Developing a Business Plan

Unit 4
 Business plan as an entrepreneurial tool
• Planning a business has the intention of drawing a map for
reaching the goal, this provides the strategy that the company
will follow, set the objectives and estimate and the finances.
• According to Burns & Dewhurst (1990) the document that helps
the entrepreneur to crystallize and focus the ideas and aids him
on measuring the performance of the business is called business
plan.
•
 Business Plan Process
• Business plans are developed for both internal and external
purposes. Internally, entrepreneurs develop business plans to
help put the pieces of their business together.
• The most common external purpose for a business plan is to raise
capital.
• Ultimately, the definition of business planning can be seen in the
business planning process. Whether you’re planning your
business’ opening, growth, projects, risk mitigation, sale, closing,
or anything else, all planning begins with a process.
 Business Plan Process
Although you can make the planning process as long or as
complicated as you’d like, I tend to break the process into 4 Basic
Steps.
• Step #1 – Decide what you’re going to do.
• Step #2 – Determine how you will do it.
• Step #3 – Pick who will accomplish it.
• Step #4 – Take action.
 Components of an ideal business plan
• Market Plan: A firm needs a good handle of the industry as well
as its target market. It will outline who the competition is and
how it factors in the industry, along with its strengths and
weaknesses.
• It will also describe the expected consumer demand for what
the businesses is selling and how easy or difficult it may be to
grab market share from incumbents.
• Marketing strategy: This area describes how the company will
attract and keep its customer base and how it intends to reach
the consumer.
• This means a clear distribution channel must be outlined. It will
also spell out advertising and marketing campaign plans and
through what types of media those campaigns will exist on.
 Components of an ideal business plan
• Financial plan:In order to attract the party reading the business
plan, the company should include its financial planning and
future projections.
• Financial statements, balance sheets, and other financial
information may be included for already-established businesses.
• New businesses will instead include targets and estimates for the
first few years of the business and any potential investors.
• Budget: Any good company needs to have a budget in place. This
includes costs related to staffing, development, manufacturing,
marketing, and any other expenses related to the business.
 Components of an ideal business plan
• Operational plan: An operation plan is an extremely detail-
oriented plan that clearly defines how a team or department
contributes to reaching company goals.
• It outlines the daily tasks required for running a business.
When properly created, an operating plan makes sure each
manager and each employee know their specific obligations, as
well as how they should execute them within a defined
timeline.
• Mapping out the day-to-day tasks that ensure a clear path to
your business and operational goals is essential to success.
 Feasibility Analysis
• A feasibility study may become the basis for the business
plan, which outlines the action steps necessary to take a
proposal from ideation to realization.
• A feasibility study allows a business to address where and
how it will operate, its competition, possible hurdles, and the
funding needed to begin.
• The business plan then provides a framework that sets out a
map for following through and executing on the
entrepreneurial vision.
• Resource sufficiency pertains to nonfinancial resources that
the venture will need to move forward successfully and aims
to assess whether an entrepreneur has a sufficient amount of
such resources.
 Financial Feasibility Analysis

• A financial analysis seeks to project revenue and expenses

(forecasts come later in the full business plan); project a
financial narrative; and estimate project costs, valuations, and
cash flow projections.
• The financial analysis may typically include these items:
• A twelve-month profit and loss projection
• A three- or four-year profit-and-loss projection
• A cash-flow projection
• A projected balance sheet
• A breakeven calculation
 Market Feasibility Analysis

• A market analysis enables to define competitors and quantify

target customers and/or users in the market within your chosen
industry by analyzing the overall interest in the product or
service within the industry by its target market.
• Market can be define in terms of size, structure, growth
prospects, trends, and sales potential.
• This market can be segmented by geography, customer
attributes, or product-oriented segments.
• From the total available market (TAM), you can further distill
the portion of that target market that will be attracted to your
business. This market segment is known as a serviceable
available market (SAM).
• Technical – hardware and software; existing or new; staffing
skills.