The business plan Prepared by: Mrs. Belen Apostol
The Business Plan • Potential investors are not likely to consider investing in a new venture until the business plan has been completed • The business plan helps the entrepreneur maintain perspective as to what needs to be accomplished.
Organizing the Enterprise, Planning the Enterprise • Entrepreneurs use planning and organizing to outline goals and define how the organization will accomplish business tasks. They may use a systematic plan broken down into steps or develop a generalized approach for achieving goals through various functions or processes.
Organizing the Enterprise, Planning the Enterprise • Strong planning and organization techniques ensure the enterprise stays focused on its goals and objectives. • Proper planning and organization management can also help the business remain flexible and adjust to changes in the economic environment.
Concept of a Business Plan • A business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. It is often an integration of functional plans such as marketing, finance, manufacturing, and human resources.
Components of Business Planning 1. Sales and Marketing Any sales and marketing decision made must be based on a realistic sales estimate over the period. 2. "Igniting Operations” Operational decisions cover Production, Engineering, Distribution, Human Resources, and Information Communication and Technology. 3. Technology The use of Technology can generate a significant market advantage that competitors find difficult to match.
Characteristics of a Sound Business Plan 1. A business plan should be detailed. In listing products and services for example, it should not stop by just enumerating them, it should include the descriptions and scope of the products and services. 2. It should include a market research that identifies competitors, the share of the market and the range of the products produced. By learning how competitors conduct their operations, tricks of the trade in the business may be learned and entered to be used as a basis to excel.
Characteristics of a Sound Business Plan 3. It needs to have a list of everything needed which comprises the equipment, technology, raw materials, financial and other resources needed when starting and running a business venture. Having all these listed will give an idea on how much capital is needed before the start-up and how much money should made in a day to make the business survive.
Characteristics of a Sound Business Plan 4. It also needs to be written in formal format and style since a business plan is something that have to be presented to business partners, financial firms and banks. Refrain from using slang in any part of the plan 5. A business plan should be error – free. This is important because the business plan defines the business person.
Why do we need a Business Plan 1. A business plan is an effective tool for defining the existing realities. It prompts to analyze the business project or the existing situation objectively and critically, define a focus and set realistic goals. It may also constitute the basis for control and evaluation.
Why do we need a Business Plan 2. A good business plan will reveal weaknesses or omissions in planning. Because good business plans require a guesstimate of risk calculation, it helps to reduce risks.
Why do we need a Business Plan 3. It provides a valuable communication tool presented in an organized, credible manner, which allows lenders, outside directors, investors, banks and employees to obtain a complex view of your business. Even if, in some cases, a business plan format is not officially required when applying for a loan, although most lenders will ask for one, the very existence of a plan constitutes a plus, a step forward in obtaining the loan.
Obtaining the facts for a Business Plan A business plan gives an insight into the entrepreneur's ability to define and develop policies for the essential areas of the business. This business document will map out the entire process by considering all the possible factors.
Obtaining the facts for a Business Plan Fundamental factors that is needed in creating a business plan: 1. Consultants and Backing Type: When starting to create a business plan, one must decide who will be reviewing it as this could help form a great plan. 2. Business Plan Outline: Outlining the plan for the business is the second most vital point once it has targeted its audience. The target audience will determine the structure of your document..
Obtaining the facts for a Business Plan Fundamental factors that is needed in creating a business plan: 3. Research and Information Collection: Once decided on the financial investment and its sources, it is time to make a research. The approach from the work experience of the entrepreneur and observation will help to research the market and the product. Published information from library, internet and paid database services will inform the entrepreneur on the market growth, overall industry outlook and customer requirements. Field research will help in covering interviews with customers, suppliers, competitors, and industry experts.
Obtaining the facts for a Business Plan Fundamental factors that is needed in creating a business plan: 4. Collection Files: sum up all experiences, interviews, and research in files for the plan analysis. 5. General Industry Overview: have a general understanding of the industry and the knowledge about the various strategies and services that apply in developing the business.
Obtaining the facts for a Business Plan Fundamental factors that is needed in creating a business plan: • 6. Analysis: Once data is collected, analyze the process of building an aggressive profile, a comprehensive plan and consider the risks involved with it. • 7. Executive Summary: When all the segments of the business plan is thoroughly completed write an executive summary highlighting the key points and including the loan repayment methods and return on investments.
Obtaining the facts for a Business Plan 8. Review and Editing: a well-written business plan opens the doors to success. It will become a road map to success, which guides the entrepreneur in the right direction. Therefore, make sure that it has been proofread and checked for a number of times before giving a final copy.
Outline of a Business Plan • The Executive Summary • TheExecutive Summary provides a concise synopsis of the business plan, and highlights the key points raised within. The Executive Summary must communicate to the prospective investor the size and scope of the market opportunity, the venture’s business and profitability model, and how the resources/skills/strategic positioning of the Company’s management team make it uniquely qualified to execute the plan. The Executive Summary must be compelling, easy-to-read, and no longer than 2-4 pages.
Outline of a Business Plan • The Industry This section evaluates the playing field in which the company will be competing, and includes well-structured answers to key market research questions such as the following: What are the sizes of the target market segments? What are the trends for the industry as a whole? With what other industries do your services compete?
Outline of a Business Plan • Market Analysis • This section assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them.
Outline of a Business Plan • Competitive Analysis • An investigation of direct and indirect competitors, with an assessment of their competitive advantage and an analysis of how it will overcome any entry barriers to the chosen market.
Outline of a Business Plan • Marketing Plan • A detailed explanation of the sales strategy, pricing plan, proposed advertising and promotion activities, and product or service's benefits.
Outline of a Business Plan • Management Plan • An outline of the business's legal structure and management resources, including the internal management team, external management resources, and human resources needs. • The Management Team section demonstrates that the company has the required human resources to be successful. The business plan must answer questions including: • Who are the key management personnel and what are their backgrounds? What management additions will be required to make the business a success? • Who are the other investors and/or shareholders, if any? • Who comprises the Board of Directors and/or Board of Advisors? • Who are the professional advisors (e.g., lawyer, accounting firm)?
Outline of a Business Plan • Operating Plan • A description of the business's physical location, facilities and equipment, kinds of employees needed, inventory requirements and suppliers, and any other applicable operating details, such as a description of the manufacturing process. • These sections detail the internal strategies for building the venture from concept to reality, and include answers to the following questions: • What functions will be required to run the business? • What milestones must be reached before the venture can be launched? • How will quality be controlled?
Outline of a Business Plan • Financial Plan • A description of the funding requirements, detailed financial statements, and a financial statement analysis.
Outline of a Business Plan • Appendices and Exhibits • Any additional information that will help establish the credibility of the business idea, such as marketing studies, photographs of the product, and/or contracts or other legal agreements pertinent to the business. • The Appendix is used to support the rest of the business plan. Every business plan should have a full set of financial projections in the Appendix, with the summary of these financials in the Executive Summary and the Financial Plan. Other documentation that could appear in the Appendix includes technical drawings, partnership and/or customer letters, expanded competitor reviews and/or customer lists.
Market Plan • The marketing plan details the strategy for penetrating the target markets. Key components include the following: • A description of the company’s desired strategic positioning • Detailed descriptions of the company’s product and service offerings and potential product extensions • Descriptions of the company’s desired image and branding strategy • Descriptions of the company’s promotional strategies • An overview of the company’s pricing strategies • A description of current and potential strategic marketing partnerships/ alliances
Production Plan • A production plan is that portion of the intermediate-range business plan that the manufacturing / operations department is responsible for developing. The plan states in general terms the total amount of output that the manufacturing department is responsible to produce for each period in the planning horizon.
Production Plan • The output is usually expressed in terms of pesos or other units of measurement (e.g. tons, liters, kgs.) or units of the aggregate product (this refers to the weighted average of all the products in the company). The production plan is the authorization of the manufacturing department to produce the items at a rate consistent with the company's overall corporate plan.
Production Plan • This production plan needs to be translated into a master production schedule so as to schedule the items for completion promptly, according to promised delivery dates; to avoid the overloading or under loading of the production facility; and so that production capacity is efficiently utilized and low production costs result.
Organizational Plan • An organizational plan is basically a “to do” list for an organization. It lists out the plan of work, programs and organizational growth over a period of time. The tasks involved, who is responsible for them, and when they’ll be done. • An organizational plan helps to: • Set priorities for work • Make sure tasks get done on time • Focus on one thing at a time • Share work among staff, board members & volunteers • Make goals clear to investors • Get a handle on big projects by breaking them down • See the big picture of what an organization is doing.
Financial Plan • The Financial Plan involves the development of the company’s revenue and profitability model. It includes detailed explanations of the key assumptions used in building the model, sensitivity analysis on key revenue and cost variables, and description of comparable valuations for existing companies with similar business models.
Financial Plan • In addition, the financial plan assesses the amount of capital the firm needs, the proposed use of these funds, and the expected future earnings. It includes Projected Income Statements, Balance Sheets and Cash Flow Statements, broken out quarterly for the first two years, and annually for years 1-5. Importantly, all of the assumptions and projections in the financial plan must flow from and be supported by the descriptions and explanations offered in the other sections of the plan. The Financial Plan is where the entrepreneur communicates how he/she plans to “monetize” the overall vision for the new venture.
Organizing the Enterprise • Common structural and operating components and all businesses include a series of jobs to be done and a specific overall purpose. Each organization must develop the most appropriate organizational structure -- the specification of the jobs to be done in the ways in which they relate to one another.
Organizing the Enterprise • Firms prepare organization charts to clarify structure and to show employees were they fit into a firm's operations. Each box represents a job, and solid lines define the chain of command, or reporting relationships. The charts of large firms are complex and include individuals and many levels. Because size prevents them from charting every manager, they may create single organization charts for overall corporate structure and separate charts for divisions.
Choosing Your Own Role in the Business • Your role within your business organization is of crucial importance to investors because you may very well make the difference between the success or failure of your business. • You should be able to describe exactly what part you will play in managing your business how you are going to compensate for your own weaknesses, such as lack of experience in certain areas or lack of knowledge.
Choosing Your Own Role in the Business • When you detail your role in your business, you describe your weak areas with respect to your role and outline how you plan to maximize your strengths and keep your own shortfalls at bay. • To confirm your qualifications, you need to establish your involvement in the overall, long-term planning for the company and establish your involvement in the day-to-day running of the company. • Establish your qualifications, including your education background and your business experience.
Choosing Your Own Role in the Business • If you have industry specific experience, you should detail that as well. • If you don't have much experience in the industry you will be operating in, then you need to provide some insight as to how you are going to acquire the necessary knowledge to operate successfully.
Choosing Your Own Role in the Business • If you will not be involved in the day to day functions of your business, you need to establish who will be taking on the responsibility as a general manager. • It is important to the security of your deal that you provide investors with sufficient information to be confident in the person (whether it is you or someone else) who will be managing the business and monitoring its performance.
Choosing People to Work With You • Identifying the Skills Your Business Needs But Lacks • The best way to find the right people for your business is by indentifying the jobs that need to be done, and then working out what type of person is needed to do them. • Make a list of jobs that need to be filled now and in the future. • Next to each item, note whether you or someone else will need to do that job. • Group tasks for specific roles and then create job specs accordingly. • Include a detailed list of responsibilities, and any qualifications or experience required for that role.
Choosing People to Work With You • Finding the Right Applicants • A good way to find employees is by recommendation. • Trade publications are also a good bet if you are looking for a specific skill set and there are now many online websites that allow you to easily post job advertisements as well.
Choosing People to Work With You • Interviewing a Potential Employee • When you interview a candidate for a job, make sure to prepare a list of questions in advance. • This should include questions relating to their experience, suitability, and attitude towards work. • Ask them how they would deal with various scenarios relevant to the potential role in your business.
Choosing People to Work With You • Choosing the Right Candidate • Finding the right type of employee isn’t just about finding someone with the right skill set. • You need to enjoy their company considering how much time you will be spending with them. • Many entrepreneurs go into business with people they don’t particularly like or get on with because they think the potential candidate is impressive. • Working with someone who winds you up, no matter how good their credentials, is not a recipe for your own motivation or business success!
Choosing People to Work With You • Go With Your Instinct • Go with your gut. • If you instinctively believe someone won’t be a good fit, then you’re probably right. • Try Before You Hire • An interview or discussion won’t always reveal whether someone is suitable • Some people are good at interviews but not on the job • Always try working with someone before you hire them full-time.
Choosing the Legal Form of Your Business • Each type of business is best for a specific purpose or situation, relating to taxes, liability, and your ability to control the profits and losses of the business. • Sole Proprietorship • A sole proprietorship is a business operated by one individual; the business is considered part of the individual, not a separate entity. • The business profits and losses are included on the individual's personal tax return, and the individual retains personal liability for the business debts and lawsuits.
Choosing the Legal Form of Your Business • Partnership • A partnership is a business entity with two or more individuals who share the risk and benefits of business. • A partnership may include general partners, who bear the liability for partnership debts and for actions of the partnership. • It may also include limited partners who are merely investors and who do not share in the day-to-day operations of the business and who do not share in liability.
Choosing the Legal Form of Your Business • Corporation • A corporation is an entity which is separate from its owners. • The corporation is formed under the laws of the state in which it is operating, with Articles of Incorporation.
Choosing the Legal Form of Your Business • Cooperative • A cooperative is an organization composed of individuals or businesses that have banded together to reap the benefits of belonging to a large organization. • Cooperatives are not organized for profit but to make its members individually profitable or save money.
The Option Not to Register • There is no option not to register for a certain business since setting up a business in the Philippines, as in other countries, will require the business owner to register with several government agencies. • For a company to be legitimate it must have records in different government agencies such as: • Department of Trade and Industry (DTI), • Securities and Exchange Commission (SEC), • Bureau of Internal Revenue (BIR), • Social Security System (SSS), • Philippine Health Insurance Corporation (PhilHealth) • Home Development Mutual Fund (usually referred to as Pag-IBIG).