Business Plan

• Blueprint of step-by-step procedure followed to convert business

idea into a successful business venture.

• First of all Identify an innovative idea, researches external environment

to list O&T, identifies internal strength and weakness, assesses
feasibility of the idea and than allocate resources( production
/operation, finance, HRs)

• A business plan is a written description of the goals and

objectives of the business and how they are going to be achieved. It
includes the mission of the business along with the production,
organizing, marketing, and financing intentions –

• Is it feasible to operate my own business?

• Is my business idea feasible?

Development of a business plan

• Title page

• Table of contents

• Executive summary

– Description of business

– Description of industry

– Marketing plan

– Financial plan

– Production plan

– Organization plan

– Operational plan

– Summary

• Appendices (Exhibits)

Why Develop a Business Plan? Or objectives of a business plan

 A business plan is a very important tool if you are starting a new

business or expanding an existing one.
  The business plan communicates to others how successful you
are going to be.

 Lending institutions require them to support loan applications.

 Experience shows that successful businesses have a plan; the

majority that fail do not.

 A good business plan is your road map to success!

 Implementing the plan

 Objective evaluate the prospects of the business - TOWS

 Resource requirement for implementation

 To document ownership arrangement, future prospects, and

projected growth rate.

BP Process

 Preliminary Investigation

 Idea Generation

 Environmental Scanning

 Feasibility Analysis

 Project Report Preparation

 Evaluation Control and Review

1. Idea Generation: Innovative idea, new concept, product or service

also incremental value addition.

Sources of new ideas – consumers, existing companies, R&D,

employees, dealers, retailers.

Methods of generating new ideas – brain storming, GD, data

collections, feedback, invitation of ideas through advertisements, mails
 or internet, market research, commercializing inventions, business
contests, fests, business bazigar on Star TV- contest business plans

2. Environmental Scanning

After idea generation, next phase,

Environment scanning - both external and internal that includes analysis

of perspective TOWS of business enterprise.

Sources of information can be both informal (family, friends and

colleagues) and formal(bankers, magazines, newspapers, govt deptts,
seminars, suppliers, competitors, dealers.

Environment scanning focus on maximizing information because more

supportive the information, greater is the confidence regarding the
success of the business.

External Environment
1. Socio-cultural Appraisal: Social and cultural norms, beliefs, value
system, open or close culture, level of rigidity/flexibility of a society
toward product /service/concept. Eg Americans are experimenting and
adventurous whereas Arabs are conservative. For a innovative product
like Bungee jumping acceptability would be more in USA than UAE.

2. Technological know-how to convert the idea into a product, modern

technologies expected in the future. Eg. Idea of manufacturing
tobacco-free cigarettes, technological appraisal can assess whether
this kind of a product is possible or not.

3. Economic Appraisal : Assessment of economy in a given society in

terms of inflation, per capita income and consumption pattern, balance
of payment, consumer price index etc. Healthy economy offers greater
opportunities for growth and development of industry together with
confidence to the entrepreneur about the success of his business
venture.

4. Demographic Appraisal : OA population pattern in a given geographical

region. It includes variables like age, profile, distribution, sex,
education profile, income distribution etc. Demographic
5. Government Appraisal : Assessment of legislation, policies, incentives,
subsidies, grants, procedures etc. formulated by government for a
particular industry. For eg. Government policies of subcidised
electricity in Uttranchal is an added advantage for setting up industry
due to its heavy dependence on power. Whereas in UP, electricity is
not only expensive but is also of acute shortage, which led
entrepreneurs to depend on personal generators, increases cost of the
product. Uttranchal is a proffered state for setting up manufacturing
units in comparison to UP.

• Outcome of the other policies too be taken in to consideration while

conducting govt appraisal

Internal Environment

• Raw Material : Assess availability of raw material at present and future,

if not adequate/ shortage, serious concern, where is the nearest source
and cost involved therein.

• Production/Operation : Availability of machineries, equipments, tools

and techniques required for production/ operations.

• Finance : Assessment of total requirement of finances in terms of start-

up expanses, fixed expanses and running expanses. It also indicates
source of finance that can be approached for funding

• Market : It asses the present, potential and future demands of the

market.

• Human Resource : Assessment of the kind of the human resources

required and its demand and supply in the market. This helps in
estimating the cost and level of competition in hiring and retaining the
human resources.

• Objective of the environment scanning should be Maximizing

information from maximum sources for enhanced possibility of success
in
3. Feasibility Analysis

• Feasibility study is done to find whether the proposed project

(considering the above discussed environment appraisal) would be
feasible or not.

• Feasibility study is dependent on environment appraisal yet it is far

more descriptive.

• The variable/dimensions of feasibility analysis -

1. Market Analysis

2. Technical/Operational Analysis

3. Financial feasibility

Drawing functional plan

.1. Market Analysis

• M A is conducted to estimate the demand and market share of the

proposed product/service in future.

• Demand analysis and market share is based on number of factors -

consumption pattern, availability of substitute goods/service,
competition etc.

• A preliminary discussion with consumers, retailers, distributors,

competitors, suppliers is carried to understand consumer preferences,
existing and potential demands, strategy of competitors, and practices
of distributors, retailers etc., present and prospective consumers,
geographic and seasonality distribution of the demand, marketing mix
of competitors, accepted marketing mix of consumers.

2. Technical/Operational Analysis

• Done to assess operational ability of the proposed business enterprise.

• Key questions to be answered are- what are the technological and

equipments needs, from where this technology and equipments be
obtained, from where the raw material be obtained.

• T/O analysis collects information about :

a) Material availability & requirement planning

 b) Plant location

c) Plant capacity

d) Machinery and equipment

Plant layout

a) Material availability & requirement Planning

Assessment of the raw material required for production of

goods/service.

Quality and quantity of raw material

Factors influencing availability of raw material

Price sensitivity of raw material

Perishable time of raw material

Material Requirement Planning i.e. quantity of material required to let

the production run smoothly.

b) Analysis of choice of technology

Identify whether product developed at the idea generation stage is

technologically feasible or not.

Answers whether a technology for the product exists or not, if exists in

more than one form, which one would be more profitable to the
company.

Choice of the technology would be affected by ; capacity of the plant,

amount of investment, production cost, latest development, quantity of
planned production, impact of environment.

• Plant location : Area(broad) where the enterprise is to be established,

like city, industrial zone or coastal area. Plant location is the physical
layout of the business and is affected by process of production, safety
of personnel, minimum production cost, scope of expansion, proper
space utilization etc. Location choice is influenced by following factors :

i) Proximity to raw material and markets

 ii) Availability of infrastructure like power, transportation, water,
communication means.

iii) Favorable government policies

i) Other factors like climate conditions, availability of manpower etc.

• Machinery and equipment : Machinery and equipment is dependent

on production technology, plant capacity, investment cost of buying, ,
maintenance and running cost.

Financial Feasibility

• Financial feasibility is done for financial assessment of the proposed

business venture. Following cost estimates have to be carried out :

i) Cost of land and building – depending upon the requirement and

availability of funds, the land and building can be hired, taken on lease
or purchased.

ii) Cost of plant & machinery-estimating cost of plants & machineries and
their running & maintenance.

iii) Preliminary cost estimation – cost required for conducting market

survey, preparing feasibility report, registration expenses, expenses
involved in raising capital from public & other misc expanses.

iv) Provision of Contingencies : Needs to be made to cover certain

unexpected expanses which can emerge due to change in external
environment like increase in the price of the raw material, petrol price,
transportation costs.

v) Working capital estimates for running the business are also made.

vi) Cost of Production – It include raw material cost, labour cost, overhead
expanses, utilities like power, water, fuel etc.

vii) Sales and Production estimates : Based on the plant capacity the
production and sales estimates are made which help in estimating
profitability

viii) Profitability projections are made on the following parameters

a. Cost of production

b. Sale expenses
c. Administrative expanses

d. Expected sales

e. Calculation of the above gives gross profit

Drawing Functional Plan

• After feasibility study, functional plans are drawn which means

developing plans and strategies for all operational areas : marketing,
finance, HR and production.

a) Marketing Plan : MP lays down the strategies of marketing

(Marketing mix) which can lead to success of business. From the
market feasibility study and marketing research, potential/present
demand of customers, which helps in laying down the strategies for
market segmentation, identification of target market and laying down
strategies for the target market.

b) Production/operation Plan : Production plans are drawn for

manufacturing whereas operational plans are for service sector. It
includes strategies for following parameters :

1. Location and reasons for selecting the locations

2. Physical layout

3. Cost & availability of machinery, equipments, raw material

4. List of suppliers and if possible, distributors.

5. Cost of manufacturing / running operations

6. Quality management

7. Production scheduling, capacity mgt,inventory mgt

c) Organisational Plan : Defines the type of ownership, organization

structure and proposes HRM practices that would govern the
successful running of proposed business enterprise.

d) Financial Plan : Financial Plan indicates the financial requirement of the

proposed business

1. Cost incurred in smooth running of all the plans – financial, marketing,

operations and HRs.
 For eg. Cost incurred in the marketing plan would include forecasting
sales, for production plan it includes cost of goods, for organizational
plans it includes cost of compensation to employees.

2. Projected cash flows.

3. Projected income statement

4. Projected break-even point

5. Projected ratios.

6. Projected Balance sheet.

Project Report Preparation

• Written document that describes sep-by-step, strategies involved in
starting and running a business.

• Project report helps to understand the opportunities, problems and

weakness of the business.

• It guides the entrepreneur in actually starting up and running the

business venture.

• Helps to monitor whether the business is going to be as projected in

the business plan or not.

• Helps in documenting cost estimates of the business.

• Handy tool to persuade investors and financial institutions to fund a

project.

• Helpful in proper utilization of the resources.

• Finally lead to sustainable development of the organization

Essentials of a Project Report

1. The project report should be sequentially arranged.

2. It should be exhaustive(covering all the details).

3. Should logically & objectively explain projections

4. Projections should be appropriately for 2 to 10 yrs

5. Should professionally made to demonstrate that promoters posses

entrepreneurial acumen, experience.

6. Should justify financial needs & financial positions

7. Should also justify market prospects and demands

8. Should be attractive to the financial agencies and investors.

9. Should also have a high aesthetic value.

Preparing a Project Report

1. Cover Sheet : It mentions the name of the project, address of the

headquarters (if any) and name and address of the promoters.

2. Table of Contents : A Good Project report should be divided in to

sections eg. 1,2,3 or I, II, III or A,B,C and each section into subsections
eg. 1.1, 1.2, 1.3 or I-i, I-ii,I-iii or A-a.A-b,A-c. No matter which method is
used for classification but once a method is selected than uniformly
adopted for entire project report.

3. Executive Summary : A brief summary should about 2 to 3 pages.

Briefly describe the company, mention some financial figure and some
salient figures of the project. Generating interest in the minds of the
readers is the prime motive of the executive summary.

4. The Business : This will give the details about the business concept. It
will discuss the objective of the business, brief history about the past
performance, form of ownership along with the proposed
headquarters.

5. Funding Requirement : To address to the investors and financial

institutions, a careful, well planned, funding requirement should be
documented. It is also necessary to project how these requirements
would be fulfilled. Debt equity ratio can give an indication about how
 much finance would company require and how it would like to fund the
project.

6. The Product/Services : Description of product/ service, features,

product range, and advantages in comparison to available product in
market.It also give details about patents, trademarks, copyrights,
franchise & licensing agreements.

7. Function plans : Functional plans for Marketing, finance, human

resources, and operations.

a. Marketing Plan : Marketing mix strategies on the basis of MR MR –

market characteristics and demography, SWOT of market and
competitors. Marketing mix strategies for product/service, price,
promotion, distribution. The budget for the marketing plan are drawn
at an end.

b. Operational plan : Give information about i) plan location, reason for

the selection thereof – vicinity of the market, suppliers, labour,
availability of raw material, machinery, or does it have advantages of
the govt. subsidies or any other. ii) Plant layout to provide a pattern of
arrangement of the organisation and would indicate exhaustive
planning of the business. iii) Plan for material requirement, inventory
management and quality quality control are drawn for identifying
further costs and intricacies of the business. Finally the budget for
operational plan is also drawn

c. Organisational Plan : The organisationa plan indicates the pattern of

flow of responsibilities and duties amongst people in the org. Detail
about the BOD, it can also enlist the manpower plan that would be
required to put life into the company and it will also enlist laws that
would be governed in managing the employees of the org. In the end
the org plan is also budgeted.

d. Financial Plan : Usually drawn for 2 to 5 years for a existing company.

A summary of financial data is given, whereas for new org, the
following projections are drawn ;

i. Projected sales

ii. Projected Income and expenditure statement.

iii. Projected break even point

iv. Projected profit and loss statement.

v. Projected Balance sheet.

vi. Projected cash flows.

vii.Projected fund flow.

viii. Projected ratios.

8. Critical Risks : The investors are interested in knowing the tentative

risks to evaluate the viability of the project and to measure the risk
involved in the business.

9. Exit Strategy : Details about how the organization would be dissolved,

what would be the share of the each stakeholder in case of winding-up
of the organization. It further help in measuring the risk involved in
investing.

10. Appendix : Information about the CV of the owners, ownership

agreement, certificate from pollution board, MOU, AOA and all other
supporting agreements/documents that can help in marketing the
project viability at large.

Key Components of a Business Plan

The business plan covers six key areas:

• The Industry, the Company, and the Products

• Market Research and Analysis

• Marketing Plan

• Operating Plan

• Management Team

• Financial Plan
 The Industry, the Company, and the Products

This section of the business plan describes the business venture in a

detailed but concise manner. You must clearly describe:

Ø The nature of the industry

Ø The proposed business

Ø The product the business

plans to offer

The Industry

Present the current status and outlook for the industry in which the business
will operate.

Ø New products and developments

Ø New markets and customers

Ø General trends affecting the business

Ø Identify sources of information used to describe trends

The Company

Write a detailed description of the proposed business venture, the products

and services it will offer, and the principal customers.

Ø Mission statement with goals and objectives

Ø Ownership and legal form of the company

Ø Reasons why the business will be successful

The Products or Services

Describe in detail the products or services to be sold, as well as the

application of the product or service.

4 Benefits to the customers

4 Competitive advantages

4 Unique features
 4 Current state of development

Market Research and Analysis

This section of the business plan presents enough facts obtained through
market research and analysis to determine if the product or service has
a substantial market in a growing industry despite a competitive
market.

v Customers

v Market Size and Trends

v Competition

v Market Share and Sales

Types of Market Research

PRIMARY RESEARCH = DO IT YOURSELF:

 Observation

 Surveys

 Interviews

SECONDARY RESEARCH = USE EXISTING DATA:

 Public Library

 College or Universities

 Chamber of Commerce

 Business Publications

 Trade Shows

 The Internet

 Census Information

 Sales Tax Data

Types of Market Analyses

The information obtained through primary and secondary research
techniques can be analyzed in a variety of ways.

 Economic Trend Analysis

 Political and Social Analysis

 Customer Analysis

 Market Potential Analysis

 Competitive Analysis

Customers

Identify your target market and develop a customer profile.

4 Demographic profile

4 Lifestyle patterns

4 Expectations

Customer Profile

• Age

• Income

• Education

• Gender

• Stage of business

• Type of business

• Size of business

• Location

• Behavior patterns

• Customer expectations

• Other ???

 Who is your target audience?

  How will you reach this audience?

Market Size and Trends

Describe the primary market for the product, both geographically and in
terms of sales volume.

 Describe seasonal fluctuations

 Discuss potential for growth

 Discuss factors affecting growth

Competition

List the strengths and weaknesses of competitive products and services and
list the companies that supply them.

 Identify and list current and future competitors

 Assess the competition on the basis of price, quality,

performance, service, etc.

 Discuss advantages and disadvantages of competing

products or services

Market Share and Sales

Summarize what it is about your product or service that will make it sell in
the face of current and future competition.

Ø Identify and list major customers and estimate potential sales

Ø Estimate share of the market

Ø Estimate sales in units and dollars for the next two to five years

Marketing Plan

This section of the business plan describes the company’s marketing goals
and objectives and how they will be achieved.

Ø Overall Market Strategy

Ø Pricing

Ø Sales Tactics
 Ø Advertising and Promotion

Ø Packaging

Ø Marketing Plan Outline

Overall Market Strategy

Describe the general marketing philosophy and strategy of the company.

 Derived from market research and analysis results

 Include discussion of markets targeted for sales promotions

 List short-term and long-term marketing objectives

 Discuss specific marketing tactics

Pricing

The pricing strategy selected can mean the difference between success and
failure.

Ø Provide a detailed description of the pricing strategy for each

product or service

Ø Outline factors considered in developing pricing strategies

Ø Discuss wholesale vs. retail pricing strategies

Ø Discuss price levels, geographic terms, discount policies, etc.

Sales Tactics

Describe specific actions that will be taken to generate sales and distribute
the product or service to customers.

 Analyze effectiveness of everything available within the sales

system

 List channels such as salespeople, agents, dealers, and direct

mail services

 Describe methods that will be used to distribute products to

customers
  Describe merchandising techniques

Advertising and Promotion

Describe approaches the company will use to bring the product

or service to the attention of the target market.

Ü List advertising methods along with benefits and costs

Ü Discuss promotional efforts and strategies

Ü Publicity

Packaging

Describe how the product will be packaged for the target market.

* Package design

* Package labeling

Packaging materials

Marketing Plan Outline

A marketing plan outline is a useful tool for pulling together information

related to the marketing plan. The marketing plan outline should include
information on the following:

Ø Marketing situation

Ø Marketing objectives

Ø Marketing Strategies

Ø Budget

Ø Action plan

Ø Evaluation