Chapter-II

New Ventures & Business Plan

 A business plan is a written document prepared by an
entrepreneur that describes all the relevant external &
internal elements involved in starting a new venture. It
is an integration of functional plans such as marketing
, finance, manufacturing & human resources. It
addresses long term & short term decision making . It
is also referred to as road map
 The business plan should be prepared by the
entrepreneur with consultation of service core of
retired executives, small business development
centers, lawyers, Accountants, marketing consultants
& engineers. The internet also provides sample
templates or outline of business planning.
Scope & value of the Business Plan
 The business plan may be read by employees, investors,
bankers, venture capitalist, suppliers, customers, advisors
& consultants.
 Since each of these groups reads the plan for different
purposes , the entrepreneur must be prepared to address
all their issues & concerns.
 Three main perspectives that should be considered
- First is the perspective of the entrepreneur, who
understands better than anyone else the creativity &
technology involved in the new venture. He must be able to
clearly articulate what the venture is all about.
- Second is the marketing perspective. He has to view his
business through the eyes of the customer
 Third the entrepreneur should stress on the investors
perspective. Sound financial projection is required.
 The size of the market competition & potential growth
may also affect the scope of the business plan
 Thus the BP helps determine the viability of the
venture 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
finance
Writing the Business Plan
1. Introductory Page – This is the cover page that provides a
brief summary of the business plans contents
 The name & Address of the company
 The name of the entrepreneur “(Telephone No, Fax No, e-
mail Address )
 A paragraph describing the company & the name of the
business
 The amount of finance required. Many entrepreneurs
may offer a package in their own way that is stock , debt.
 A statement of the confidentiality of the report. This is
for security purposes & is impt for the entrepreneur
2.Executive Summary-
About two or three pages in length which should
stimulate the interest of the investors. It also
determines whether the entire plan is worth reading
 What is the business concept
 How is the business concept unique
 Who are the individuals starting this business
 How will they make money & how much
 If the new venture has a strong growth plan & in 5
years expects to be positioned for an initial public
offering , then it should include an exit strategy
 Any supportive evidence such as data points from
mrktg research or legal documents or contracts that
may strengthen the case .
 Highlight the Key factors & hold a strong motivation
for the reader to read further
3.
Environmental & Industry Analysis-
To identify trends & changes occurring on a national &
international level that may impact the new venture.
 Economy- The entrepreneur should consider trends in the GNP ,
unemployment by geographic area, disposable income etc.
 Culture- shifts in population demographics ,the impact of baby
boomers ,the growing elderly population, trends in health, safety,
nutrition as well as concern for the environment may have an
impact on the entrepreneurs plan.
 Technology-Being in a market that is rapidly changing due to
technological development will require careful short term
marketing decisions as well as be prepared with contingency plans .
 Legal concern-
Future legislations that affects product, pricing,
Distribution ,promotion strategy etc. The deregulation
of prices, restrictions on media Advertising & safety
regulations regarding product or packaging
Industry Analysis-
 Industry Demand- is often available in various public
sources , knowledge whether the mkt is growing or
declining , the number of new competitors & possible
changes in consumer needs
 Competition- Most entrepreneurs face potential threat
from large corporations. The entrepreneurs must be
prepared for these threats & should be aware of who
the competitors are & what are his strengths &
weaknesses so that an efficient mktg plan can be
implemented
4. Description of Venture-
 This should begin with a description of mission or vision
statement
 Key elements are the products or services, the location if
it involves Retail or service & size of the business
 The personnel & office equipment
 Assessing the building or the space the entrepreneur will
occupy, parking, access from roadways to facility, access to
customers, suppliers, distributors, town regulations &
zoning laws . "Zoning laws are an excellent means of
protecting individuals from the real and potential harm
caused by occupations and businesses run at home that are
incompatible with the peace and safety of a neighborhood
 If your request for a zoning variance or change is
approved, many restrictions still apply. In addition to
meeting local building codes, you will probably be
required to observe maximum floor space in relation
to land area; maximum heights; minimum provisions
for parking; and other factors. You need to get
detailed, specific information from your city or town
government, since policies vary from place to place.
5. Production Plan-
If the new venture is a manufacturing operation then it
needs a production plan. If some or all part of the work
is subcontracted, the plan should describe the
subcontractors (location, cost, any contracts that have
been completed)
If the manufacturing is to be carried out in whole or in
part by the entrepreneur , he need to describe the
physical layout, the machinery & equipment needed
6. Operation Plan-
A manufacturing or a non manufacturing plan should include a
operation plan which describes the flow of goods & services from
production to the customer, which includes inventory of
manufactured products, shipping & customer support services
A non manufacturer such as retail or service providers the
chronological steps in completing a business transaction.
Eg- An internet retail sports clothing operation would need to
describe
- How & where the products offered would be purchased
- How they would be stored
- How the inventory would be managed
- How products would be shipped
- How a customer would log on & complete a transaction
 It is important here that major distinctions between
services & manufactured goods is services involve
intangible performances. eg- hotels, airlines hospitals,
car rental agencies They rely on quality of service. For
these firms success depends on location, facility layout
& personnel which can in turn affect service quality.
The process of delivering this service quality is what
distinguishes one new service venture from another &
thus needs to be the focus of an operation plan
Operations Information Needs
 Location- The companies location & its accessibility to customers, suppliers &
distributors need to be determined This is especially true of retail businesses
where traffic count and accessibility are critical .
 Manufacturing operations- Basic machine & assembly operations need to be
identified, as well as whether any of these operations subcontracted & by whom
 Raw Materials- needed & suppliers names addresses & costs should be
determined
 Equipment- needed should be listed with its cost & whether it will be
purchased or leased
 Labour skills- Each unique skill needed the number of personnel in each skill,
pay rate & an assessment of where & how these skills will be obtained should be
determined
 Space- The amount of space needed should be determined , including whether
the space will be owned or leased
 Overheads- each item needed to support manufacturing such as tools supplies
utilities should be determined
7. Marketing Plan- describes how the product or services
will be distributed, priced & promoted.
 Marketing research evidence to support any of the
critical marketing decision strategies as well as for
forecasting sales should be described
 Specific forecasts for products or services are indicated
in order to project profitability of the venture.
 Potential investors regard the marketing plan as
critical to the success of the new venture
 Defining the Target Market/ Opportunities & Threats-
 Market Segmentation- Dividing the mkt into small
homogeneous groups which allows the entrepreneur to
effectively respond to the needs of the homogeneous consumers.
 Eg- Reebox discovered that many consumers who bought the
running shoes were not athletes. They bought the shoes for
comfort & style. They developed a mktg plan that was targeted
directly to this segment
 Considering strength & Weakness(unique liquid cleaner)
 Establishing goals & Objectives- should respond to the questions
such as mkt share, sales, number of distributors, sales
promotion etc. (10% mkt penetration, distribution in 75% of the
mkt) set up sales training programe, improve packaging, find a
new distributor
Defining Marketing Strategy & Action Plans

a).Product or Service-
If your products/services are not unique, you must find a
way to position your products/services in the mind of
your customer and to differentiate them from the
competition. Positioning is the process of
establishing your image with prospects or customers.
(Examples include: highest quality, lowest price, wider
selection, Best customer service, faster delivery, etc.)
 eg- Dell distinctive from others they are assembled
from off shelf components & are marketed with direct
marketing & internet techniques promising quick
delivery & low prices. It also provides extensive
customer service with e-mail & telephone available to
ask technical & non technical questions. Packaging
,price ,warranty, style service etc
 b). Pricing – Pricing Strategies
 1) What will be your pricing strategies? (For example: Premium, Every
Day Low Price, Frequent Sale Prices, Meet Competitor Price, etc.)
 2) How will you compare with competition and how will they respond?
 3) Why will customers pay your price?
 4) What will be your credit policies?
 5) Is there anything about your business which insulates you from price
competition?
 6) Can you add value and compete on issues other than price
 Cost
 Mark-ups or margins-A standard mark-up for cosmetics is 100% on cost
expected to cover overhead cost & some profit. Standard mark-ups can
be ascertained from trade publications or by asking suppliers
 Competition-
 "Who is your competition?" is one of the first questions a
banker or investor will ask. Business by nature is
competitive, and few businesses are completely new. If
there are no competitors, be careful; there may be no
market for your products.
 Expand your concept of competition. If you plan to open
the first roller skating rink in town, your competition
includes movie theaters, malls, bowling alleys, etc.
 Basic Questions:
 1) Which products cannot be easily differentiated
entrepreneur charges the same price
Higher price if the product or service has unique
benefits, ( innovations such as technology products,
plasma televisions to recover high development cost
 In a non differentiated product higher price would be
charged if the entrepreneur would provide additional
services to the customer in case of T- Shirt such as money
back guarantee, a warranty against fading or free delivery.
Although these services would increase the cost of the
entrepreneur they would establish a distinctive image
c). Distribution-
- Provides utility to the consumers
- A high quality product will be distribute in outlets that
have a high image
- If the mkt is concentrated is concentrated ,the
entrepreneur may consider direct sales .if it is
dispersed the cost of direct sales would be more
- Attributes such as perishables, expensive, bulky would
require direct channel
- Middlemen add impt value to the product
- Multiple channels such as retail stores, websites,
catalogs
d). Promotion
- Inform & educate the consumers
- For a local service or retail company Television would
be expensive unless the entrepreneur considers a cable
television a viable outlet
- Larger markets can be reached using the internet
direct mail, trade magazine or newspapers
- Professionally written news releases releases about the
venture & its products & services are often of interest
to media.
e). Marketing strategy – Consumer/ business markets-
- In marketing to consumers direct mail & the internet
& to business it uses its own sales force.
- The sales force calls on business with a intention of
selling a large volume at one transaction
- For a start up venture the attendance at a trade show
can be one of the effective means to reach many
potential buyers in one location.
f). Budgeting the marketing strategy
- Effective planning decisions must also consider the
costs involved in the implementations of these
decisions
g). Implementation of the mktg plan- It is not a
formality that serves as a superficial document to
outside financial supporters or suppliers. It should be
coordinated & implemented
8. Organizational Plan –
-It describes the ventures form of ownership i.e
proprietorship, partnership or corporation.
- If the venture is partnership , the terms of the
partnership should be included. If the venture is a
corporation , it is important to detail the names
addresses & resumes of the directors & offices of the
corporation.
- Provide an organization chart indicating the line of
authority & responsibility of the organization.
 Organization structure
- What is the form of ownership
- If a partnership, who are he partners & what are the terms of
agreement
- If incorporated who are the principal shareholder & how much stock
do they own
- How many shares of voting & non voting have been issued & of what
type
- Who are the members of the board of directors
- Who has cheque signing authority & control
- Who are the members of the management team & what are their
backgrounds
- What are the roles & responsibilities of each member of the mgt team
- What are the salaries bonuses or other forms of payt for each member
of the mgt team
9. Assessment of risk-
- The entrepreneur should indicate the potential risks to
the new venture
- What happens if these risk become reality
- Discuss the strategy that will be employed to either
prevent minimize or respond to the risks if they occur
- Risk may arise from competitors reaction, weakness in
production or mgt team, new advance in technology
10. Financial Plan-
- It determines the potential investment commitment related to
the new venture & indicates whether the business plan is
economically feasible.
- The entrepreneur should summarize the forecasted sales &
expenses for at least first 3 years ,projections provided monthly
-It includes forecasted sales, general & administrative expenses.
- Cash flow figures for 3 years , since bills have to be paid at
different times of the year determine cash on a monthly basis
- Sales may be irregular & receipts from customers may also be
spread out necessitating borrowing of short tern funds to meet
fixed expenses such as salaries & utilities
- The projected balance sheet which shows the financial condition
of the business at a specific time.
11.Appendix-
- Any back up material that is not necessary in the text
of the document
- Letters from customers, distributors, subcontractors
- Leases, contracts agreements
- Price list from suppliers
Sources of business idea
 Consumers
 Existing products and services
 Distribution channels
 Government
 Research and development
Methods of generating ideas
 Focus groups
 Brainstorming
 Problem inventory analysis