Professional Documents
Culture Documents
Seeking to develop a broader and deeper view of their market opportunities, today and
tomorrow
Being more innovative in strategy and structure than their competitors, more
collaborative with partners and more questioning of themselves and their potential
Taking a much more holistic and long-term approach to their people and
communicating more frequently and transparently to both their internal and external
stakeholders
Broadening their understanding of risk in their market and from their actions, and
tightening their execution and key support processes to mitigate that risk
Pursuing and attaining greater speed in making and executing decisions to take
advantage of their changing market
Business Advantages
outlines measures for generating the cash for daily operation, to repay debts and to
turn a profit
allows for test to see if strategies are giving the desired results.
MARKETING PLAN:
Meaning:
A marketing plan is a written document that details the necessary actions to achieve
one or more marketing objectives. It can be for a product or service, a brand, or a product
line. Marketing plans cover between one and five years. A marketing plan may be part of an
overall business plan. Solid marketing strategy is the foundation of a well-written marketing
plan. While a marketing plan contains a list of actions, a marketing plan without a sound
strategic foundation is of little use.
Pricing strategy.
Market Segmentation.
Quantified - The predicted outcome of each activity should be, as far as possible,
quantified, so that its performance can be monitored.
Focused - The temptation to proliferate activities beyond the numbers which can be
realistically controlled should be avoided. The 80:20 Rule applies in this context too.
Realistic - They should be achievable.
Agreed - Those who are to implement them should be committed to them, and agree
that they are achievable. The resulting plans should become a working document
which will guide the campaigns taking place throughout the organization over the
period of the plan. If the marketing plan is to work, every exception to it (throughout
the year) must be questioned; and the lessons learned, to be incorporated in the next
year's planning.
PRODUCTION PLAN/OPERATION PLAN:
If the new venture is a manufacturing operation, a production plan is necessary. This
plan should describe the complete manufacturing process. If some are all of the
manufacturing process is to be subcontracted, the plan should describe the subcontractor,
including location, reasons for selection, costs, and any contracts that have been completed. If
the manufacturing is to be carried out in whole or in part by the entrepreneur; he or she will
need to describe the physical plant layout; the machinery and equipment needed to perform
the manufacturing operations; raw materials and suppliers names, addresses, and terms;
costs of manufacturing; and any future capital equipment needs. In a manufacture operation,
the discussion of these items will be important to any potential investor in assessing financial
needs.
ORGANIZATIONAL PLAN:
An Organizational Plan is basically a to do list for an organization. It lists out the plan
of work, programs, and organizational growth over a period of time - six months, a year or
five. The tasks involved, who is responsible for them, and when theyll be done.
The organizational plan for the entrepreneur requires some major decisions that could affect
long term effectiveness and profitability. Decisions are needed on hiring procedures,
training, supervising, compensation, evaluation of performance and so on. An Organizational
Plan Helps To:
Developing the management team
It is important to begin the new venture with a strong management team that is committed to
the goals of the new venture .The management team must be able to work together effectively
toward these ends. Managements ability and commitment to the new venture are significant
to investors. Investors will usually demand that the management team not attempt to operate
the business as part time venture. It is expected to operate for full time and at a modest salary.
Drawing out large salaries for the management team is unacceptable to an Entrepreneur and
considered to be a lack of psychological commitment to the business.
Legal form of Business
One of the most important decisions the entrepreneur must make in the business plan is the
legal form of business. Basic legal forms are Proprietorship form of business with single
owner; unlimited liability; control over all decisions; receives all profits Partnership form of
business with 2 or more individual with unlimited liability, pooling resources to own a
business. Corporation form of business with separate legal entity, run by stockholders
having limited liability & regulated by statute
Factors of the three forms of Business Formation
Ownership
In the proprietorship, the owner is the individual who starts the business. He or she has full
responsibility for the operations. In a partnership, there may be some general partnership
owners and some limited partnership owners. In the corporation, ownership is reflected by
ownership of shares of stock Other than the S corporation, where the maximum number of
shareholders is 70, there is no limit as to the number of shareholders who may own stock.
Liability
It is one of the most critical reasons for establishing a corporation rather than any other form
of business. The proprietor rather than any form of business. The proprietor and general
partners are liable for all aspects of the business. Since the corporation is a legal entity, which
is taxable and absorbs liability, the owners are liable only for the amount of their investment.
In case of proprietorship or regular partnership, no distinction is made between business
entity and owner (s).Then to satisfy any outstanding debts of the business, creditors may seize
any assets the owners have outside the business or share the amount equally, regardless of
their capital contributions. In limited partnership, the limited partners are liable only for the
amount of their capital contribution.
Costs of starting a business
The more complex the organization, the more expensive it is to start. The least expensive is
the proprietorship, where the only costs incurred may be filing for business or trade name. In
In any new venture, the entrepreneur(s) will want to retain as much control as possible over
the business. Each of the forms of business offers different opportunities and threats as to
control and responsibility for making business decisions. In the proprietorship, the
entrepreneur has the most control and flexibility in making business decision. The partnership
can present problems over control of business decisions if the partnership agreement is not
concise regarding this issue. Usually, the majority rules unless the partnership agreement
states otherwise. It is most important that the partners are friendly toward one another and
that dedicate or sensitive decision areas of the business are spelled out in the partnership
agreement. In limited partnership, only the general partners control the business. In a
Corporation majority stockholder(s) have most control from legal point of view. Day-to-day
control in hands of management who may or may not be major stockholders. However
Control over long term decisions requires a vote of the major stock holders.
Proprietorship
Usually a calendar year
Partnership
Corporation
usually calendar year but Any year can be used at
other day may be used
beginning. Any changes in
incorporation
Distribution
of profits
to owners
Organization
costs
Dividends
received
Capital gains
Capital losses
Initial
organization
No income is allocated to
stockholders
Amortizable
over 60
months
80% of more of dividend
received may be deducted
(after 12/31/86)
Taxed at corporation level.
After July 1, 1987 the
maximum rate will be
34%.
forward Capital losses can be used Carry back three years and
to offset other income. carry over five years as
Carried
forward shore, term capital loss
indefinitely
offsetting only capital
gains
Commencement
of Contribution of property
business results in no to a partnership not taxed
additional
tax
for
individuals
Job description specifies the details of the work that is to be performed and any special
conditions or skill involved in performing the job. Job description should contain a job summary,
skills or experience required, a summary of the responsibilities and duties the authority of the
individual and standards of performance.
Job specification outlines the skills and abilities needed to perform the job including prior
experience. Outlining the job specification for a trained employee is easier than for the untrained
people who will be trained on the job. So the entrepreneur should focus on specific qualities that
will be required, such as personality, physical traits, interest, or sensory skill.
ROLE OF A BOARD OF DIRECTORS
BOARD OF ADVISORS
Loosely tied to the organizations
Serve the venture in an advisory capacity
FINANCIAL PLAN:
Financial Plan is that part of business plan determines the potential investment commitment
needed for the new venture and indicates whether the business plan is economically feasible.
Bankers and potential investors evaluate financial plan to see whether enough profits will be
generated to make the venture an attractive investment.
Financial Statements
Financial Statements are summary past and current performance data according to logical
and consistent accounting procedure. Its purpose is to convey an understanding of some
financial aspects of a business firm.
It highlights profitability, leverage and liquidity .Financial statements give information
which is used by a variety of users, especially shareholders and creditors (present and
potential) and employers.
If a firm is a new venture, must present the following:
Income Statement
The income statement is a simple and straightforward report on the proposed business's cashgenerating ability. It compares the financial performance of business, when sales are made
and when expenses are incurred. It draws information from the various financial models
developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of
goods. By combining these elements, the income statement illustrates just how much a
company makes or loses during the year by subtracting cost of goods and expenses from
revenue to arrive at a net result--which is either a profit or a loss.
For a business plan, the income statement should be generated on a monthly basis during the
first year, quarterly for the second, and annually for each year thereafter. It's formed by listing
financial projections in the following manner:
1. Income. Includes all the income generated by the business and its sources.
2. Cost of goods. Includes all the costs related to the sale of products in inventory.
3. Gross profit margin. The difference between revenue and cost of goods. Gross profit
margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP
margin is always stated as a percentage of revenue.
4. Operating expenses. Includes all overhead and labor expenses associated with the
operations of the business.
5. Total expenses. The sum of all overhead and labor expenses required to operate the
business.
6. Net profit. The difference between gross profit margin and total expenses, the net
income depicts the business's debt and capital capabilities.
7. Depreciation. Reflects the decrease in value of capital assets used to generate income.
Also used as the basis for a tax deduction and an indicator of the flow of money into
new capital.
8. Net profit before interest. The difference between net profit and depreciation.
9. Interest. Includes all interest derived from debts, both short-term and long-term.
Interest is determined by the amount of investment within the company.
10. Net profit before taxes. The difference between net profit before interest and interest.
9. R&D. All the labor expenses required to support the research and development
operations of the business.
10. G&A. All the labor expenses required to support the administrative functions of the
business.
11. Taxes. All taxes, except payroll, paid to the appropriate government institutions.
12. Capital. The capital required to obtain any equipment elements that are needed for the
generation of income.
13. Loan payment. The total of all payments made to reduce any long-term debts.
14. Total expenses. The sum of material, direct labor, overhead expenses, marketing,
sales, G&A, taxes, capital and loan payments.
15. Cash flow. The difference between total income and total expenses. This amount is
carried over to the next period as beginning cash.
16. Cumulative cash flow. The difference between current cash flow and cash flow from
the previous period.
As with the income statement, it is a need to analyze the cash-flow statement in a short
summary in the business plan. Once again, the analysis statement doesn't have to be long and
should cover only key points derived from the cash-flow statement.
The Balance Sheet
The last financial statement to be developed is the balance sheet. Like the income and cashflow statements, the balance sheet uses information from all of the financial models
developed in earlier sections of the business plan; however, unlike the previous statements,
the balance sheet is generated solely on an annual basis for the business plan and is, more or
less, a summary of all the preceding financial information broken down into three areas:
1. Assets
2. Liabilities
3. Equity
To obtain financing for a new business, an entrepreneur may need to provide a projection of
the balance sheet over the period of time the business plan covers. More importantly, it is a
need to include a personal financial statement or balance sheet instead of one that describes
the business. A personal balance sheet is generated in the same manner as one for a business.
As mentioned, the balance sheet is divided into three sections.
The top portion of the balance sheet lists are assets.
Assets are classified as current assets and long-term or fixed assets. Current assets are assets
that will be converted to cash or will be used by the business in a year or less.
Current assets include:
Cash. The cash on hand at the time books are closed at the end of the fiscal year.
Accounts receivable. The income derived from credit accounts. For the balance sheet,
it's the total amount of income to be received that is logged into the books at the close
of the fiscal year.
Inventory. This is derived from the cost of goods table. It's the inventory of material
used to manufacture a product not yet sold.
Total current assets. The sum of cash, accounts receivable, inventory, and supplies.
Capital and plant. The book value of all capital equipment and property (if firm own
the land and building), less depreciation.
Investment. All investments by the company that cannot be converted to cash in less
than one year. For the most part, companies just starting out have not accumulated
long-term investments.
Miscellaneous assets. All other long-term assets that are not "capital and plant" or
"investments."
Total long-term assets. The sum of capital and plant, investments, and miscellaneous
assets.
Total assets. The sum of total current assets and total long-term assets.
After the assets are listed, account for the liabilities follows:
Current liabilities are as follows:
Accounts payable. All expenses derived from purchasing items from regular creditors
on an open account, which are due and payable.
Accrued liabilities. All expenses incurred by the business which are required for
operation but have not been paid at the time the books are closed. These expenses are
usually the company's overhead and salaries.
Taxes. These are taxes that are still due and payable at the time the books are closed.
Total current liabilities. The sum of accounts payable, accrued liabilities, and taxes.
Bonds payable. The total of all bonds at the end of the year that is due and payable
over a period exceeding one year.
Mortgage payable. Loans taken out for the purchase of real property that are repaid
over a long-term period. The mortgage payable is that amount still due at the close of
books for the year.
Notes payable. The amount still owed on any long-term debts that will not be repaid
during the current fiscal year.
Total long-term liabilities. The sum of bonds payable, mortgage payable, and notes
payable.
Once the liabilities have been listed, the final portion of the balance sheet-owner's equityneeds to be calculated. The amount attributed to owner's equity is the difference between
total assets and total liabilities. The amount of equity the owner has in the business is an
important yardstick used by investors when evaluating the company. Many times it
determines the amount of capital they feel they can safely invest in the business.
BREAK EVEN ANALYSIS
Many entrepreneurs make the mistake of bringing a product or service to the market without
fully understanding the total costs involved and the prices they can charge. As a result, they
discover they can't sell enough of the product or service to make a profit.One of the most
important tools that can be used to make better business decisions is the break-even analysis;
it enables to determine with great accuracy whether a idea is a profitable one or not. A breakeven analysis is a simple way to determine how much of the product must be sold to generate
a specific level of profitability. Keep the following in mind:
Each business has certain fixed costs that must be paid every month, whether or not
any sales take place.
Each product or service has variable costs that are incurred when the product is
produced and sold.
There are semi-variable costs that go up or down depending on the level of business
activity.
After all costs attributable to bringing that product to market are deducted, each product or
service yields a certain amount of profit. This profit contribution can then be divided into the
"fixed costs" to determine how many units must be sold to break even.
Here's a simple example of the break-even model:
The total costs of operating the business each month are $10,000. Each product the company
produces can be sold for $1,000. Each product costs an average of $800 per unit to produce,
sell and deliver. The profit contribution per unit is therefore $200 each. The amount $200 is
divided into $10,000 to determine the break-even point. Next, $10,000 divided by $200
equals 50 units. The company must therefore sell 50 units per month to break even, or
approximately two units per business day. Only after the company has sold 50 units in one
month does it begin to earn a profit of $200 per unit.
A project report is prepared by an expert after detailed study & analysis of the various
aspect of the project. It gives a complete analysis of the inputs and outputs of the project. It
enables the entrepreneur to understand, at the initial stage, whether the project is sound on
technical, commercial, financial and economic parameters.
PARTIES INTERESTED IN PROJECT REPORT
Financial institutions & commercial bankers are the interested parties in the project report
which is prepared for direct submission to financial corporations, banks for getting loans.
PROJECT REPORT INCLUDES INFORMATION ON FOLLOWING ASPECTS
ECONOMIC ASPECTS: The project report should be able to present economic justification
for investment. It should present analysis of the market for the product to be manufactured.
TECHNICAL ASPECTS: The appropriate report should give details about the technology
needed, equipments and machinery required and the sources of availability.
FINANCIAL ASPECTS: The report should indicate the total investment required including
sources of finance and the entrepreneurs contribution.
PRODUCTION ASPECTS: It should contain a description of the product selected for
manufacture and the reasons for such selection.
MANAGERIAL ASPECTS: The report should contain qualifications and experience of the
persons to be put on the management of the job.
IMPORTANCE OF A PROJECT REPORT
Project report is of a great importance it highlights the practicability of a project in terms of
different factors like economy, finance, technology and social desirability. It is need by the
entrepreneur for carrying out expansion or starting a new production line. An important
aspect of report lies in determining the profitability of the project and minimizing risks in the
execution of the project.
FEASIBILITY REPORT
A feasibility report or a project report of a new enterprise or of an a expansion provides, in
general, primary economic information, financial data and technical details which serve a
finite number of discrete economic process or cost structures of the industry concerned.
The feasibility report should contain the following details:
1. Promoters of the project.
2. Products of the project.
3. The level of output.
4. The raw material used and sources of supply.
5. The technical production method selected & the location of the plant.
6. The total cost of the project.
7. The proposed method of financing and legal structure of the future enterprise.
8. The unit cost of the manufacture compared to those at FOB or CIF prices.
9. The size of the market.
10. The effects of the project on the economy, public finances and the labour market.
Qty
Qty
Value
Value
Indigenous/
Imported
Qty
Price
Sale
Tax
Int. Total
Name &
address
of the
Suppliers
Designation
No.
Salary
Total
Technical
Office
Sales
Others
Salaries per month
Perquisites (10 to 20% of
Salaries)
Total Salary
ii) Raw materials (per month on single shift basis including packaging materials).
Name with
Specifications
Indigenous/
imported
Qty.
Rate
Total
Qty
Rate
Total