Business plan

is defined as a detailed and intergrated written document that describes the various
activities involved in opening and operating a new entrepreneurial venture.

MAJOR PARTS OF THE BUSINESS PLAN

Though thete are bo universal accepted standard format or structure of the business plan, this book
adopts the following format for the major parts of the business plan:

1.Introduction

2.Executive summary

3.Environmental analysis

4.Business description

5.Organizational plan

6.Production plan

7.Operation plan

8.Marketing plan

9.Financial plan

10.Appendix

Introduction

The introduction presents the general perspective of the business.It may consist of one to two
pages.It include, among others, the following:

1. Proposed name of the business

2.Address of the business

3.Name of the owner or owners

4.Description of the business

5.Location of the business

6.Funding requirement and source

Proposed Name of the Business

The formulation of the proposed business name is not as simple as it sound. It is a
delicate and important entrepreneurial task.
 The proposed business name must 1 reflect the business identity and image, 2 promote the
philosophical values and culture that the business values the most, 3profess the brand identity
of the product, and 4attract or influence the target consumers.
Address of the Business
The main location from which the business operates. It is important that the business
address is correctly written because all business correspondence are mailed to it. Also, it is
where Raw materials and other manufacturing supplies are shipped by the seller.
Name of the Owner
The name of the owner must be properly stated. In a sole proprietorship, there is only one
owner. In case the venture is a partnership, the names of the partners including the extent of
their liabilities must be indicated.
Description of the Business
A brief description of the business such as the type of product or services that the
business intends to produce or provide, and the ultimate mission, vision, and objectives of the
business.
Location of the business
It is where the business is located. There are no rigid rules in the selection of the business
location since several variables affect the selection of the business location.
The difference between the Address of the Business and Location of the Business
The former simply states the exact business address while the latter indicates the reason/s
for the selection of the location.
The following factors should be considered when deciding on the location of the proposed
business: 1Proximity to the target consumers. 2Distance from the source of raw materials,
labor and utilities. 3Availability and cost transportation. 4Peace and order situation. 5Presence
of direct competitors. 6The geographic and climatic conditions
Funding Requirement and Source
The estimated total initial cost of the business venture must be indicated including the
projected breakdown or allocation of the total cost. This section also presents the source/s of
funds.
ENVIRONMENTAL ANALYSIS

- It is a strategic tool that helps determine the external and internal factor affecting the
performance of the business.

Global Analysis
 - The environmental analysis section may begin with a description of the global business
situation to provide enough knowledge about the global perspective or horizon of the business.

Societal Analysis
1. Political forces,
2. Economic forces,
3. Socioeconomic forces,
4. Technological forces,
5. Ecological forces,
6. Legal forces.

"Economic environmental"

Industrial Analysis
1. Conducting a critical evaluation of the forces in the industry that affect the proposed
business
2. Evaluating the probable position of the business in the iindustr
3. Determining the most appropriate strategy that may be adopted by the proposed
business.

Conducting a Critical Evaluation

- Is the most delicate, tedious, and difficult task in industry analysis.

The unsatisfied demand may be considered the market share of the proposed business
under the following condition:
1. The proposed business has the capability to produce the product.
2. There are no expected new entrants to the industry other than proposed business.

-Demand and supply analysis

Evaluating the Business Position

 - Perceptual map,
- Positioning map.

Determining the Most Appropriate Business Starategy

BUSINESS DESCRIPTION

- The business description section presents the nature and form of the business to be undertaken, and
may cover two to three pages.

In addition, the business description also includes the following information:

1. Product or service that it plans to produce or serve

2. Various plant and office equipment

3. Size of the proposed business

4. Future parties with whom contrasts may be necessary

5. Personnel requirement

6. Administrative operation

LESSON 3

ORGANIZATION PLAN, PRODUCTION PLAN, AND OPERATION PLAN

ORGANIZATION PLAN
The organization plan provides a detailed description of the business in terms of the
following:
1. Form of the business organization
2. Liability of the owner or owners
3. Organizational structure
4. Roles and responsibilities
5. Salary requirements
Form of the business organization
 A business organization can come in the form of a sole proprietorship, a partnership, or a
corporation. " The ABC Manufacturing shall be in the form of a sole proprietorship," is an
incomplete description of the business organization.
The factors affecting the selection of the most appropriate business form include the following:
1. Capital requirement
2. Liability of the owner or owners
3. Management and supervisory skills
4. Tax implications
5. Government intervention
6. Nature of the business
7. External financing requirement
Liability of the owner or owners
The creditors can be in the form of individual persons, suppliers of raw materials and supplies,
or financial institutions. The extent of financial liability can either be limited or unlimited.
The term limited liability means that in the case of business dissolution and there still remains
unsettled financial obligation of the business, the creditor cannot go after the personal
property of the business owner.
The term Unlimited liability means that the creditors can run after the personal property of the
owner in the event that the business fails to fully settle its financial obligation during business
dissolution.
Organizational structure
The business is usually shown or reflected in the organizational chart. It shows and define
the hierarchy of the different positions in the organization and the inter relationship of the
different offices or departments.
A corporation has the most complicated organizational structure, since most corporations
are composed of a huge workforce and also if the corporation operates across the different
parts of the Philippines.
Roles and Responsibilities
The various positions in the business organisation must be clearly defined in order to
minimize and avoid misunderstanding and overlapping of functions.
Salary Requirements
 The organizational plan must show the total estimated monthly and annual salary
requirements of the business. The Social Security System (SSS), Pag-ibig, and Philhealth
PRODUCTION PLAN
The production plan presents or describes activities related to the production of goods. The
production plan is the result of the industry analysis, particularly the study of supply and
demand and consumer behaviour.
The production plan usually includes the following:
1. Production schedule
2. Production Process
3. Processing plant and equipment
4. Sources of materials
5. Production cost
This section basically applies to manufacturing entities. For service entities, this section must
be modified and labeled as Service Provision plan.
Production Schedule
Present the total number of good to be produced and the expected time to produce them.
The total number of units to produce, however, is usually affected by the following factors:
1. Demand for the product
2. Availability of resources
3. Capacity of the plant
The entrepreneur must produce goods based on the total demand of the consumers.
Production Process
The different processes or stages involved in the production of good must be clearly spelled
out in this section, as well as the description of the following:
1. Exact processing procedure
2. Materials, parts, or ingredients required
3. Expected time to process the product
A schematic diagram showing the procedural steps in making the product will help clarify
this section.
OPERATION PLAN

The operation plan is a major section of the business plan that outlines the various activities, from the
acquisition of raw materials to the delivery of the products to the target consumers.

The operation plan commonly covers the following areas:

1. Evaluation of suppliers

2. Materials requisition and receiving procedures

3. Storage and inventory control system

4. Shipment system and control

5. Functions of support services

Evaluation of Suppliers

The new basic entrepreneurial concept of quality management is that control starts from the suppliers
of raw materials. It used to be a common practice that a business starts to implement its control
system upon receipt of the materials.

Materials Requisition and Receiving Procedures

The procedures in requisition raw materials and other manufacturing suppliers and receiving them
must be explained in the operation plan.

This section covers the following areas:

1. Basis of receiving the raw materials

2. Comparison of the order and receipt

3. Quality of materials received

Storage and Inventory Control System

The operation plan describes how the business stores the finished goods and protects its inventory
against possible theft and losses.

This section deals with the following:

1. Owning or renting a warehouse

2. Management of the warehouse

3. Procedures in the transfer of goods

4. Control of inventory in the warehouse

Shipment System and Control

The basis of sales invoice and other shipment documents are the purchase order received from the
customers.

This section covers the following:

1. Approval of shipping and sales documents

2. Terms of shipment

3. Manner of shipping the product

4. Other terms and conditions like sales contract

Functions of Support Services

The operation plan defines and describes the functions of other support services relative to the
acquisition, processing, and shipment of goods to the consumers.

Most businesses consist of three or four functional areas as follows:

1. FFunctions of Support Services

The operation plan defines and describes the functions of other support services relative to the
acquisition, processing, and shipment of goods to the consumers.
Most businesses consist of three or four functional areas as follows:

1. Finance

2. Marketing

3. Operation

4. Human resources

Processing Plant and Equipment

This section of the production plan describes the manufacturing plant, the machinery and equipment,
and the various tools to be used in the production of goods, including their respective estimated costs.

The entrepreneur must consider the following factors:

1. Capacity of the plant or machinery

2. Model of the machinery or equipment

3. Cost and terms of payment

Sources of Materials

The possible sources of raw materials and manufacturing suppliers must be described in terms of the
following:

1. Proximity of the source to the processing plant

2. Payment terms and condition

3. Discounts and damages

4. Terms of shipment
Financial Plan
-it accumulates and describes all the data expressed in monetary units
from the other sections of the business plan.
Composed of the following areas:
1.major assumptions
2.projected statement of comprehensive income
3.projected statement of cash flows
4.projected statement of changes in equity
5.projected statment of financial position
6.financial statement analysis
Major Assumptions.
The financial statements in the business plan are not actual but rather
projected, thus requiring some major assumptions based on reliable data or
information
Financial statements
1.statement of comprehensive income
2.statement of cash flows
3.statement of changes in equity
4.statement of financial position
Financial statement analysis
The last section of the financial plan is the analysis of financial
statements. This analysis is intended to primarily fit the requirements of
the course.
Basically, a financial statement analysis is conducted to determine the
financial operation of the business in terms of its liquidity level,
profitability of operations and solvency status.