are three basic legal forms of business formation with some variations
available depending on the entrepreneurs’ needs. The three basic legal forms are
(1) proprietorship
(2) partnership
(3) corporation

17. Proprietorship
Form of business with single owner who has unlimited liability,
controls all decisions, and receives all profits.
Partnership
Two or more individuals having unlimited liability who have pooled
resources to own a business
Corporation
Separate legal entity that is run by stockholders having limited liability

19. • S corporation
S corporation Special type of corporation where profits are distributed to
stockholders and taxed as personal income. S corporation combines the tax
advantages of the partnership and the corporation. It is designed so that
venture income is declared as personal income on a pro rata basis by the
shareholders. In fact, the shareholders benefit from all the income and the
deductions of the business.
Advantages of S corporation
• Capital gains or losses from the corporation are treated as personal income or
losses by the shareholders on a pro rata basis (determined by number of
shares of stock held). The corporation is thus not taxed.
• Shareholders retain the same limited liability protection as the C corporation.
• The S corporation is not subject to a minimum tax, as is the C corporation.
• Stock may be transferred to low-income-bracket family members (children
must be 14 years or older).
• Stock may be voting or nonvoting.
• This form of business may use the cash method of accounting.
• Corporate long-term capital gains and losses are deductible directly by the
shareholders to offset other personal capital gains or losses

20. Disadvantages of S corporation
• Depending on the actual amount of the net income, there may be a tax advantage to the C
corporation. This will depend on the company payout ratio, the corporate tax rate, the capital
gains tax rate for the investor, and the personal income tax rate of the investor.
• The S corporation may not deduct most fringe benefits for shareholders.
• The S corporation must adopt a calendar year for tax purposes.
• Only one class of stock (common stock) is permitted for this form of business.
• The net loss of the S corporation is limited to the shareholder’s stock plus loans to the business.
• S corporations cannot have more than 100 shareholders
The limited labiality company
THE LIMITED LIABILITY COMPANY As stated earlier, the new flexibility offered by LLC status has
enhanced its choice by entrepreneurs. The tax rules for an LLC fall under Subchapter K, and this
business form is considered a partnership-corporation hybrid with the following characteristics:
• Whereas the corporation has shareholders and partnerships have partners, the LLC has members.
• No shares of stock are issued, and each member owns an interest in the business as designated by
the articles of organization, which is similar to the articles of incorporation or certificates of
partnership.
• Liability does not extend beyond the member’s capital contribution to the business. Thus, there is
no unlimited liability, which can be detrimental in a proprietorship or general partnership.

21. Advantages of an LLC
A number of advantages of an LLC over an S corporation are described
here.
• In a highly leveraged enterprise, the LLC offers the partnership a
distinct advantage over an S corporation in that the partners can add
their proportionate shares of the LLC liabilities to their partnership
interests.
• States vary on the requirements of taxation but the LLC may have tax
advantages in most states.
• One or more (without limit) individuals, corporations, partnerships,
trusts, or other entities can join to organize or form an LLC. This is not
feasible in an S corporation.
• Members are allowed to share income, profit, expense, deduction,
loss and credit, and equity of the LLC among themselves. This is the
only form of organization that offers all these features