Entrepreneur development

New venture development (Business plan)

A business plan or new venture development is a blueprint of the step by step procedure that would
be followed in order to convert a business idea into a successful business venture. Venture
development involves various aspects from concept development to product commercialization,
expansion till fully developed.

Meaning of Business Plan

The Business Plan may be read by employees, investors, bankers, venture capitalists, suppliers,
customers, advisors and consultants. Since each of these groups reads the plan for different
purposes, the entrepreneur must be prepared to address all their issues and concerns. In some ways,
the business plan must try to satisfy the needs of everyone, whereas in the actual market place the
entrepreneur’s product will be trying to meet the needs of selected group of customers. The depth
and detail in the business plan depend on the size and scope of the proposed new venture. An
entrepreneur planning to market a new high-tech machine will need a comprehensive business plan,
largely because of the nature of the product and market.
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. It involves the
following tasks.

 Identify business opportunities and an innovative idea.

 Researching the external environment for opportunities and threats
 Identifying internal strengths and weakness
 Assessing the feasibility of that idea and
 Allocating resources in the best possible manner

Objectives of a business plan

 To give direction to the vision of entrepreneur

 To objectively evaluate the future prospects of the business
 To monitor the progress after implementation of the plan
 To seek loans from financial institution
 To facilitate the decision making process
 To persuade others to join the business
 To identify strength and weaknesses present in the environment
 To identify opportunities and threats in the external environment
 To assess the feasibility of the business.

Preparation of a business plan

A good business plan must identify strength and weaknesses internal to the business and the
challenges in terms of opportunities and threats to assess the viability of the business. It must lay
down all the necessary steps that are involved in initiating and operating a proposed business.
Preparation of a business plan involves the following steps:-

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(1) Preliminary Investigation – In order to create an effective plan an entrepreneur
must

 Review available business plans

 Draw key business assumptions on which plan is based
 Scan the environment for strengths, weakness, opportunities and threats
 Seek professional advice
 Conduct a functional audit

Preliminary Investigation

Idea Generation

Environment scanning

Feasibilty analysis

Drawing functional plans

Project report preparation

Evaluation, Review and control

(2) Idea Generation-

It involves generation of a new concept/product/services or value addition to an existing product or

services addition to an existing product or service. The idea must be such that satisfies the existing
demands and future demands of market.

Sources of idea-
 Consumers
 Existing companies
 Research & Development
 Employees
 Dealers/ retailers

Methods of generating ideas-

 Brain storming
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 Group discussion
 Data collection through questionnaires
 Invitation of ideas from professionals
 Value addition to existing product and servies
 Market research
 Import of ideas from products launched abroad
 Commercializing inventions
Screening of ideas is done to identify practical ones and eliminates practical one. The most feasible
and the most promising idea are selected for further investigation.

(3) Environment scanning-

The internal and external environment must be analysed to study the prospective strengths,
weaknesses, opportunities and threats of the business. An entrepreneur must collect information
from all formal and informal sources in order to understand the supportive and obstructive factors
related to the business enterprise.
Externals factors –

 Socio cultural appraisal- It involves assessment of the values, beliefs and norms of a particular
society in order to understand their perception towards a particular idea or product.

 Technological appraisal- it involves assessment of existing technical knowhow and availability

of technology necessary to convert an idea into a product.

 Economic appraisal- it assess the economic environment in terms consumer price index,
inflation, balance of payments, consumption pattern, per capita income etc.

 Demographic – it involves an assessment of the overall population pattern of a particular region.

Variable like age, education, income pattern, sex, occupatio0n, distribution etc. help in identifying
the size of target market.

 Government environment- it assess various grants, legislations, policies, incentives, subsidies

etc. formed by government.

Internal environment-

 Availability of raw material

 Availability of various machines, tools and equipment required for production
 Means of finance and assessment of opening, maintain and operating expenses.
 Assessment of present, potential and future market
 Assessment of cost, quantity and quality of human resources required

(4) Feasibility analysis-

Feasibility analysis is done to find out whether the proposed project will be feasible or not. The
various variables that are studied include-

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 Market analysis- It is conducted to-

 Estimate the demand of the proposed product in the future

 Estimate the market share of the proposed product in the future

 Technical or operational analysis-

It is conducted to access the operational ability of the proposed business. It is very important to find
out the cost and availability of technology. Under technical analysis data is collected on following
parameters-
 Material availability
 Material requirement planning
 Plant location
 Machinery and equipment
 Plant layout

 Financial analysis-

A financial feasibility test is carried out to access the financial issues related with the proposed
business. The following estimates have to be carried out-

 Cost of land and building

 Cost of plant and machinery
 Preliminary cost estimation
 Provision for contingencies
 Working capital estimates
 Cost of production
 Sales and production estimates

Based on the above analysis the following projections are made-

 Break-even point
 Cash flow statement
 Balance sheet

(5)Drawing functional plans-

If the feasibility plans give a positive indication a draft business plan is formulated. It involves
preparation of the following functional plans-

 Marketing plan- a marketing plan lays down strategies for marketing a product/service which
can lead to success of business. These strategies are made in terms of marketing mix(4p’s) i.e.
product, price, place and promotion.

 Production/operation plan- a production plan is made foe a business involved in

manufacturing industry while an operation plan is made for business involved in service industry. It
includes strategies for following-
 Location and reasons for selecting a location
 Physical layout
 Cost and availability of equipment, machine and raw material
 List of suppliers and distributors

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 Cost of manufacturing and running operations
 Quality management
 Production scheduling capacity and inventory management

 Financial plan- it indicates the financial requirement of the proposed business and furnishes the
following details-
 Cost incurred in smooth running of all the financial plans
 Projected cash flows
 Projected income statement
 Projected break-even point
 Projected ratios
 Projected balance sheet

 Human resource plan- it consists of the details on the following:-

 Manpower requirements
 Recruitment and selection
 Compensation
 Organization structure
 Wages and salaries
 Budget
 Remuneration etc.

(6)Project report preparation-

It is a written document that describes step by step, the strategies involved in starting and operating
a business. It is prepared when environmental scanning has been done and feasibility studies have
been carried out.

(7) Evaluation, reviews and control-

In order to keep up with the dynamic environment and successfully face global competition a
business must be continuously evaluated and reviewed. It is necessary to periodically evaluate and
review a business to keep up with the technological changes and introduce changes in the business
strategy.

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