AARTI CHAWLA, MBA(B.E)(2.3), 8141

Memorable statistics
 New business start-ups  Business failures each

each year: 150,000-190,000 Failure due to 1. Managerial incompetence or inexperience 2. Neglect 3. Weak control systems 4. Insufficient capital

year: 50,000-100,000 Success due to 1. Hard work, drive, and dedication 2. Market demand for product/service 3. Managerial competence 4. Luck

Reasons for Failure and Success of Businesses

) – Financial (income and cash flow statements. value prop. etc. break even analysis. positioning. etc. how you will take the concept to market. industry trends. balance sheet.) . how you WILL do it • All business plans should address – Business concept (product service description.What Is a Business Plan? • A roadmap for success – Future oriented: What you WILL do. customers. sales cycles.) – Marketplace (competition. purchasing behaviors. etc. funding needs. financial ratios. business structure.

suppliers and other stakeholders • Organizes ideas and examines feasibility • Increases the chances of success • Helps attract key employees • Maximizes chance of success • Helps avoid and eliminate waste • The business needs funding! Entrepreneur without business plan . potential funders.WHY DEVELOP A BUSINESS PLAN? • A well developed plan provides: – Focus to the entrepreneur – Vision to management team.

objectively. entrepreneurs develop and examine operation strategies and expected results for outside evaluators The business plan quantifies goals and objectives.IMPORTANCE OF BUSINESS PLAN  The time. which provide measurable benchmarks for comparing forecasts with actual results The completed business plan provides entrepreneurs with a communication tool for outside financial sources as well as an operational tool for guiding the venture toward success . and financial analyses included in the business plan subject entrepreneurs to close scrutiny of their assumptions about the venture’s success Because all aspects of the business venture must be addressed in the plan. and holistically The competitive. economic. effort. and discipline needed to create a     formal business plan force entrepreneurs to view the venture critically. research.

 The entrepreneur may consult with many other sources in its preparation. and engineers. . marketing consultants. accountants.Who should write the plan?  The business plan should be prepared by the entrepreneur. such as lawyers.

explanatory works best when you want to explain key issues fully. people heavy on the quantitative analysis meant to inspire managers.Three Fundamental Types of Business Plans               First Type: The Summary Plan contains only the most important information about a business and its directon business strategy stated in one sentence works best when applying for a loan. looking for a strategic partner Type 3: the Operational Business Plan internal planning document of an operational company usually much longer because it takes more time to describe ongoing business more history. gives order to growth used as part of an annual review . need money quickly Type 2: the Full Business Plan introduction detailed. looking for a lot of money. best for fast-growing company. not seeking funding from other investors. if you are well-known. products.

and positioning). space. manufacturing operations.Information Needs  Before committing time and energy to preparing a business plan. and production (location. the entrepreneur should do a quick feasibility study of the business concept to see whether there a any possible barriers to success. obtainable from many sources should focus on marketing (segmenting. revenue). targeting. . demand forecast.  The information. equipment. finance (list of all possible expenditures. labor skills.  Internet can be a valuable resource. raw materials. overhead) .

2. 4. Executive Summary (created last) Company Description Products and Services Marketing Plan Operational Plan Management & Organization Personal Financial Statement Startup Expenses & Capitalization Financial Plan Appendices . 6. 3.Typical Business Plan Table of Contents 1. 10. 7. 9. 8. 5.

and Intellectual Property • Goals & Objectives: What will happen and when? • Ownership & Legal Structure. Core Competencies.2. Company Description & Mission • Services or products offered • Mission Statement: 30 words or less (guiding principles) • Business Philosophy: How will you conduct business? • Facilities. Fixed Assets. Insurance. Outside Services • Customers: Who will be buying product or service? • Industry Overview: Growth industry? Forecast future • Strengths. Tax considerations . Manufacturing Processes • Sources of Supply.

Defines Business Type • Retailer/wholesaler • Manufacturer • Service provider • Storefront / Internet Defines Operational Aspects • Where will the facilities be located • Leasing or buying • Zoning • Material and equipment needed • Special licenses required Describes the Marketplace • Target customers • Customer needs and expectations • How will you reach them • Your competition .

Goals & Strategy Examples • Max of 3 or 4 major goals • Measurable – quantitative – obtainable • Goal Examples: • • • • • Increase profits 20 % in 3 calendar years” “Pay off bank loan by August 2015” Strategies & actions required to meet goals: “Add 3 sales reps next year & two following year” “Increase sales by 20% per year Includes Legal Status of the Business • Proprietorship • Partnership • Corporation • Limited Liability Companies .

IP What makes you better? • Better quality? • Better customer service? • More responsive? • Better technology? • Better customer training? • More flexibility? • More knowledge? • Lower price or better value? What do your customers value/need & will pay for? .3. fees and leasing plans • Why customers will buy from you • Brand names. trademarks. Products and Services What unique items are you selling? • Describe your products and or services • Focus on benefits rather than features • Competitive advantages envisioned • Pricing strategy.

4. trends Promotional Strategies Pricing Strategies Distribution Methods Competition: Strengths/Weaknesses . Marketing Plan • Identifiable Target Groups likely to use your • • • • • products or services: Regional. Global. Niche Size of potential market. National.

Selling and Promotion • Who will sell your product? • How will you promote your product? • Will you use mass communication? • Will you work with a Public Relations Firm? • Selling Costs (distinct from production cost or other overhead expenses) Pricing • How will you Price Your Product/Service? • Will it be Profitable? • Is it Competitive?  Are there cheaper products available?  What market share can you get with these prices  Seasonal/Cyclic Variations  “Life Cycle” of Product or Service  Will you offer credit? • How will you deal with poor payers? .

All the time. When you are planning to start-up or buy a business. . 3. When a new competitor arrives on the scene. 2.COMPETITIVE ANALYSIS Competitors:  Products & services  Location  Size  Market share  Yrs in business  Ownership  Financial strength  Importance of business  Pricing  Advertising & promotion  Image  Sales approach  Distribution  Customer Support  Customer profile  Mfg process & cost  Patents & copyrights  Summary of strengths  Summary of weaknesses A B C You 3 times to be concerned about competition: 1. or planning to enter a new market.

website design & hosting) Locations. space.5. Operational Plan • • • • • Inventory control Production technology Transportation and delivery Quality control Customer Service • • • Handling variations in demand Product development Employees: – Training – Full-time. email. contractors • • Communications (phone. part-time. parking .

Full resumes in Appendices Personnel Staffing Types of positions. number of employees.Attorney. timing of employment Professional advisors identified: .6. Insurance Organization Chart with responsibilities . salary ranges. Accountant. Banker. Management & Organization • Management Staffing • Owners • Brief resumes of key personnel • • • • .

Monthly & Annual income and expenses Personal Assets and Liabilities Personal assets required to finance a portion of the business startup and continuation May be required to use Personal assets as collateral for repayment Address past credit problems . Personal Finance Statement • Personal Finances (Independent of Business) • • • • .7.

Start Up Expenses & Capitalization • Itemize all expenses anticipated before “doors • • • • open” Exhaustive and accurate. Do not run the risk of being asked “ What about X”? Add contingency for each expense item Separate item called contingency (typical 20%) Identify each capital item to be purchased .8.

net worth at a point in time  Break Even Analysis (when profitable?)  “Projections” rather than facts  Do “best guess” and “worst case” – State your assumptions  Prepare statements for 3 to 5 years – by month for early years.9. Financial Plan Get expert advice if you need it  Cash Flow  Flow of cash in and out of the business  Income Statement (aka P&L or Earnings Statement)  Net income over a period of time  Balance Sheet  Assets. liabilities. quarterly thereafter .

Operating Expenses . Cash inflow and Cash outflow 2.Startup Expenses .Sales Income DISBURSEMENTS . Like checkbook register 3. How much cash is generated and when .Initial Investment .Cost of Goods Sold .Personal Living ? Cash Flow Statements Show: 1.Cash Flow Projection RECEIVABLES .

• What you Owe (Liabilities).Income and Expense Statement (P&L)  Operating Results for a Period of Time  Sales  Expenses  Net Profit or Loss Balance Sheet • Your Financial Position at a Point in Time. • Your Net Worth = Assets minus Liabilities . (“Snapshot of the moving train”) • What You Own ( Assets).

1. Executive Summary  Created AFTER rest of Plan is prepared: • Defines basic goals • Request for loan and purpose • Present status of company • Marketing plan summary • Financial plan summary • Assets and your equity .

• List of assumptions for profits and losses • List of capital expenditures • Proforma balance sheet (3 years) • Estimated cash flow (1st year) • Personal financial statement • Brochures & advertising samples • Location maps & photos • Industry studies • Statistical market data • Target customer profile • Letters of support . contracts.Appendices & Attachments • Three year Profit and Loss Statement • Owners' resumes • Leases. insurance. etc.

” #10 – Over expansion # 9 – Poor capital structure # 8 – Failure to control the controllable costs # 7 – Failure to prepare for volatility of uncontrollable costs # 6 – Add new products or divisions that reduce the profitable ones # 5 – Poor internal controls and execution # 4 – Poorly designed business model # 3 – Reliance on critical financing that dries up #2 – Failure to adapt to a changing market. and .BUSINESS FAILURE “People don’t plan to fail. They fail to plan.

THE #1 REASON FOR BUSINESS FAILURE IS… Management in complete denial! MORE REASONS FOR FAILURE Dun & Bradstreet also claim that business failure results from •Lack of market awareness •Entrepreneur falls in love with product •Lack of financial responsibility and awareness •Lack of clear focus •Insufficient capital •Optimistic/realistic/pessimistic .

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