Chapter Three

DEVELOPING A BUSINESS PLAN

Learning Objectives:
At the end of this chapter, the student must be able to:

1. Define the concept of a business plan;

2. Recognize the elements that make up a business plan;
3. Recognize the guidelines for creating a business plan.

GENERAL GUIDELINES FOR DEVELOPING A BUSINESS PLAN

A business plan is a written document that describes a company's goals,
strategies, market, and financial projections. It states business objectives, argues why
they are attainable, and demonstrates a strategy for achieving them. It is also a
useful tool for monitoring business performance and staying on track.

Main advice:

- ensure it is feasible, be realistic!

- Be adaptable; remember, it is a tool for decision-making.
- Examine the business objectively and honestly, avoiding personal biases.
- Make sure it is understandable to all stakeholders; avoid getting lost in
complicated reasoning.
- If it helps, think of the business plan as a sequence of sub-plans, one for
each business discipline (e.g.: finance, human resources management,
marketing, operations management, etc.)

CHAPTER 1: BACKGROUND INFORMATION

A. History of the Business

Simply summarizes the company's history. Why was the company

established? who motivated you to start this business?

B. Name of the business

Explain the origins of the company's name. Make sure the company
name is distinct and easy to remember.

C. Company Logo

Explain and elaborate on all elements of the company logo.

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D. Business Address

Simply determine the complete address of the business. Following the

proper sequence of the complete address (Street, Barangay,
Municipality, Province)

E. Nature of Business

Determine what kind of business you are putting into. Check this link for
the list of the nature of business. NAICS.pdf (isc.ca) – Press Ctrl + Click the link
in order to check the list.

F. Form of Ownership

Determine what type of ownership/business the company have.

G. Proponents

State the names of the owners, address and contact numbers.

H. Vision, Mission and Objectives

A. Vision

B. Mission

C. Objectives

- Where do you want to go? Usually, target results are related

to increase the market share, profitability, the sales volume
(quantity) and to improve the image of the product as well
as its relative position on the market (quality). They are also a
consequence of the more general objectives of General
Management, marketing management, sales management,
communication management, and product management. In
general terms, all these objectives have to be precise
(quantifiable as much as possible), realistic and coherent. It is
a good practice to break-down the objectives by
intermediate objectives, i.e. milestones. A chart might also be
useful.

I. Marketing Aspects

Summary of the Market Strategies (Chapter 2) Complete information

about the Product, Place, Price and Promotion.

J. Technical Aspects

Summary of the content in the Operating/Technical Plan of the

business.

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 K. Management & Organizational Aspects

Summary of the content in the Management and Organizational

Aspects of the business.

L. Financial Plan

State the total projected cost of the business.

CHAPTER 2: MARKET STRATEGIES

A. Market Analysis

Provide an answer to the following questions: Which is your market?

How do the distribution channels work, i.e. how do the customers receive your
products? Which are your segments? How are your segments? In what
position are your competitors?

B. Product Strategy (Description of Products & Service)

- What makes your product/service different, i.e. Unique Selling Point or

competitive advantage
- What benefits it offers
- Why customers would buy it from you instead of your competitors

C. Price Strategy

- Costs, margins, discounts

- Price setting to only one product
- Price setting to a whole line of products

D. Place Strategy

- Distribution channels: How will you reach your customers? Which

partners will be needed in your distribution channels?
- The advantage of the location

A. Figure (Location of Business – Sketch Map)

E. Promotion Strategy

- Sales management: How will you make your sales? Do you have a sales
plan? Have you considered which sales method will be the most
effective and most appropriate for your market, such as selling by
phone, over the internet, face-to-face, or through retail outlets? Are
your proposed sales methods consistent with your marketing plan? And
do you have the right skills to secure the sales you need?
- Sales promotion: How will you promote your product or service and
attract new customers? Identify your sales process methods, e.g. direct
marketing, advertising, PR, e-mail, e-sales, social marketing
- Corporate image
- Provide a table for selling expense. Refer on the table below.

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 Selling expenses Year 1 Year 2 Year 3
Advertising Php 10,000 Php 8,000 Php 7,000

CHAPTER 3: OPERATING/ TECHNICAL PLAN

A. Business/ Store Location

Determine the company's location. Indicate whether the owners

rented or built the business. If the establishment is rented, include the
monthly rental payment as well as information such as the owner's
name and other agreements. If the establishment was built or
renovated, include the total amount spent. Provide the following
information about the establishment:

a. Floor Plan of the business

b. Bird’s eye view of the business

c. Front View of the business

d. Rear View of the business

B. Manufacturing process

Describe the steps and processes involved in making your company's

products. Kindly provide all of the ingredient measurements.

C. Machinery, Tools and Equipment

List every piece of machinery, equipment, and tools required for the
operation of your company. Also include the number, the purchase
price and pictures of each piece of machinery, equipment, and tools.

Follow this table:

Machines, Tools and Equipment Quantity Acquisition Cost

1. Refrigerator 1 unit Php 30, 000.00

(Photo)

2. Measuring Spoon 3 sets Php 300.00

D. Raw Materials

Enumerate and give definition of all the raw materials needed in the
producing the products.

E. Labor and Source

Describe the employment agreement or contract, including the status

of the employees. How much is each employee's monthly and yearly

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 pay? Is hiring such a person really necessary? Does the worker get
rewards? What are the different rewards that they might get?

F. Waste Disposal

Describe many approaches that demonstrate consideration for the

environment's effects, such as placing trash cans in accordance with
their classifications.

Answers questions: What are you going to with the empty containers of
oils, margarine, etc.?

G. Names of Suppliers

List all supplier who provides materials to the establishments, specifying

each item they provide.

CHAPTER 4: MANAGEMENT AND ORGANIZATIONAL PLAN

A. Form of Organization (Please see the type of Ownership)

B. Organizational Chart

- Company legal structure

- Company organization chart
- Human resources and company divisions involved in the project
- Personnel plan, i.e. hiring plan and related costs

C. No. of the Employee Needed and Its Qualification of Employee

Provide the requirements for each position together with the number of
personnel required.

Follow this table:

No. of Employee
Position Qualifications
Needed

D. Functions and Responsibilities of the Employees

List all the duties and obligations that each employee has.

Follow this table:

Position Functions and Responsibilities

1. Manager a. Has the over – all incharge in managing the
establishments.
b. Have the directive in selecting applicants.

CHAPTER V: FINANCIAL PLAN

1. Financial Plan

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1.1. Assumptions
Include possible assumptions underlying your figures projection, both in
terms of costs and revenues to clarify the thinking behind the numbers.

1.2. Sales forecast

The amount of money you expect to raise from sales

1.3. Cash flow statements

Your cash balance and monthly cash flow patterns for at least the first 12
to 18 months. The aim is to show that your business will have enough
working capital to survive, so make sure you have considered the key
factors such as the timing of sales and salaries. Explain also individual costs
such as; overheads, wages, equipment, legal, direct costs, loans, etc.

1.4. Profits and losses forecast

A statement of the trading position of the business: the profits you expect
to make, given your projected sales and the costs of providing goods and
services and your overheads.

1.5. Seasonality
In case your business is subjected to seasonality, explain the situation
for the different phases of the cycle, and provide a seasonality chart.

1.6. Scenarios
Your forecasts should include at least one worst and one best scenario,
i.e. to include subsidiary forecasts based on sales being significantly
slower/smaller or faster/higher than you are actually predicting

1.7. Risk analysis

With time on the x-axis and sales value (quantity or revenue) on the y-
axis, the seasonality chart is a typical Cartesian diagram. It is a good idea
to demonstrate that you have assessed the risks that your company could
encounter and that you have looked at contingencies to address those
risks alongside your financial forecasts.

Risks can consist of:

- Competitive behavior
- business concerns: sales, prices, and deliveries
- failure in operations, information technology, or production
- personnel - expertise, accessibility, and expenses
- Forceful incident

1.8. Exit Strategy

Provide an exit strategy in case of business failure. (See figure 3.4)

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 CHAPTER EXERCISES 3

Answer the following questions accordingly.

1. Discuss the importance of a business plan.

2. Explain each part of the content of a business plan.
3. Formulate a Vision, Mission and Objectives of your own business.

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