Chapter : 4

Business Plan

Prepared by : Chandani Karn

Course content
Concept of business plan

Advantage and disadvantages of planning

Elements of business plan

Different types of business plan

Different types of plans – specificity, length and audience

The business planning process:

Setting preliminary goals,
Conducting initial research,
Confirming goals,
Conducting subsequent detailed research,
Writing business plan, - critically assessing proposed plan,
Implementing and evaluating the plan
Concept :
A business plan is an essential written document that provides a description
and overview of your company's future.

All businesses should have a business plan. The plan should explain your
business strategy and your key goals to get from where you are now to where
you want to be in the future.

Usually a startup- defines its objectives it is to go about achieving its goals.

A business plan lays out a written roadmap for the firm from marketing,
financial, and operational standpoints.
A business plan is a document describing a company's core business activities
and how it plans to achieve its goals.

Startup companies use business plans to get off the ground and attract
outside investors.

A business plan can also be used as an internal guide to keep an executive

team focused on and working toward short- and long-term objectives.

Businesses may create a lengthier traditional business plan or a shorter lean

startup business plan.

Good business plans should include an executive summary and sections on

products and services, marketing strategy and analysis, financial planning, and
a budget.

In a nutshell, a business plan is a written expression of a business idea and

will describe your business model, your product or service, how it will be
priced, who will be your target market, and which tactics you plan to use to
reach commercial success.
 Advantages of Business Plan
1. See the whole business
2. Increased Clarity
3. Creation of a Marketing Roadmap
4. Support for Funding
5. Helps to Secure Talent
6. Provides Structure
7. Strategic Focus
8. Milestones
9. Realistic regular reminders to keep on track.
10.Develop accountability
1. See the whole business.
 Business planning done right connects the dots in your business so you get a better
picture of the whole. Strategy is supposed to relate to tactics with strategic
alignment.
 Does that show up in your plan? Do your sales connect to your sales and marketing
expenses? Are your products right for your target market? Are you covering costs
including long-term fixed costs, product development, and working capital needs as
well?
 Take a step back and look at the larger picture.

2. Increased Clarity
A business plan can bring clarity to the decision-making process regarding key
aspects of the business such as capital investments, leases, resourcing, etc.
You can't do everything. A good Business Plan will help you identify business critical
priorities and milestones to focus on.

3. Creation of a Marketing Roadmap

It helps to define your target market(s), target customers and how you will promote
and place your product / service to these markets / customers.
4. Support for Funding
Whether you’re seeking credit from a bank or capital from investors, a business plan that
answers questions about profitability and revenue generation is often required.

5. Helps to Secure Talent

For a business to succeed, attracting talented workers and partners is vital.
Part of a business plan’s purpose is to help bring in the right talent, at the right time.
Staff want to understand the vision, how the business will achieve its goals, and how
they can contribute to this in their own roles.

6. Provides Structure
A business plan provides structure and defines business management objectives.
It becomes a reference tool to keep the business on track with sales targets and
operational milestones.
When used properly and consulted regularly, it can help measure and manage your
priority areas of focus.
7. Strategic Focus
 Startups and small business need to focus on their special identities, their target
markets, and their products or services tailored to match.

8.Milestones
 Good business planning sets milestones you can work towards. These are key goals you
want to achieve, like reaching a defined sales level, hiring that sales manager, or opening
the new location.
 We’re human, We work better when we have visible goals we can work towards.

9. Realistic regular reminders to keep on track

We all want to do everything for our customers, but sometimes we need to push back to
maintain quality and strategic focus.
It’s hard, during the heat of the everyday routine, to remember the priorities and focus.
The business planning process becomes a regular reminder.
10. Develop accountability
 Good planning process sets expectations and tracks results.
It’s a tool for regular review of what’s expected and what happened.
Good work shows up. Disappointments show up too. A well-run monthly plan
review with plan vs. actual included becomes an impromptu review of tasks and
accomplishments.
 Disadvantages of Business Plan
It was Benjamin Franklin who immortalized the words “by failing to prepare, you
are preparing to fail.”

1. Ignore cash flow

2. Express your thoughts too much

3. No specific goals

4. Lack of sufficient research

5. Too much time can be spent on analysis

6. There is often a lack of accountability

7. Inflexibility
1. Ignore cash flow
The earliest business plans focused almost entirely on profitability -- how you could
generate more revenue than you could on related expenses.
 However, it is more important to consider the concept of cash flow, specifying how
much cash the business has at any given time.
Technically, a business can be "profitable" on paper but still have cash flow problems,
imagine, for example, a scenario in which bills pile up and customers don't pay invoices
on time.

2. Express your thoughts too much

 your idea is important, but it's not the most important thing in a business plan.
 if you think "this idea is good enough to work." Then you've created a flawed business
plan.
Even the best ideas still need some practical, actionable solution to lay the foundation
for success. Your focus should be less on "what" and "how", "where" and "when".
3. No specific goals
Most startup entrepreneurs will skip the details and give a vague description such as
"substantial growth in the first few years," rather than "40% sales growth in the first
year and 30% in the second year."
 two reasons for this: laziness (or a lack of desire to provide more specific
information), or fear that your numbers might be wrong. It can be wrong, but if you
want to get a measurable and actionable goal, you have to give a specific description.

4. Lack of sufficient research

How much of your business plan is based on guesswork and how much is based on
actual quantitative data? If you're like most start-up and aspiring entrepreneurs, your
business plan will lean toward the former.
If you have a lot of experience in your field, you can draw important conclusions on your
own, but it's never a bad idea to bring more research
4. Too much time can be spent on analysis.
Maybe you’ve heard the expression “paralysis by analysis.” It cute and catchy, but it also
accurately describes the struggle that many have in the creation of a business plan.

5. There is often a lack of accountability.

Because one person is generally responsible for the creation of a business plan, it is
difficult to hold that person accountable to the process.
6. Inflexibility – a feeling that you must adhere to the plan and never deviate

7. Discouraging creativity, innovation, initiative and experimentation after the plan is set

8. Breeding a false sense of security and tunnel vision, stemming from putting too much
stock in the plan and not seeing or reacting to changing conditions

9. Blinding employees to opportunities that were not foreseen and addressed

10. Being a time consuming process, requiring research, analysis and interpretation

11. Being expensive, drawing resources away from a business when they could be used on
other things

12. Being rendered obsolete or irrelevant in a heartbeat

Elements/ parts of business plan
1. Title page

2. Executive summary

3. Description of the company

4. Description of the products and services

5. Market analysis

6. Competitive analysis

7. Operational management

8. Financial analysis

9. Additional information/appendix
Writing Business Plan
1. Title page

2. Executive summary

3. Description of the company

4. Description of the products and services

5. Market analysis

6. Competitive analysis

7. Operational management

8. Financial analysis

9. Additional information/appendix
1. Title page :-
 The title of the plan, and very
brief description of the business
 Date and name of the owner
 The company name and location
2. Executive summary :-
 It is an extract of the entire plan
 It should include a mission
statement, a brief description of
the products or services offered,
and a broad summary of financial
growth plans
3. Description of the company :-
It should contain information like
Your business’s registered name and location
Names of key people in the business
Information about the nature of the business and the factors
that should make it successful

4. Description of the products and services :-

It should include the following:
An explanation of how product or service works, pricing
model, category of the customers, supply chain and order
fulfillment strategy, sales and distribution strategy
Describe the factors you think will make it successful

5. Market analysis :-
It requires meticulous analysis of all aspect of the market,
such as demography, cultural norms, environmental standard,
resource availability, prices, distribution channels, etc
6. Competitive analysis :-
The purpose of competitive analysis is to
determine :
The strengths and weaknesses of the competitors
within your market
Barriers that can be developed to prevent you
from entering the market
Strategies that will provide you with a distinct
advantage

7. Operational management :-
The operations and management
component of the plan is designed to
describe how the business continues to
function
The operation plan highlights the
organization’s functions, such as the
responsibilities of the management team,
the tasks assigned to each department
within the company, and capital and
expense requirements related to operating
the business
8. Financial analysis :-
It provides a prospective financial outlook
It include a forecasted income statement,
balance sheet and cash flow statement
The aim is to provide an accurate idea of the
company’s value and ability to bear operational
costs and earn profits

9. Additional information/appendix
This section may include supporting documents
such as licenses, permits, patents, product
diagrams, building blueprints, and letters of
support from consultants and accountant
Different types of plan – specificity, length and
audience
The most popular way to describe types of plans is by their breadth. Business
Plans can also be classified in terms of their time frame, specificity, and
frequency.

The various types of plans are as following:

Based on length

Based on Specificity

Based on Audience
Types of Plans (based on Length)
1. Strategic Plan
2. Tactical Plan
3. Operational Plan

Strategic Plan:
 Formulated to provide direction for mission, objectives, and strategies for the
organization. It defines the course of action by which a company intends to attain
strategic goals.
 Created by Top management such as the CEO, Board of Directors, Chairmen of
the company. These plans become the framework and set dimensions for the
lower-level planning in the organization.
Long term plans – It has a time span of above five years. ...

For Example – Strategic Plans consist of the Vision, Mission, Values, and overall-
Objectives of the Organization. These are the key elements that clearly define the
state of the business in terms of what to achieve in the future.
Tactical Plan:
 Formulated to create the blueprint for the strategic plan. These plans clearly define how
the strategic plan will be implemented.
This plans are often short-term and are carried out by middle-level managers such as the
Head of the Department, Sales Manager, HR Manager, Production Manager.
 It has a time span of 3 – 5 years and they focus on achieving the intermediate goals of the
firm. ...

For Example – Managers of the company create plans to allocate required resources to
support the strategic plan. HR Manager make plans to manage Human Resources of the
company. Production managers make plans to smooth the production process of the
business.
Operational Plan:
 Very similar to Tactical Plan but they cover the day-to-day operations of the organization
also. The specific results expected from departments, workgroups, and individuals are the
operational goals.
This plan is one that a manager uses to accomplish his or her job responsibilities.
Operational plans are also short-term in nature and created by Supervisors, team leaders, and
facilitators to support tactical plans.
Short term plans – It has a time span of 6 – 18 months.

For Example – Team leaders have to manage daily shift timing schedules and allocate tasks
to their subordinates, Supervisors make strategies to reach daily targets that should be
completed according to the daily plan.
Types of plan (based on specificity )
Specificity refers to very detailed, clearly defined plans wherein objectives are clearly
stated and could easily be understood.
Simple language must be used in order to facilitate understanding
Frequency of use refers to the number of times or instances a plan may be used

1. Directional plan
2. Specific plan
Directional plan
Directional plan are flexible plans that set out general guidelines
Such plans are preferable in a dynamic environment where management must be
flexible in order to respond to unexpected changes

For example –
The sales manager provides a guideline to his subordinates to the expected target and
now how subordinates will achieve that it’s up to them. They are free to opt for any mode
of practice. Hence we can say that the Directional plans are outcome focus

Specific plan
 Those plan which are clearly defined objectives and leave no room for interpretation
are called specific plans
 Such plan require specific stated objectives and do not contain ambiguity

For example –
The production manager briefing the plan to his subordinates as to what, when,
where, how much, and by whom task will be performed. Hence we can say that the
specific plans are process focused
Types of plan (based on audience )
Audience planning is an evolution to media planning where the primary consideration
the consumer herself and reaching that consumer through the devices, content feeds and
content streams that they prefer and control
This can help brand by providing clarity on who your audience is and what action you can
take to better engage and retain them
the method of obtaining information about the people in your audience to better
understand their wants, needs, values, and attitudes.

1. Demographic analysis
2. Psychographic analysis
3. Situational analysis
Demographic plan
Include things like gender, age range, marital status, race and ethnicity, and
socioeconomic status.
You probably already know how many male and female students are in your
public speaking class, how old they are roughly, and so on.

Psychographic plan
A psychographic analysis looks at things like values, beliefs, opinions, and
attitudes.
Even though two people say they don’t buy junk food, they might have very
different ideas about what foods are “junk food.”

Situational plan
In the world of digital marketing and media, this refers to the size of your
preferred audience, their attitude towards your product/company, their prior
knowledge, and the websites or social media channels.
They view your advertisements or interact with your products and services by
this.
Business planning process – preliminary goals
Preliminary Business Plan means a preliminary high-level business plan for the next fiscal
year, which shall only consist of a consolidated profit and loss statement forecast.

A good business plan must identify strengths and weaknesses internal to the business and
the challenges in terms of opportunities and threats to assess the viability of the business

Preparation of a business plan involves the following steps:

1. Preliminary Investigation
2. Idea generation
3. Environment scanning
4. Feasibility analysis
5. Drawing functional plans
6. Project report preparation
7. Evaluation, review and control
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, threats
 seek professional advice for weaknesses, opportunities
Conduct a functional audit
2.Idea generation
The idea must be such that satisfies the existing demands and future demands of
market

Source of idea generations :

Consumers
Existing companies
Research and development
Employees
Dealers/retailers

Methods of generating ideas :

Brainstorming
Group discussion
Data collection through questionnaires
Invitation of ideas from professionals
Market research import of ideas from products launched abroad
Commercializing inventions
3. Environment scanning
Internal and external environment must be analyzed SWOT analysis
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

Internal environment
Availability of raw materials
Availability of various machines, tools and equipment required for production
Assessment of present, potential and future market
Assessment of cost, quantity and quality of human resources required

External environment
Socio cultural appraisal
Technological appraisal
Economic appraisal
Demographic
Government appraisal
Financial analysis
4. Feasibility analysis
This analysis is done to find out whether the proposed will be feasible or not

Market analysis
Technical or operational analysis
Financial analysis

5.Drawing functional plans

Marketing plan
Production/operation plan
Organizational plan
Financial plan
Human resource plan
6. Project report preparation
It is a written document that describes step by step, the strategies involved in
starting and operating a business

7.Evaluation, review and control

It is necessary to periodically evaluate, control and review a business to keep up
with the technological changes and introduce changes in the business strategy.
 Conducting Initial Research
How to conduct market research for a business plan

 Understand your audience.

 Identify target persons.

 Size your market.

 Research the competition.

 Discover your unique sales proposition.

 Define marketing priorities.

Features of Effective Organizational Goals (SMART Goal)

1. S = Specific : Goal should not be vague and complicated. It should have

clear and well-defined objectives. For example, the goal “Revise web site
based on client feedback” is not very specific. “Change to the new color
scheme and headers” of the web site is more specific.

2. M = Measurable : Goal should be clearly measurable. If they are not

measurable, they cannot be accomplished. For example, goal like “make
sales calls” is not measurable. However, the measurable goal would be
“make ten new calls per day”.

3. A = Attainable or Achievable : Goal must be achievable in a given period of

time. It means they should be set with due consideration of the
organizational resources, and capability. For example, for a local business
to expand globally within a limited time would not be achievable. However,
increase its market shares in a year by 20% would be achievable.
4. R = Relevant or Realistic : Goals must be based on reality. For them to be
realistic, they need to be something that the organization actually does.
To be realistic, goals should be based on the organizational as well as
external situations.

5. T = Timely or Time bound : Goals must cover a certain period of time. For
example, increase the sales by 20% is not timely. However, increase the
sales by 20% over the period of one year is timely.
ch
Primary Research

A
 Critically assessing proposed plan
It is the detailed examination and evaluation of
another person's ideas or work.

 It is subjective writing as it expresses your

interpretation and analysis of the work by breaking
down and studying its parts.

Good critical analysis evaluates the ideas or work in a

balanced way that highlights its positive and negative
qualities.

It helps people better understand themselves, their

motivations and goals.

When you can deduce information to find the most

important parts and apply those to your life, you can
change your situation and promote personal growth
and overall happiness
Implementing

and

Evaluating the plan

An implementation plan is a written document that outlines a team's steps to
accomplish a goal or project. Having such a document enables team members and key
stakeholders to understand all aspects of a project before executing it.

Implementation is the execution or practice of a plan, a method or any design, idea,

model, specification, standard or policy for doing something. As such, implementation
is the action that must follow any preliminary thinking for something to actually
happen.

A process of interaction between the creation of goals, objectives, and strategies

and the actions geared to achieve them

Implies a link between the business plan and action

Many business plans suffer from an ‘implementation gap’

Implementation gap Instruments
 Implementation gaps occur when  Instruments are the way
there are no actions to implement implementation occurs
goals and objectives  Cam range from highly voluntary to
highly compulsory
Can be a result of several things  Different instruments are appropriate in
Lack of power by the planner different situations
Nobody is assigned responsibility
Responsible parties are unaware (lack
of communication) Types of instruments
Responsible parties lack resources to
implement 1. Regulatory instruments
2. Voluntary instruments
3. Expenditure
4. Financial incentives
 Evaluating business objectives is important as it allows you to:
Improve the overall performance and results of your business.
Know if your business is heading in the right direction and make
changes when needed. See an overview of your financial
performance and persuade investors to invest in your business.
Why is evaluation important ?
External and internal environments change

Strategies may become obsolete

Timely evaluations can help destinations adapt to changing environments

Basis of evaluation

Examine the indicators of strategy success

Compare expected to actual results
Take corrective action if necessary
Externally : Examine how competitors have reacted to the effectiveness of strategies
• Have their strategies changed?
• Are their strategies more successful than yours?
• Why?
Comprehensive Questions (4X3=12)
A Multinational Company specialized in food processing has been operating in India
for about 3 decades. The Company has recently decided to expand its production. It
was decided to shift the factory to new location about 20KMs. Away from the site. As
the workers transferred to the mew site were living in Town, the union demanded an
increase of Rs60/ month in the salary, but the company offered to give Rs25/- only to
cover the transport cost.
When the plant was being shifted to the new site, negotiation
went on interrupted between the management and the union of the issue. However
both the parties could not come to a settlement even after 6 months.
The management was firm on their decision even though the
union indicated some flexibility. The union refused to compromise fully on the issue.
They adopted go slow tactics to pressurize the management. The production went
down drastically, but still the management was firm on their stand. In the meanwhile
the management charge-sheeted some of the Union leaders and suspended them
pending enquiry.
Questions
•Analyse the case given above and explain the problem and causes.
•Do you justify the management decision? If yes/ No –why?
•Are the workers right in their approach? Comment.
•As a General Manager-HR of this company how would you resolve the problem?