10/1/201

What is a Business Plan?

• A business plan is a very crucial document
if you're trying to start a new business or
trying to expand an already existing one.
You communicate your business plans to
potential partners and investors through a
BUSINESS PLAN business plan format.
• A business plan format can spark off a
brain storming session over the various
MAHESH HATHIRAMANI aspects of your business.. A well-drafted
business plan can help you sort out the
objectives and set up a framework within
which your business would operate

Who Reads the Business Plan—And What

Are They Looking For? What is the purpose of a BP?
There are two primary audiences for a firm’s • A business plan describes the business: how it operates, how
business plan it is managed, how it interacts in the marketplace, how it
functions financially and what its strengths and
Audience What They are Looking For weaknesses are. The business plan is a planning tool that
details the goals of the business and gives the owner a
A clearly written business plan helps path to follow.
A Firm’s
Employee the employees of a firm operate in • A business plan is the most professional format to
s sync and move forward in a consistent present the information the bank will need to
and purposeful manner. evaluate a loan request.
• Lack of planning can cause serious business problems or
Investors A firm’s business plan must make the outright business failure. Poor management and planning
and other case that the firm is a good use of an are estimated to account for over 90% of business
external investor’s funds or the attention of failures. The most common mistakes made are: poor initial
stakeholders others. planning; not understanding market position; not knowing
costs; not properly pricing; not planning cash flow in
6-3 advance; not controlling costs; and, not planning and
managing growth.
• A good business plan can help the business
owner avoid all of these costly pitfalls.

Guidelines for Writing a Business Plan Guidelines for Writing a Business Plan
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• Structure of the Business Plan • Structure of the Business Plan

– To make the best impression a business plan should follow – Software Packages
a conventional structure, such as the outline for the • There are many software packages available that employ an
business plan shown in the chapter. interactive, menu-driven approach to assist in
the writing of a business plan.
– Although some entrepreneurs want to demonstrate
• Some of these programs are very helpful. However, entrepreneurs
creativity, departing from the basic structure of the should avoid a boilerplate plan that looks as
conventional business plan is usually a mistake. though it came from a “canned” source.
– Typically, investors are busy people and want a plan where – Sense of Excitement
they can easily find critical information. • Along with facts and figures, a business plan needs to project a
sense of anticipation and excitement about the
possibilities that surround a new venture.

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Guidelines for Writing a Business Plan Guidelines for Writing a Business Plan
3 of 5 4 of 5

Types of Business
• Content of the Business Plan Plans
– The business plan should give clear and concise
information on all the important aspects of the proposed
venture.
– It must be long enough to provide sufficient information
yet short enough to maintain reader interest.
– For most plans, 25 to 35 pages is sufficient.
• Types of Business Plans
– There are three types of business plans, which are shown
on the next slide.

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Guidelines for Writing a Business Plan

5 of 5 Contents of a business Plan
• Recognizing the Elements of the Plan May Change • Executive Summary
– It’s important to recognize that the plan will usually change • Industry Analysis
while written. • Company Description
– New insights invariably emerge when an entrepreneur or • Market Analysis
a team of entrepreneurs immerse themselves in writing • Financial Plan
the plan and start getting feedback from others. • Marketing Plan
• Design and Development Plan
• Operation Plan
• Management Team and Company Structure
• Overall Schedule
6-9 4-10

Executive Summary Industry Analysis

– The executive summary is a short overview of the entire – This section describes the industry the business will enter
business plan. in terms of its size, growth rate, and sales projections.
– It provides a busy reader with everything that needs to – Items included :
be known about the new venture’s distinctive nature. • Industry size, growth rate, and sales projections.
– An executive summary shouldn’t exceed two pages. • Industry structure.
• Nature of participants.
– Even though the executive summary appears at the • Key success factors.
beginning of the business plan, it should be written • Industry trends.
last. • Long-term prospects.
• SWOT Analysis
• In many instances an investor will ask for a copy of a firm’s Before a business selects a target market it should have a good grasp of
its industry—including where its promising areas are and where its
executive summary and will ask for a copy of the points of vulnerability are.
entire plan only if the executive summary is The industry that a company participates in largely defines the playing
sufficiently convincing. field that a firm will participate in.
• The executive summary, then, is arguably the most important 6-12

section of a business plan.

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Company Description Market Analysis

– This section provides information about the company. – The market analysis breaks the industry into segments and
– Items included in this section: zeros in on the specific segment (or target market) to which
• Company description. the firm will try to appeal.
• Company history. – Items included in this section:
• Mission statement. • Market segmentation and target market selection.
• Products and services. • Buyer behavior.
• Current status. • Competitor analysis.
• Legal status and ownership. • Most start-ups focus on servicing a specific (target)
• Key partnerships (if any). market within the industry.
• Market analysis must highlight the behavior of the
consumers in the market.
• The more a start-up knows about the consumers in its
target market, the more it can tailor its products or
6-13
services
appropriately. 6-14

Financial Plan Marketing Plan

– This section addresses the profitability, break-even – The marketing plan focuses on how the business
analysis, cost sheet and funding aspects of the will market and sell its product or service.
business – Items to include in this section:
– Items included in this section: • Overall marketing strategy.
• Revenue drivers and profit margins. • Product, price, promotions, and distribution. (4 P’s of
• Fixed and variable costs. Marketing)
• Operating leverage and its implications. • Sales process (or cycle).
• Start-up costs. • Advertisement and Promotional strategies
• Break-even chart and calculations. • Product Distribution Strategy
• Sources and uses of funds statement.
• Assumptions sheet.
• Projected income statements.
• Projected balance sheets.
• Projected cash flows. 6-15 6-16
• Ratio analysis.

Lower Middle Upper Middle

Class Class

Higher Elite
4-18
Class Class

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Design and Development Plan Operations Plan

– If you’re developing a completely new product or

service, you need to include a section in your business – Outlines how your business will be run and how
plan that focuses on the status of your development your product or service will be produced.
efforts. – A useful way to illustrate how your business will be run
– Items included in this section: is to describe it in terms of “back stage” (unseen to the
• Development status and tasks. customer) and “front stage” (seen by the customer)
• Challenges and risks. activities.
• Projected development costs. – Items included in this section:
• Proprietary issues (patents, trademarks, copyrights, licenses, brand • General approach to operations.
names). • Business location.
• Many seemingly promising start-ups never get • Facilities and equipment.
off the ground because their product
development efforts stall or the actual
development of the product or service turns out
6-20
to be more difficult than thought.
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Management Team and Company Structure Overall Schedule

• The management team of a new venture typically consists – A schedule should be prepared that shows the major
of the founder or founders and a handful of key events required to launch the business.
management personnel. – The schedule should be in the format of milestones
– Items included in this section: critical to the business’s success.
• Management team. – Examples of milestones:
• Board of directors. • Incorporating the venture.
• Board of advisers. • Rental of facilities.
• Company structure. • Obtaining critical financing.
• Many investors and others who read the • Starting production.
business plan look first at the executive • An effectively prepared and presented
summary and then go directly to the schedule can be extremely helpful in convincing
management team section to assess the potential investors that the management team is
strength of the people starting the firm aware of what needs to take place to launch the
6-22
venture
get and has a plan in place to
6-21
there.

Appraisal of business plan: Appraisal of business plan:

• Economic viability: • Marketing viability:

Impact on production, employment, revenue, living Market potential, demand forecast, position of
standard, national income, etc, is evaluated. competitors, distribution channels, etc are examined.

• Managerial viability:
• Ecological viability: The background of the business project developer,
qualification, experience and potential of key management
Effect on the environment - ground water and air personnel are examined.
pollution – is examined.
• Financial viability:
Financial position of business enterprise is examined for
• Technical viability: sound implementation of the project. The surplus generation
Factors related to infrastructure, technology, capacity of the project is assessed for timely repayment of
credits, meeting the project cost in the pre-defined time line,
availability of machine, equipment, and raw materials, sources of various type of finance. Projected income statement,
skilled manpower are need to be evaluated. balance sheets and various financial ratios are also critically
examined.

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Documents needed to aid BP

• Resumes
• Personal and business references
• Business licenses, permits
• Insurance information
• Samples of marketing materials - business cards,
brochures, statements, ads, flyers, price lists, etc.
• Schematic of floor plan, signage and/or picture of
business location, Product endorsements
• Leases
• Contracts
• Proof of fulfilling legal requirements for your type
of business--for example, insurance and authority
for transportation businesses; medical license for
health care provider.