Peruda, Raven Mae

Velardo, Rodelin
Aposacas, Kristine Joy
 What is a Business Plan?
It is a document that helps the small business owner
determine what resources are needed to achieve the
objectives of the firm, and provides a standard against which
to evaluate results.

It is a business blueprints and it keeps the entrepreneur on

the right track.

It provides guidance, influence, and leadership as well as

communicating ideas about goals and the means of achieving
them to partners, associates, employees, and others.
Purpose of a Business Plan
A business plan is written for two main purposes:

1. To serve as management’s guide during the

lifetime of the business; and
2. To fulfill the requirement for securing lenders
and investors.
 The Plan as a Guide
The Small Business Operator
(SBO) is afforded sufficient time to
consider all factors relevant to
operating the business. Through
analysis of the environment and
derivation of what can be expected to
happen, decision about various aspect
of business operations can be
consider in advance.
The business plan serves as a
useful tool for comparing what was
planned against what was achieved.
 A Tool for Securing
Funds

The Business Plan is a handy

means of convincing lenders and
investors. It will serves as a means of
providing some assurance that the
investor will place his funds in a
worthwhile investment.
 Revising the Plan
The SBO must strive to be well informed
about what is happening to his business and to
the industry where his business belongs.
Necessary steps must be undertaken to adjust
changes. For instance, if the usual source of labor
has become unreliable, the corresponding portion
of the business plan must be revised.
 Parts of the Business Plan
The contents of the business plan will depend
upon the purpose. Usually, however, they
contain the following:

1. Title page and contents

2. Executive summary
3. Description of the business
4. The product or service
5. Market strategies
6. Analysis of the competition
7. Operations and management
8. Financial data
9. Supporting documents
Title Page and Contents
The business plan must be easily identifiable through a cover page
with a listing of the following:
a. The name of the business;
b. The name or names of the proponents (in this case, the SBO);
c. Address;
d. Telephone number;
e. E-mail and website address;
f. The date; and
g. The name of the person who prepared the business plan

The next page should provide a table for contents so the readers
can easily find the information they need.
 The Executive Summary
The executive summary is a portion of a business plan that summarizes the
plan and states the objectives of the business. If the SBO is intending to
borrow money or is seeking capital from the investors, the following must
be indicated:

1. The capital needs of the business;

2. How the money will be used;
3. What benefits will be derived by the business from the loan investment;
and
4. In case of loan, how it will be repaid with interest, and in the case of the
outside investment, how profits will be generated.

The executive summary is prepared after the business plan is written.

 Description of the Business
This particular portion of the business plan is very
useful to the SBO, as well as prospective investors and
lenders. This is divided into two parts:
1. A short explanation of the industry; and
2. A description of the business.

Statements about the following will be useful in describing

the business:
3. The industry sector where the business falls into (ex.
Retail, manufacturing, education, entertainment and
others);
4. Whether the business is new or established;
5. The ownership status of the business (sole
proprietorship, partnership or corporation);
6. Information on who the costumers are;
7. Information on the size of the market; and
8. Information on how the product or service is distributed.
Description of the Product or Service
The product or service must be describe clearly in the plan. To achieve this, the
following must be presented:
1. The important features of the product or service, such as the maintenance free
features of the product, or the home delivery service for products ordered through
the phone.
2. A detailed description of how the product is used.
3. What makes the product or service different from others available in the market.
Examples are the availability of the product or service 24 hours a day, or the water
based features of the product insect repellant.
 Market s
consist of the following:

1. Definition of the market;

2. Determination of the market share;
3. Positioning strategy;
4. Pricing strategy;
5. Distribution strategy; and
6. Promotion strategy.
 Definition of the Market

The objective of the market definition is to

determine which part of the total potential market
will be served by the firm. Hence, the market must
be defined in terms of size, demographics, structure,
growth prospects, trends and sales potential.

MARKET STRATEGIES
 Determination of the market share
The business plan will be more useful to the reader, especially
lenders and investors, if the projected market share of the firm is
presented.

To determine the firm’s market share, the following steps may be

used:
1. Determine the number of prospects in the target market;
2. determine the number of times the product or service is
purchased by the target market;
3. Figure out the potential annual purchase; and
4. Determine the percentage of the potential annual purchase that
the firm can attain.

MARKET STRATEGIES
M
A
Positioning Strategy
R
K
E
• Positioning refers to how the firm differentiates
T its product or service from those of the
competitors and serving a niche.
S
T
• Positioning strategy is one where the firm
R identifies a target market segment and develops a
A strategy mix to address the desires of that
T
E
segment. The objective of the positioning is to
G establish the firm’s product or service identify in
I the mind of the buyer.
E
S
 Pricing Strategy
How the firm prices its product or service is a very important
component of the business plan. If the firm wants to achieve
its objectives, the right price for its product or service must
be maintained. In determining the right price, the following
factors must be considered:

1. The customer’s perception of value in the firm’s kind of

business;
2. The costs involved such as, overhead, storage, financing,
production, and distribution; and
3. The profit objectives of the firm.

MARKET STRATEGIES
The firm’s price may be established through any of the following methods: M
A
1. Cost plus pricing – this method covers all costs, variable and fixed, plus R
an extra increment to deliver profit. K
2. Demand pricing – this is a method of pricing where the firm sets prices E
based on buyers desire. The range acceptable to the target market is T
determined.
3. Competitive pricing – this method of pricing calls for price-setting on the S
basis of prices charged by competitors. T
4. Market pricing – this is a form of cost-oriented pricing in which the firm R
sets prices by adding per-unit merchandise costs, operating expenses and A
desired profit. T
E
Each of the various methods of pricing has corresponding strengths and G
weaknesses. In given situation, one pricing method could be the most I
effective. E
S
 Distribution Strategy
1. Direct Sales – if the plan is to move goods directly to the ultimate users, this is the most
effective channel.
2. Original equipment manufacturer sales – this channel involves selling a manufactured product
to another manufacturer who incorporates the same to his product. Example of this is the sound
system incorporated into cars.
3. Manufacturer’s representatives – they are wholesalers employed by one or more several
producers and paid on commission according to quantity sold.
4. Wholesalers – these are channel members that sell to retailers or other agents for further
distribution through the channel until they reach the final users.
5. Brokers – they are distributors who buy directly from distributors or wholesalers and sell to
retailers end users.
6. Retailers – they sell directly to consumers.
7. Direct mail – these are printed materials used in a targeted campaign to consumers. These are
sent directly to consumers.

MARKET STRATEGIES
1. Advertising aspects
a. Advertising budget
b. Positioning message
c. First year’s media schedule
2. Packaging which describes how the company’s
product will be packaged.
3. Public Relation
4. Sales Promotions
5. Personal Sales
d. Pricing procedures
e. Rules on returns and adjustments
f. Methods of sales presentations
g. Generation of leads
h. Policies on costumer services
i. Compensation of salesmen; and
j. Responsibilities of the salesmen
MARKET STRATEGIES
Analysis of the Competition

In competitive analysis, the following must be determined:

 Strengths and weaknesses of the firm’s and competitors;

 Strategies that will give the firm a competitive advantage;
 Barriers that can be developed to prevent competitors from
exploiting the firm’s market; and
 Any opportunity that can be exploited.
 Operations and
Management

The plan must contain the following:

1. Organizational structure;
2. Operating expenses;
3. Capital requirements; and
4. Cost of goods sold.
Organizational Structure

• 1. Marketing (including sales, customer relation and

service);
• 2. Production (including quality assurance);
• 3. Research and development;
• 4. Management; and
• 5. Human resources.

OPERATIONS AND MANAGEMENT

 Operating Expenses
1. Rent; 9. Payroll taxes and benefits;
2. Advertising and sales 10.Bad debts;
promotion; 11.Professional services;
3. Supplies; 12.Insurance;
4. Utilities 13.Loan payments;
5. Packaging and shipping; 14.Depreciation; and
6. Maintenance and repair; 15.Travel;
7. Equipment leases;
8. Payroll;

OPERATIONS AND MANAGEMENT

 O
P
E
Capital Requirements R
A
T
I
The business plan will not be complete unless O
N
a listing of capital equipment needed to be S
purchased is drawn up. Manufacturing firms will AND
need more elaborate types of equipment. Service M
business usually require less equipment. A firm A
N
engaged in transporting elementary and high A
school students, for example, will need buses or G
E
jeepneys only. M
E
N
T
Cost of goods
The cost of goods of trading firms consist of products purchased for resale,
while the cost of goods of manufacturing firms refer to total expenses incurred in
manufacturing the product that are intended to be sold.

The expenses include the following:

1. Material
2. Labor
3. Overhead

OPERATIONS AND MANAGEMENT

Financial Data

Financiers are most interested in the financial aspects of the

business plan. To satisfy this requirement, the following
statements must be presented in the business plan:

1. The Income Statement

2. The Balance Sheet
3. The Cash Flow Statement
F The Income Statement
I
N The income statement shows the
A income expenses, and profits of a
N
C firm over a period of time. It is also
I alternatively called “statement of
A earnings.” it may cover a certain
L
year, quarter, or moth. It provides
D basic data to help the prospective
A financier analyze the reasons for the
T projected profits.
A
 MDM Food Shop
Projected Income Statement
For the Year Ending Dec. 31, 2012

Gross Annual Sales 12,000,000

Less:
Food Cost 4,800,000
Gross Profit 7,200,000
Less:
Operating Costs
Rent 864,000
Salaries 1,920,000
Utilities, insurance
overhead 600,000
Owner salary 2,400,000
Net Profit 5,784,000
(Sample Income Statement) 1,416,000
 The Balance Sheet
A summary of financial information about the business is contained in the balance
sheet and are broken down into three areas:
1. ASSETS – portion of the balance sheet lists the assets of the firm in order to
liquidity. This portion is subdivided into the following:
1. Current assets
a) Cash-includes in checking, savings, and short-term investment accounts;
b) Account receivable-refers to income derived from credit accounts;
c) Inventory-the inventory of materials used to manufacture a product not yet sold.
2. Fixed assets-durable assets and will last more than one year.
d) Capital and Plant-refers to the book value of all capital equipment.
e) Investment-investment account owned by the company that cannot be converted to
cash in less than a year.

FINANCIAL DATA
2. LIABILITIES-Is classified as current or long-term. Current liabilities are due in one
year or less and they include the following:
A. Accounts payable-refers to all expenses incurred by the business that are purchased
on an open account from suppliers and are due for payment.
B. Accrued liabilities-refers to operational expenses that are not yet paid.
C. Taxes that are due and payable.

Long term liabilities are due in more than one year. They include the following:
D. Bonds payable-these are bonds due and payable over one year.
E. Mortgage payable-refers to loans used for the purchased of real estate and is repaid
for a period of over one year.
F. Notes payable-loans represented by a written document which is payable for a
period of over one year.
3. Owner’s Equity-refers to how
much the owner has in the
business. It provides s useful
means in evaluating the company.
 Mikaela Manufacturing Enterprises
Projected Balance Sheet Statement
As of December 31, 2012
Assets
Cash 70,450
Accounts Receivable 2,406,130
Inventories 2,608,791
Prepaid Expenses 9,437
Not Fixes Assets 289,003
Total Assets 5,383,811

Liabilities and Owner’s Equity

Notes Payable 497,643
Accounts Payable 47, 665
Accrued liabilities 112,164
Long-term debt 2,638,737
Total Liabilities 3,296,209
Owner’s Equity 2,087,602
Total Liabilities and Owner’s Equity 5,383,811
(Sample of Balance Sheet)
 F
The Cash Flow Statement I
It estimates the amount of cash inflows and outflows of the business during a specific N
period of time. A proper balance between the cash inflows and outflows will result to A
profits. N
The following items are listed in a cash flow statement:
C
1. Cash 10. R and D expenses
2. Cash sales 11. G and A expenses
I
3. Receivables 12. Taxes A
4. Other income 13.Capital L
5. Total Income 14.Loan payment
6. Material or merchandise 15.Total expenses D
7. Direct labor 16.Cash flow A
8. Overhead 17.Cumulative cash Flow
T
9. Marketing expenses
A
 Sample Cash Flow Statement
Mikaela Enterprises
Projected Cash Flow Statement
2012 to 2014
(000)
2012 2013 2014
Cash sales 5,000 7,000 10,000
Receivables 900 1,100 1,500
Other income 100 150 300
Total Income 6,000 8,250 11,800
Material 500 700 900
Direct Labor 600 700 850
Overhead 900 400 450
Marketing and Sales 250 300 400
Research and Development 100 150 200
General and Administrative 400 400 400
Taxes 55 80 110
Capital 120 130 150
Loans 50 50 50
Total expenses 2,475 2,901 3,500
Cash Flow 3,525 5,340 8,300
Cumulative cash flow 8,865 17,165
 Supporting Documents

The business plan would be more meaningful if supporting

documents are included. The documents usually consists of the
following:
1. The owner’s resume;
2. Contracts with suppliers;
3. Contracts with customers or clients;
4. Letters of reference;
5. Letters of intent;
6. A copy of the firm’s lease;
7. A copy of copyright or patent acquired, if applicable; and
8. Tax returns for the past three years.
 The business plan is a very useful
document in managing an entrepreneurship or
SUMMARY small business. It provides information on how
the owner will undertake the various activities
necessary in operating the business.
The plan enumerates the various decisions
made after careful analysis. As such, it relieves
the owner of spur-of-the-moment decisions
when the business is already in operation.