UNIT III - BUSINESS PLAN PREPARATION

Sources of Product for Business - Prefeasibility Study - Criteria for Selection of Product -
Ownership - Capital - Budgeting Project Profile Preparation - Matching Entrepreneur with the
Project - Feasibility Report Preparation and Evaluation Criteria.

Sources of Product for Business

As an entrepreneur, one of the crucial aspects of starting and growing a successful business is
identifying and securing reliable sources of products. Without quality products, it will be
impossible to attract customers and generate revenue. Here are some potential sources of
products that entrepreneurs can consider:

1. Manufacturers: These are companies that produce goods on a large scale. They can be
located locally or overseas and can provide a wide variety of products.
2. Wholesalers: These are businesses that purchase goods in bulk from manufacturers and
sell them to retailers at a discounted price. Wholesalers often specialize in a particular
industry or product line.
3. Distributors: These are businesses that purchase goods from manufacturers or
wholesalers and sell them to retailers or directly to consumers. Distributors can offer
additional services such as storage and transportation of goods.
4. Importers: These are businesses that source products from overseas and import them
into the country for resale. Importers can offer access to unique products that may not
be available domestically.
5. Retailers: These are businesses that sell products directly to consumers. Retailers can
also act as a source of products for other businesses by purchasing goods in bulk and
reselling them.
6. Online Marketplaces: Platforms such as Amazon, eBay, and Alibaba offer a vast range
of products from a variety of sellers, including manufacturers, wholesalers, and retailers.
Online marketplaces can be a convenient source of products for businesses looking for
a wide selection and competitive pricing.
7. Private Label Manufacturers: These are manufacturers that produce goods under a
brand name owned by another company. Private label manufacturers can offer
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 businesses the opportunity to sell products under their own brand without having to
invest in manufacturing facilities and equipment.
8. Crowdfunding: Crowdfunding platforms like Kickstarter and Indiegogo can be a
source of funding to develop and produce new products.

These are just a few of the many sources of products available to businesses. Choosing the
right source will depend on the type of product you need, your budget, and your business goals.

Here are some important characteristics to consider:

1. Quality: The quality of the products is a critical factor for the success of any business.
The source of the products must offer consistent quality and reliability. Entrepreneurs
should carefully evaluate the quality of the products from each potential source to ensure
that they meet their customers' expectations.
2. Cost: The cost of the products will affect the pricing strategy, profit margins, and overall
financial performance of the business. Entrepreneurs must consider the cost of the
products from each source, including manufacturing, transportation, and any other
expenses, to ensure that they can offer competitive prices and achieve a reasonable profit
margin.
3. Lead Time: The lead time is the amount of time it takes for the products to be
manufactured and delivered to the entrepreneur's location. Entrepreneurs must evaluate
the lead time from each source to ensure that they can meet their customers' demands
and avoid stockouts.
4. Customization: If the entrepreneur wants to offer customized products, they must
ensure that their source can accommodate their needs. Some sources, such as
manufacturers, offer more customization options than others, such as wholesale
suppliers.
5. Scalability: Entrepreneurs must consider the scalability of their product source. If the
business grows quickly, can the source keep up with the demand? Can they offer the
same level of quality and consistency? Entrepreneurs must ensure that their source can
scale up or down as needed.

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 6. Reputation: The reputation of the source is an essential factor for entrepreneurs to
consider. They must research and evaluate the potential sources' reputation to ensure
that they are reliable, trustworthy, and have a track record of delivering quality products.

Prefeasibility Study

Before developing a business plan, entrepreneurs often conduct a prefeasibility study to

determine the feasibility and potential profitabili

ty of their business idea. A prefeasibility study involves analyzing the market, identifying
potential customers, evaluating the competition, and estimating the financial resources needed
to start and run the business. Here are some key steps to prepare a prefeasibility study:

1. Market Analysis: The first step in a prefeasibility study is to conduct market research
to identify the target market and potential customers. Entrepreneurs should consider the
demand for the product or service, the size of the market, the target audience's
demographics and preferences, and any trends or changes in the market.
2. Competition Analysis: Entrepreneurs must analyze the competition in the market to
determine the potential demand for their product or service. They should evaluate the
strengths and weaknesses of their competitors, identify any gaps in the market that they
can fill, and develop a unique value proposition that sets their business apart from the
competition.
3. Technical Analysis: This step involves analyzing the technical aspects of the business,
such as the production process, equipment, and technology needed to deliver the product
or service. Entrepreneurs must evaluate the feasibility and efficiency of their production
process, the availability and cost of necessary equipment, and any other technical
requirements.
4. Financial Analysis: A financial analysis is a critical component of a prefeasibility
study. Entrepreneurs must estimate the initial investment required to start the business,
including the cost of equipment, inventory, and any other expenses. They should also
prepare a projected income statement, cash flow statement, and balance sheet to estimate
the potential profitability of the business.

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 5. Resource Analysis: Entrepreneurs must consider the human resources and skills
required to operate the business. They should evaluate their own skills and experience,
identify any gaps that need to be filled, and develop a plan to recruit and train
employees.
6. Risk Analysis: A risk analysis involves identifying and evaluating the potential risks
associated with the business, such as market competition, regulatory challenges, and
financial risks. Entrepreneurs should develop a risk management plan to minimize the
impact of these risks and ensure the long-term success of the business.

In conclusion, a prefeasibility study is an essential step in the business planning process. It

allows entrepreneurs to evaluate the potential feasibility and profitability of their business idea
and make informed decisions about the resources needed to start and run the business. By
conducting a thorough prefeasibility study, entrepreneurs can increase their chances of success
and build a sustainable and profitable business.

Criteria for Selection of Product

When developing a business plan, entrepreneurs must consider several criteria when selecting
the products, they will offer. Here are some key criteria to consider:

1. Market Demand: The first criterion for selecting a product is market demand.
Entrepreneurs must evaluate the potential demand for their product by analyzing the
target market, identifying their needs and preferences, and evaluating the competition.
They should ensure that there is a sufficient demand for the product to support a viable
business.
2. Profitability: The profitability of the product is another critical factor to consider.
Entrepreneurs should evaluate the production costs, potential sales volume, and pricing
strategy to estimate the potential profitability of the product. They should ensure that
the product can generate enough revenue to cover production costs and generate a
reasonable profit margin.
3. Product Quality: The quality of the product is a critical factor for the success of any
business. Entrepreneurs should select products that meet the quality standards and

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 expectations of their target market. They should also ensure that the product can be
produced consistently and reliably.
4. Production Costs: The production costs of the product will affect the pricing strategy
and profitability of the business. Entrepreneurs must evaluate the cost of production,
including the cost of raw materials, labor, and equipment, to ensure that they can offer
competitive prices and achieve a reasonable profit margin.
5. Scalability: Entrepreneurs must consider the scalability of the product. If the business
grows quickly, can the product keep up with the demand? Entrepreneurs must ensure
that their product can scale up or down as needed.
6. Differentiation: Entrepreneurs should consider whether their product offers any unique
features or benefits that set it apart from the competition. They should ensure that the
product has a competitive advantage that will appeal to their target market.
7. Regulatory Compliance: Entrepreneurs must ensure that their product complies with
all relevant regulations and standards. They should evaluate the regulatory requirements
for their product, such as safety and environmental regulations, and ensure that they can
comply with these requirements.

In conclusion, entrepreneurs must consider several criteria when selecting the products they
will offer. By carefully evaluating the market demand, profitability, quality, production costs,
scalability, differentiation, and regulatory compliance of each potential product, entrepreneurs
can select the best option that will allow them to build a successful and sustainable business.

Ownership

Ownership refers to the legal right of an individual, group of individuals, or an organization

to own and control property or assets. Ownership gives the owner the right to use, transfer,
sell, or dispose of the property or asset as they see fit, subject to legal and regulatory
requirements.

Ownership can take many forms, including:

1. Sole Proprietorship: This is a form of ownership in which a single individual owns

and operates a business. The owner is responsible for all aspects of the business and is
personally liable for its debts and obligations.
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 2. Partnership: This is a form of ownership in which two or more individuals share
ownership and control of a business. Partnerships can be general, where all partners
share in the profits and losses, or limited, where one or more partners have limited
liability.
3. Corporation: This is a form of ownership in which a business is owned by shareholders
who have limited liability for the company's debts and obligations. The corporation is a
separate legal entity from its owners, and ownership can be transferred through the
buying and selling of shares.
4. Cooperative: This is a form of ownership in which a group of individuals or businesses
own and control a business for their mutual benefit. Members share in the profits and
have a say in the company's decision-making process.
5. Franchise: This is a form of ownership in which an individual or group of individuals
owns and operates a business under a license agreement with a larger company. The
franchisee is responsible for running the business according to the franchisor's
guidelines and pays a fee for the right to use the franchisor's name and business model.

Ownership can also apply to assets such as real estate, vehicles, and intellectual property. The
type of ownership of an asset can have implications for legal and tax purposes, as well as the
ability to transfer or sell the asset.

Capital

Capital refers to the financial resources that a business or individual has available to invest in
assets, such as equipment, inventory, and property, or to use to generate income or profits.
Capital can come from various sources, including personal savings, investments, loans, and
grants.

In a business context, capital can be categorized into two types: debt capital and equity capital.

1. Debt Capital: This refers to funds that are borrowed by a business or individual and
must be repaid over time with interest. Debt capital can come from various sources,
such as banks, credit unions, and bondholders.

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 2. Equity Capital: This refers to funds that are invested in a business in exchange for
ownership in the company. Equity capital can come from various sources, such as
venture capitalists, angel investors, and stockholders.

Capital is critical for a business's success and growth. It is used to finance the purchase of
assets, pay for operating expenses, and invest in new opportunities. A business's ability to
access capital can depend on factors such as its creditworthiness, business plan, and industry
trends.

In addition to traditional sources of capital, businesses can also explore alternative financing
options, such as crowdfunding, grants, and small business loans. It is important for businesses
to carefully consider their capital needs and evaluate the costs and benefits of different
financing options to determine the best fit for their unique situation.

Budgeting Project Profile Preparation

Project Profile Preparation for Budgeting:

1. Project Overview: Provide an overview of the project, including the purpose, scope,
and objectives. This section should also outline the stakeholders involved and the
benefits of the project.
2. Project Costs: Identify all the costs associated with the project, including materials,
labour, equipment, and any other expenses. This section should also include a
breakdown of the costs by phase or stage of the project.
3. Project Schedule: Create a detailed project schedule that outlines the timeline for each
phase of the project, including start and end dates, milestones, and deliverables.
4. Project Risks: Identify and analyse potential risks that may impact the project's success,
including financial, technical, and environmental risks. This section should also include
a risk management plan that outlines strategies for mitigating each risk.
5. Project Stakeholders: Identify all stakeholders involved in the project, including
internal and external stakeholders. This section should also include a communication
plan that outlines how stakeholders will be informed of project progress and changes.

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 6. Project Metrics: Identify metrics to measure the project's success, including financial
metrics such as return on investment (ROI) and non-financial metrics such as customer
satisfaction and employee morale.
7. Project Management: Describe the project management approach, including the roles
and responsibilities of the project team, project governance, and project monitoring and
control processes.
8. Project Funding: Identify the funding sources for the project, including internal and
external funding sources. This section should also include a budget breakdown that
outlines the funding requirements for each phase of the project.
9. Project Implementation: Describe how the project will be implemented, including the
methodology, tools, and techniques that will be used.
10.Project Evaluation: Describe how the project's success will be evaluated, including the
evaluation criteria and methodology. This section should also include plans for ongoing
monitoring and evaluation to ensure the project's continued success.

Overall, a well-prepared project profile can help ensure that budgeting for the project is
accurate and effective, and can help identify and mitigate potential risks and challenges.

Matching Entrepreneur with the Project

Matching an entrepreneur with a project requires careful consideration of the entrepreneur's

skills, experience, and interests, as well as the project's requirements and goals. Here are some
steps that can be followed to match an entrepreneur with the right project:

1. Identify the entrepreneur's skills and experience: The first step is to identify the
entrepreneur's skills and experience, including their education, work history, and any
relevant certifications or licenses. This will help identify the areas where the
entrepreneur is most proficient and can contribute the most value.
2. Identify the project's requirements: The next step is to identify the requirements of
the project, including the skills, experience, and expertise needed to successfully
complete the project. This will help identify the areas where the entrepreneur's skills
and experience can be leveraged most effectively.

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 3. Assess the entrepreneur's interests and passions: It's important to consider the
entrepreneur's interests and passions when matching them with a project. If an
entrepreneur is passionate about a certain industry or type of work, they are more likely
to be motivated and engaged in the project.
4. Consider the entrepreneur's leadership style: The entrepreneur's leadership style can
also be a factor in matching them with a project. For example, if the project requires a
more hands-on approach, an entrepreneur who prefers to delegate tasks may not be the
best fit.
5. Evaluate the entrepreneur's track record: Finally, it's important to evaluate the
entrepreneur's track record in managing and executing projects. An entrepreneur with a
proven track record of success in similar projects is more likely to be a good fit for the
project.

By considering these factors, you can better match an entrepreneur with the project that is most
suitable for their skills, experience, and interests, and maximize the chances of project success.

Feasibility Report Preparation and Evaluation Criteria

Feasibility Report Preparation

A feasibility report is a comprehensive study that evaluates the technical, financial, and
organizational aspects of a proposed project to determine its feasibility. The report should
provide an overview of the project, including the purpose, scope, objectives, and potential
benefits, as well as a detailed analysis of the key feasibility factors. Here are the steps to
prepare a feasibility report:

1. Project Overview: Provide an overview of the project, including its purpose, scope,
objectives, and potential benefits.
2. Market Analysis: Conduct a thorough analysis of the market, including the target
market size, competition, and market trends.
3. Technical Feasibility: Evaluate the technical feasibility of the project, including the
availability of technology, the feasibility of the production process, and any potential
technical challenges.

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 4. Financial Feasibility: Evaluate the financial feasibility of the project, including the
estimated costs and revenues, potential profitability, and funding requirements.
5. Organizational Feasibility: Evaluate the organizational feasibility of the project,
including the availability of resources, personnel, and management capacity.
6. Risk Analysis: Conduct a risk analysis to identify and assess potential risks and
challenges that may affect the success of the project.
7. Conclusion and Recommendations: Summarize the findings of the feasibility report
and provide recommendations on whether to proceed with the project.

Evaluation Criteria:

When evaluating the feasibility report, the following criteria should be considered:

1. Market Potential: The project should have a viable market with sufficient demand and
potential for growth.
2. Technical Feasibility: The project should be technically feasible, with the necessary
technology and equipment available to support its implementation.
3. Financial Feasibility: The project should be financially feasible, with a clear revenue
model and realistic cost estimates.
4. Organizational Feasibility: The project should be organizationally feasible, with
sufficient resources and management capacity to support its implementation.
5. Risk Analysis: The project should have a risk management plan in place to address
potential risks and challenges.
6. Conclusion and Recommendations: The feasibility report should provide clear and
actionable recommendations on whether to proceed with the project and any
modifications or improvements needed to ensure its success.

Overall, a well-prepared feasibility report can help identify the strengths and weaknesses of a
proposed project, and provide valuable insights into its potential success. By carefully
evaluating the key feasibility factors, stakeholders can make informed decisions on whether to
proceed with the project, and ensure that the project is well-positioned for success.

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