THE BUSINESS PLAN

Chapter 7
The Business plan
◦ The number of problems that may be felt when the small
business is already in operation may just overwhelm the
entrepreneur. If he is good enough, he may be able to
handle them successfully if they happen one at a time.
However, it will be very difficult for him if problems occur
simultaneously.
WHAT IS A BUSINESS
PLAN
What Is a Business Plan

◦ The business plan is a document that helps the small

business owner determine what resources are needed to
achieve the objectives of the firm, and provides a standard
against which to evaluate results.
Purposes of a Business Plan

◦ A business plan is written for two main purposes. They are

the following:
1. to serve as management's guide during the lifetime of
the business; and
2. to fulfill the requirement for securing lenders and
investors
The Plan as a Guide

◦ In the course of writing the business plan, the small

business operator (SBO) is afforded sufficient time to
consider all factors relevant to operating the business.
Through analyses of the environment and derivation of
what can be expected to happen, decisions about various
aspects of business operations can be considered in
advance
A Tool for Securing Funds

◦ When the SBO needs initial or additional funding for his

business venture, the business plan is a handy means for
convincing lenders and investors.
Revising the Plan

◦ A business plan is prepared in consideration of the current

and expected situations. In the process of implementing the
plan, however, the expected development or changes in the
environment may not happen fully or even partially.
 PARTS OF THE
BUSINESS PLAN
1. Title page and contents 6. Analysis of the
2. Executive summary competition
3. Description of the business 7. Operations and
management
4. The product or service
8. Financial data
5. Market strategies
9. Supporting documents
Title Page and Contents
1. the name of the business;
2. the name or names of the proponents in this case, the
SBO);
3. address:
4. telephone number
Title Page and Contents
6. e-mail and website address:
7. the date; and
8. the name of the person who prepared the business plan
The Executive Summary

1. the capital needs of the business;

2. how the money will be used;
3. what benefits will be derived by the business from the loan
or investment; and
4. in case of loan, how it will be repaid with interest, and in the
case of outside investment, how profits will be generated.
Description of the Business

This is divided into two parts:

1. a short explanation of the industry; and
2. a description of the business,
◦ In describing the industry, it is important to present the
current situation and the outlook for the future.
◦ Information must be provided regarding the various
markets within the industry as well as new products or
developments that could affect the business. The sources
of information must be indicated.
Description of the Product or Service

◦ The product or service must be described clearly in the

plan. To achieve this, following must be presented:
1. The important features of the product or service, such as
the maintenance free feature of the product, or the home
delivery service for products ordered through the phone.
2. A detailed description of how the product is used.
3. What makes the product or service different from others
available in the market.
Market Strategies

◦ Market strategies refer to what the SBO plans to do to

achieve the market objective of the firm. These strategies
are formulated after undertaking market research.
Market strategies consist of the following:

1. definition of the market:

2. determinations of the market share;
3. positioning strategy;
4. pricing strategy
5. distribution strategy; and
6. promotion strategy
Analysis of the Competition

◦ The small business operator (or the entrepreneur) will find

it difficult to compete if his competitors are unknown to
him. This makes it necessary to make an analysis of the
competitors.
In competitive analysis, the following must be
determined:
1. The strengths and weaknesses of the firm's competitors;
2. Strategies that will give the firm a competitive advantage
3. Barriers that can be developed to prevent competitors or would
be competitors from exploiting the firm's market; and
4. Any opportunity that can be exploited.
Operations and Management

◦ How the firm will be operated on a continuing basis is an

important component of the business plan. As such, the
plan must contain the following:
Operations and Management

1. Organizational structure;
2. Operating expenses;
3. Capital requirements; and
4. Cost of goods sold.
Financial Data

◦ Financiers are most interested in the financial aspects of

the business plan satisfy this requirement, the following
statements must be presented in the busine plan:
Financial Data

1. The income statement

2. The balance sheet
3. The cash flow statement
Supporting Documents

◦ The business plan would be more meaningful if supporting

documents as included. The documents usually consist of
the following:
◦ The owner's resume;
◦ Contracts with suppliers;
◦ Contracts with customers or clients;
◦ Letters of reference;
◦ Letters of intent;
◦ A copy of the firm's lease;
◦ A copy of copyright or patent acquired, if applicable; and
◦ Tax returns for the past three years.
SUMMARY
◦ The business plan is a very useful document in managing
an entrepreneurship or small business. It provides
information on how the owner will undertake the various
activities necessary in operating the business.

◦ The plan enumerates the various decisions made after

careful analysis. As such it relieves the owner of spur-of-
the-moment decisions when the business is already in
operation