ES 010 - 1ST SEMESTER, TERM 2

BUSINESS PLANS
Lecture 03
 #1
Objectives To define what is a business plan and what
is its purpose

#2
To explain why a business plan should be
prepared

#3
To know what is the scope and value of a
business plan

#4
To explain the steps on how to start a
business plan

#5
To describe the reasons why a business
plan fail
Entrepreneurial Profile
Entrepreneurial Profile
STEVE HAFFNER
He has been a significant contributor to the
development of new Internet technologies
providing consumers with improved services in the
travel industry. His ability to understand market
opportunities and build a successful business plan
and model to penetrate this market has made him
into a multi-billionaire.
Entrepreneurial Profile
STEVE HAFFNER
After graduating from Dartmouth College in 1991,
Steve considered two career paths: banking and
consulting. He chose to go to work for the
Marketing Corporation of America as a consultant
and stayed there for four years.
Upon graduation at Northwestern University in
1997, he then went to work for the Boston
Consulting Group as a strategy consultant. While
employed there for the next three years, he saw the
significant changes that were occurring in the e-
commerce business sector.
Entrepreneurial Profile
STEVE HAFFNER
Hafner grew up living in multiple locations such as
Peru, Guatelama, Costa Rica, and Texas. With his
constant traveling, he became aware of how
difficult it was to buy airline tickets, hotel rooms, or
rent automobiles. To book any of these services, it
was necessary to check each airline site, hotel site,
and automobile rental site. Finding the best prices
and options took a lot of time on the Internet.
Entrepreneurial Profile
STEVE HAFFNER
In November 1999, he launched Orbitz. Here,
consumers could explore multiple airlines, hotels,
and car rentals in order to find the best price.
The company quickly grew in size from a handful of
individuals to 1,600 and went public in 2001 at a
market value of $1.4 billion. Hafner continued at
Orbitz for three years before leaving.
Entrepreneurial Profile
STEVE HAFFNER
Hafner and his cofounder Paul English each
contributed $1.5 million and with their plan for
Kayak raised an additional $15 million in capital
(AOL became an investor as well). Key engineers
from major technology industries were then hired
to develop the technology for the implementation
of Kayak. Soon the company was launched in 2004.
Entrepreneurial Profile
STEVE HAFFNER
One day while having dinner with a number of
colleagues in the Web travel business discussion
centered on the weaknesses of the existing travel
sites such as Orbitz, Expedia, and Travelocity. They
imagined what it would be like to have a site that
would give the airlines and other travel services
leads instead of selling tickets.
Entrepreneurial Profile
STEVE HAFFNER
Within weeks, Hafner and his co-founder Paul
English each contributed $1.5 million and with their
plan for Kayak raised an additional $15 million in
capital (AOL became an investor as well). Key
engineers from major technology industries were
then hired to develop the technology for the
implementation of Kayak. Soon the company was
launched in 2004.
Entrepreneurial Profile
STEVE HAFFNER
The company quickly grew and by 2005 had
generated $3.6 million in sales. Within 18 months,
the company had more than 10 million visitors to
its site.
By 2006, the company was a leader in the travel
industry and was awarded the best site for travel
deals. In 2012, Hafner and his partners sold the
company to Priceline for a significant payout.
Entrepreneurial Profile
STEVE HAFFNER
Hafner is still the CEO of Kayak and the company
maintains its individuality.
Priceline is more of a holding company and owns a
number of booking companies that made the sale
an excellent match for Hafner and his partners.
Hafner continues to pursue new opportunities as
he intends to meet the goal of consolidating all
aspects of a consumer’s travel under one umbrella,
using the most up-to-date technology possible.
Business Plan

ES 010 - LECTURE 3-1

Business plan
DEFINITION
A written document prepared by the entrepreneur
that describes all the relevant external and internal
elements involved in starting a new venture.
It is often an integration of functional plans such as
marketing, finance, manufacturing, and human
resources.
Business plan
DEFINITION
The business plan must address the integration and
coordination of effective business objectives and
strategies particularly when it involves a technology
and marketplace that is complex.
It also addresses both short-term and long-term
decision making for the first three years of
operation.
Business plan
PURPOSE
To identify, describe and analyze a business
opportunity and/or a business already under way,
examining its technical, economic and financial
feasibility.
It should serve as a business card for introducing
the business to others: banks, investors, institutions,
public bodies or any other agent involved, when it
comes time to seek cooperation or financial
support of any kind.
Business plan
PURPOSE
To identify, describe and analyze a business
opportunity and/or a business already under way,
examining its technical, economic and financial
feasibility.
It should serve as a business card for introducing
the business to others: banks, investors, institutions,
public bodies or any other agent involved, when it
comes time to seek cooperation or financial
support of any kind.
Business plan
FUNCTIONS
Management tool
Provides economic/financial projections.
Enhances the monitoring and control of the
business by following up the results obtained
and analyzing management indicators.
Introduces an analysis of the supply and
demand.
Business plan
FUNCTIONS
Management tool
Reflects the commercial strategy and the
marketing policy.
Identifies the guidelines for the management of
human resources.
Analyzes the key factors of success and the risks
of a business.
Business plan
FUNCTIONS
Planning tool
With results-oriented actions.
Strict fulfillment of its economic commitments.
Orients decision-making processes:
Provides qualitative and quantitative
information.
Planning conforms to a homogeneous pattern.
Business plan
IMPORTANCE
Target your problems
The importance of a business plan to an
entrepreneur begins by helping you to identify
your possible problems and challenges.
A business plan forces you to get realistic and
look at your numbers.
Business plan
IMPORTANCE
Get better advice
The importance of a business plan to
entrepreneurship can also be in the way it
crystallizes just what kind of help you need.
Showing a business plan that outlines the exact
duties, salaries, and expectations you have for
employees gives far more information for
people to provide advice about.
Business plan
IMPORTANCE
Organize your resources
A business plan is also essential as the primary
guide for how you will structure and allocate
your resources.
The business plan can quickly show you
whether you will be making a profit or running
at a loss, and it shows how much those losses
may be every month.
Business plan
IMPORTANCE
Approach Investors
For some, this may be critical. Investors want to
know that you know what you’re doing.
A business plan can often be the single most
important document you can present to your
investors that will provide the structure and
confidence that they need to make decisions
about funding and supporting your company.
Business plan
IMPORTANCE
Create milestones
A business plan is also a plan of action. By laying
out milestones, you now have targets to shoot
for in the short, mid and long term.
These goals also mean that you can "course
correct" with greater agility if you have targets
and realize that you may need to make some
changes in order to meet them.
Preparation

ES 010 - LECTURE 3-2

Business plan
WHY PREPARE ONE?
It provides a global analysis of the business.
It forces us to analyze whether the business project
is feasible or not.
It forces us to make a strategic reflection of the
business.
It will help to manage the business.
It serves as business card introducing the company.
Business plan
WHO SHOULD WRITE ONE?
The business plan should be prepared by the
entrepreneur; however, he or she may consult with
many other sources in its preparation.
Lawyers, accountants, marketing consultants, and
engineers are useful in the preparation of the plan.
The Internet also provides a wealth of information
as well as actual sample templates or outlines for
business planning.
Scope and value of a
business plan

ES 010 - LECTURE 3-3

Scope
WHO READS THE PLAN
The business plan may be read by employees,
investors, bankers, venture capitalists, suppliers,
customers, advisors, and consultants.
Who is expected to read the plan can often affect
its actual content and focus. Since each of these
groups reads the plan for different purposes, the
entrepreneur must be prepared to address all their
issues and concerns.
Considerations in
preparing the plan
THREE PERSPECTIVES
Investor's perspective
Sound financial projections are required; if the
entrepreneur does not have the skills to prepare
this information, then outside sources can be of
assistance.
Considerations in
preparing the plan
THREE PERSPECTIVES
Entrepreneur's perspective
You must be able to clearly articulate what the
venture is all about.
Marketing perspective
An entrepreneur will consider only the product
or technology and not whether someone would
buy it. They must try to view their business
through the eyes of their customer.
Value
The business plan is valuable to the entrepreneur,
potential investors, or even new personnel, who are
trying to familiarize themselves with the venture, its
goals, and objectives. The business plan is
important to these people because:
It helps determine the viability of the venture in
a designated market.
It provides guidance to the entrepreneur in
organizing his or her planning activities.
It serves as an important tool in helping to
obtain financing
Pitching
One of the important considerations for an
entrepreneur, as a preliminary to the preparation of
a business plan, is to develop a “pitch” that will be
used to engage interest from potential investors of
your start-up.
This “pitch” is often referred to as an elevator plan. It
is assumed that you will be able to explain your
idea and gain interest by explaining your idea and
the opportunity it has for success to someone
during an elevator ride.
Business plan evaluation
WHO EVALUATES IT?
Suppliers
Who may want to see a business plan before
signing a contract to produce either
components or finished products or even to
supply large quantities of materials on
consignment.
Customers
May also want to review the plan before buying
a product that may require significant long-
term commitment
Business plan evaluation
WHO EVALUATES IT?
Lenders
They will likely vary in terms of their needs and
requirements in the business plan.
Ex.: Their interest of the entrepreneur to pay
back the debt including interest within a
designated period of time.
These lenders focus on the four Cs of credit:
character, cash flow, collateral, and equity
contribution.
Business plan evaluation
WHO EVALUATES IT?
Venture capitalists
They have different needs since they are
providing large sums of capital for ownership
(equity) with the expectation of cashing out
within five to seven years.
Investors often place more emphasis on the
entrepreneur’s character than lenders do, and
often spend much time conducting
background checks.
Business plan evaluation
WHO EVALUATES IT?
Venture capitalists
They have different needs since they are
providing large sums of capital for ownership
(equity) with the expectation of cashing out
within five to seven years.
Investors often place more emphasis on the
entrepreneur’s character than lenders do, and
often spend much time conducting
background checks.
Writing the business plan

ES 010 - LECTURE 3-4

Information needs
BEFORE STARTING THE BUSINESS PLAN
The entrepreneur should do a quick feasibility study
of the business concept to see whether there are
any possible barriers to success. The information,
obtainable from many sources, should focus on
marketing, finance, and production.
Before beginning the feasibility study, the
entrepreneur should clearly define the goals and
objectives of the venture.
Information needs
FEASIBILITY STUDY
The entrepreneur should do a quick feasibility study
of the business concept to see whether there are
any possible barriers to success. The information,
obtainable from many sources, should focus on
marketing, finance, and production.
Before beginning the feasibility study, the
entrepreneur should clearly define the goals and
objectives of the venture.
Goals and objectives that are too general or that are
not feasible make the business plan difficult to
control and implement.
Information needs
MARKETING INFORMATION
To ascertain the size of the market, it is first
necessary for the entrepreneur to define the
market.
To build a strong marketing plan with reasonable
and measurable market goals and objectives, the
entrepreneur will need to gather information on
the industry and market.
Most entrepreneurs have difficulty with this stage
and do not often know where to begin.
Information needs
MARKETING INFORMATION
Information needs
OPERATIONS INFORMATION NEEDS
Location. The company’s location and its
accessibility to customers, suppliers, and
distributors need to be determined.
Manufacturing operations. Basic machine and
assembly operations need to be identified, as well
as whether any of these operations would be
subcontracted and to whom.
Information needs
OPERATIONS INFORMATION NEEDS
Raw materials. The raw materials needed and
suppliers’ names, addresses, and costs should be
determined.
Equipment. The equipment needed should be
listed, with its cost and whether it will be
purchased or leased.
Labor skills. Each unique skill needed, the number
of personnel required for each skill, pay rate, and an
assessment of where and how these skills will be
obtained should be determined.
Information needs
OPERATIONS INFORMATION NEEDS
Space. The total amount of space needed should
be determined, including whether the space will
be owned or leased.
Overhead. Each item needed to support
manufacturing—such as tools, supplies, utilities, and
salaries—should be determined.
Information needs
FINANCIAL INFORMATION NEEDS
Before preparing the financial section of the
business plan, the entrepreneur will need to
prepare a budget that includes a list of all possible
expenditures in the first year and a list of all
revenue sources, including sales and any external
available funds.
Information needs
FINANCIAL INFORMATION NEEDS
To prepare the actual budget, the entrepreneur will
need to identify benchmarks in the industry that
can be used in preparing the final pro forma
statements in the financial plan.
These benchmarks or norms establish reasonable
assumptions regarding expenditures based on
industry history and trends. This is a very acceptable
method to arrive at the necessary projected costs
for the new venture.
Information needs
USING INTERNET AS A RESOURCE TOOL
The Internet can serve as an important source of
information in the preparation of the business plan
for such segments as the industry analysis,
competitor analysis, and measurement of market
potential, to name a few.
An entrepreneur in the process of writing a
business plan can also access one of the popular
search engines, social networks, and discussion
groups.
Writing the business plan
OUTLINE OF A BUSINESS PLAN
Writing the business plan
OUTLINE OF A BUSINESS PLAN
Writing the business plan
OUTLINE OF A BUSINESS PLAN
Writing the business plan
INTRODUCTION
The introductory page should contain the following:
The name and address of the company.
The name of the entrepreneur(s), telephone
number, fax number, e-mail address, and Web site
address if available.
A paragraph describing the company and the
nature of the business.
Writing the business plan
INTRODUCTION
Writing the business plan
EXECUTIVE SUMMARY
This section of the business plan is prepared after
the total plan is written. About two to three pages
in length, the executive summary should stimulate
the interest of the potential investor.
This is a very important section of the business plan
and should not be taken lightly by the
entrepreneur since the investor uses the summary
to determine if the entire business plan is worth
reading. Thus, it should highlight in a concise and
convincing manner the key points in the business
plan.
Writing the business plan
EXECUTIVE SUMMARY
Generally the executive summary should address a
number of issues or questions that anyone picking up
the written plan for the first time would want to know.
For example:
What is the business concept or model?
How is this business concept or model unique?
Who are the individuals starting this business?
How will they make money and how much?
Writing the business plan
ENVIRONMENTAL AND INDUSTRY
ANALYSIS
Environmental analysis - assessment of external
uncontrollable variables that may impact the
business plan.
Industry analysis - reviews industry trends and
competitive strategies.
Writing the business plan
ENVIRONMENTAL AND INDUSTRY
ANALYSIS
Environmental factors include:
Economy
Culture
Technology
Legal concerns
Industry factors include:
Industry demand
Competition
Writing the business plan
CRITICAL ISSUES
Writing the business plan
DESCRIPTION OF THE VENTURE
Provides complete overview of the product(s),
service(s), and operations of a new venture.
This section should begin with the mission
statement or company mission of the new venture.
This statement basically describes the nature of the
business and what the entrepreneur hopes to
accomplish with that business.
This mission statement or business definition will
guide the firm through long-term decision making.
Writing the business plan
DESCRIPTION OF THE VENTURE
After the mission statement, a number of
important factors that provide a clear description
and understanding of the business venture should
be discussed.
Key elements are the product(s) or service(s), the
location and size of the business, the personnel and
office equipment that will be needed, the
background of the entrepreneur(s), and the history
of the venture.
Writing the business plan
DESCRIPTION OF THE VENTURE
Writing the business plan
PRODUCTION PLAN
Details how the product(s) will be manufactured.
This plan should describe the complete
manufacturing process. If some or all of the
manufacturing process is to be subcontracted, the
plan should describe the subcontractor(s),
including location, reasons for selection, costs, and
any contracts that have been completed.
Writing the business plan
PRODUCTION PLAN
Writing the business plan
OPERATIONS PLAN
This section goes beyond the manufacturing
process and describes the flow of goods and
services from production to the customer.
It might include inventory or storage of
manufactured products, shipping, inventory control
procedures, and customer support services.
A non-manufacturer such as a retailer or service
provider would also need this section in the
business plan to explain the chronological steps in
completing a business transaction.
Writing the business plan
MARKETING PLAN
Describes market conditions and strategy related to
how the product(s) and service(s) will be
distributed, priced, and promoted.
Marketing research evidence to support any of the
critical marketing decision strategies as well as for
forecasting sales should be described in this
section.
Specific forecasts for a product(s) or service(s) are
indicated to project the profitability of the venture.
Writing the business plan
ORGANIZATIONAL PLAN
Describes form of ownership and lines of authority
and responsibility of members of new venture.
If the venture is a partnership, the terms of the
partnership should be included.
If the venture is a corporation, it is important to
detail the shares of stock authorized and share
options, as well as the names, addresses, and
resumes of the directors and officers of the
corporation.
Writing the business plan
ORGANIZATIONAL PLAN
Writing the business plan
ASSESSMENT OF RISK
Identifies potential hazards and alternative
strategies to meet business plan goals and
objectives.
First, the entrepreneur should indicate the
potential risks to the new venture.
Next, should be a discussion of what might happen
if these risks become reality.
Finally, the entrepreneur should discuss the
strategy that will be employed to prevent,
minimize, or respond to the risks should they occur.
Writing the business plan
FINANCIAL PLAN
Projections of key financial data that determine
economic feasibility and necessary financial
investment commitment.
Three financial areas are discussed in the financial
plan:
Summarize the forecasted sales and the
appropriate expenses for at least the first three
years, with the first year’s projections provided
monthly.
Cash flow figures for at least three years.
Writing the business plan
FINANCIAL PLAN
Projections of key financial data that determine
economic feasibility and necessary financial
investment commitment.
Three financial areas are discussed in the financial
plan:
Summarize the forecasted sales and the
appropriate expenses for at least the first three
years.
Cash flow figures for at least three years.
Projected balance sheet.
Writing the business plan
APPENDIX
The appendix of the business plan generally
contains any backup material that is not necessary
in the text of the document. Reference to any of
the documents in the appendix should be made in
the plan itself.
Letters from customers, distributors, or
subcontractors are examples of information that
should be included in the appendix.
Why some plans fail
FACTORS INCLUDE
Goals set by the entrepreneur are unreasonable.
Objectives are not measurable.
The entrepreneur has not made a total
commitment to the business or to the family.
The entrepreneur has no experience in the planned
business.
The entrepreneur has no sense of potential threats
or weaknesses to the business.
No customer need was established for the
proposed product or service.
Thank you!
We'd love to hear your thoughts

FB:
Ruel Rick Villegas Ranay

EMAIL
ruelrick.ranay@gmail.com

EMAIL
rranay@uic.edu.ph