Business Plan Components

CHAPTER 7
BUSINESS PLAN
" The most complex thing
in this world is YOU. Try
to solve yourself and one
day, you will see world is
full of solutions."
BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP
PREPARED BY: MATHIVANNAN JAGANATHAN
Learning Objective
At the end of this chapter, students will be able to:
1. Understand the importance of business plans for entrepreneurs.
2. Identify categories of entrepreneurs are supposed to write a business
plan.
3. Identify categories of entrepreneurs who need business plans.
4. Identify the types of business plans prepared by the entrepreneur or
company.
5. Discuss the important components of a business plan.
6. Prepare a business plan effectively.
Introduction
help determine where you are, where you want to go, why do you need
to go, how you can be there, how long to get there, and what will await
you there.
described as the development of the idea to become a profitable
business activities.
The process of business plan is clearly focused on the following
issues:
Identify business opportunities by looking at the needs and requirements
of customers.
Analyzing the business environment.
Analyzing business potential, strengths and weaknesses, opportunities
and expected threats
Document and justify the idea that business has the potential to enable
a rational and realistic analysis of potential returns and risk.
Introduction
Managing all business ideas in a structured and logical format to enable
the borrower, investors, partners or certain parties who need to assess
the possibility of success.
Provide the basis and direction as well as thorough strategy and special
operations to achieve specified goals.
Help maintain focus on objectives.
Provide tools to evaluate alternatives, and
Provide a reference to measure actual effects.
TYPES OF BUSINESS PLAN
Concept-Based Business Plan

Executive Summary is intended to document the business idea on paper
for the first time.
written between one to two pages and contains only brief information.
designed to assist entrepreneurs or potential entrepreneurs to get the
views, criticisms, and more information is needed before writing the
actual business plan.
The business plan is based on this concept can help:
evaluate the business concept will be developed,
identify specific areas that need to be made in the study of business,
studies suggest that is suitable for business,
consider the appropriate approach to certain aspects of the business,
and
identify other options that have not been considered before

Business plan for bank loan
provided by a skilled person and want to start a business with small
investment
The main goal is to get a bank loan to finance the initial capital business
Entrepreneurs and prospective entrepreneurs write a business plan is
comprised of professionals and highly skilled individuals.
Retailing Business Plan
developed for retail businesses in the business complexes, cities or
other fixed locations and moving
consisting of retail stores, catalog stores and online business more solid
and detailed.
Break-even analysis provides when and how much return on capital and
profit is earned by businesses or companies.

Internet Business Plan
service-related websites.
small, medium or large scale
For example, the business of advertising services, business information
services offering news and advice, web-hosting business.
Venture capital business plan
presentation of business ideas and financial plan for funding through
investments by venture capitalists.
financial resources to fund large-scale growth or development
not exceed 30 pages
presented (in writing and verbal)
prepared to deal with the questions to be asked by investors is high
demand.
Agricultural business plan

developed among the entrepreneurs or company carrying on business or
agricultural businesses.
purposes of capital from financial institutions or investors, or meet the
requirements for credit providers, or as a guideline
For example, cow breeding projects
Franchise business plan
Full documents relating to the proposed business franchise franchisors.
provided with detailed information as it involves many important aspects
and the high cost
Who needs business plan?
a) Financial Institutions
the bank requires a business plan entrepreneurs to assess the viability of
the project or business before making any loan
b) Supplier
Providing capital resources faster and cheaper
Only give credit sales if financial position and business entrepreneurs
have the potential to succeed.
c) Investors
source of external capital to finance start-up or business growth.
Investors will evaluate and invest in businesses that are guaranteed to
provide a higher profit.
Whos should prepare business plan?
New entrepreneurs.
New business entrepreneurs seeking external funding to launch their
business.
Existing entrepreneurs who seek financing for business development.
Any entrepreneur who wants to increase their business success.
Why business plan is important?

documenting the business ideas that are generated in addition to
identifying potential problems and find solutions.
managers will use the plan as a benchmark
to review progress and future business goals.
To find the financial resources or outside investors.
BUSINESS PLAN COMPONENTS

1.
Introduction
This area covers the following items:
a) Main Page
b) Contents
c) Executive Summary
a)
Main Page
It is to inform the reader of what they are about to read & provide
information regarding the business. The main page consists of the
name of persons involved, name of company that prepare the BP,
company logo, address, phone number, fax number & e-mail address.

b)Contents.
Consists of all the chapters in the BP.
It is a document that helps the reader track a specific topic.
Every page, section & sub-section is important & needs to be numbered.
c)Executive Summary.
The main area of a BP.
It explains in brief the main elements of the proposed business idea.
1 to 2 pages only.
Financiers & investors will read this first to grasp hold of the main idea of
BP.
It must be able to capture the attention of the reader.
The MAKE OR BREAK of a BP.

Exec Summary should also discuss in brief the following items:
Company Status? Company management/Key personnel/ Strengths?
How the product looks like or is going to look like and what makes it
unique? Target market, size & market share?
Financial flow; Forecasted sales, revenue & profits? Financiers? (bank &
biz. partners)

2) BUSINESS MATTER
This area provides the information on status & trend, product information
& product development, description of management team & marketing
strategy. It consists of:
a) The Industry;
b) The Company;
c) The Product;
d) Market Analysis;
e) Marketing Plan;
f) Production or Operation Plan;
g) Management Plan

a)
THE INDUSTRY
) An entrepreneur should define the industry & his objectives.
) Understand the industry clearly.
o) At which stage is the industry?
o) Introduction, growth or mature industry?
o) Is the industry affected by changes in technology, economy, demography
& other surroundings?
) An entrepreneur should identify & evaluate true competitors to his/her
own capabilities.

b)
THE COMPANY
Company information can be described in 3 phase:
1. Company history
2. Current status
3. Future planning

1) Company History
Formation: When and who is the founder?- Who owns the company?Why and how was it formed?
Type of company; sole proprietor or partnership or private limited What is the companys product? Why is it the choice & how does it fit the
need of the market?
Is network created with the suppliers & the clients? - What is the success
rate in the market? - What are the problems faced & what is the solution?

2) Current Status of Company
Is there any difference? If there is, what is the unique and outstanding
feature? - Product: If there are any difference, Explain! What is unique
about it? How does it fit the need and environment of the market?
It should also explain the management, target market, size and market
share, financial, product improvements, trends, other changes in plans
as compared to past achievements.

3) Future Planning
What are the future plans for the product? Explain if it should differ from
now. - Marketing Plans: short term & long term goals to penetrate the
market and achieve financial success. - What is the facilities & resources
needed?
How to capitalize on the strengths & reduce the weaknesses? - How to
overcome resource shortage such as technology, human resource,
finance etc.

c) PRODUCTS
Should be explained through description, application and advantages;

i) Product Advantages
The advantage of a product is normally described as unique by the
customers:
Performance
Price
Multi-Purpose
Long Lasting
Speed
Accuracy
Cost Effective
Quality
Design and others

ii) Product Description
Types of products?
types of products to be produced?
what makes it different? - uses?
what is the lifespan of the products?
what are the accessories and is it ready for the customers? Etc..

iii) Product Application
Is it a new product or a new brand or an existing product?
how is the product used and who is the customers - product manuals ?
Will the product be purchased repeatedly or once?
Is it able to compete with other products in the market?

d) MARKET ANALYSIS
this of should describe the knowledge of the industry and provides the
data of the market research;

Customer analysis
identify clients
who are the buyers? Age, job, income, geographical location, lifestyle,
attitude and others?
why do buyers buy?
why and what makes it profitable? Fulfill the needs or just wanting it? Is
the lifestyle different should the product be bought?

ii)Market analysis
identifying market
How many potential buyers? What is the market share and size? How
often do they buy? Market status: new or mature? Market potential with
economic growth or government policy or changes in the environment?
Can it affect the market?
Market segment
What is the kind of market segment? Geography or activity or customers
purchasing power or attitude?

iii)Competitive analysis
identifying competition
who are the main competitors to the company or the products? where
are they and how long theyve been in the biz.? Are they expanding or
deteriorating? How far are they controlling the market? Is the competition
intense?
competitive analysis
types of products and types of market segment , need to evaluate
strength , weakness , opportunity and threats of competitors .
BP COMPONENTS
Example ; competitive analysis based on strengths and

weaknesses . Ratings from 1 to 10
Factors
Company
Competitor
1
Competitor
2
Competitor
3
Competitor
4
Products
Production costs
Price
Profit margin
Technology
Management
Financial capital

e)MARKETING PLAN
Marketing plan is done to enable the company to operate in a
competitive environment, to maintain profit & market domination. This is
done through 4 Ps strategy.
4Ps: 1) Pricing strategy , 2) Promotion strategy, 3) Distribution strategy
(Placing) & 4) Product strategy .
i)Pricing strategy
what are the price of the products ? Are the customers sensitive to
pricing ? Why is this pricing strategy chosen ? Will the price reduce
when the sales increase ?
1)Additional cost price: set the price by adding fixed cost + variable cost
+ % of profit wanted. 2) Demand price: set the price according to
demands in the market, if demand is high you can set at a higher price.
3) Competitive price: set the price according to competitors price. 4)
Additional price: set price by adding the profit wanted.

ii) Promotion strategy
How do you inform & offer the products to potential buyers? Which is the
best method to inform about the advantages & reliability of the
products ?
It can be done in a few ways ;
advertising - sales promotion - personal sales good public/customer
relations
iii) Place (Distribution strategy)
how to distribute products to the buyers? Who will distribute? What types
of distribution network depends on the industry and the market size.
Distribution methods ; direct selling, manufacturers sale from factory,
agents, wholesaler, broker, direct mailing, selling through internet.
iv) Product strategy (already discussed product advantages, product
applications, product descriptions)

f) OPERATION / PRODUCTION PLAN
This part describes all activities involved in production process from raw
materials to finished products including determining the facilities &
production tools used .
i) Lists out what is needed to produce the products
What are the items of components needed ? Where do you get ? How
much does it cost ? How much do you need for stock ? Why do you
need any stock ?
ii) List out the tools needed for production operation cost. Show if these
tools are bought or rent . What are the costs?
iii) Lists out skilled laborers needed to operate the tools & machineries.
How much is the compensation and salary?
iv) Space Space needed to create products , store the raw materials ,
keep the finished products, car parking facilities . How much is the rent ?

g) MANAGEMENT PLAN
Management plan identifies who the managers/supervisor/workers are ,
their positions, responsibilities & experiences needed in the
organization/company .
organization chart & management structure is needed to describe the
chain of command and authority.

h) FINANCIAL INFORMATION
the main focus of the BP readers - should be made easy for the reader
to understand , evaluate & make financial analysis on the project or
business .
Financial analysis should contain PRO FORMA of 3 financial statements
1)cash flow statement,
2) profit & loss statement,
3) balance sheet.

i)Cash flow statement
incoming & outgoing of cash flow in a business - consists of revenue &
expenses, money receives (cash in) or payments (cash out)
Profit & loss statement
consists of revenue and expenses , financial surplus/deficit - prepared
based on financial year end - capable of showing profits - return on
investment. Usually the total amount of sales minus the cost & expenses.
iii) Balance sheet
to show assets & liabilities of the business
consists of fixed assets , current assets , current liabilities , debt , loans
and total liability and equity.
prepared yearly - helps the reader to determine the strengths &
weaknesses of the business through financial analysis such as current
ratio, acid-test ratio, the average collection period, Long-term debt ratio
and others .

As mentioned a Balance Sheet is about assets, liabilities & owners
equity of a business.
Fixed assets + current assets = liabilities + owners equity.
Fixed assets: building, machines, vehicles & furniture. Current assets:
cash at hand, cash in bank & stocks.
Liabilities: loans & debts. Equity: capital or money provided by owners to
his business
Balance Sheet (example of ABC Company)

4.Attachments
any documents to support your BP
such as supporting research data - financial goals ; map to your
business premise, a copy of business registration, letter of permit
approval, agreements - personal testimony - pictures of products ,
pamphlets etc.

Front Page
Contents
Executive Summary
1.0 Industry
2.0 The Firm/The Business
2.1 History of the Company
2.2 Current Status
2.3 Future Plan
3.0 Product
3.1 Product Description
3.2 Product Application
3.3 Product Advantageous
4.0 Marketing Analysis
4.1 Customer Analysis
4.2 Market Analysis
4.3 Competitor Analysis

5.0 Marketing Plan
5.1 Pricing
5.2 Promotion
5.3 Distribution & Positioning
6.0 Operation/Production Plan
7.0 Management Plan
8.0 Financial Plan
8.1 Cashflow Statement
8.2 P & L Statement
8.3 Balance Sheet
9.0 Attachments
CONCLUSION
A good business plan and could potentially create the success of a
business that developed.
Components discussed the business plan consists of four main parts:
the introduction, part of the business, financial statements and
attachments

Business Plan Components

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CHAPTER 7

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

TYPES OF BUSINESS PLAN

Concept-Based Business Plan

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

TYPES OF BUSINESS PLAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

TYPES OF BUSINESS PLAN

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

TYPES OF BUSINESS PLAN

Agricultural business plan

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

Who needs business plan?

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

Whos should prepare business plan?

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN

Why business plan is important?

BPME1013 FUNDAMENTAL OF ENTREPRENEURSHIP

PREPARED BY: MATHIVANNAN JAGANATHAN