Topic 4 Preparing Biz Plan

Business Opportunity Identification
Topic 4: Preparing a Business Plan

(Management and Operation)
Fundamentals of Entrepreneurship All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2013 1– 1
ADDITIONAL READING

What is Business Opportunity?
 A business idea or business concept that results in

profits if it is turned into a tangible product or
service.
 Normally involving changes in knowledge,
technology, economy, social and demographic
conditions.
 Entrepreneurs should: identify, pursue and capture
the value of a business opportunity.
 Ability to seize opportunities depends on interest,
experience, skills, networking and capital
What is Business Opportunity?
 Improvement of existing products or introduction of better

quality new products.
 Fulfilling the gaps of needs, wants and creation of value to
customers.
 Opportunities based on macro factors such as
– technology
– demographic, geographic and psychographic factors
– political
– trend, etc.

Sources of Business Ideas
The following are examples of possible sources of business ideas:

 Customers needs, wants, problems or finding gaps in the market
place.
 Market trend or market growth potential.
 Your own working experience; hobby and interest.
 Family business; or suggestions from spouse, siblings and friends.
 Business networks
 Chance encounters or observations while travelling.
 Copying successful business model.

Sources of Business Ideas (contn)
 Based on franchise business.

 Based on experimentation, trial and error methods and better
product development.
 Looking for good existing business for sale.

Adequacy Threshold

Critical Success Factors of an
Entrepreneur
1. Entrepreneurial characteristic and traits. (hardworking, alert to

opportunities, perseverance, willing to take calculated risks,
tolerance for ambiguity, high need for achievement, internal locus
of control, goal oriented, etc.
2. Knowledge and experience in the field.
3. Soft skills such as leadership, communication and negotiation
skills.

Critical Success Factors of an
Entrepreneur (contn)
4. Adequate resources such as capital and human resource.

5. Good networking with potential customers, suppliers, experts,
potential workers, bankers and investors.
6. Good viable business opportunities with many positive and
attractive environmental factors such as market size, market growth,
minimum or tolerable competition, good support system and a good
business concept, strategy, sound business plan and meticulous
execution details.

ANALYSING the
Macroenvironment

SELECTIONG of Business
Opportunities

Business Identification

A Summary
1. Business opportunity identification involves the process of

analysing:
A. INTERNAL FACTORS. (Ability to seize opportunities depend
on these factors)
i. Interest
ii. Aspiration
iii. Character
iv. Experiences
v. Skills and capability
vi. Capacity
vii. Capital

A Summary
B. EXTERNAL FACTORS
Which comprised of two environments:
i. Micro Environment
a. Customers (finding customers needs and wants)
b. Competitors (know them and measure your ability to compete)
c. Suppliers
d. Financial Institution
e. Government agencies
ii. Macro Environment
a. Political
b. Social-Cultural
c. Economy, technology
A Summary
After scanning the environment to identify opportunities, the

entrepreneurs need to select the opportunities to suit his
strengths and long-term strategic plan.

TOPIC 4
PREPARING A BUSINESS PLAN

Learning Outcomes
At the end of this chapter, students should be able to:

 apply a systematic business planning methodology which can
be applied to many other tasks or undertakings
 learn the various scopes and disciplines of business planning
such as marketing operation, finance, organization and human
resources management, many of which involve generic
planning skills that can be applied in their working careers and
their life.

Learning Outcomes (contn)
 use and enhance their communication skills through business

plan presentation
 develop their creativity, innovativeness and critical thinking skills
when they work out their business plan.
 improve their social skills by working in teams effectively and
harmoniously on the business planning project.
 prepare a good business plan that is effective, practical and
viable.

What is a Business Plan?
 A business plan is a written document that outlines the

detailed execution plan of the business. It will include
details of the:
− organization, administration and human resource plan
− marketing plan
− production plan
− financial plan
 The business plan should enable an entrepreneur to determine
whether the project is viable, needs to be modified or whether
the project is not feasible and should be abandoned altogether.

REASONS FOR
PREPARING A BIZ PLAN
The following are the prime reasons for preparing
a business plan:
I. to allow the entrepreneur to objectively,

critically and practically evaluate a business
proposal. A feasibility study to ascertain the
viability of the project.
2. As a guide for project implementation.
3. to instil confidence in potential financiers for

the purpose of securing financing facilities; or to
convince partners or investors.
WHO WILL BENEFIT
YOUR BUSINESS PLAN?
I. The Owner
2. The management team
3. The employees
4. The customers
5. The suppliers
6. Other stakeholders

Project Preliminary Screening
 Before you prepare the business plan of the project, an

entrepreneur should do a preliminary screening on the suitability
of the project.
 At least he should have a general idea that the proposed
business is fairly satisfactory on the following issues.
– The viability, sustainability and growth potential of the business
concept, model and strategy
– Overcoming initial start up hurdle or chasm: The provision of
adequate capital, skill manpower and the ability to achieve early
break even sale volume

Key Elements in
Business Plan
A basic business plan should include:

 executive summary
 table of content
 introduction
 company background
 owner/partner background
 location
 organization, administration and human resource plan
 marketing plan
 operation plan
 financial plan
 conclusion
 appendices

SAMPLE OF A BUSINESS PLAN
(FOR A BURGER KIOSK)
Introduction
The following is an example on how to prepare a simple business
plan for a burger kiosk. It shows important planning elements that
must be worked out, i.e.
 organization, administration and human resources
 market planning
 operation planning
 financial planning

ADMINISTRATION AND
HUMAN RESOURCE PLAN
Basic issues that need to be resolved for man power planning are:
 Manpower requirement and the organization structure for the
company.
 Manpower planning also includes planning for their job
qualifications, job specification, recruitment and their
remunerations budget.

Organization Chart

Employee’s Salary, EPF and SOCSO

Administrative Budget

MARKETING PLAN
Basic marketing issues that need to be resolved are:

 What is your product and its special attraction or quality?
 Who is your target market?
 What is the market size?
 Who are your competitors and what are their competitive
strengths?
 What is your market share and your sale forecast?
 What are your marketing strategies?
 What is your marketing budget and plan?

Marketing Strategies

Target Market Profile

Target Market Profile (contn)
 Based on the issues as outlined in the above table, the

following are issues for the burger kiosk.
 What is your product range?
– burgers, hot dog, kebab, etc.
 Where are you going to do your business?
– It should be at strategic location where there is sizable market or
traffic and accessible. The market growth potential is good.

Target Market Profile
(contn)
 Who is your target market?

− Let’s say the purchases expected from the main group of customers
in the area of operation are as follows:
− College students
− Factory workers
− Local residents
− Tourist and others

Target Market Profile (contn)
 What is the total market size?

 The estimation of the total purchase of similar products in the
locality including those purchased from your competitors.
 Let’s say daily market size is as follows:
− College students 100@RM3.00 RM300.00
− Local residents 50@RM3.00 RM150.00
− Factory workers 30@RM3.00 RM 90.00
− Tourist and others 20@RM3.00 RM 60.00
− Total daily market size (200 burgers) RM600.00

Target Market Profile (cont.)
 Who are your competitors?

 Let’s say you only have one competitor in the area.
 What is your market share and your daily sale forecast?
− Let’s say, your market share is 50 per cent, thus sale forecast is
RM300.00 per day
− What is your promotion strategy?
− Roadside banners and signboard only.
− What is you selling price?
− RM3.00 per burger

Target Market Profile (cont.)
 What is your marketing Budget

 Let’s say, you are going to promote your burger through
pamphlet and roadside banner:
− Pamphlet—Printing and distribution RM200.00
− Banner—Printing and permit RM200.00

OPERATION PLAN
 Basic production plan issues that need to be resolved are:

− What products do you want to produce and what are its quality
specifications and characteristics? Does this quality meet the target
customers’ needs and wants?
− What is the cost of production per unit and what is the possible
selling price the market can absorb?

Operation Plan (contn)
 How many do you need to produce per day/week / month so that

you can cater for your sale forecast?
 Based on quality and quantity required, what is the best
production plan for the job; you will have to decide whether it is
going to be fully mechanized, semi-mechanized or totally
manual?
 You will have to outline your material, machines, tools, space
and lay out needs based on the production process flow chart.


 Based on your production schedule, you will have to plan and

calculate the following items:
– Product: chicken and beef burgers
 Let’s say your operation is quite simple. Your material input cost
per burger is only RM1.00 and your selling price per burger is
RM3.00.
– Estimated sale per day RM300.00
– Cost of raw material for one day RM140, therefore for 5 days (one
week) RM700/week
– Sale for five days/week RM300 ×5 days = RM1,500/week
– Salary:
• RM20.00 /person for 2 persons
• 5 working days/ week, RM20 × 2 persons × 5 days = RM200/week
 Let’s say your asset equipment cost is only RM1,500.00
Process Flow Chart

Process Flow Chart (contn)

FINANCIAL PLAN
Basic financial plan includes the following:

 project implementation cost
 sources of fund for the project
 financial schedule for asset depreciation and loan amortization
 cash flow projection
 income statement projection (profit and loss)
 balance sheet projection

Project Implementation
(Operational) Cost
Example of project implementation cost of burger kiosk:

 Project implementation cost is as follows:
 Assets (equipment) RM1,500
Working capital for one week i.e. salary and raw material:
 RM100@5 days + RM40@5days= RM 700
 Registration cost RM 100
 Banner and pamphlet (one time) RM 400
 Total project implementation cost RM2,700
Note:
Operational Cost = Direct Labour + Direct Material + Overhead Costs)

Sources of Funds

Project Implementation Cost
Table

Depreciation Table

Loan Amortization Table
Example of loan amortization table for the proposed burger kiosk

project: Let’s say, the loan amount is RM1,000, duration 4 weeks,
interest at RM10.00 per week.
Period Principal Interest Loan balance
1st week 250 10 750

2nd week 250 10 500
3rd week 250 10 250
4th week 250 10 0

Social Entrepreneurship Project
 As an alternative, students can also do a social entrepreneurship

project for their practicum.
 Students can look into the internet to gain some ideas on the
types or themes of the social entrepreneurship project that can
be undertaken.
 For instance, some non-governmental organizations (NGOs)
organize efforts to help the urban or rural poor, orphans, single
mums, ex-drug addicts, HIV or cancer patients, etc.
 There are NGOs that work on environmental causes, animal
protection or organize to fight child labour, pollution, etc.


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Business Opportunity Identification

Topic 4: Preparing a Business Plan

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

 A business idea or business concept that results in

 Improvement of existing products or introduction of better

Fundamentals of Entrepreneurship All Rights Reserved

The following are examples of possible sources of business ideas:

Fundamentals of Entrepreneurship All Rights Reserved

 Based on franchise business.

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

1. Entrepreneurial characteristic and traits. (hardworking, alert to

Fundamentals of Entrepreneurship All Rights Reserved

4. Adequate resources such as capital and human resource.

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

1. Business opportunity identification involves the process of

Fundamentals of Entrepreneurship All Rights Reserved

After scanning the environment to identify opportunities, the

Fundamentals of Entrepreneurship All Rights Reserved

PREPARING A BUSINESS PLAN

Fundamentals of Entrepreneurship All Rights Reserved

At the end of this chapter, students should be able to:

Fundamentals of Entrepreneurship All Rights Reserved

 use and enhance their communication skills through business

Fundamentals of Entrepreneurship All Rights Reserved

 A business plan is a written document that outlines the

Fundamentals of Entrepreneurship All Rights Reserved

I. to allow the entrepreneur to objectively,

2. As a guide for project implementation.

3. to instil confidence in potential financiers for

2. The management team

Fundamentals of Entrepreneurship All Rights Reserved

 Before you prepare the business plan of the project, an

Fundamentals of Entrepreneurship All Rights Reserved

A basic business plan should include:

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Basic marketing issues that need to be resolved are:

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

Fundamentals of Entrepreneurship All Rights Reserved

 Based on the issues as outlined in the above table, the

Fundamentals of Entrepreneurship All Rights Reserved

 Who is your target market?

Fundamentals of Entrepreneurship All Rights Reserved

 What is the total market size?

Fundamentals of Entrepreneurship All Rights Reserved

 Who are your competitors?

Fundamentals of Entrepreneurship All Rights Reserved

 What is your marketing Budget