Development of a Business Plan

Entrepreneurship
Ilwyn F. Gascal, MBA
Learning Objectives
• Describe the process of seeking, screening, and seizing business opportunities.
• Discuss what a business plan is and its role in enterprise development.
• Identify the parts of a business plan.
• Develop a business vision and mission statement.
Opportunity Seeking
Entrepreneurs are innovative opportunity
seekers. They have endless curiosity to discover new
or different ideas and see whether these ideas will
work in the marketplace. This is what separates
entrepreneurs from the ordinary businessman whose
main objective is simply to earn profits from
producing, buying, and selling goods.
Entrepreneurs create value by introducing
new products and services or finding better ways of
making them. These may include innovation in
terms of product design or addition of new product
features to existing ones, employing new
technologies, or creating new markets.
Opportunity Screening
After opportunity seeking comes the rigorous process of opportunity screening. Because
of the many opportunities possible for the entrepreneur, it is important to come up with a short
list of a few very promising opportunities, which could be scrutinized in detail.
• The Personal Screen
• The 12Rs of Opportunity Screening
• Relevance, Resonance, Reinforcement of Entrepreneurial Interests, Revenues, Responsiveness, Reach, Range,
Revolutionary Impact, Returns, Relative Ease of Implementation, Resources Required, Risks
• The Pre-Feasibility Study
• Market Potential and Prospects – Segmenting the Market, Assessing Competition, Estimating
Market Share and Sales
• Technology Assessment and Operations Viability – Quantities demanded, Quantity
specifications demanded, Delivery expectations, Price expectations
• Project investment and detailed cost estimates – Pre-Operating Costs, Production/Service
Facilities Investment, Working Capital Investment
• Financial forecast and determination of financial feasibility – Projected Financial
Statements, Financial Ratios and Measurements
• The Feasibility Study
Opportunity Seizing
After seeking and screening, the entrepreneur is ready for the final stage -
Opportunity Seizing. By now, the entrepreneur has an idea as to where he or she will
locate the business and how he or she will market the product or service. At this stage,
the entrepreneur must be able to determine the critical success factors that enable
other players in the same industry to succeed while, at the same time, be vigilant about
those factors that cause other businesses to fail.
The question for the entrepreneur at this point is “Will I be able to manage, to
my advantage, the critical success factors and avoid the critical failure factors?”

• Crafting a Positioning Statement

• Conceptualizing the Product or Service Offering
• Designing, Prototyping, and Testing the Product
• Implementing, Organizing, and Financing
The Many Sources of Opportunities

There are many ways to

uncover or discover opportunities.
Some have to do with looking at
the big picture and noticing
emerging trends and patterns.
Other have to do with finding out
what specific customer segments
are being targeted in the market
place. Still, other come from new
technologies and new knowledge.
Macro Environmental Sources

The macro environment refers

to the “big or macro forces” that
affect the area, the industry, and
the market, which the enterprise
belongs to. They influence how
business should be conducted, how
consumers will behave, how supply
and demand will move, how
different competitors would position
themselves, and how the cost of
doing business will process.
Macro Environmental Sources
• Political
• These factors determine the extent to which a government may influence the economy or a certain
industry. For example, a government may impose a new tax or duty due to which entire revenue
generating structures of organizations might change. Political factors include tax policies, fiscal
policy, trade tariffs etc. that a government may levy around the fiscal year and it may affect the
business environment (economic environment) to a great extent.

• Economic
• These factors are determinants of an economy’s performance that directly impacts a company and
have resonating long term effects. [For example] a rise in the inflation rate of any economy would
affect the way companies’ price their products and services. Adding to that, it would affect the
purchasing power of a consumer and change demand/supply models for that economy. Economic
factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns etc.
It also accounts for the FDI (foreign direct investment) depending on certain specific industries
who’re undergoing this analysis.

• Social
• These factors scrutinize the social environment of the market, and gauge determinants like cultural
trends, demographics, population analytics etc. An example for this can be buying trends for
Western countries like the US where there is high demand during the Holiday season.
Macro Environmental Sources
• Technological
• These factors pertain to innovations in technology that may affect the operations of the industry
and the market favorably or unfavorably. This refers to automation, research and development
and the amount of technological awareness that a market possesses.

• Legal
• These factors have both external and internal sides. There are certain laws that affect the
business environment in a certain country while there are certain policies that companies
maintain for themselves. Legal analysis takes into account both of these angles and then charts
out the strategies in light of these legislations. For example, consumer laws, safety standards,
labor laws etc.

• Environmental
• These factors include all those that influence or are determined by the surrounding environment.
This aspect of the PESTLE is crucial for certain industries particularly for example tourism,
farming, agriculture etc. Factors of a business environmental analysis include but are not limited
to climate, weather, geographical location, global changes in climate, environmental offsets etc.
Industry and Market Sources
After the macro environment, the next biggest sources of
opportunities are the industry and the market. One of the most
difficult aspects about the industry analysis is defining what
constitutes an industry in the first place. The proper classification of
what industry the enterprise is competing in is important of the
entrepreneur’s intention is to define who are the relevant customers,
who are the direct and indirect competitors, and what are the
critical characteristics of the market as to quality of products or
services to be delivered.
Participants in an industry include:
a) Direct and indirect competitors in a particular type of business
b) Suppliers of input
c) Consumer market segments being served by rivals or
competitors
d) Substitute products or services, which customers shift or turn to
e) All other support and enabling industries
 What is a business plan?
It is a written document that describes in detail how a business, usually a new one, is
going to achieve its goals.
It lays out a written plan from a marketing, financial and operational viewpoint.
Sometimes, a business plan is prepared for an established business that is moving in a new
direction.
It describes the nature of the business, the sales and marketing strategy, and the
financial background, and containing a projected profit and loss statement .
It is also a road map that provides directions so a business can plan its future and helps it
avoid bumps in the road.
 PURPOSE IMPORTANCE
A business plan explains the idea behind A business plan makes you think about all
your business and spells out how your aspects of your business
product or service will be produced or sold.

A business plan may help you secure financing

for your business.
A business plan sets specific objectives and
describes how your business expects to
achieve them.
A business plan helps you communicate your
ideas to others.

A business plan describes the backgrounds

and experience of the people who will be A business plan can serve as a tool for
running the business. managing your business.
Basic Elements of a Business Plan
Every new business should have a
business plan, but not all business plans are alike.
The content of a business plan for a small, home-
based, sole-owner business will differ from a
business plan for a large corporation with offices in
many cities. But regardless of the business, all
business plans serve the same basic purposes.
They should also contain the same three basic
components— introductory elements, the main
body, and the appendix.
The main body of the business plan will
contain the bulk of the information about the
business idea. It provides details on how the
business will succeed. A lot of time and effort will
go into writing the main body of the plan, and it
should be compiled first. Then, details from the
main body will be used to compile the other
components in the business plan.
The main body of the business plan will
cover many areas. It should be organized into five
sections: Introduction, Marketing, Financial
Management, Operations, and Concluding
Statement.
Title Page and Contents
The business plan must be easily identifiable through a cover page with a listing of the following:
1. the name of the business;
2. the name/s of the proponents;
3. address;
4. telephone number;
5. e-mail and website address;
6. the date; and,
7. the name of the person who prepared the business plan.
The next page should provide a table of contents so the readers can easily find the information they need.

Executive Summary
The executive summary is a portion of the business plan that summarizes the plan and states the objectives of the business. If
the small business is intending to borrow money or is seeking capital from investors, the following must be included:
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 or investment; and
4. in case of loan, how it will be repaid with interest, and in the case of outside investment, how profits will be
generated.
The executive summary is prepared after the business plan is written. Its counterpart in research is the abstract. It provides
highlights of the entire document.
 Introduction
• The introduction section of a business plan
contains many important details about the
proposed business idea. The following
information should be included in the
introduction section.
• A detailed description of the business and
its goals
• The ownership of the business and the legal
structure
• The skills and experience you bring to the
business
• The advantages you and your business have
over your competitors
Detailed Description
Something inspired the idea for your
business. Describing how you came up with your
idea can help lenders, investors, and others
understand what your business is about. Your
business plan should also outline your short-term
(three months to one year), medium-term (two to
five years), and long-term (more than five years)
goals. This section describes your vision for the
company’s future. Stating goals will help provide
you with direction and focus for your business
activities.
 Skills and Experience

Introduction A written summary of your experience is an essential

part of your business plan. This summary should
emphasize all experience you have that relates to the
Ownership and Legal Structure business, including paid work experience, volunteer
experience, and any hobbies you have that relate to your
In your business, you should have a proposed business. The skills and experience of any
section detailing your form of ownership. Will it managers or professional employees who will be hired
be a sole proprietorship (one owner), a will also be relevant.
partnership (two or more owners), or a
corporation (many owners that hold shares of Competitive Advantages
stock in the business)? Provide information
relevant to your form of business, such as who You should list your company’s advantages over the
your partners are or how many shareholders competition. These advantages may include the
you have. This section of the business plan is following.
important because each legal form of business
has an effect on how the business works and • Performance • Price • Quality
makes profits.
• Promotion • Reliability • Distribution

• Public image or reputation

 Marketing
The marketing section of your business plan
should describe the products and/or services you
will offer, the market, the industry, and your
location. The marketing plan also includes the
strategies you will employ to reach your
customers.
Products and Services
Describe the products or services and explain
how they differ from those already on the market.
Highlight any unique features of your products or
services, and explain the benefits customers will
receive by purchasing from your company.
Market
You will explain who your prospective customers
are, how large the market is for your product or
service, and how you plan to enter that market.
You should also explain how you plan to deal
with competition.
Industry
You should describe the industry in which you
will operate. To find this information, you will
need to conduct research. Things you should
include in this section are
• External factors affecting your business, such
as high competition or a lack of certain suppliers
• Growth potential of the industry, including
growth forecasts
• Economic trends of the industry
• Technology trends that may affect the industry
Location
Describe the location of your business. Lenders
want to know exactly where your business will be
because the location is often a critical factor in its
success.

Financial Management
The financial section of your business plan
will help determine your financial needs. It
forces you to look at financial risks and the
costs and expenses of running your business.
It consists of three elements.
2. Financial Statements. A new business must
include projected financial statements in its
business plan. An existing business must include
current as well as projected statements. A financial
statement based on projected revenues and
expenses is called a pro-forma financial statement.

1. Identification of Risks. Prospective

lenders and investors will want to know
what risks your business faces and how you
plan to deal with them. Do not be afraid to
list potential problems. Lenders know that
every business faces risks. They will be
reassured to see that you have clearly
thought through the potential problems and
have a plan for dealing with them. Risks
typically faced by new businesses include
competitors cutting prices, costs exceeding
projections, and demand for your product or
service declining.
3. Funding Request and Return on
Investment. You must indicate how much you
need to borrow and how you plan to use the money.
You should give investors an idea of how much
money they could expect to earn on their
investment in your business. You should state how
much money you are personally investing and
provide a personal financial statement.
Operations Concluding Statement
The operation of your company is critical In this section, you should summarize
to its success. In this section of your the goals and objectives you have for
business plan, you should explain how your business. You should also
the business will be managed on a day- emphasize your commitment to the
to-day basis and discuss hiring and success of the business.
personnel procedures.
You should also include information on
insurance and lease or rental
agreements. Describe the equipment
that will be necessary for production of
your products or services and how the
products or services will be produced and
delivered.
Crafting a Vision and Mission Statement
A vision statement identifies what a company would like to achieve or
accomplish. Your vision is your dream. It's what your organization believes are
the ideal conditions for your community; that is, how things would look if the
issue important to you were completely, perfectly addressed. It might be a world
without war, or a community in which all people are treated as equals,
regardless of gender or racial background.

There are certain characteristics that most vision

statements have in common. In general, vision statements
should be:

• Understood and shared by members of the community

• Broad enough to include a diverse variety of local

perspectives

• Inspiring and uplifting to everyone involved in your effort

• Easy to communicate - for example, they are generally

short enough to fit on a T-shirt
Crafting a Vision and Mission Statement
An organization's mission statement
describes what the group is going to do and
why it's going to do that. A mission statement
is a declaration of the purpose for your
business. Here's how to craft yours. For
example, "Promoting care and caring at the
end of life through coalitions and advocacy."
Mission statements are similar to vision
statements, in that they, too, look at the big
picture. However, they're more concrete, and
they are definitely more "action-oriented"
than vision statements. Your vision statement
should inspire people to dream; your mission
statement should inspire them to action.
Goals and Objectives
The vision and mission statements must then be translated into measurable end results, more
popularly called objectives. Goals and objectives must be more specific than the vision and
mission statements. They should be SMART: Specific, Measurable, Attainable,
Realistic/Relevant, and Time-bounded. Set both financial and non-financial goals.
Examples of objectives:
• To establish a strong a market presence in Central Luzon by the end of 2017
• To produce net profits after the 2nd year of operations
• To delight customers with high quality food and services
• To make ABC Company a happy and rewarding place to work in
•
•

•
 OPPORTUNITY BUSINESS PROPOSALS
1. Lack of internet access in most 1.1 Establish an Internet café
barangays/towns
1.2 Set-up low cost Wi-Fi hotspot for
restaurants and eateries

2. Growing demand for motorcycles 2.1 Establish a repair and vulcanizing

shop specializing in motorcycles

2.2. Establish a motorcycle distributorship

2.3. Establish a motorcycle rental shop

END OF PART 2
QUESTIONS?