Define what business plan is

Explain why a business plan is important to its

users
Identify the information needed in preparing a
business plan
Describe the major sections of a business plan
Explain why some business plan fail, and
Deliver an elevator pitch, using the content of an
existing business plan
After recognizing and assessing opportunities, the
entrepreneur must formalize his or her attempt to exploit
these opportunities in the form of a business plan. In this
chapter, we emphasize the importance of the business
plan for a variety of users. We then proceed to describe
the major sections of the business plan after identifying
the information needed for each section. We end by
providing guidelines on how to present a business plan to
relevant stakeholders.
Business plan is a document that describes that various external
and internal elements involved in starting a business or in
expanding an existing venture, amidst a dynamic business
environment.
It serves as a guide for short term and medium term decision
making and managerial action.
It integrates different functional plans…
1. Marketing
2. Manufacturing
3. Finance
4. Human resource management
It helps determine whether a proposed or existing business
venture is viable given its target market
It guides the entrepreneur in mobilizing the resources needed by
the business
It serves as a tool in helping get financing for the business
Entrepreneur
Lender
Investor
Serves as a roadmap for managing the business
Identifies the resources needed to operate and grow the
business
Allows the entrepreneur to anticipate potential business risks
Allows the lender to assess whether the entrepreneur will be
able to meet he debt and interest of payments
Provides information about the collateral or tangible assets that
can be secured for the loan
Allows the investor to gauge whether projected returns are
acceptable
Provides information about the character of the entrepreneur
and about the capability of the ventures management team
National government agencies
City or municipal offices
Industry assocoations
Market Information Needs
Operation Information Needs
Financial Information Needs
General environmental trends
Specific industry trends
Local market condition
Market potential
Demographic and psychographic profile of target market
Location
Manufacturing or service operations
Equipment and furniture required
Space requirements
Labor requirements
Raw material needed and potential suppliers
Utilities
Rental rates
Cost of equipment
Cost of utilities
Personnel cost
Distribution cost
Cost of insurance
Registration and license fees
Introductory page Marketing plan
Executive Summary Organizational plan
Environmental and industry analysis Financial plan
Description of the business Assessment of risk
Production plan Timetable/Milestone
Operations plan Appendices
Business name and address
Names and addresses of business owners/entrepreneurs
Nature of the business
Statement of financing needed
Statement of confidentiality of the report (optional)
Highlights of the business plan summarized in two or three
pages
Sociocultural, technological, economic, politico-legal

 Supply and demand, competition

Products and/or services
Size of the business
Mission statement and core values
Location of the business and its major physical assets
Background of the business owners/entrepreneurs
Manufacturing process
Physical plant
Machinery and equipment
Suppliers of raw materials
Future capital equipment needs
Description of the company’s operation
Flow of the orders for goods and services
Pricing
Distribution
Promotion
Sales forecasts
Form of the ownership
Principal shareholders or partners
Organizational chart/lines of authority
Background of the management team
Roles and responsibilities of management team
Assumptions
Pro forma balance sheet
Pro forma income statement
Cash flow projections
Sources and uses of funds
Breakeven analysis
Potential risks – internal or external
Strategies for preventing or minimizing risks
Response to risks should they occur
Formal registration of the business
Completion of the product or service design
Completion of the prototypes
Hiring of initial personnel
Reaching agreements with suppliers and distributors
Actual production
Initial orders, sales, and deliveries
Market research data
Detailed financial projections
Curriculum vitae of the management team
Price lists from suppliers
Profile of competitors
This cover page provides a brief summary of the business plan’s
content. It must contain the following:
1. Name and address of the company
2. The name of the entrepreneur and his contact information
3. A brief description of the company and the nature of the
business
4. the amount of financing needed
It is prepared after the total plan has been written, must
stimulate the interest of its reader, especially if he or she is a
potential investor. If it is written in a concise and compelling
manner, the business plan might just convince the potential
investor that the entire business plan is worth reading.
The entrepreneur must use his judgment in determin
Environmental Factors
1. Sociocultural conditions
2. Technological conditions
3. Economic conditions
4. Politico-legal conditions
5. Supply and demand
6. Competiton
Sociocultural conditions - includes among others, a description
of shifts in the characteristics of the population (demographics)
Technological conditions - include an assessment of the major
developments in science and technology
Economic conditions - include a description of the growth of
both the national and local economies, as measured by the
Gross Domestic Product or GDP and the regional GDP
respectively
Politico-legal conditions - must take into account existing laws
and regulations, as well as future legislation
Supply and demand - it is important to know whether his
proposed business venture belongs to an industry that is
rapidly growing (sunrise industry), steadily growing, plateauing,
or rapidly declining (sunset industry).
Competition - it is essential for the entrepreneur to “know
the enemy” so that he can execute an appropriate
competitive strategy.
Worth including in this section is the venture’s mission statement,
which could serve as a guide in decision-making. The
entrepreneur must also include information about the product or
service offered by the company, the location of the business, its
major physical assets, and some background information about
the business owner and its management team.
• If the new venture is a manufacturing concern, the entrepreneur
must prepare a production plan that describes the complete
manufacturing process.
If the manufacturing will be carried out by the business these, are the
things to be included in the production plan:
1. Description of the layout of the physical plant
2. The machinery and equipment needed to perform the manufacturing
operations
3. Names, addresses, and terms of payment of the suppliers of raw
materials
4. Production cost
5. Future capital equipment needs
If the manufacturing will be fully or partially subcontracted:
1. Describe the subcontractor, including its location and facilities
2. Indicate the reason for selecting the subcontractor
3. Spell out the costs of subcontracting.
The operations plan must be included whether the business is
concerned with manufacturing or service. For manufacturing
business, this section must describe the flow of goods and
services from production to the customer, including purchasing,
inventory of raw materials and of finished goods, inventory
control procedures and distribution. For service businesses, the
section must describe the procedures in completing a business
transactions.
This section describes the target market for the new product or
service.
Once the target market is defined, then the entrepreneur must
describe how the product or service will be priced, promoted or
distributed to its target customers.
It is not enough for this section to provide a documentation of
the venture’s form of ownership – that is proprietorship,
partnership, or corporation, nor it is sufficient to have a nice
organizational chart that indicates the positions and job
descriptions of the venture’s management team.
This section determines the investment that must be poured
into the business, and indicates whether the business is an
economically viable undertaking.
Effective business plans must contain a section that discusses the risks
that might prevent the business from achieving its objectives.
1. Price cutting by competitors,
2. Operating costs that exceed initial estimates
3. Failure to achieve sales forecasts
4. Sudden unavailability or a steep increase in the price of the raw
materials
5. Difficulties in raising additional capital
6. Advances in technology that might render the new product obsolete
7. Unforeseen environmental conditions, such as a natural disaster, a major
recession, or an unfavorable legislation
1. Formal registration of the business
2. Completion of product or service design
3. Completion of prototypes
4. Hiring of initial personnel
5. Agreements between suppliers and distributors
6. Actual production
7. Receipt of initial orders
8. Initial sales and deliveries
To ensure that the main body of the business plan is concise
enough to include only the most essential information, several
items could instead be appended to the document.
Document is sloppy and looks unprofessional
Executive summary is not coherent and is too long
Unclear on why people would want to buy the product or
service
Sales and financial projections are unreasonably optimistic
Inadequate description of the qualifications and experience of the
management team
Inadequate assessment of the potential threats to the business
Tell a compelling story
Exhibit confidence and professionalism
Cover the basics
Adapt a cooperative attitude when answering questions