MGT 13 - BUSINESS PLANNING, OPERATION AND MANAGEMENT

Unit I: The Business Plan

DEFINITION OF BUSINESS PLAN

Business Plan. A document designed to detail the major characteristics of a firm – its
product or service, its industry, its market, its manner of operating
(production, marketing, management), and its financial outcomes on the
firm’s present and future. (Katz & Green, 2018)

IMPORTANCE OF BUSINESS PLAN

For the writer and reader:
• funding start-up enterprises
• attracting investors
• entrepreneurs’ blueprint
• constant motivator

PARTS OF THE PREFORMATTED BUSINESS PLAN

I. Rationale of the Project/Business Venture

A. Description of the Industry
B. Opportunity statement

II. The Company

A. The name of the business
B. Vision
C. Mission
D. Goals
E. Objectives
F. Competitive Advantage

III. Organizational Plan

A. Form of ownership
B. Legal requirements
C. Personnel Requirements
D. Organizational chart

IV. Marketing Plan

A. Target market
B. Positioning statement
C. Products
D. Promotional tools
E. Distribution techniques

V. Operations and Development Plan

A. Location
B. Store lay-out
C. Store/business hours
D. Supplies and materials
 E. Production/Operations Process
F. Operational policies

VI. Production Plan and Sales Forecast

A. Projected production
B. Projected sales

VII. Financial Plan

A. Financial requirements
B. Sources of funds
C. Projected Income Statement

VIII. Socio-economic Plan (social responsibilities)

HOW TO PREPARE THE PREFORMATTED BUSINESS PLAN?

RATIONALE OF THE PROJECT/BUSINESS VENTURE

Description of the Industry
• industry – the general name for the line of product or service being sold, or the firms in
that line of business
• Name of the industry, size (in number of firms and sales), status of the industry (growing,
stable, or in decline)

Opportunity to Take Advantage

• Describe how the business will fill or satisfy the need/s or solve the problems of the
target customers.
• A product or business is usually a result of business opportunity seeking exercise or
some form of market survey

THE COMPANY
Business Name
Tips for Naming your Business:
• It should be simple. Easy to say, spell, pronounce and remember. It should sound
good. Make it short and memorable.
• It should be distinctive. Do not be a copycat.
• Use a name that has meaning to it and conveys a benefit. Adopt a business name
that provides some information about what the business does.
• Use initials.
• It can be registered and legally protected.
• It is extendable. Avoid names that limit your business to add to its product lines.
• Translate well into other languages.
• Portray your values and vision. It portrays the persona, feeling and meaning of the
business.

Vision
possible and desirable future state of the organization
Mission
• declares the company’s purpose for being and what it aims to accomplish as an
enterprise
Goals
• broad, long-term desires that an organization seeks to accomplish
Objectives
• more specific targets of performance that everyone undertakes to accomplish the goals

https://www.dummies.com/business/start-a-business/business-plans/set-goals-and-objectives-
in-your-business-plan/

✔ Keep each goal clear and simple.

✔ Be specific.
✔ Be realistic.
✔ Don’t be afraid to push yourself and think big.
✔ Make sure that your goals are in sync with your mission.

Competitive Advantage
• Unique Selling Proposition (USP) – refers to the proposed business’ competitive
advantage, what sets it apart from the competition
What should you bear in mind when trying to create your own USP?
✔ What does your perfect customer really want?
✔ How can your product or service solve their problem(s)?
✔ What factors motivate their buying decisions?
✔ Why do your existing customers choose your business over your competitors?

ORGANIZATIONAL PLAN
Legal Forms of Business Organization
• Single Proprietorship – owned and manage by one individual grocery stores, freelancing
• Partnerships - 2 or more people who co-own the entity for making money law firms
• Corporation – formed by at least 5 parties; considered a “legal person” which allows it
to conduct business acts that a natural person can do coca-cola corp, toyota corp.
• Cooperative – formed by at least 15 members working together to achieve social and
economic goals insurance, INEC

Business Requirements
• Barangay Clearance
• Tax Identification Number
• Business Name Certificate (for single proprietorship)
• Mayor’s Permit
• Invoice and Book of Journal

Personnel Requirements
Consider the following questions:
• List the people who are (or will be) running the business
• Describe their responsibilities and abilities
• Project their salaries
• How many employees will there be in what positions?
• What are the necessary qualifications?

Types of Organizational Chart

• Flat or horizontal – there are few or no levels; managers and workers; for
small/individual unit organizations

• Hierarchical – organization is divided and aligned into different levels where the line of
command moves downwards from the top level to the next lower level, down to the
bottom
• Matrix – organization is divided and aligned in such a way that same-skilled people are
pooled together in a group reporting to a group manager

MARKETING PLAN
Target Market
• A specific group of people you have decided to target with your products or services
• Differentiate between business-to-business markets and business-to-consumer markets
• Describe demographics of the target market such as age range, gender, educational
level, income level, etc.
• Specify the benefit the selected market will derive from the product

Positioning Statement
 This portion will give the customers a bird’s eye view on what they can get from your
business. This summarizes what you intend to provide your customers. Your
positioning statement should be targeted to your selected target market.

Marketing Mix
• Product – description of the product/service or product mix
• Price – determine price levels
• Place/Distribution - how to distribute the products

• Promotion – promotional activities

A. Advertising is a non-personal commercial messages to the public designed to inform

both established and potential customers. To know how to properly advertise your
business, here are some ways on how it can be advertised:

1. Direct mail and direct advertising. Use direct advertising if your market
is a subdivision, or a barangay or barrio where you can possibly deliver or
advertise house to house the product.

2. Print ads. Consider local publications circulating in small geographic

areas. If your business caters students, advertising in campus
newspapers might be worth considering.

3. Radio advertising.
 4. Advertising specialties. Advertising messages also can appear on T-
shirts, calendars, book matches, pens, pencils etc. These articles allow
only small advertising space but are considered reminder advertising and
are likely to be effective in keeping old customers than bringing new ones.

5. Outdoor advertising. This is most effective near the store where it

serves as a last minute reminder.

6. Transit advertising. Product is advertised in buses, taxicabs, and other

vehicles.

B.Sales promotion is designed to supplement and coordinate personal selling. It

includes the use of store displays, holding trade shows, and using samples.

Below are some sales promotion techniques

1. Sampling – this involves distribution of free samples. It is expensive but a

powerful tool. Samples are offered for free or trial of a product to the
consumers. The sample may be delivered door to door, offered in retail
store, sent by mail, distributed at fairs or other places where public
assemble.

2. Coupon – it is a certificate that entitles the consumer to a specified saving

on the purchase of a specified product. These coupons are generally
issued by the manufacturers either directly by mail or through the retailers.

3. Premium or bonus offer – premiums are actual products or services

offered as an incentive to buy other products or services. It is generally
offered to buyers who buy a specified amount of a product. There are 4
types: a) direct premium – it is included either inside or outside the
package; b) re-usable container – it is a container that has value to the
customer after the product is consumed; c) free in mail premium – is an
item that the company will mail to consumers who make a request for it
enclosing a proof of purchase and d) self-liquidating premium – is an item
that the company will sell by mail at price well below the normal or the
original price to consumers.

4. Money refund offers – manufacturer will return within a specified period

the purchase price if the customer is not completely satisfied.

5. Price off promotion – used for products that are new (reduced price
pack; multiple pack)

6. Contests, sweepstakes and games – provides excitement on the

product being offered. Contest calls for a consumer to submit an entry, a
suggestion or a slogan then will be examined by a panel of judges.
Sweepstake involves nearly the inclusion of the consumer’s name or his
 bill number placed in drop boxes for drawing. A game calls for the
consumer to receive something every time they make a purchase.

C.Personal selling includes all activities and characteristics of an individual salesperson

that result in successful sales. As entrepreneur, you can identify frequently asked
questions (FAQs) about your product/business so that you can prepare good answers.

D.Public relations is a planned effort by an organization to influence some group’s

attitude or opinion toward that organization. “Do good things and tell them to people”.
You can sponsor civic activities or organize events to draw the attention of the media.
Formulation of CSR programs may also be included.

OPERATIONS AND DEVELOPMENT PLAN

Location
Basic Aspects of Selecting a Location for a Business:
• Decide on a particular community
• Selecting a particular site within that community

Lay-out
• Description of the store lay-out or production lay-out

Supplies and Materials

• Materials checklist and other supplies - present a detailed breakdown using a
checklist in a tabulated format specifying the description and specification, quantity, unit
cost, total amount and sources
• Equipment

Production/Operations Process
• For processing or manufacturing of food and non-food products, prepare a flowchart or
flow of diagram to detail the step-by-step manufacturing process
• For services, identify the appropriate procedure in delivering the right services to the
target customers and present a service process flowchart

Policies
• Business policies establish the rules of conduct for a company. They not only describe
the responsibilities for the employer and the employees, they also create a frame of
reference for handling the countless issues that arise in an organization.

Characteristics:
✔ Must be clear, specific and easily understood
✔ Specify company rules
✔ Explain their purpose
✔ State when policy should be applied
✔ Who it covers
✔ Method of enforcement
✔ Describe consequences of non-compliance

PRODUCTION PLAN AND SALES FORECAST

 • Describe the projected scale of production. The input requirements will depend on the
production schedule and size.
• Describe the projected sales based on the projected production

FINANCIAL PLAN
Estimating the Start-up Capital
Pre-operating expenses
+ Fixed capital investment
+ Initial working capital
+ Contingency
Start-up Capital Requirement

Pre-operating Expenses
• Cash expenses that the business incurs prior to the actual start of operations
• Fees for permits, licenses, clearances, registration fees, initial promotional expenses,
consultancy fees, cost of personnel recruitment and training, initial franchise cost, one-
time deposit fees with utility companies, research and technical studies

Fixed Capital Investments

• Assets needed by the business for it to operate and do business
• Land, buildings, building improvements, furniture and fixtures, vehicles, tools, machinery
and equipment, etc.

Working Capital
• To keep the business going for the first few cycles of operation
• Enables to pay for raw materials, salaries, supplies, rent, utilities, inventories,
receivables and other business-related expenses even before the regular streams of
revenue start to come in

Sources of Funding
• Personal funds or parent’s cash support or contributions from team members or from
relatives and friends
• Debt or loan financing
• Equity financing
• Venture capital firms
• Angel investors
• Alternative sources of funding – government agencies and non-profit organizations

Financial Statements
• Income Statement or Profit and Loss Statement – shows the profitability of the
business during the period covered by the statement
• Balance Sheet – presents the financial position of a company at a specified date
1. Assets – shows what the business owns
2. Liabilities – how much it owes other entities
3. Owner’s Equity – net worth of the business; represents the excess of all assets
of the business over all liabilities
✔ Statement of Cash Flows - presents how the changes in the balance sheet and income
statement accounts affect the company’s cash balance

Illustration of an Income Statement of a service company

 Reyes Shoes and Bags Repair
Income Statement
For the year ended January 31, 200A

Shoes repair income P 24,100

Bags repair income 20,800
Total income P 44,900

Less Expenses:
Salaries and wages P7,500
Rent 4,000
Taxes and permits 1,650
Delivery expense 3,350
Electricity 3,100
Telephone 1,900
Miscellaneous 2,750
Interest expense 350 24,600
Net Income P 20,300

SOCIO-ECONOMIC PLAN

• Determine what are the social, economic and environmental implications of your
business
• Benefits that society can generally derive from your business

“Be concise when writing your business plan.”

REFERENCES:
Books
Small Enterprises Research and Development Foundation. (2013). Windows to
Entrepreneurship: A Teaching Guide. Small Enterprises Research and Development
Foundation: Author

Web
Peterson, Steven D., Jaret, Peter E., & Schenck, Barbara Findlay. (n.d.) Set Goals and
Objectives in Your Business Plan. Retrieved from
https://www.dummies.com/business/start-a-business/business-plans/set-goals-and-
objectives-in-your-business-plan/

https://www.digglescreative.com/resources-downloads/worksheet-brand-vision.pdf