The Business Plan

Business Plan
Written document prepared by the entrepreneur that describes a business. It describes all relevant external and internal elements involved in starting a new business.

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DEFINITION
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It also contain background information about the organization or team attempting to reach those goals

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 Used to:
test the feasibility of a business idea raise capital serve as a road map for future operations help find omissions and flaws in the idea

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A business Plan performs three functions Action Plan Road Map Sales Tool

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What is a Business Plan?

Gives the Reader

What

Where

When

Why

Who

How

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PRESENTING THE PLAN

Orally Presentation. 30 minute presentation. It is mainly presented to the venture capitalists and private investors. It is designed to sell the investors on why this would be good investment for them.

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INFORMATION NEEDS
Market Information In order to build a strong marketing plan with reasonable and measurable market goals and objectives the entrepreneur will need to gather information on the industry and market.

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General environment & Demographic trends National food industry trends Local environmental & Demographic trends

Local food industry trends

Local competition Strengths & weaknesses

Market positioning

Market objective

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 Operation Information
Location
Manufacturing operations Raw materials Equipment Labor skills

Space

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 Financial Information Before preparing the financial plan the entrepreneur should prepare the budget. The budget includes capital expenditures, direct operating expenses and cash expenditure for non expense items.
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The entrepreneur will need to identify the benchmarks in the industry. The benchmarks or financial ratios need to prepare financial statements can be found in trade associations and trade magazines.

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Business Planning Process

When planning you need to:
define the goals of your business
determine the actions that need to be taken to accomplish them gather and commit the resources needed aim for well-defined targets

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Three Primary Reasons for Writing a Business Plan

Prove Feasibility Provide Direction

Attract Capital

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Business Plan Content

Introduction page Executive summary Company & Industry Description of venture Production plan Operations Plan Marketing plan Organizational plan Critical Risks Financial Plan Appendix

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Structure of the Business Plan

Introduction Page:
Name of the business Address and phone number Nature of business Date the plan was issued Statement of financing need Statement of confidentiality

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Structure of the Business Plan (continued)

Executive Summary: Company:
Company information Analysis and trends Market segmentation Future outlook and trends

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Structure of the Business Plan (continued)

Industry Analysis:
Industry demand? Competitive reactions and industry wide trends? major players? Businesses recently entered or exited? Why did they leave? Industry growing or declining? Who are the new competitors?

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Structure of the Business Plan (continued)

Description of venture:
Different from those currently on the market Other uses for the product Size of Business Background of entrepreneurs

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Structure of the Business Plan (continued)

Production plan:
Manufacturing process Physical plant Machinery and equipment Names of suppliers of raw materials

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 Operation plan
Description of companys operation Flow of orders of goods and services Technology utilization

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 Marketing Plan:
Pricing Distribution Promotion Product forecast Controls

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 Organizational plan:
Form of ownership Identification of Partners Authority of principals Management team background Roles and responsibilities of members of organization

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 Assessment of Risks:
Evaluate weakness of business Competitors ability to under price or to make your product obsolete New Technologies Appropriately trained workers not as available as predicted Erratic supply of products or raw materials

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 Financial Plan:
Sources and uses of capital (initial and projected) Cash flow projections for three years Balance sheets for three years Profit and loss statements for three years Breakeven analysis Ratio Analysis

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Financial Plan (continued)

Show conclusions and important points:
How much equity and how much debt are included The highest amount of cash needed How long the pay-back period for loans is expected to be

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 Appendix: Letters Market research datas Contracts Price list from suppliers

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Review Process
The business plan should be carefully reviewed and revised before being presented to a potential investor After writing the business plan, evaluate it as you think lenders and investor might

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Business Plan Mistakes

Goals set by the entrepreneur is unreasonable. Entrepreneur has no experience in the planned business. Depending on outdated financial information or industry comparisons

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Business Plan Mistakes (continued)

No proper Market research on consumer needs. Trying to impress financiers with techno jargon Lack of marketing strategies Making unsubstantiated assumptions

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Business Plan Mistakes (continued)

Being overly optimistic Misunderstanding financial information Ignoring the macroenvironment Avoiding or disguising potential negative aspects Having no personal equity in the company

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