UNIT 4.

Develop a Business Plan

Desired Learning Outcomes

At the end of the Unit, the students must have:
1. explained the purpose of writing a good business plan;
2. described the importance of a business plan
3. explained the components of a business plan

PRE ACTIVITY: Develop a Business Plan

As part of your initial activity, try to evaluate your prior knowledge about the business plan. Answer
Task 1.

Task 1. Matching Type

Directions: Match the components of the business plan in Column A with their meaning in Column
B. Write the letter of the correct answer on the space provided before each number.

A B

___1 Executive summary A. covers the market research and competitor analysis

___2 Target market B. written document that provides details of a proposed

venture

___3 Organizational C. Clear, concise description of the business & overview of

structure market potential.

___4 Market analysis D. detailed description of products or services you plan to

sell

____5 Appendix E. Where you can find the mission, vision and goals are
stated

____6 Financial F. Identify the key functions in your start up and assign
responsibilities accordingly.

____7 Marketing and Sales G. company’s process of identifying and creating a

customer base

____8 Products/services H. Provides specific information that certain individuals

(such as creditors) may want review.

____9 Business plan I. Sometimes called a “pro-forma projection”

___10 Company description J. customer personas and market size

 How well did you do?

How do you feel about the test? Did it make you feel confident or insecure? Your
feelings will be your guide to go slow or breeze through this module. Below is the answer
key to your pre-test.

Answers: Task 1

1. C 2. J 3. F 4. A 5. H 6. I 7. G 8. D 9. B 10. E

A perfect score 10 makes you a good business planner. Kindly, continue to study this module as a
review. If you go lower than 10, studying this module is very important .

Now let us begin the exploration of this Module.

Lesson 1. Purposes and Importance of a Business Plan

Introduction:

In this module, you will be learning the importance of a business plan, its essential
components and on how to create an effective one. It will help and guide you in coming-up a
simple business plan as an output of this module. Likewise, this module will encourage you to think
about if what business will you produce, who will buy and run your products or services, how your
business will succeed in earning a profit and so on. In short, it will inspire you to be an effective
business planner.

There three (3) major questions to know and answer in this module, to wit;
1. Why business plan is important in entrepreneurship?
2. What goes into a business plan? and;
3. How to create an effective business plan?

To begin with this module, let’s first understand what business plan is all about.
Why should you make a Business Plan in venturing a business? Well, of course you don't need
a Business Plan if you wish to employ in other business firm just to earn a living. But, if you want to
earn income from your own products or services, you will hardly be able to avoid a Business Plan.

The following explanations and information will help you if you are thinking about or have
already decided to start a business seriously. You will learn how to position yourself professionally in
order to be an entrepreneur. You will recognize many things once you have planned the things that
you are going to do entrepreneurship.

A business plan 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. This term,
which started from the USA, is used as synonym for
"company concept" or "business concept". A Business Plan
describes your business idea with the aim of implementing
this idea in your proposed project.

The Business Plan comprises two:

 Written formulation of your business idea with regard to your proposed business products,
services, customers, and marketing. This is a text section of your business plan
 Planning for financing, planned revenue and expenditure, (financial part).

To be a successful entrepreneur, you need to have a business plan. A business plan is a

document that contains your company’s background, product description, marketing plan,
competitor analysis, SWOT analysis, operational plan and financial plan. It is a
very important strategic tool for entrepreneurs. The business plan serves three important
purposes.
1. The business plan explains the idea behind your business
and spells out how your product or service will be
produced and sold.
2. It sets specific objectives and describes how your business
expects to achieve them
3. It describes the backgrounds and experience of the
leadership team of the business.
Having a business plan will help you to focus on how to operate your new business, and give it
the best chance for success. Therefore, business plan writing is quintessence of any curriculum on
entrepreneurship training.
Below are few importance of a Business Plan to an Entrepreneur:

 Writing a business plan allows you to have a clear indication of what you’re doing, and
where you are going; you get more clarity about an idea, as well as the execution plan.
 A business plan helps you to understand the industry you are venturing into, in an in-
depth manner, before your start-up.
 It will enable you to brain-storm on things you may not have, and think critically about
and the industry (business) you are going into. A lot of ideas sound great on paper and
even in discussion, until when you start adding the numbers.
 A business plan makes you to think through the numbers, making sure of the possibility
to hit your revenue and profit goals.
 Writing a business plan is an ideal way to ensure that everyone in your team is aligned
with the current and future plans for the business.
 A business plan ensures that you think and create a long-term vision and strategy for
your idea.
 It helps you stay organized, remain on track and remain committed to your business’
long-term goals. It provides benchmarks that you can use to track your performance and
make mid-course corrections, in the course of business.
  A business plan can be used as a résumé; you can design one to introduce your business
to investors, suppliers, vendors, lenders and others.
 It is a necessity to raise funds for a start-up business, because a business plan is the
document that gives the details on the commercial potential of your idea or business,
based on which financing decisions are made.
 A business plan is the written guide to your business’ success. You can have others
prepare it for you, but it is advisable to be the one developing the plan; using others for
assistance, because the plan reflects your image and views of the business. The process
of developing the plan is perhaps, much more valuable as a learning experience than the
plan itself. The entrepreneur doing the “road map”.
 A good business plan not only helps entrepreneurs to focus on the specific steps
necessary for their to make business ideas succeed, but it also helps them to achieve
both their short-term and long-term objectives.

According to Benjamin Franklin, “Don’t start a business without a business plan because,
If you fail to plan, you are planning to fail!”

Activity 1 Video Presentation

Directions: Answer the following guide questions on a separate sheet of paper after watching
the video. Form your group (3 members/group). Share your answers and discuss online with
your classmates.

Click the video. “How the Starbucks Really Became a Coffee Giant”

Questions:

1. Why do you think Starbucks was a successful company?

2. Do you think success comes quickly for most entrepreneur?
3. What do you think Starbucks first business plan included as his vision for the company ?

How was your experience in answering the guide questions with your
classmates? Were you able to benefit from them? What were the insights you
have realized?
Task 2. Guide Questions

Direction: The following are guide questions which cover the entire module. Write your answers
on your assignment notebook.

1. What are the importance and purposes of writing a business plan?

2. Describe each component of a business plan.

After answering the guide questions, share, compare and discuss these with your
classmates through messenger or any used platforms.

Lesson 2. Components of a Business Plan

In this topic, we will tackle about step by step components of a business plan. Before, we formally
discuss the topic, let me show a short video to motivate you in studying this lesson. Watch this:
https://www.youtube.com/watch?v=Fqch5OrUPvA

The created business plan ends up becoming the entrepreneurs "road map." Doing this will
help the entrepreneurs identify opportunities and potential pitfalls, assess the overall market
potential, determine financial requirements, develop opportunity strategies, and guide in the
management of the venture. The business plan maybe simple or complex depending upon the
product or service. The entrepreneur doing the “road map” gets to:
 See the product and service in detail
 Do self-assessment
 See obstacles
 Assess cash and other resource requirements
As you look at the diagram below, it shows the detailed components and process in making a
business plan. This is usually used for funding purposes.
 The completed and printed Business Plan should comprise a maximum of 30 to 35 pages in
total, so that it can be read by possible donors, such as banks or promotion agencies, in a short time.
This is to be written for three to five years into the future. You should plan in the first year on a
monthly basis, in the following years you can also plan annually.

However, it is impossible to be prescriptive in the content of a business plan since every

business plan will be different and will be designed for different requirements like the number of
pages, budgetary requirements and contents in the diagram above. Yet, there are a number of
standard sections that are normally included in a business plan.

Basically, the contents of a Business Plan are:

Introductory Elements
 Cover sheet
The cover sheet should include the name of the business, the names of the
directors, addresses, and number of the business and directors.

 Table of Contents
It is a list of the chapters or sections given at the front of a business plan. This
section should not be more than one page. The purpose of the table of
contents is to help the reader to locate the section of interest easily.

 Executive Summary
This section highlights briefly and convincingly the different parts in the
business plan. It sums up the following areas such as:
 purpose and objectives of a plan,
 market opportunity,
 management,
 financial projection and funding requirements.
This section should not be completed until the business plan is written.
Main Body
 Introduction (Description of the venture/project )
It provides complete picture or description of the products and services and
their unique features. In your description, you consider the following aspects:
a. Description of the people involved in starting your business
b. Products and Services - what your product or service is and what it does:
 Background to its development
 Benefits and features
 Unique selling points
 Advantages to customers and others
 Disadvantages or weak points
 Future developments

c. Objectives of the Venture/Project - state the specific milestones to be

achieved over the next five years
d. Long Term Aim of the business – state the long-term of the project

 Operating Plan
This part gives the detail of how products are to be manufactured. The
merchandising plan for trading business shows in detail how the products are to
be acquired.
  Marketing Plan
It describes market conditions and strategy related to how products and services will
be priced, distributed and promoted. Further, this section covers your market
research and competitor analysis. You must show that you have done the market
research to justify the projections made in your Business plan.
a. Target Market
The market to which you are planning to sell
your products or services. Analyse the
segments of your market as follows: (Market
Segment defines who your potential buyers.
For example, women with children under 18,
college students, etc. Gather demographic,
behavior, and psychographic information on
your market segment)
 Size of each market segment
 Is this segment growing or declining
 Characteristics of potential customers in each segment
 Special needs of potential customers

b. Total market valuation

It shows the total potential value of the market for this type of product or service in all your
target market areas.

c. Target revenue
These figures are the basis for the income figures in your financial projections and must be
based on realistic assessments. Include average deal size, length of income cycle,
recurring revenues
d. Market Trends
You analyse what is happening in the market like:
 Recent changes (e.g. what does the Philippine General Data Protection Regulation mean
for your business)
 Future prediction (e.g. how relevant will Intellectual Property Rights issues be for your
business)
 Drivers such as demographic changes, economic and legislative factors (e.g. how will
you consider the needs of disabled and elderly persons?)
 Your plans to meet demand and changes in the market

e. Profile of Competitors
It is the analysis of your competitors in the market. These are some of the things to be
considered:
 What are the competing products and services?
 Profile of key players (company size, turnover, profitability,
Etc.) and their market share)
 Advantages and disadvantages of the competitors’ offerings

f. Competitive advantage
This is your assessment of why potential customers
will choose to buy your cultural products or services
in place of those profiled above. Advantages may
include:
 Unique features
 Price
 New technologies or systems
  Better value for customers
 Include any independent validation of case studies.
g. Benefits to clients
This is what your cultural product or services provides to potential customers in terms of their
expectations and needs. What will buying your product or services actually do for
your customers?

This aspect maybe very important to certain clients, e.g. elderly persons, disabled persons, etc.
In here, you explain what you will do specifically for them and demonstrate with
supportive data if any.

 Marketing Strategies/Sales
This section sets out your strategies for reaching out market, raising their interest in
your product or service, and actually delivering the product or services to them in sales.
These are the things to be considered:

a. Marketing Strategy
How will you position your product or service in the market and
differentiate it from its competitors:
 Which segment of the market will be targeted?
 How will this be developed to reach the full target market
 How will you differentiate your products or service?
 What key benefits will be highlighted?
 Which potential customers have your already targeted?
 What contacts can be used to generate market awareness and sales?
 Who will do the marketing staff, agency, representative?

b. Sales Strategy
How will you sell your product or your service to the target market?
 Directly
 Retail
 Agent/Sales agent
 Website
 Revenue sharing partners
Also, in doing so you state the advantage/s or
disadvantage/s of the methods you have chosen
to sell your products or service.

c. Pricing
How you will set the price charged from your products or service.
Considerations include:
 Competitors’ prices
 Level of completion in the market
 Perception of quality/price relationship by customers
 Production costs and overheads
 Chain of distribution and the added value at each stage
 The extent to which the buyer can control the price

State how each product or service will be priced referring to the income
sources stated above.
 d. Marketing and Communication Strategy
How you will promote your product or service in the market
 Advertising – where, when, how, to whom
 Public relations
 Direct Marketing
 Website and internet marketing
 Exhibitions and conferences
 Special groups (e.g. disabled persons)
 Word of mouth

 Organization and Management Plan

This section describes the form of ownership and lines of authority and
responsibilities of the people in the organization. This is where you will outline
the intended structure of your project in terms of management, number of
employees, their skills and qualification, and the physical operational requirements
to produce or supply your products or service.
Things to be considered are:
a. Management Organizational Chart
You include a diagram of the way in which the management of new venture will be
organized. This should show the areas of responsibility of each manager and
employees.
b. Staffing
State what employees will be taken on over the next three years, with which skills,
in which areas of the business. Describe your own qualification(s), skills and
experiences as well.

c. Training Plans
Outline the planned employee and management development to be undertaken in
order to maintain a skilled workforce. This should also tie with future market
developments and any new product or service developments.

d. Operations
State the physical requirements of the business:

 Premises
 Equipment
 Production Facilities
 Infrastructure
 Communication facilities
 Costs Involved
 Suppliers

 Financial Management/Analysis
This section reviews the key assumption used in the financial projections. It is a
guide to explain how key figures in the financial projections were arrived Likewise,
it explains how the company is expected to perform financially over the next
several years. (Sometimes called a “pro-forma projection.”) Because investors
and lenders look closely at this projection as a measure of your company’s growth
potential, professional input is strongly recommended.

Included here should be items such as:

 Income sources
 Number of employees projected for each year and their intended salaries
 Projected investment in equipment and salaries
  Depreciation allowed for
 Expected rent and rates charges
 Creditors days expected and debtor days allowed
 Expenses calculations
This section should be brief and to the point. Further details regarding
these items can be placed in the Appendices

a. Profit and Loss Account

Attach here projected profit and loss accounts for the first three years of the
operation of your proposed project.

b. Balance sheet
Attach here projected balance sheets for the first
three years of your proposed project.

c. Cash flow
Attach here a monthly cash flow prediction for the
first two years of your project’s operations

Appendix of Supporting Documents

 Appendices or Annexes
The appendix to the business plan includes supporting documents that provide
additional information and back-up statements made in the body of the report.
The back-up materials that support the text of the business plan include:
 Resumes of key personnel and partners
 Letter of reference
 Details of market studies
 Copies of licenses, permits, leases, contracts, etc.

Activity 2
Directions: Based on the video “How Starbucks really Became a Coffee Giant” that you have
seen, answer the following guide questions on a separate sheet of paper. Share and discuss
your answers with your group mates.

1. Write a description of the product or service and its unique features of Starbucks.
2. Identify its mission, vision, and objective/s.
3. Describe the market conditions and strategy/ies related to how products and services are priced,
distributed and promoted.

Lesson 3. How to create an effective business plan?

Research the business plan
Your business plan needs to convince readers that you have come up with practical
business idea. To do this you must include information and data from objective sources to
show that your idea is founded on solid evidence. The information that you will need to write
your business plan involves researching all aspects of your business. For example, from
leasing space or equipment to determining what you will charge what you will charge from
your products or services to dealing with competitors.
 Available research resources for business plan
 Community, government and professional resources
When writing a business plan, you will likely need to seek out advice from others.
People from many organizations can help in crafting a business plan. Like for
instance, DTI, NEDA, professional consultants and any successful business
groups/individuals.

 Print Resources
Information for your business plans can come from any print resources like books,
magazines, government documents and many more.

 Online resources
Much of the information can be taken from various websites. These can help you
crafting your business plan with less time consumed since there are several websites
about entrepreneurship can be browsed.

 SWOT Analysis
The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is one of the strategic
planning tools that is utilized by businesses and other organizations to ensure that there
is a clear objective defined for the project or venture, and that all factors related to the
effort, both positive and negative, are identified and addressed. In order to accomplish
this task, the process of SWOT involves four areas for consideration: strengths,
weaknesses, opportunities, and threats. It should be noted that when identifying and
classifying relevant factors, the focus is not just on internal matters, but also external
components that could impact on the success of the project.
In doing this, analyze the strengths and weaknesses of your proposed project and products
or services, the opportunities that exist in the market, and the threats to the viability of
the project.
 When we talk about:

 Strengths – these are attributes of your project which are helpful to achieving the
objective
 Weaknesses - attributes of your project which are harmful to achieving the objective
 Opportunities - external conditions which are helpful to achieving the objective
 Threats – These are external conditions which could damage to your project’s
performance.
Risk Analysis
A systematic process is
necessary to ensure that all
relevant sources of risk are
identified. Sources of risk have
changed, so an important part of
the monitoring and review
process is to identify new
hazards which might change
have emerged for your project.
You should also indicate the
potential to be affected by a risk
(risk susceptibility) and how quickly your system can recover from failure (resilience). The
risk analysis should also contain a risk mitigation plan. Donors (or funding institutions)
always ask for risk mitigation, because they do not fund or invest in a project that has no
exit strategy. Your risk mitigation plan should identify the objectives to be achieved,
actions to be undertaken to achieve these objectives, timelines for these actions to be
undertaken, person(s) responsible for each of these actions, and means to assess the
success of this plan.

Mistakes in Business Planning

To create an effective business plan, avoid the following common mistakes:
1. Unrealistic financial projections
Many investors will go straight to the financial section of the business plan, so it is very
important for the projections to be realistic. Projections should be based on solid
evidence for the potential growth of the company.
2. An Undefined Target Market.
You must clearly define your market and give an accurate picture of your potential
customers. You explain why these customers will buy your product
3. Poor research
Many potential business owners do not spend the time necessary to do good research.
Use up to date research information and verify the facts and figures in your business
plan
4. Ignored Competition
Do not overlook the completion and do not focus only on what the competition has done
wrong. Outline how you will differentiate yourself from the competition.
5. Inconsistences in the business plan
6. You should review your final business plan to be sure it is well written and formatted in
an attractive style. Be sure that information provided is consistent from section to
section.
 ACTIVITY PROPER 3: How to create an effective
business plan?
Directions: Read a story below and answer the guide questions. Discuss your answers with your
group mates and present to the class.
Michelle loved working with children. All of the parents in the neighbourhood wanted her
to babysit for them. She was always thinking up fun games to play and creative activities for
the children to do. She wondered if she could do even more with these activities to earn
money for college. She talked with her mother and some of the parents and came with an
idea. She would run an ice cream parlor where she could host parties and let the children
make their own ice cream sundaes, play games, and watch movies. Once Michelle came up
with a business idea, she knew it was time to make a detailed plan. However, she didn’t
know how to get started on a plan.

Questions.
1. What kind of information do you think Michelle needs to gather?
2. Where might Michelle find this information and whom might she talk with to learn more about
starting a business?

Assess your Knowledge

Direction: Answer the following questions

1. Why business plan is important in putting up a business?

2. Discuss the essential parts of a business plan
3. How can you say that your business plan is an effective one?

References

Medina, Roberto G., 2014. Entrepreneurship and Small Business Management

Greene, C., 2013. Entrepreneurship
Scarborough, N., 2011. Essential of Entrepreneurship and Small Business Management, Sixth
Edition
Banastao, C. and Frias, S, 2008. Entrepreneurship
Internet Sources:
https://articles.bplans.com/how-to-write-a-business-plan/
https://www.entrepreneur.com/article/247574
https://www.google.com/search?q=business+plan+meaning&oq=business+plan+meaning
&aqs=chrome..69i57j0l7.5965j1j7&sourceid=chrome&ie=UTF-8
https://entre3jean.weebly.com/business-plan
https://www.thebalancesmb.com/why-write-a-business-plan-2948013
https://www.godfreylegal.com/why-a-business-plan-is-important-for-entrepreneurs/
https://www.google.com/search?q=swot+analysis+of+jollibee&sxsrf