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What is the business plan?

A business plan is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals. Business plans may also target changes in perception and branding by the customer, client, taxpayer, or larger community. When the existing business is to assume a major change or when planning a new venture, a 3 to 5 year business plan is required, since investors will look for their annual return in that timeframe.

The business plan is a written document prepared by the entreprenur that describes all the relavent extarnal and internal elements involved in starting a new venture.It is often an integrasion of fountional plan such as marketing,finance,manufacturing and human resources.As in the case of Belinda Guadarrama,it addresses the integration and coordination of efective business objectives and strategies when the venture contains a varity of product and service.It also addresses both shot-term and long-term decision making for the first three years of oparation.thus,the business plan or as it is sometimes referred to,the game plan or road map answer s the questions where am I now ?Where am I going?How will I get there? potential investors suppliers and even customers will request or require a business plan. A business plan is a written description of your business's future. That's all there is to it--a document that desribes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan. Business plans can help perform a number of tasks for those who write and read them. They're used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better. So what's included in a business plan, and how do you put one together? Simply stated, a business plan conveys your business goals, the strategies you'll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.

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Scope and value of the business plan

The individuals creating the corporate business plan need to be prepared to address issues, needs, and concerns of each constituency in the organization. While these individuals will definitely include management of the organization and/or the internal venture funds evaluation team, they could also include consultants, customers, employees, suppliers, or even outside funders. Corporate entrepreneurs need to put themselves in the position of the potential buyer. Apples tremendous turnaround in 1998 (with its focus on desktop and portable computers) and continued success in 2009 (with the simple-to-use iPod) was a direct result of considering the product from the end users point of view. The business plan is valuable to the corporate entrepreneur as it: (1) establishes the objectives and goals of the proposed corporate entrepreneurial venture; (2) provides guidance to the corporate entrepreneur about the needs and planning necessary for implementing the corporate entrepreneurial venture; (3) helps determine the viability of the corporate entrepreneurial venture in the organization; and (4) provides the information necessary to obtain management approval and funding. If we can briefly discribe that 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 afect its actual content and focus.Since each of these groups reads the plan for different purposes,the entreprenur must be prepared to address all their issues and concerns.However there are probably three perspectives should be considered in preparing the plan. First is the prospective of the entreprenure,who understands batter than anyone else the cretivity and technology involved in the new venture.The entreprenure must be able to clearly articulate what the venture is all about. Second is the marketing perspective.Too often an entreprenure will consider only the produc or technolohy and not whether someone would buy it. Third the entreprenur should try to view his or her business through the eyes of the investor.Sound financial projections are required if the entreprenur does not have the skills to prepare this information,then outside sources can be of assistance. The business is valuable to the entreprenur,potential investors,or even new personal,who are trying to familiarize themselves with the venture,its goals and objectives.The business is important to these people because: It helps determine the viability of the ventue 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.
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Potential investors are very particular about wat should be included in the business plan. Even if some of the information is based on assumptions, the thinking process required to complete the plan is a valuable experience for the entrepreneur sice it forces him or heer to assess such things as cash flow and cash requirements. In addition, the thinking process takes the entrepreneru into the future, leading him or her to consider important issues that could impede the road to success.

How do potential lenders and investors evaluate the plan?

As stated earlier there are a number of cookbook or computer generated software packages or samples on the internet that are available to assist the entrepreneur in preparing a business plan .These sources,however ,should be used only to assist in its preparation,since the business plan should address the need of the potential readers or evaluators and should reflect the strengths of management of personnel,the product or service,and available resources.There are many different ways to present a quality business plan and thus any attempt to imitate or fit your strategy and objectives into a cookie-cutter approach could have very negative result .The plan need to focus on the above mentioned factors and should ultimately consider its purpose. It is conceivable that the entrepreneur will prepare a first draft of the business plan from his or her own personal viewpoint without consideration of the constituencies that will ultimately read and evaluate the plan feasibility.As the entrepreneur become aware of who will read the plan appropriate changes will be necessary .For example one constituency may be suppliers who may want to see a business plan before signing a contract to produce either components or finish products or even to supply large quantities of materials on consignment customers may also want to review the plan before buying a product that may require significant long term commitment,such as a high technology telecommunication system.In both cases the business plant should consider the needs of these constituencies who may pay more attention to the experience of the entrepreneur and his or her projection of the marketplace. The business plan should address the needs of all the potential evaluators, software packages and Internet samples should be used only to assist in preparation. As the entrepreneur becomes aware of who will read the plan, changes will be necessary. Suppliers may want to see a business plan before signing a contract to supply products or services. Customers may also want to review the plan before buying the product. The business plan should consider the needs of these constituencies.

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Potential suppliers of capital will vary in their needs and requirements in the business plan. Lenders are primarily interested in the ability of the new venture to pay back the debt and focus on the four C's of credit: 1. The entrepreneur's credit history or character. 2. Their ability to meet debt and interest payments (cash flow.) 3. The collateral or tangible assets being secured. 4. Equity contribution or the amount of personal equity that has been invested by the entrepreneur. Investors provide large sums of capital for ownership (equity) and expect to cash out within 5 to 7 years. They will often place more emphasis on the entrepreneur's character than lenders. The venture capitalist will play an important role in management of the business and wants the entrepreneurs to be pliable and willing to accept this involvement. These investors will also demand high rates of return and will thus focus on the market and financial projections. If the entrepreneur does not consider the needs of these sources, the plan may be an internalized document without consideration of the feasibility of meeting market goals. Most external advisors and potential investors are bound by a professional code of ethics regarding disclosure.

Information Needs
Before committing time and energy to preparing a business plan the entrepreneur should do a quick feasibility study of the business concept to see whether there are any possible barriers to success.The information obtainable from many sources should focus on marketing ,finance and production.The internet discussed below,can be a valuable resource for the entrepreneur.Before beginning the feasibility study,the entrepreneur should clearly define the goals and objectives also provide framework for the business plan,marketing plan and financial plan.

Market Information
One of the initial pieces of information needed by the entrepreneur is the market potential for the product or service. In order to ascertain the size of the market, It is first necessary for the entrepreneur to define the market, For example, is the product most likely to be purchased by men or women? People of high income or low income? Rural or urban dwellers? To project market siz and subsequent market goals for the4 new venture.

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Financial Information Needs

Before preparing the financial section of the business plan, the entrepreneur will need to prepare a budget that incluedes a list of all possible expenditures in the first year and a list of all revenue sources, including sales and any external available funds.Thus the budget includes capital expenditures, direct operating expenses, and cash expenditures for nonexpense items. The revenue from sales must be forecast from market data, as discussed above. These benchmarks or norms establish reasonable assumptions regarding expenditures based on industry history and trends. This is a very acceptable method to arrive at the necessary projected costs for the new venture.

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 the prepare.Onet the process has begun however the entrepreneur will realize that it is invaluable in sorting out the business functions of a new venture.

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Outline Of Business Plan

Serial 1 Subject Co-subject

Introduction Page Name and address of business Name(s) and address (es) of Nature of business Statement of financing needed Statement of confidentiality of

Executive Summary Mission Keys to Success Objectives

Industry Analysis
Company Ownership

Future outlook and trends Analysis of competitors Market segmentation Industry and market forecasts
4 5

Descripiton of
Market Analysis Summary Market Segmentation Target Market Segment Strategy Service Business Analysis Competition and Buying Patterns

Production Plan Manufacturing Process Physical Plant Machinery and equipment Names of suppliers of Material Milestones

Web Plan Summary Website Marketing Strategy Development Requirements

8 9 9

Management Summary Personnel Plan Financial Plan Break-even Analysis Projected Profit and Loss Projected Cash Flow

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Projected Balance Sheet Business Ratios



Environmental and industry analysis

Environmental is important to put the new venture in a proper context by first conducting an environmental analysis to identify trends and change occurring on a national and international level that may impact the new venture. This process was described earlier in this chapter.Example of these environmental factors are: Economy The entrepreneur should consider tredds in the GNP,unemployment by geographic area,disposable income and so on.

An evaluaton of cultural changes may consider shifts in the population by demographics.

Advances in technology are difficult to predict.However the entrepreneur should consider potential technological development determind from resources committed by major industries or the U.S.gvernment.

Legal concerns
There are many important legal issues in starting a new venture.The entrepreneur should be prepared any for any future legislation that may affect the product or service, channel of distribution,price,or promotion strategy. All of the above external factors are generally uncontrollable.

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 manufacturuing process is to be subcontracted, the plan should describe the subcontractor, including location, reasons for selection, costs, and anby contracts that have been completed. If the manufacturing is to be carried out in 7 |Page Sarker Manage By : Md. Nurunnabi

whole or in part by the entrepreneur, he or she will need to discribe the pghysical plant layout. The machinery and equipment needed to perform the manufacturing operation s; 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.

Operations Plan
All businesses manufacturing or nonmanufacturingshould include an operations plan as part of the business plan. This section goes beyond the manufacturing process 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 sectin in the business plan in order to explain the chronological steps in completing a business transaction.

Marketing Plan
The marketing plan is an important part of the business plan since it describes how the product or service will be distributed, priced, and promoted. Marketing research evidence to support any of the critical maerketing decision strategies as well as for forecasting sales should be described in this section. Specific forecasts for a product or service are indicated in order to project the profitability of the venture.

Organizational Plan
The organizational plan is the part of the business plan that descries the ventures form of ownershipthat is, proprietorship, partnership, r 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 nemes, addresses, and resumes of the dicectors 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.

Assessment Of Risk
Every new venture will be faced with some potential hazards, given its particular industry and competitive environment. It si important that the entrepreneur make an assessment of risk in the fllowing manner. First, the entrepreneur should indicate the potential risks to the new venture. Next should be a discussion of what might happen if these risks become reality. Finally, the entrepreneur should dicuss the strategy tghat will be emloyed to either prevent,
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minimize, or respond to the risks should they occur. Major risks for a new venture could result from a competitors reaction weaknesses in the marketing, production or management team and new advances in technology that might render the new product obsolete.

Financial Plan
Like the marketing, and organization plans, the financial plan is an important part of the business plan. It determines the potential investment commitment needed for the new venture and indicates whether the business plan is economically feasible. Generally, three financial areas are dicussed in this section of the business plan. First the entreprneur should summarize the forecasted sales and the appropriate expenses for at least the first three yeaers, with the first years projectins provided monthly. The form for displaying this information. It includes the forecasted sales, cost of goods sold, and the general and administrativ expenses. Net profit after taxes can then bd projected by estmating income taxex. The scond major area of financial information needed is cash flow figures for there years, with the first years projections provided monthly. Since bills have to be paid at different times of the year, it is important to determine the demands on cash on a monthly basis , especially in the first year, Remember that sales may be irregular, and receipts from customers also may be spread out, thus necessitating the borrowing of short-term capital to meet fixed expenses such as salaries and utilities.

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Using and implementing the Plan

The business plan is designed to guide the enrepreneur through the first year of operations. It is important that the implementation of the strategy contain control points to ascertain progress and to initiate contigency plans if necessary, Some of the controls necessary in manufaturing, marketing, finacing, and the organization are discussed in subsequent chapters. Most important to the entrepreneur is that the usiness plan not end up in a drawer some where once the financing has been attained and the business launched. `There has beeb a tendency among many entrepreneours to avoid planning. The reason often given is that planning is dull or boring and is something used only by large companies. This may be an excuse; perhaps the real truth is that some entrepreneurs are afraid to plan. Planning is and important part of any business operation. Without good planning, the entrepreneur is an important part of any business operation. Without good planning, the entrepreneour is likely to pay an enormous price. All one has to do is consider the planning done by suppliers, customers, competitors, and banks to realize that is is important for the entrepreneur. It is also important to realize that without good planning the employees will not understand the companys goal and how they are expected to perform in their jobs.

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. Goals are not measurable. The entrepreneur has not made a total commitment to the business or to the family. The entrepreneour 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.

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Book: Entrepreneurship ( Robert D. Hishich, Michael P. Peters, Dean A. Shepherd) www. Google.ocm

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