BUSINESS PLAN:

How to Make It
 What is a Business Plan?
 A business plan is a document used as a base
for future actions of the business venture
 Business plan provides entrepreneur’s road
map for successful enterprise
 Business plan is the outcome of an integrated
process of making future plans for different
organizational functions
 production
 finance
 marketing
 organization/management
 Specifics of a Business Plan
 illustrates current status, expected needs, & projected
results of the new business
 demonstrates what that venture is, where it is
projected to go, & how the entrepreneur proposes it
will get there
 describes all the facets, like the project, marketing,
research & development, manufacturing, management,
critical risks, financing, & milestones/ timetable of the
proposed venture
 Details how to raise money from the banks or financial
investors
 demonstrates that the business can sell enough of its
product or service to make a satisfactory profit & be
attractive to potential bankers
 future guide for successful operation of the venture
 Why is a Business Plan so Essential?
 forces the entrepreneur to take an objective,
critical, & unemotional look at the business in
its entirety
 a tool to manage the business better
 a way of communicating the firm’s ideas to
others & the basis for the financial proposal
 improves the firm’s chances of success
 sells the entrepreneur & others on the business
 communicates the strategy & business
approach within the firm
 increases coherence of operation of various
functions within the firm
 Why is a Business Plan so Essential? (Cont.)
 helps to direct everybody to work for the same
goals
 makes the firm better prepared for changes in the
external environment
 shortens the time required for planning new
operations, developing & launching new products,
etc.
 gives confidence to the entrepreneur
 can be used in funding negotiations with venture
capitalist
 in many cases it is a prerequisite for continuation
of business negotiations
 often the complete version of the business plan is
shortened or modified for different use
 Uses of Business Plan
 Operating the firm efficiently
 Funding of the firm
 Seeking financing
 Arranging strategic alliances
 Obtaining large contracts
 Attracting key employees
 Completing mergers & acquisitions
 Starting international operations
 Selling the firm or part of its operations, etc.
 Features of a Business Plan
 A business plan is always comprehensive
– all aspects of the firm must be treated
 The focus of a business plan is always in the
future
 A business plan must be prepared by the
management team, not by an outsider
 Expert assistance should be sought in making
the business plan
 The planning process, as such, is even more
important than the resulting documents
 Detailed Outline of a Business Plan
Section Topic

I Summary
II Business Description Segment
A. General description of the venture (product or service)
B. Industry background
C. Company history or background
D. Goals/potential of the venture and milestones (if any)
E. Uniqueness of the product or service
III Marketing Segment
A. Marketing Research
1. Target market (customers)
2. Demand analysis
3. Market size and trends
4. Competition
5. Estimated market share
Detailed Outline of a Business Plan (Cont.)
Section Topic

B. Marketing plan
1. Current market situation
a. Market situation
b. Product situation
c. Competitive situation
d. Distribution situation
e. Macro economic situation
2. SWOT analysis/Issue analysis
3. Objectives
4. Marketing strategy
5. Action programs
6. Controls
Detailed Outline of a Business Plan (Cont.)
Section Topic

IV Research, Design, & Development Segment

A. Development & design plans
B. Technical research results
C. Research assistance needs
D. Cost structure
V Manufacturing Segment
A. Location analysis
B. Production needs, facilities, utilities & equipment, etc.
C. Suppliers/transportation factors
D. Sources of raw materials
E. Labor supply
F. Manufacturing cost data
Detailed Outline of a Business Plan (Cont.)
Section Topic

VI Management Segment
A. Organization structure
B. Management team: key personnel
C. Legal structure: stock agreements, employment
agreements, ownership, etc.

D. Board of directors, advisors, consultants, etc .

VII Critical Risks Segment
A. Potential problems
B. Obstacles & risks
C. Alternative courses of actions
VIII Financial Management Segment
A. Financial forecast
1. Profit & loss
2. Cash flow
3. Break-even analysis
4. Cost controls
Detailed Outline of a Business Plan (Cont.)
Section Topic

VIII Financial Management Segment (Cont.)

B. Sources & use of funds

C. Budgeting plans
D. Stages of financing
IX Milestone Schedule Segment
A. Timing and objectives
B. Deadlines, milestones
C. Relationship of events
X Appended Parts
Notes
Appendices
References/ Bibliography
 Useful Hints for Writing the Business Plan Segments

I Summary
 No more than three pages
 This is the most crucial part of your plan because it must capture
the reader’s interest
 What, how, why, where, etc., must be summarized
 Complete this part after the rest of the business plan has been
written
II Business Description Segment
 The name of the business
 A background of the industry with history of the company (if
any)
 The potential of the new venture should be described clearly
 Any unique or distinctive features of the venture should be
spelled out
 Useful Hints for Writing the Business Plan Segments

III The Marketing Segment

 Convince investors that sales projections & competition can be
met
 Market studies should be used and disclosed
 Identify target market, market position, & market share
 Evaluate all competition & specifically cover “why” & “how” you
will be better than the competitors
 Identify all market sources & assistance used for this segment
 Demonstrate pricing strategy, since your price must penetrate &
maintain a market share to produce profits
– “lowest” price is not necessarily the “best” price
 Identify your advertising plans with cost estimates to validate
the proposed strategy
 Useful Hints for Writing the Business Plan Segments
IV Research, Design, & Development Segment
 Cover the extent & costs involved in needed research, testing, or
development
 Explain carefully what has been accomplished already
(prototype, lab testing, early development)
 Mention any research or technical assistance that has been
provided
V Manufacturing Segment
 Provide the advantages of your location (zoning, tax laws, wage
rates)
 List the production needs in terms of facilities (plant, storage,
office space) & equipment (machinery, furnishings, suppliers)
 Describe the access to transportation (for shipping & receiving)
 Explain proximity to your suppliers
 Mention the availability of labor in your location
 Provide estimates of manufacturing costs
– Note that, too many entrepreneurs “underestimate” their costs
 Useful Hints for Writing the Business Plan Segments

IV The Management Segment

 Provide resumes of all key people in the management of the
venture
 Carefully describe the legal structure of the venture (sole
proprietorship, partnership, or corporation)
 Cover the added assistance (if any) of advisors, consultants, &
directors
 Provide information on how everyone is to be compensated
(also, how much)

VII Critical Risks Segment

 Discuss potential risks before investors point them out, e.g.
 Price cutting by competitors
 Potentially unfavorable industry-wide trends
 Design or manufacturing costs in excess of estimates
 Sales projections not achieved
 Useful Hints for Writing the Business Plan Segments

VII Critical Risks Segment (Cont.)

 Product development schedule not met
 Difficulties or long lead times encountered in the procurement of
parts or raw materials
 Larger than expected innovation and development costs to stay
competitive
 Alternative courses of action

VIII Financial Segment

 Provide statements
 Describe the needed sources for your funds & the intended uses
for the money
 Provide a budget
 Create stages of financing for purposes of allowing evaluation by
investors at various points
 Useful Hints for Writing the Business Plan Segments

IX Milestone Schedule Segment

 Provide a timetable or chart (GANTT chart) to demonstrate when

each phase of the venture is to be completed

– This shows the relationship between events & provides a

deadline for finishing tasks

X Appended Part

 Explanatory notes, references, etc.

 Add elements which do not fit in the main body as they

interrupts the normal flow, e.g., MOU, Constitution, etc.
 Alternative Outline for Developing a Basic Business Plan

Section Topic

I Executive Summary
A Description of your proposed business
1 Describe your product or service
2 Support with diagrams, illustration or pictures (if any)
B Summary of your proposed marketing method
1 Describe the market segment (sub-market) you’re aiming to
reach
2 Outline the channel you plan to use to reach this market
segment, retail, wholesale, distributors, mail order or other
C Summary of your financial estimates
1 State the dollars in sales you aim for in each of the first 3
years
2 State the estimated profit for each of the first 3 years
3 State the estimated starting capital you'll need
 Alternative Outline for Developing a Basic Business Plan
Section Topic

II Statement of Objectives
A Statement of desirability of your product or service
1 Describe the advantages your product or service has, its
improvements in existing products & services
2 State the long-range objectives & the short sub-objectives for
your proposed business
3 Describe your qualifications to run the business
4 Describe the "character" you want for your business, the
image you’d like your customers to see
III Background of Proposed Business
A Brief summary of existing condition in the business you are
intending to enter as it is now
1 Where the product or service is now being used
2 How the product or service is now being used
 Alternative Outline for Developing a Basic Business Plan
Section Topic

III Statement of Objectives (Cont.)

B Detailed explanation of your place in the existing condition
1 Describe the projections & trends
2 State your intended strategy for meeting competition
3 Describe the special qualities of your product or service that
make it unique
IV Technical Description of Product or Service
A Describe from a technical viewpoint the way that the product
works, or how the service is used
B Outline the tests that have been made and give the tests date
and results
C Outline the tests that are to be made and describe the test
objectives
D State briefly your concepts for concepts for follow-on (next
generation) products or services
 Alternative Outline for Developing a Basic Business Plan

Section Topic

V Marketing Strategy (A comprehensive description)

A Describe the segment of the market you plan to reach
B Describe in full detail the distribution channel you plan to use
to reach your market segment: retailers, jobbers, wholesalers,
brokers, door to door, mail order, party plan, or other
C Describe the share of the market you expect to capture versus
time
VI Selling Tactics (An outline of the activities to be used in selling
the product or service)
A State the methods you intend to use to promote your product
or service: direct calling, telephone, advertising, mail, radio,
television, or other
B Include a sample brochure or dummy, advertisements,
announcements, or other promotional literature
 Alternative Outline for Developing a Basic Business Plan

Section Topic

C Present data supporting your ability to meet your sales goals:

actual orders, personally known prospective key accounts, &
potential customers
D Explain the margins of safety you've allowed in your sales
forecasts
VII Plan of Operation (Description of the proposed organization)
A Show an organization chart describing the needed business
functions & relationships
B Describe the key positions and identify the persons to fill them
C Give résumés of the key persons
D List location, equipment facilities & the space required
E Describe the research & development facilities you'll need
F If manufacturing, outline the kind of production you’ll do in-
house & those to be subcontracted
 Alternative Outline for Developing a Basic Business Plan

Section Topic

VIII Plan of Operation (Description of the proposed organization)

A Information required supporting the major points in the
business plan
1 Include a set of drawings of the product to be manufactured
or a detailed description of the service to be offered
2 Show a list of the tools you'll need & estimated costs of the
tools
3 List the capital equipment you'll need & its estimated cost
4 Provide a layout of your proposed plan, supported by
manufacturing flow chart (include the estimated cost of
manufacturing your product)
5 Give packing & shipping analysis
 Alternative Outline for Developing a Basic Business Plan

Section Topic
6 List a price schedule for your product line or service
7 Include your detailed market survey data
8 Supply the following financial data
a Projected Profit & Loss statement & Balance Sheet for the first
two years by the month & for the third years by the quarter
b Income Statement for 2 years by the month
c Cash Flow Projection for 2 years by the month
d Break-even Chart for two years by the month
e Fixed Asset Acquisition Schedule by the month, showing each
item you expect to buy & its cost
IX Conclusions and Summary
A A Statement of proposed approach in starting new
organization
1 State the total capital you'll need & the safety factor you've
used
 Alternative Outline for Developing a Basic Business Plan

Section Topic

A A Statement of proposed approach in starting new organization

(Cont.)

2 State how much profit you expect and when you expect to
show it
3 Tell what percentage of ownership you want for yourself and
for your partners
4 Indicate the total capital you need and how it is to be made up:
a Your share of the starting investment
b. How much more you'll need from others and when you'll need
the money
c. State what share of the business you'll give to the investors or
lenders for this additional capital
5 State your planned schedule for starting your business
 How to Write a Winning Business Plan?

1. Have a winning business idea

 if your business idea is not good enough, improve it or forget it
 don’t concentrate on writing a business plan but on developing
the business
2. Gather a strong management team
 many venture capitalist hold that the management team is even
more important than the product idea
 find expertise complementary to your own expertise
3. Be committed
 take the plan seriously
 if you yourself are not committed to your business plan, it will
only be shown
 if you don’t believe in the idea, how could others do so?
 How to Write a Winning Business Plan?
4. Emphasize the report
 the investors are interested in the business only if it can create profit
 identify the targeted market or niche precisely
 make the profit projections explicit
 be sure that your projections are true to the best of your knowledge
 projections high in comparison to similar business make the investors
suspicious
5. Be realistic
 adjust your growth targets to the resources available or attainable
 rely on facts
 do not let your hopes and wishes distort sound judgment
6. Be open and sincere
 don’t try to hide anything, not even the most unfavorable facts
 highlight critical risks, risks and weaknesses will show up anyway
 no-one will invest without conducting his own analyses
 How to Write a Winning Business Plan?
7. Focus on the future
 only the future justifies the effort, yours and others’
 try to quantify the near future as much as possible
 state the strategies and visions of the firm clearly
 don’t let the description of the current business have too much
weight
8. Be comprehensive
 consider all relevant factors affecting the business, now or in the
future
 if appropriate, a short mentioning of the factor is enough
9. Demonstrate due diligence
 before you present your plan, do your home work well
 Make it explicit that you have researched the facts, and be sure
you really have done it
 utilize assistance from a well balanced selection of experts
 How to Write a Winning Business Plan?

10. Concentrate on the essential

 many investors will use less than 5 minutes to decide whether to
read future
 capture the reader’s interest, state the uniqueness of the venture
 include an executive summary (2 pages explaining firm’s current
status, products/services, benefits to customers, financial
forecasts, corporate objectives in 3-5 years, amount of finance
needed, benefit to investors)
 do not exceed 40 pages, excluding appendix
11. Make it simple & easy
 the core of most business ideas is very simple
 avoid difficult expert expressions
 avoid meaningless slogans like “we strive for superior quality”.
Use exact expressions and measurable facts
 How to Write a Winning Business Plan?

12. Use your business plan

 make following the business plan a part of the everyday

operations of your business

 always up-date your business plan when things change

13. Learn from others

 read existing business plans

 don’t copy

 use checklists
 Business Plan Checklist: A Personal Step-by-Step Evaluation
Have you Is the Is the
Segment Checklists covered answer answer
this in the clear? complete?
plan? (yes/no) (yes/no)
I. Business description segment      
A. What type of business you planning?
B. What products or services will you sell?
C. What type of opportunity is it (new, part-time,
expansion, seasonal, year-round)?
D. Why does it promise to be successful?
E. What is the growth potential?
F. What uniqueness exists? (Discuss strengths or
weakness)
II. Marketing segment      
A. Who are your potential customers?
B. How big is the market?
C. Who are your competitors? How are their
businesses prospering?
D. How will you promote sales?
E. What market share do you anticipate?
F. How will you price your product or service?
G. What advertising and promotional strategy
are you using? (Discuss strengths or
 Business Plan Checklist: A Personal Step-by-Step Evaluation
Have you Is the Is the
Segment Checklists covered answer answer
this in the clear? complete?
plan? (yes/no) (yes/no)
III. Research, design & development segment      
A. Have you carefully described your design or
development?
B. Is there any technical assistance that you
have received?
C. What research needs do you anticipates?
D. Are the costs involved in research & design
reasonable? (Discuss strengths or
weakness)
IV. Manufacturing segment      
A. Where will the business be located?
B. What factors has influenced the choice of
location?
C. Have you described the needs for
production facilities & equipment?
D. Who will be your suppliers?
E. What type of transportation is available?
F. What is the supply of available labor?
 Business Plan Checklist: A Personal Step-by-Step Evaluation

Have you Is the Is the

Segment Checklists covered this answer answer
in the plan? clear? complete?
(yes/no) (yes/no)
V. Management segment      
A. Who will manage the business?
B. What qualifications do you have?
C. How many employees will you need? What will
they do?
D. What are your plans for employees’ salaries,
wages, benefits?
E. What consultants or specialists will you need?
Why will you need them?
F. What legal form of ownership wills you choose?
Why?
G. What licenses & permits will you need?
H. What regulations will affect your business?
(Discuss strengths or weakness)

VI. Critical risks segment      

A. What potential problems have you identified?
B. How many obstacles do you foresee?
C. What alternative courses of action are there?
(Discuss strengths or weakness)
 Business Plan Checklist: A Personal Step-by-Step Evaluation
Have you Is the Is the
Segment Checklists covered this answer answer
in the plan? clear? complete?
(yes/no) (yes/no)
VII. Financial segment      
A. What is your total estimated business income for
the first year? Monthly income for the first year?
Quarterly income for the second & third years?
B. What will it cost you to open the business?
C. What will be your monthly cash flow during the
first year?
D. What will be your personal monthly financial
needs?
E. What sales volume will you need in order to make
a profit during the first three years?
F. What will be the break-even point?
G. What will be your projected assets, liabilities, &
net worth on the day before you expect to open?
H. What will be your total financial needs?
I. What will be potential funding sources?
J. How will you use the money from lenders of
investors?
K. How will the loan be secured? (Discuss strengths
or weakness)
 Business Plan Checklist: A Personal Step-by-Step Evaluation

Have you Is the Is the

Segment Checklists covered answer answer
this in the clear? complete?
plan? (yes/no) (yes/no)
VIII. Milestone schedule segment      
A. What timing have you projected for this
project?
B. How have you set your objectives?
C. Have you set deadlines for each stage of
your venture?
D. Is there a relationship between events in
this venture? (Discuss strengths or
weaknesses)
IX. Appendix segment      
A. Have you included any documents,
drawings, agreements, or other materials
needed to support the plan?
B. Are there any names of references, advisers,
or technical sources you should include?
C. Any other supporting documents? (Discuss
strengths or weaknesses)