BUSINESS PLAN

Is a document that helps the small

Business owner determine what
Resources are needed to achieve
The objectives of the firm
PURPOSES OF A BUSINESS PLAN
•To serve as management’s guide during the
lifetime of the business.
•To fulfill the requirement for securing lenders
and investors.
PARTS OF THE BUSINESS PLAN
•TITLE PAGE AND CONTENTS
•EXECUTIVE SUMMARY
•DESCRIPTION OF THE BUSINESS
•DESCRIPTION OF THE PRODUCT
OR SERVICE
•MARKET STRATEGIES
•ANALYSIS OF THE COMPETITION
•OPERATIONS AND MANAGEMENT
•FINANCIAL DATA and
•SUPPORTING DOCUMENTS.
TITLE PAGE
•The name of the business
•The names of the proponents
•Address
•Telephone number
•E-mail and website address
•Date
•The name and the person who prepared the
business plan.
The Executive Summary
 is a portion of the business plan that summarizes the
plan and states the objectives of the business.
 The capital needs of the business;
 How the money will be used;
 What benefits will be derived by the business from
the loan or investment; and
 In case of loan, how it will be repaid with interest, and
in the case of outside investment, how profits will be
generated.
 The executive summary is prepared after the
business plan is written.
 Description of the Business
– This divided into two parts:
• A short explanation of the industry; and
• A description of the business
 Statements about the following will be useful in
describing the business:
– The industry sector where the business falls into (examples
are retail, manufacturing, education, entertainment, and
others);
– Whether the business is new or established;
– The ownership status of the business (sole proprietorship,
partnership, or corporation);
– Information on who the customers are;
– Information on the size of the market;
– Information on how the product or service is distributed.
 Description of the Product or Service
 The important features of the product or service, such as the
maintenance-free feature of the product, , or the home delivery
service for products ordered through the phone.
 A detailed description of how the product is used.
 What makes the product or service different from others
available in the market.
 The objective of product or service description is to show that
the firm has a competitive edge over the others. If the business
plan is able to show that edge, lenders and investors may just
respond favorably. It is very important to explain that the
business will be profitable.

 Some of these positive factors that are worth
describing are:
– Superior organization of the business;
– The latest equipment that are currently used by the
company;
– The superior location of the company
– The fair price of the product or service; and
– The superior customer service offered by the company
MARKET STRATEGIES
refers to what the SBO plans to do to achieve
the market objectives of the firm..

These strategies are formulated after

undertaking market research.
 Component of Market Strategies
– Definition of the market;
– Determination of the market share;
– Positioning strategy;
– Pricing strategy;
– Distribution strategy; and
– Promotion strategy.
 Market
– defined in terms of size, demographics,
structure, growth prospects, trends and
sales potential. The objective of the market
is to determine which part of the total
potential market will be served by the firm.
Determine the total potential market; the total aggregate
sales of the competitors must be presented.
 Steps in Determination of the Market Share
– Determine the number of prospects in the target market;
– Determine the number of times the product or service is
purchased by the target market;
– Figure out the potential annual purchase; and
– Determine the percentage of the potential annual purchase
that the firm can attain (table5).
Demography – the statistical study of human populations especially
with reference to size and density (thickness/compactness/ bulk),
distribution, and vital statistics.
 Positioning Strategy
– Refers to how the firm differentiates its product or
service from those of the competitors and serving
a niche.
– Is one where the firm identifies a target market
segment and develops a strategy mix to address
the desires of that segment.
– The objective of positioning is to establish the
firm’s product or service identify in the mind of the
buyer.
 The followings factors must be
considered in Pricing Strategy:
– The customer’s perception of value in the
firm’s kind of business;
– The costs involved such as, overhead,
storage, financing, production, and
distribution; and
– The profit objectives of the firm.
The firm’s price may be established through any of the
following methods:
Cost plus pricing – this method covers all costs, variable and
fixed, plus an extra increment to deliver profit.
Demand pricing – this is a method of pricing where the firm sets
prices based on buyer desires. The range acceptable to the target
market is determined.
Competitive pricing – this method of pricing calls for price-
setting on the basis of prices charged by competitors.
Market pricing – this is a form of cost-oriented pricing in which
the firm sets prices by adding per-unit merchandise costs,
operating expenses and desired profit.
Distribution Strategy
 Distribution – refers to the process of moving goods and
services from the firm to the buyers.
 The following are the Common Distribution Channels:
 Directs sales – if the plan is to move goods directly to the
ultimate users, this is the most effective channel.
 Original equipment manufacturer sales – this channels
involves selling a manufactured product to another
manufacturer who, in turn, incorporates the same to his
product and which is later sold as a finished product to the end
user. An example is the sound system incorporated into cars.
Distribution Strategy (cont.)
 Manufacturer’s representatives – they are wholesalers employed by
one or several producers and paid on commission according to the
quantity sold.
 Wholesalers – these are channel members that sell to retailers or
other agents for further distribution through the channel until they
reach the final users.
 Brokers – they are distributors who buy directly from distributors or
wholesalers and sell to retailers or end users.
 Retailers – they sell directly to customers.
 Direct mail – these are printed materials used in a targeted campaign
to consumers. These are sent directly to consumers. These include
catalogs, letters, e-mail, and other direct appeals.
Fig. 22, Common Distribution Channels
The Promotion Strategy must include the
following:
 Advertising aspects
 Advertising budget
 Positioning message
 First year’s media schedule
 Packaging which describes how the company’s
products will be packaged.
 Public relations – this will be detailed presentation of
the publicity strategy of the firm. This will include a list
of media that will be tapped to convey the firm’s
message to the target market.
The Promotion Strategy must include the
following:
 Sales promotions – these are means used to support the
sales message like special sales, coupons, contests,
premium awards, trade-in, among others.
 Personal sales – these present the sales strategy including
– Pricing procedures
– Rules on returns and adjustments
– Methods of sales presentations
– Generation of leads
– Policies on customer services
– Compensation of salesmen, and
– Responsibilities of the salesmen.
Analysis of the Competition
Competitive analysis, the following must be determined:
The strengths and weaknesses of the firm’s competitors;
Strategies that will give the firm a competitive advantage;
Barriers that can be developed to prevent competitors or
would-be competitors from exploiting the firm’s market;
and
Any opportunity that can be exploited.
The aim of competitor analysis is to determine how the
firm stands against competition. After determining its
position, the firm must take stock of its strengths and
weaknesses and craft appropriate strategy to achieve its
business objectives.
 Generating Sales Leads
– Generating sales leads is the process of making contact with and
collecting information from prospective clients. In larger companies,
generating sales leads falls to the marketing department, since they're
responsible for creating all advertising and outreach materials. However,
in smaller organizations, it's common for salesmen to have to do their own
sales lead generation.
– There are several proven techniques for generating sales leads:
– Networking
– Advertising (TV/print/Web)
– Telemarketing and teleprospecting
– Direct mail, fax or e-mail marketing campaigns
– Web sites and search engine optimization
– Buying a sales lead list
 Generating sales leads traditionally begins with networking. This is as simple as
contacting your friends, family, former coworkers and existing clients and
asking if they know anyone who may be interested in your product or service.
These referrals are also called sales tips.
 Besides networking, trade shows are excellent opportunities for business-to-
business (B2B) networking. By setting up a table at a trade show, you can collect
contact information from dozens of potential buyers and business
Table 6: A Comparison of the
Strengths and Weaknesses of
Competing Firms
Key Assets and skills Our Company Competitor A
Competitor B

Superior product Strength Weakness Strength

Good business location Weakness Strength Weakness

Strong sales team Weakness Strength Strength

Weakness
Strong financial capacity Strength Weakness
 Operation and management
– Organizational structure;
– Operating expenses;
– Capital requirements; and
– Cost of goods sold
Organizational Structure
 A well-defined and realistic organizational structure is
an important element of the business plan.
 They will be concerned how the firm is organized along
the following concerned:
 Marketing (including sales, customer relations and
service);
 Production (including quality assurance);
 Research and development;
 Management; and
 Human resources
Operating expenses
Overhead, which may be fixed or variable, includes the following:
1. Rent;9. Payroll taxes, and benefits;
2. Advertising and sales promotions; 10. Bad debts;
3. Supplies; 11. Professional services
4. Utilities; 12. Insurance;
5. Packaging and shipping; 13. Loan payments;
6. Maintenance and repair; 14. Depreciation; and
7. Equipment leases; 15. Travel.
8. Payroll;
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