FINANCIAL

PLAN
 One of the most difficult parts of
the business plan is the financial
plan. Not all entrepreneurs are
adept with accounting procedures,
rules, and reporting policies.
However there is no choice for the
entrepreneur but to be familiar with
numbers. The sustainability of a
business depends on a meticulous
monitoring of finances.
This is the portion of the
business plan that speaks of
the product or service
performance . 
 FINANCIAL DATA
 LIQUIDITY

 CASH FLOW

FINANCIAL STANDING
OFFERING CREDITS TERMS TO:
 CUSTOMERS
APPLYING BANK FOR A LOAN
EXPAND
OR SELL THE BUSINESS

  Without  proper accounting of business

activities and transactions, the
entrepreneur will be loss on where his or
her business is leading on her.  
 Financial management begins
when the entrepreneur starts to
raise capital for the business
venture.
 Capital is the money that will
be allocated by the
entrepreneurs to establish a
business.
It shouldn't be mixed with the
personal money of the
entrepreneur. A business is
separate entity and should not be
mixed with the personal finances of
the entrepreneur.
 A number of entrepreneurs
produce capital out of
their Personal savings. 
 Some of the budding entrepreneur
borrow money from families or friends,
whereas same look interested investors
or stakeholders.  The entrepreneurs can
also turn to banks or financial
institutions for capital, but they usually
require collaterals and base their credit
decisions on the business performance
(e.i., the net income of the business). 
 Collateral refers to high value assets
that is submitted by the business to the
bank when applying for a loan and will
be subject for repossession if the
business defaults. Regardless of where
the capital was sourced, putting this
capital at risk is one of the major
reasons that most entrepreneurs are
afraid to engage in a business venture.
 FACTORING AFFECTING
ESTIMINATION OF REVENUE
A business opportunity can only be
considered a real one when the entrepreneur
recognize that the opportunity may bring
him or her revenue.

 Revenue is the output of a sale wherein the

sale price exceeds the cost to produce the
product or render the service.
Revenue is considered earned when
the product is already sold or service
has been rendered regardless if the
business is paid in cash or credit.

Revenue is considered deferred when

the product or service has not yet been
delivered or sold but the customer
already paid in advance.
 EXTERNAL AND
INTERNAL FACTOR
The economy and the external primary
target market – the entrepreneur must be
able to incorporate the overall health of the
economy in its estimation of project revenue.

The external competitors – the

entrepreneur must devise a comprehensive
competitive profile matrix a chart that details
there relevant data of both direct and indirect
competitors and how these factors affect
profitability.
Direct competitors are those that
offer exactly the same
product/product lines or service as
the entrepreneur.

Indirect competitors are those that

do not offer exactly the same
product or service but
entrepreneur’s market share. 
The internal business –
the entrepreneur must also
devise his or own marketing
strategies based on external
and internal scan and from
the competitive profile
matrix.
COMPUTATION OF
GROSS REVENUE
STEP 1 : COMPUTE FOR THE
MARKET UNIVERSE OR
TOTAL MARKET
The entrepreneur must derive
the figure that represents the
market universe or total market
to understand how big the
market is.
To illustrate the computation of market size, assume
that Mr. Castro became interested also in selling
cellphone prepaid load, because 95% of the people
in his barangay have cellphones and most of them
are on prepaid. Mr. Castro wants to know the market
size of the prepaid load business in his barangay. He
has the following data :
Cellphone owners in Barangay Bacani – 5,000
Number of times the customers buy load per week
-2
Average amount of load customers load buy - ₱
100
Market size = total number of customers x number of
times the customer buy the product or avail the service
per year x average amount per purchase/service
availment

Market size = 5,000 x (2 times in a week x 4 weeks = 8

times per month x 12 months = 96) 96 x ₱ 100 per load
purchase

Market size of cellphone prepaid load in Barangay

Bacani
= ₱ 48,000,000
STEP 2 : Plan to capture remaining market
share.
 According to the competitive scan of Mr. Castro,
there are five stores in his barangay that
dominate the prepaid load market. Their total
combines market share is 80%. They are the
same in terms of store size, and all of these stores
re wholesalers. Aside from these five, there are
four retailer stores in the community in that
haven't ventured yet in the prepaid load
business. Therefore, Mr. Castro still has 20% of
the overall market size to tap, which is equivalent
to ₱ 9 600 000 competing with the four retailers.
STEP 3: PLAN TO CAPTURE REMAINING MARKET SHARE
Mr. Castro must devise business strategies on
how to tap the reamining market and not let the
new retailers overtake him. Some of the strategies
that he can employ is to provide marketing
promos to customers (e.g., for every ₱ 30 load,
they can get one free candy or a loyalty reward
whre customers can get ₱ 30 free load whenthey
load ₱ 100 for five times). This is an application of
a differentiate his service from them. If
competitors try to copy it, Mr. Castro must think
another strategy to differentiate his service from
them.
He can focus on customer experience, whreby
customers, even without going to the store, can buy
load using thei social media accounts. This saga of
creating various differentation strategies will be an
iterativeprocess just to capture and maintain the
reamining market share. If the differentiation strategy
is really compelling, Mr. Castro can even acquire the
market share of market leaders. It is good to set
targets. But these targets will be dependent on the
external and internal factors previously mentioned.
Assume in this example that Mr. Castro sets the target
at 40% of the remaining market share, which is ₱ 9
600 000. The target annual market share is ₱ 9 600
000 x 40%
= ₱  3 840 000
STEP 4: PREPARE A REALISTIC FIVE YEAR PROJECTED
ANNUAL REVENUE
Mr. Castro must set a realistic and achievable five
year projection that incorporates the
contingencies and the external/internal factors
discussed. He must monitor the growth or
decline of both the market size and his market
share. If the movement in market size and the
market share isa not propotional, then Mr. Castro
can already glean roughly what is happening. If
the market size is growing but the market share is
not growing, then there is something wrong with
the strategies of Mr. Castro.
If market size is not growing but the market
share is growing, then Mr. Castro must be
doing a good job in serving the customers;
thus, he is eating the market share of the
competitors. Assuming Mr. Castro is
optimistic that he will be able to differentiate
and the grow the business, he is looking at a
5% growth in year 1 due to adjustments and
difficulties he will encounter, 15% growth in
years 2 and 3, and 20% growt in years 4 and 5.
table 4.2 shows Mr. Castro's projected annual
gross revenues from his prepaid load
business. 
Table 4.2. Sample projected annual gross revenues fo Mr.
Castro

Year 1 Year 1 Year 1 Year 1 Year 1

₱ 4, 032, 000 ₱ 4, 636, 800 ₱ 5, 332, 320 ₱ 6, 398, 784 ₱ 7, 678, 541