BUSINESS PLAN

Dr.Vidya Hattangadi

Why make a business plan?

A business plan is a Road Map of a business. Regular reviews of a business plan are a must for a business as it guides the entrepreneur to take the right measures and make the right strategies for his business. Every business must have a business plan for it irrespective of whether the business needs financial assistance or not. Irrespective of the size of the business, it is important for an entrepreneur to make a formal business plan because: It helps the entrepreneur and his management to clarify, focus and research their business.

Why make a business plan

It provides a considerable and logical framework within which business can develop and pursue strategies over years. It serves as a basis of discussions with third parties such as shareholders, agencies, banks, investors etc. Offers benchmark against which actual performance can be measured and reviewed after suitable intervals. No two business plans can look alike, as no two businesses are alike. Some issues can be relevant for some business but need not be relevant for every business. Tailoring contents into the business plan as per requirement is therefore an art.

Business Plan Outline

Cover Sheet: Name(s) of the owner(s), Name of the business/venture, Address, Phone Numbers, Fax Numbers, e-mail address etc.

Statement of purpose

Statement of purpose: your business plan should start with a simple statement of purpose. The statement of purpose should be brief but with clarity and logic. It should specify details such as:

The amount of loan required The amount of money you are putting in The loan period for how many years you require the loan amount for The impact of the loan and the purpose it will have on your business The collateral that will be used to support the loan

Table of Contents:

Description of what the business does:

Your business description is your corporate vision, which should be the first point to be written in your business plan. Your corporate vision should include a wholesome picture of your strengths and how best you will make use of them. The language has to be simple, understood by everybody. Many entrepreneurs make a mistake of operating without a vision. When they dont have vision, they tend to stumble. A vision gives an ability to grow and prosper. When an entrepreneur does not have a vision he tends to give a hazy or blur picture of his enterprise. He just uses big jargons and goes on giving rambling description of his business. AN ideal Business Description should discuss the following points in detail:

Description of what your business does An overview of the industry in

which in the entrepreneur plan to begin his venture Discuss the company/venture in detail Description of the product/service Positioning plan of the product Pricing strategy

Financial Data:

Source of funding Application of funding Capital equipment and furniture list Projected balance sheet Break-even analysis Projected income statement for 1st year, 2nd year and 3rd year Notes on explanation on the figures Cash-flow projections for 1st year, 2nd year and 3rd year Details by month for 1st year, 2nd year and 3rd year Notes on explanation

Tax returns of all principals (you and your partners) for last three years. Personal financial statement (all banks have these forms) Copy of proposed lease or purchase agreement for building space Copy of licenses, patents, and other legal documents Copy of the resumes of all principals Copies of letters of intent from suppliers, etc.

Supporting Documents along with the financial data: Personal CV, personal financial statement, credit reports, bank statements, letters of references, credit reports, letter of intent, lease deeds, contracts, other legal documents and any other document of relevance.

The Market

The competition and feasibility study, describe here again your product/service

Competition: who are your five nearest competitors, list them in

order, how will you operate better than them, how is their business growing, if their growing why and if they are not growing why so, how are their operations similar or dissimilar to yours, what are their strengths and weaknesses, what have you learnt by watching them, their operating style, what controls you wish to adopt for studying the competitors.

Market: Start by defining group of customers or organizations

that is interested in a product/service and has the resources to purchase it. You should discuss here how large is the potential of the market, how many businesses are operating in it, how many prospects can use your product, is the market growing, flattening or shrinking.

Market segmentation: almost every market has some major and distinctive segmentation. The probability that it could or will be is a good sign. This is particularly true id the market place for your product or service is multi-regional or multi national. If it so then segmentation is necessary especially, for a small firm to be competitive.

You will need to discuss segmentation within your business category and how you intend to do so. This may have any positive or negative affects on your business category. As when those affects take place how you intend to cope with it. Almost all markets are segmented by price and quality issues. Generally, price and quality issues do not provide the most clear or definite market segmentation. Much stronger segmentation can usually be found through evaluation of product or service uses and importance to various consumers.

Establish marketing goals that are quantifiable Describe your customer profile the demographic and psychographic profile What is the present size of the market What percent of the market share you are going to have What is the market growth potential As the market grows your market share will increase or decrease? How will you attract customers here spell out your marketing and sales strategies How are you going to price your product/service With your pricing are you going to make profits Is your price competitive Why should your customer agree to pay you the price which you are demanding Why did your arrive at this price What special advantages you will be offering your customers justify your price Are you going to offer credit to your customers Is it really necessary are your competitors offering credit to their customers Justify whether you are in a position to offer credit

Location:

your business location is more than just choosing a place for doing business, be it a building or an office space. Besides the commercial factors, psychological factors, status, safety and security are equally important for the business. First and foremost the location has to be liked by you, because you will have to go and work there everyday. Your comfort level is of utmost importance. Then you have to think of your customers. The customer is the king/queen. Your customer will visit the place if only he/she is comfortable to visit your location. To attract good employees and retain them again your location is one of the key factors. Strategic partners are not considered a key issue, but it is a reality why some locations are developed into hubs; it is purely because of the easy accessibility of the strategic partners a business mushrooms. E.g: Gurgaon. Your potential investors also look at the long-term value of the business. Location thus is an important factor of the business. The following points decide the worth of the location.

Factors

They are: Cost: the cost of the premise should suit your, your employees and customers budget. Convenience: your business location should be convenient for you as well as your customers. Safety: find out whereabouts of the area. Is the area safe from communal violence, crime, how is the law and order in the area, you have to look after the safety of both your employees and customers. Prestige: your business location should add credibility to your business Transportation: You business location should be connected by the local transportation easily. Facilities: water supply, electrical supply and sanitation are very important for running the business. Zoning: Many cities have strict zoning requirements. Make sure that you are operating your business in commercial zone. Make sure of the zone before you sign the deal.

Management:
The management team of your business is important for your business to prosper. You need to form a team of like-minded people. The management team shapes up the business. The management team does the mentoring job for the employees as well as it does the networking for your business, gives direction from time to time, it also helps to deal with the change management. It gives a purpose to the business and helps in persisting your goals and vision. Therefore picking up the right people is your responsibility. While mentioning about your management team you need to mention the following points:

What is your business background How will it help you in running the business What management experience do you have? From where did you acquire it Is it helpful in a particular way in your business What are your weak areas as far as this business is concerned? Are you going to appoint consultants/employees to overcome those weaknesses What are your educational qualifications (mentions both formal and informal), which have bearing on your managerial abilities or knowledge? Personal Data: age, residential address, special abilities and interests and reasons for going for business Your physical strengths and weaknesses

What skills and qualities of your can make your business successful Who is on your managerial team How are they qualified to help you venture What are their business backgrounds, their qualifications What duties have you allotted to each one of them Are these duties clearly defined Who does what? Reporting system: who reports to whom Who will take the final decision How do plan to pay the management? What additional human resource you have arranged for the business? (Accountant, Lawyer)

It is important that these biographies are not merely resumes that include the educational backgrounds and previous job titles and responsibilities of the team members. Rather, biographies should highlight the most relevant past positions that the individuals have held and specific successes in each. These successes could include launching and growing new businesses or managing divisions of established companies

Staff:
is defined is filling, and keeping vacancies filled. This includes identifying work-force requirement, inventorying people available, selecting, recruiting, placing, and training, promoting, appraising and planning their careers. Staffing must be closely linked to the structure of your business. The following points need to be described in your business plan:

Staff

What are your present staffing needs What are going to be your immediate future staffing needs (after 3 and 5 years) What skills must your employees possess How many full-time and how many part-time vacancies you have What salary structure you want to offer Are you aware of the employee befits rules and regulations Are you going to provide any fringe benefits to your employees If yes, which ones Have you calculated the cost of the fringe benefits Are you going to utilize over time Are you ready for the OT benefits to be paid What about the training needs of your employees both in operation as well as management?