DEVELOPING A

BUSINESS PLAN
CHAPTER 3
LEARNING OUTCOMES
1. Discuss the factors that should be studied before venturing a new
business.
2. Explain the importance of environmental scanning.
3. Explain the importance of selecting the proper business location.
4. Discuss the important role of SWOT analysis before starting the
business.
5. Discuss the importance of a business plan before business formation.
6. Give the different phases of a business plan; and
7. Prepare a comprehensive business plan.

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 FACTORS THE
1. Know your product or service. NEW
2. Analyze the market potential. ENTREPRENEUR
3. Determine the marketing
strategy. SHOULD LOOK
4. Know the competitors. BEFORE
5. Do not set on your laurels.
VENTURING INTO
THE FIELD OF
BUSINESS
20XX Contoso business plan 3
1. Know your product or service.
First, one must believe on the product or service that one will offer to the
customer. If it is a new idea or concept, then one must be able to convince that
they have a unique product that would satisfy customers’ needs and wants.

2. Analyze the market potentials.

The customer base will determine the success of one business venture. The
wider the market potential, the more chances of growth and success.

3. Determine the marketing strategy.

A unique product or service needs effective distribution strategy to go
customer into the basket of demand potential. Continuous supply determine
product growth. Outlets must be developed that would answer customers’
demand.

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4. Know the competitors.
In launching a product with existing competitors, one must know
their strengths and weaknesses. Develop new product and marketing
strategy and turn their weaknesses a new opportunity for the product.

5. Do not set on your laurels.

Develop advertising and promotion strategy to penetrate the wider
market. Develop budget for expansion and diversification either
horizontally or vertically. Get new resources and develop new materials.
Invest in research projects that will enhance the quality of your products.

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 The environment of business is vast with opportunities
and the entrepreneur must have a greater look into this
potential as well as the conditions prevailing in the
community. The entrepreneur’s ultimate objective in
diving into the business world is to make profit.
Investment in money and effort should generate
financial gain for the entrepreneur.

ENVIRONMENTAL
SCANNING

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 1. Business Location for Small
CONTRIBUTORY
Entrepreneurs FACTORS TO THE
2. Location for Small Industrial DEVELOPMENT
Plant or Manufacturing
Facilities OF CUSTOMER
SATISFACTION

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1. Business Location for Small Entrepreneurs

A retail outlet would need a site that is convenient to prospective

customer in terms of parking space or availability of transportation. A
restaurant or an entertainment center would need ample parking area
where customers would not worry on where to leave their cars while
enjoying their stay. The same could be true with a grocery store

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In choosing the location ,the following factors must be looked into by the
entrepreneur;

a. Rent and Space

b. Terms of Leaser Agreement
c. Type of Goods or Merchants
d. Income Level of Prospective Customer
e. Prospective Sales Volume
f. Municipal or City Ordinances including taxes and fees
g. Location of the Areas

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2. Location for Small Industrial Plant or Manufacturing
Facilities

Environmental factors in locating a manufacturing plant or

industrial facilities need to be studied carefully as plant location is a
great factor in the investment of funds and its profitability in the long
run. It must comply with government zoning regulations related to
pollution and environmental laws.

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The following are important factors to consider:

a. Land Area
b. Facilities for Expansion
c. Power and Utilities
d. Building and Other Utilities
e. Plant Site Accessibility

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 The products 1. Product strength in the market
must be 2. Characteristics of weak products
and weak management
evaluated along 3. Sustainable Product
Opportunities in the marker
the following 4. Threats to product Profitability
and Market Expansion
areas;

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 1. Product strength in the market must have the following:

a. Available Technology in Product Processing

Technology is an important component in producing the product as the economies of scale
determines the price index.

b. The source of Raw Materials must be Abundant and at a Lower Price

The constant supply of raw materials is an important factor in the production of the product.

c. Skilled Workers must be Available

Worker’s efficiency and productivity must be looked into as they are lifeblood of any production
line.
d. Capital Investment in Machinery and Operating Expenditures
Starting a small capital should generate profitable operation. As the enterprise expand its market
base investment in operating capital should expand to meet the growing demand of customer

e. Expertise and Technical Skills of the Management Team

Improvements in product quality is a continuing process and it must be the management
objective to get customers patronage. 13
 2. Characteristics of Weak Product and Weak Management

a. Poor Quality and High Price

The entrepreneur should not launch a poor product in the market as it will surely fail to advance
in the sales and profit.
b. Product Design and Appeal
Product design should appeal to customer demand. Product appeal in terms of color and
features are important ingredients for customer patronage.
c. Product Cost
Production cost is the price determinant. Entrepreneur cannot make maximum profitability on
products whose production cost cannot survive market competition.
d. Supply and Demand
The supply chain management must be put in place to make the products available to valued
customer.
e. Weak Product Management
Weak management is created when people at the top of the organization fail to sustain a
vigorous effort for expansion and growth when management sets on his initial laurels and
ventured on vices and other extra activities that will lose his total investment. 14
3. Sustainable Product Opportunities in the Market

a. Product Demand
Product demand is the greatest opportunity of an entrepreneur. Demand is the essence
of profit and this must be sustained by the entrepreneur before wide competition
appeared in the market place.
b. Presence of Poor Quality in the Market
The presence of poor quality product in the market place is an opportunity for the
entrepreneur. The alternative is on the side of the entrepreneur to supply the market
with quality product and sustain patronage.
c. Government Policies and Support
The government support to local entrepreneur is an opportunity for greater expansion.
d. Liberal Credit Terms and Interest Rates
Liberal credit terms by banks and other government institutions will generate expansion
for the local entrepreneurs.

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 4. Treats to Product Profitability and Market Expansion

a. Entrance of Competition
b. The supply of raw materials will be limited as other competitors will getting the
same suppliers.
c. The emergence of Leftwing Labour Unions
d. The presence of Double taxation
e. Peace and Order in the Area of Business Operation
f. The Cost of Power Supply

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 The
entrepreneur 1. The Management Team
2. The Production Process
should look 3. The Marketing Program
4. The Financial Management
deeper into the
following areas;

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 1. The Management Team

• Management must be able to set the direction of the enterprise

with a clear MISSION and VISION as the guiding tool for its plans
and programs.
• The technical and manpower complements are important
factors in the success of the business.
• The manager must introduce new technology to make work
easier for the working team.

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 2. The Production Process

• Product specification must be maintained according to product

standards that are acceptable to customer.
• Good quality materials should not be sacrificed in terms of price
as poor quality will affect the production of quality products.
Quality and price must be looked into carefully by the
management.
• The rated daily production and monthly plant output must be
put in graph and charts for easy reference.

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 3. The Marketing Program

• The marketing program needs demand analysis for the last 5

years as to the major users of the product. Anew product would
need customer point of view before it is launched into the market.
• The demographic profile of the target customer must be taken
into account as the success of the product depends on the target
customer.
• Product competitiveness is determined by quality and price. A
demand and supply analysis must be conducted through
marketing research.

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 4. The Financial Management

• Venturing into a business needs financial resources.

Money is needed to finance the activities of business.
• Internal source of capital will come from the savings
and assets of the starting entrepreneur.
• Banks are external sources of funds.
• Other sources of funds are partnership and stock
options.

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Steps that will help 1. The starting point of conceiving
the prospective the idea of the type of
business.
entrepreneur 2. The technical Feasibility and
evaluate the idea Time Frame

before going into

business.
 TIPS IN CHOOSING THE BUSINESS NAME

1. Easy to recall or remember

2. Pleasant meaning creates pleasant feelings
3. Easy to pronounce
4. Easy to spell
5. Related to the product

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ORGANIZING THE BUSINESS ENTERPRISE

• The prospective entrepreneurs before going into the

intricate field of the business world should first go into deep
analysis of their personal and social attitudes. Some
entrepreneurs failed because they are “plain copy cats” in
putting the business.
• Business forecasting and planning skill is a vital component
that must be addressed before making investment. Careful
preparation is an essential factor in setting the enterprise
into motion.
 THE EVENT FORMATION PROCESS FOR ENTREPRENEURS

1. The change of path

2. The Desirability of the Business Concept
3. The Feasibility of Implementation
4. Forming the Business Enterprise
5. Stability of Business Income and Profit

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 BUSINESS
PLAN
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 A business plan is an essential written document that provides a
description and overview of your company’s future. Defines in detail a
company’s objectives and how it plans to achieve its goals.

In creating or searching to business opportunities, one must consider the

following factors:
1. The need of the society
2. Availability of capital resources
3. Business inclination
4. Clientele
5. Availability of raw materials
6. Human Resources
7. Nature of product or service
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 BASIC PHASES OF BUSINESS PLAN
1. Management Structure and Component
It is designing the form of ownership of the business which at the outset is known to
the investor. It shall also define the organizational structure and the duties and
responsibilities of the people in the organization.
2. Marketing and Distribution System
It shall deal with product demand analysis and it should show the competitive
product advantage over the existing product or service and designing the marketing
program of the enterprise.
3.Product and Technology
Product and technology studies refer to the need in making the product or service
4. Financial Management
The financial management aspect refers to the capital investment and sources of
funding the operation of the business.
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 General format of
a Comprehensive
Business Plan
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I. INTRODUCTION
II. PROJECT SUMMARY
A. Name of the Firm
B. Business Location
C. Brief Description of the Business
1. Brief history or how the business was organized.
2. Highlights of the findings in every phase of the business study..
III. MANAGEMENT AND PERSONNEL COMPONENTS
IV. MARKETING STUDIES
A. Market Profile
B. Demand Analysis
C. Supply Analysis
D. Competitive Analysis
1. Selling Price
2. Competitions
3. Distribution and Cost of Transportation
4. Channel of Product Distribution 30
5. General Competitive Practice
 E. Program Analysis of Marketing Strategies
1. Geographical Segmentation Strategy
2. Psychographic Strategy
3. Demographic Segmentation Strategy
4. Pricing Strategy
5. Channel of Distribution
6. Promotion and Advertising
V. PRODUCTION
A. Product Specification
B. Product Process
C. Plant Rated Capacity
D. Machinery and Equipment
E. Plant Location
F. Building and Facilities
G. Raw Materials
H. Power Supply and Utilities
I. Production Cost
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VI. FINANCIAL STUDIES
A. For New Business Venture
1. Total Project Cost
2. Capital Investment Required
3. Pre – operating cash flow and its relation to time table
4. Supporting Schedules in the Financial Statements and Income
5.Projected Financial Estimates showing return on investments, return
on equity, break – even analysis, price analysis.
B. For Existing Project
1. Audited Financial Statement – last 3 years
2. Fixed Assets, Capital Investments, Depreciation used in Capital Assets.
3. Tax Assessment, Liabilities, and other Payables
4. Financial Trends and Ratio Analysis
5. Financial Cost for Administrative expenses, Production and Selling
Expense.
6. Financial Projection for the Next Five Years
7. Financial Analysis for Return of Investment, Return of Equity, Break even
Analysis, Production Volume and Price Analysis. 32
 MICRO
BUSINESS PLAN

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 The major objective of business plan is to assess, examine
and analyze the viability or feasibility of the study. Business plan is
the ticket to success. It is also a blueprint to success and document
details what you plan to do with your venture, and how exactly
you want to achieve them. It is your map to your business,
according to Elizabeth Manuel,, Chief of the Trade Business
Management Division of the government run Philippine Trade
Training Center.
MICRO BUSINESS PLAN

A. Executive Summary
B. Marketing Plan
C. Operations Plan
D. Financial Plan
 Thank you

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