Chapter 6:

CCHTM 2110:
ENTREPRENEURSHIP IN
TOURISM AND HOSPITALITY
 CHAPTER 6:
Crafting a Business Plan
Learning Objectives:
At the end of this chapter, student should be able to:
1.describe the importance of a business plan to an
entrepreneur;
2.explain the elements in preparing a business plan.;
3.explain the benefits of developing a plan;
4.identify the differences between strategic management,
feasibility plan, and business plan; and
5.appraise the value of a plan to an entrepreneur.
 What Is This Thing
Called
Entrepreneurshi
p?
INTRODUCTION
• Planning is very important to the success of any business
and serves as a guide through uncertainty. Planning is a
function of management that involves making objectives
or goals for the business and determining a course of
action for the realization of those objectives. Planning
requires that management realized the environmental
conditions facing their organization and forecast future
conditions. Planning si very important to the success of
any business and serves as a guide through uncertainty.
INTRODUCTION
• A business plan is a written document that gives the
details of the proposed business venture. A selling
document conveys the excitement and potential of your
business to any investor or stakeholders. It describes a
clear picture of what the venture is, where it is projected
to go, and introduces the strategy and operations of the
proposed venture. A business plan also covers marketing,
research and development, manufacturing, management,
critical risks, financing, and timetable.
A. Value of Developing a Business
Plan
The business plan serves as a road map for a lucrative
business in the future. It specifies the direction the
business is taking, its goals and objectives, where it
wants to be, and how it plans to get there. The plan
serves as a written proof and assurance that the
entrepreneur has performed the necessary research and
studied well the business plan.
The business plan serves two essential
functions:

First, it provides an operational guide. The

plan provides tools for the business such as
mission statement, goals, objectives,
budgets, financial forecast, target market,
and strategies to help in the development of
the business. It gives the management, as
well as the staff, sense of direction. It also
gives everyone a target to achieve. By using
those targets or projections, the
management can measure their actual
performances versus the target they wanted
to achieve.
The business plan serves two essential
functions:

The second function of a business plan si

to attract potential investors and lenders to
finance the business venture. Applying for
loans from investors or banks without a solid
business plan might not be given the needed
financing for the business venture. An
entrepreneur must focus on the details and
explain well the sustainability of the
business. A business plan should prove that
the venture can pay of the loans in the future
as well as to have an attractive profit for the
investors.
A Good Business Plan Should Address The
Following:
1. Who is the primary customer? What are the characteristics and demographic
profiles of this customer base?
2. Where do they live, work and shop?
3. Why choose this customer base and how large it is? One must need ot know that
there is a sizeable potential market for the products or services.
4. Why do they buy? What needs and wants of the target market drive their
purchasing decision?
5. What can my business do to meet those needs and wants better than the
competitors?
6. Knowing my customer's needs and wants, what should be the basis for
differentiating my business in their minds?
B. Elements of a Business Plan
The planning packages can produce professional-looking plans that are
helpful, but it is a generic type having the same format. It is the hard work
and effort you give in making the business that will give you fulfillment and
income in the future. The entrepreneurs who exert time and effort in
building business plan are better prepared to face the possible problems in
the future. An entrepreneur should view the following elements as starting
point for building a solid plan that can be modified anytime:
Section I: Executive Summary"
• It should be clear, informative, and compelling so that
people will be interested in the business.
• It is a synopsis of the entire plan in a capsulized form
which explains the basic business model and briefly
describes the owner, key employees, target market,
and financial data.
• A brief persuasive well-developed summary that
includes a financial proposal. It should not exceed two
pages.
• The most important section of the business plan.
Section II: Company Description
The main body of the business plan should have a
general description of the company. Items included in this
section are:
a) Company description - The entrepreneur knows how
to translate an idea into a business and describes the
company itself. The purpose and reason for the
business venture should also be discussed.
b) Company history - The owner should prepare a brief
history of the company and highlights its significant
events. It describes how the company was formed
and what will it be in the future.
c) Mission Statement - It is the entrepreneur's vision of
what the company is and what he wants to
accomplish with the business in the future. It serves
as the thesis statement for the entire business plan.
d) Products and services - This part describes al the
products and services offered by the company.
e) Legal status and ownership – This part describes the
business type and who owns the business ideas.
Section III: Industry Analysis
This section familiarizes the investors in the industry in
which will compete. It will also describe the industry in
terms of its market size, growth rate, and sales projection
including where its promising areas are at size, growth
rate, vulnerability are.
Items included in these sections are:
a) Industry size, growth rate, and sale projection
b) Industry structure
c) Nature of participants
d) Key success factors
e) Industry trends
f) Long-term prospects
Section IV-A: Market Analysis

• Entrepreneurs must prove that there is a real market

for the proposed products or services.
• The market analysis breaks the industry into segments
to which the firm will try to appeal.
• He should describe the company's target market and
the characteristic of that market.
• One of the characteristics of a good business si the
ability to attract real customers who are willing to buy
the products or get the services of the business
venture.
A good market analysis should identify the following:
a. Target Market - identify the promising customers or
prospects and give their characteristics and location.
b. Advertising - after identifying the company's target
market, design a b. promotional campaign to reach
those customers effectively.
c. Market size and trends - How large is the potential
market?.
d. Location- choosing the right location will give a better
chance for success
e. Pricing - How much does the product or service cost to
produce and deliver to customer? What is the
company's overall pricing strategy?
f) Distribution – How will the product or services be distributed?
What can the company do to make it easier for the customer
to purchase product or services? It must describe the
channels of distribution that the business will use.
g) Competitor analysis – The entrepreneurs should discuss the
competitors of the business venture. He should study the
competitor market shares, product, and strategies to
compare it with his product or services.
Items included in the section are:
a. Market segmentation and target market selection
b. Buyer behavior
c. Competitor analysis
Section IV-B: Marketing Plan

The marketing plan focuses on how the business will

market and sell its product or services. Items included in
this section are:
a) Overall marketing strategy
b) Product, price, promotion, and distribution
Section V: Management Team and Company
Structures
• It is a challenge for every entrepreneur to hire and
attract the right people for the company.
• The quality of your people will determine the success
of the business.
• Indicate who is on your team, their qualifications, and
their responsibilities. Describe the company structure.
• The plan should describe the qualifications and work
descriptions of the business officers and key
employees. An investor will check on the qualifications
of the people who will implement the business plan.
• To complete the description of the business, the owner
should construct the organizational chart and identify
the key positions and the person occupying them.

Items included in this section:

a. Management team (key personnel)
b. Board of directors
c. Board of advisers
d. Company structures
Section VI: Operations Plan
• Outlines how your business will run and how your
product or service will be produced.
• Illustrate how the business runs from the front stage
(seen by customer) to the backstage (unseen by the
customers).
• How will you keep track of inventory?
• How will you keep costs reasonable to remain
competitive?
Items included in this section are:
a) The general approach to operation
b) Business location
c) Facilities and equipment
Section VII: Product Design and Development Plan

If developing a completely new product or service, you

need to include a section that focuses on the status of
your development effort.
Items included in this section:
a) Development status and tasks
b) Challenges and risks
c) Intellectual property
Section VIII: Financial Projections
• The final section of a business plan presents a firm's
pro forma or projected financial projections.
• Demonstrate the potential growth and profitability of
the business.
• The most important section of the business plan is an
outline of the proposed company's financial
statements.
• When making financial projections, it is important to
explain any assumptions — how you determined the
figures you used.
• If you are looking for financial assistance, lenders will
want to know where you will get financing for your
business and how you will spend the money.
• Ideally, these statements should be audited by a
certified public accountant because most financial
institutions prefer that extra reliability.
Item included in this section:
a) Sources and uses of fund statement
b) Assumption sheets
c) Pro forma income statement
d) Pro forma balance sheet
e) Pro forma cash flows
f) Ratio analysis
• The loan or investment proposal section of the business
plan states the purpose •of the financing, the amount
requested, and the plans for the repayment or in the case
of the investors, an attractive exit strategy:
• When describing the purpose of the loan or investment, an
entrepreneur must specify the planned use of the funds
such as for the modernization of the production area.
• Another important element of the loan or investment is the
repayment schedule for the loans.
• Financial projections must reflect the firm's ability to repay
loans and produce attractive profits.
• The owner should have a timetable for implanting the
proposed plan.
Presenting the business plan to investors:

1. Investors and lenders must be impressed by

having a well-prepared and informative
business plan.
2. Know your audience thoroughly ahead of time.
Build a good rapport with the investor or lenders
as this will be highly needed during the follow-
ups for the implementation
Presenting the business plan to investors:

3. The smart entrepreneur must have good idea of

the questions that will be asked and must
prepare for those questions. It is important to
rehearse for the presentation.
4. Demonstrate enthusiasm about the business
ventures.
5. Use visual aids for a clearer picture of the
presentation.
6. Simplify your presentation by limiting two to
three major points of the business s plan and
avoid technical terms that might be difficult to
understand by the investors.
The criteria lenders and investors
evaluate the creditworthiness
entrepreneurs seeking financing
using the 5Cs: capital, capacity,
character, collateral, and
conditions. A small business must
have stable capital and base
before lender grants their loans.
The investors see capital as risk-
sharing strategies with the
entrepreneurs.
C. Benefits of a Business Plan
• Reality test - The reality test's external components revolve around
proving that the market for the product and service exists. The
entrepreneur must prove that there is a strong demand for their business
venture's product and services. It focuses on the attractive industry,
market niche, potential customers, market size, and other similar factors.
The internal component of the reality test focuses on the features of the
product or service itself. Can the company produce it for the cost
estimates? sI it uniquely different from the competitor's offerings?
• Competitive test - The competitive test external component assesses the
business's relative positioned its key competitor. What is the company's
strength and weaknesses as compared to the competitors? How will the
competitor react to the new entrants the market? While the internal
competitive tests focus on the management's ability to create accompany
that will gain an edge over the competitor, business plan must prove the
quality for their products or the skills of the management team and team
members are better than the rest in the industry.
• Value test – The entrepreneurs must convince the investors and lenders
that they can pay off the loan and give an attractive returns on
investment. The business plan must explain that the business is good
investment and that it will give appealing profitability for them.
D. Differences Between Strategic
Management , Feasibility Study, and
Business Plan
Feasibility Study. A feasibility study is a detailed investigation and analysis of
a proposed business venture to determine its viability. It is the investigative
tool to answer the question, "Should we proceed with this business idea or
not?" based upon three important elements namely (a) market and industry,
(b) product/service, and (c) financial data in a sufficient degree of detail to
ensure confidence in the results. The study serves as a filter or screening of
ideas for building a successful business. It is also an assessment of the
practicality of a proposed project. Feasibility study is done before an
entrepreneur commits the necessary resources to build a business plan.
Business Plan. It is the planning tool for transforming an idea into reality. Its
a written document that describes in detail how a business will l achieve its
goals from start-up to financial components. It is document that thoroughly
explains business idea and how it will be carried out. It talks about the story
of what the business is and will be, includes al costs, operations, and
marketing plans. It also includes a description of financing and an estimation
of earnings.
Strategic Management. It is the formulation and implementation of the
goals, initiatives, and decisions that enable an organization to achieve its
objectives. The main purpose of strategic management is to identify the
company's competitive advantage over its competitors. Normally, it is done
when the company is existing for over five years. Strategic management has
the following elements: environmental scanning, review of vision and
mission statement, strategy formulation and implementation, and strategy
evaluation.
THANK
YOU!
In life, we are not just learning but
sometimes we also need to unlearn
ideas or principles that aren’t helping
us to grow. We need to listen, study
and evaluate our learnings everyday
because not all ideas we heard or
seen in other people fits in our
situation. Never afraid to try acquire
new ideas, to change your decisions
and LEARN again.
- Ma’am
Jinni