The business-plan

The Business Plan :The Business Plan :
Creating and Starting TheCreating and Starting The
VentureVenture

Planning as Part of The BusinessPlanning as Part of The Business
OperationOperation
 Planning is a process than never ends for aPlanning is a process than never ends for a
business.business.
 It is extremely important in the early stages ofIt is extremely important in the early stages of
any new venture when the entrepreneur willany new venture when the entrepreneur will
need to prepare a preliminary business plan.need to prepare a preliminary business plan.
 As the venture grow up to mature business,As the venture grow up to mature business,
planning will continue …planning will continue …
 Plan may be short term or long term, strategic orPlan may be short term or long term, strategic or
operational.operational.

What is Business Plan?What is Business Plan?
 The business plan is a written documentThe business plan is a written document
prepared by the entrepreneur that describes allprepared by the entrepreneur that describes all
the relevant internal and external elements andthe relevant internal and external elements and
strategies for starting a new venture.strategies for starting a new venture.
 It is a integration of functional plans such asIt is a integration of functional plans such as
marketing,marketing,
 finance,finance,
 manufacturing,manufacturing,
 sales andsales and
 human resources.human resources.

Definition-Business PlanDefinition-Business Plan
Document that can convince the readerDocument that can convince the reader
that the business can produce enoughthat the business can produce enough
revenue to make a satisfactory profit andrevenue to make a satisfactory profit and
therefore attractive as an investmenttherefore attractive as an investment
opportunityopportunity

Who should write the plan?Who should write the plan?
The business plan should be prepared byThe business plan should be prepared by
thethe entrepreneurentrepreneur..
The entrepreneur may consult with manyThe entrepreneur may consult with many
other sources in its preparation, such asother sources in its preparation, such as
lawyers,lawyers,
accountants,accountants,
marketing consultants and engineers.marketing consultants and engineers.

Who is it for?Who is it for?
SelfSelf
Investor/Venture capitalistsInvestor/Venture capitalists
DebtDebt
EquityEquity
Key employeesKey employees
Significant others ( suppliers, bankers…)Significant others ( suppliers, bankers…)

Scope and Value of the Business Plan – WhoScope and Value of the Business Plan – Who
Reads The Plans?Reads The Plans?
 The business plan may be read byThe business plan may be read by
 employees,employees,
 investors, venture capitalistsinvestors, venture capitalists
 bankers, suppliersbankers, suppliers
 customers, advisors, and consultantscustomers, advisors, and consultants
 & by the entrepreneur himself& by the entrepreneur himself
 There are three perspectives should be consideredThere are three perspectives should be considered
in preparing the plan :in preparing the plan :
 Perspective of the entrepreneurPerspective of the entrepreneur
 Marketing perspectiveMarketing perspective
 Investor’s perspectiveInvestor’s perspective

Scope and Value …Scope and Value …
 The business plan is valuable to theThe business plan is valuable to the entrepreneurentrepreneur,,
potential investorspotential investors, or, or even new personneleven new personnel, who are, who are
trying to familiarize themselves with the venture, ittrying to familiarize themselves with the venture, it
goals, and objectives.goals, and objectives.
It helps determine the viability of the venture in aIt helps determine the viability of the venture in a
designated marketdesignated market
It provides guidance to the entrepreneur inIt provides guidance to the entrepreneur in
organizing his or her planning activitiesorganizing his or her planning activities
It serves as an important tool in helping to obtainIt serves as an important tool in helping to obtain
financing.financing.

How do Potential Lenders and InvestorsHow do Potential Lenders and Investors
Evaluate The PlanEvaluate The Plan ??
 Four Cs of Credit:Four Cs of Credit:
CharactersCharacters
Cash flowCash flow
CollateralCollateral
 Contribution ofContribution of
EquityEquity
Another …Another …
MarketableMarketable
Payback periodPayback period
RiskRisk
Feasibility, etcFeasibility, etc

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

Information NeedsInformation Needs
 Before committing time and energy to preparingBefore committing time and energy to preparing
a business plan,a business plan,
 the entrepreneur should do a quick feasibility study ofthe entrepreneur should do a quick feasibility study of
the businessthe business conceptconcept
 The information, obtainable from many sourcesThe information, obtainable from many sources
should focus onshould focus on
marketing (segmenting, targeting, andmarketing (segmenting, targeting, and
positioning),positioning),
 finance (list of all possible expenditures,finance (list of all possible expenditures,
demand forecast, revenue),demand forecast, revenue),
 and production (location, manufacturingand production (location, manufacturing
operations, raw materials, equipment, laboroperations, raw materials, equipment, labor
skills, space, overhead) .skills, space, overhead) .
 Internet can be a valuable resource.Internet can be a valuable resource.

Outline of a Business PlanOutline of a Business Plan
Introductory PageIntroductory Page
Name and address of businessName and address of business
Name(s) and address(es) of principal(s)Name(s) and address(es) of principal(s)
Nature of businessNature of business
Statement of financing neededStatement of financing needed
Statement of confidentially of reportStatement of confidentially of report

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

 Environmental and Industry AnalysisEnvironmental and Industry Analysis
 Future outlook and trendsFuture outlook and trends
 Analysis of competitorsAnalysis of competitors
 Industry and market forecastsIndustry and market forecasts
 Description of VentureDescription of Venture
 Product(s)Product(s)
 Service(s)Service(s)
 Size of businessSize of business
 Office equipment and personnelOffice equipment and personnel
 Background of entrepreneursBackground of entrepreneurs

 Production PlanProduction Plan
 Manufacturing process (amount subcontracted)Manufacturing process (amount subcontracted)
 Physical plantPhysical plant
 Machinery and equipmentMachinery and equipment
 Names of suppliers of raw materialsNames of suppliers of raw materials
 Operational PlanOperational Plan
 Description of company’s operationsDescription of company’s operations
 Flow of orders for goods and/or servicesFlow of orders for goods and/or services
 Technology utilizationTechnology utilization

 Marketing PlanMarketing Plan
 PricingPricing
 DistributionDistribution
 PromotionPromotion
 Product forecastsProduct forecasts
 ControlsControls
 Organizational PlanOrganizational Plan
 Form of ownershipForm of ownership
 Identification ofIdentification of
partners or principalpartners or principal
shareholdersshareholders
 Authority of principalsAuthority of principals
 Management-teamManagement-team
backgroundbackground
 Roles andRoles and
responsibilities ofresponsibilities of
members ofmembers of
organizationorganization

Assessment of RiskAssessment of Risk
Evaluate weakness of businessEvaluate weakness of business
New technologiesNew technologies
Contingency PlansContingency Plans

Financial PlanFinancial Plan
Pro forma income statementPro forma income statement
Cash flow projectionsCash flow projections
Pro forma balance sheetPro forma balance sheet
Break-even analysisBreak-even analysis
Sources and applications of fundsSources and applications of funds
 IRR and NPV projectionsIRR and NPV projections
BudgetBudget

Appendix (contains backup material)Appendix (contains backup material)
LettersLetters
Market research dataMarket research data
Leases or contractsLeases or contracts
Price lists from suppliers.Price lists from suppliers.

Using and Implementing TheUsing and Implementing The
Business PlanBusiness Plan
 The business plan is designed to guide theThe business plan is designed to guide the
entrepreneur through the first year ofentrepreneur through the first year of
operations.operations.
 Implementation of the strategy containImplementation of the strategy contain
 control point to ascertain progress andcontrol point to ascertain progress and
 to initiate contingency plan if necessary.to initiate contingency plan if necessary.

Measuring Plan ProgressMeasuring Plan Progress
 Entrepreneur should checkEntrepreneur should check
the profit and loss statement,the profit and loss statement,
 cash flow projections, andcash flow projections, and
information on inventory, production, quality, sales,information on inventory, production, quality, sales,
collection of accounts receivable, and disbursementscollection of accounts receivable, and disbursements
for the previous month.for the previous month.
Inventory controlInventory control
Production controlProduction control
Quality controlQuality control
Sales controlSales control
DisbursementsDisbursements

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

Why Some Business Plans Fails?Why Some Business Plans Fails?
 Goals set by the entrepreneur are unreasonable.Goals set by the entrepreneur are unreasonable.
 Goals are not measurableGoals are not measurable
 The entrepreneur has not made a total commitment toThe entrepreneur has not made a total commitment to
the businessthe business
 The entrepreneur has no experience in the plannedThe entrepreneur has no experience in the planned
business.business.
 The entrepreneur has no sense of potential threats orThe entrepreneur has no sense of potential threats or
weaknesses to the business.weaknesses to the business.
 No customer need was established for the proposedNo customer need was established for the proposed
product or service.product or service.

Packaging the PlanPackaging the Plan
It is a ”living” documentIt is a ”living” document
No right/wrong way: the need of reader isNo right/wrong way: the need of reader is
essentialessential
What are the challenges/ questions thatWhat are the challenges/ questions that
can be raised by reader: answer these.can be raised by reader: answer these.

Packaging the PlanPackaging the Plan
Include supporting materialsInclude supporting materials
Don’t make unsupported statementsDon’t make unsupported statements
Designate an outside reviewer/ reader thatDesignate an outside reviewer/ reader that
can critique plancan critique plan

The business-plan

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