GROUP MEMBERS :SHAYAN JAVEDHUMERA AHSAN ZAHID HUSSAINSAAD REHAN

LEARNING OUTCOMES : To define what the business plan is, who prepares it, who reads

it, and how it is evaluated. To understand the scope and value of the business plan to

investors, lenders, employees, suppliers, and customers To identify information needs and sources for each critical

section of the business plan. To enhance awareness of the ability of the internet as an

information resource and marketing tool. To present examples and a step by step explanation of the

business plan. To present helpful questions for the entrepreneur at each stage

of the planning process. To understand how to monitor the business plan

DEFINITION:It is a document prepared by and entrepreneur that describes,

The set of business goals, reason for viability, Functional plans for achieving the goals, relevant external and internal elements involved.It is an integration of functional plans and also contains background information about the organization and team. Business plan is not absolute but iterative.

SET OF BUSINESS GOALS;It gives idea about, Product being made Target consumer Market size Production quantity and quality

REASONS FOR VIABILITY;Why are these goals achievable Potential customer Availability of potential capital Available suppliers Market demand

FUNCTIONAL PLANS FOR ACHIEVING GOALS; Road map, guidance or structure in each particular area of business

such as Marketing Financing etc

It is a constant monitoring process(requires review).These plans will be discussed in the body laterIt also addresses both short term and long term decision making at least for the first three years of operation

EXTERNAL AND INTERNAL ELEMENTS;Business plan is influenced by these factorsExternal elements include,

Legal issues and regulations Marketing trends (bulls and bears) Customer needs Competition Political/economical environment

Internal elements include, Control over manufacturing Control over marketing etc Personal skills

WHO SHOULD WRITE PLAN

The business plan should be prepared by the entrepreneur.The entrepreneur may consult with many other sources, such as Lawyers Accountants Marketing consultants Engineers MentorsThese sources can be provided by the services of ;

Small Business Administration (SBA) Service Core of Retired Executives (SCORE) Small Business Development Centers (SBDC)

Other sources may be Business partners Internet Friends and relatives

Entrepreneurial Assessment is Necessary!!Tohelp determine whether to hire a consultant or to make use of other resources,the en- trepreneur can make an objective assessment of his or her own skills

SCOPE & VALUES OF BUSINESS PLAN

Good business plan should satisfy Possible readers and their requirements

(investors, employees, bankers, venture capitalists, suppliers, customers, advisors, and consultants)

Perspectives to be considered entrepreneurial perspective Market perspective (should be customer driven) Investors perspective (based on finance)

SCOPE & VALUES OF BUSINESS PLAN contd;

The depth and detail in the business plan depend on the size and scope of the proposed new venture.

Differences in the scope of the business plan may depend whether the new venture is a service, involves manufacturing,

Overall future of business Viability of venture in market Guidance to managing and organizing functional plan Powerful tool to obtain financing Who is our customer and competitor etc

PREREQUISITES (INFORMATION AND DATA REQUIRED)

Steps followed, Define goals and objectives

Business plan must reflect reasonable goals Strategy of achieving the goals Feasibility study

Quick feasibility study of the business concept to see whether there are any possible barriers to success

Information should focus on: Market Operations Financial aspects

Market Information :

MARKET INFORMATION;

For a defined market we gather information about, Market potential Size of market Collect market data

(from market associations and sources) Market competitors

Figure 7.1 - An Upside-Down Pyramid Approach to Gathering Market Information

OPERATIONAL INFORMATION;Depending on nature of business, the entrepreneur may need information on the following

Location Manufacturing operations Raw materials Equipment Labor skills/expertise Space (land building etc.) Overhead

Research should be made by keeping targeted readers in mind.

FINANCIAL INFORMATION NEEDS:

FINANCIAL INFORMATION;

For gathering financial information the pre requisite is the budget of enterprise.Budget includes List of expenditure List of revenue and funds

Forecasted based on market dataNow the financial information required is

Available equity Required balance Sources

• Available sources• Selection of best sources

Industry benchmarks can be used in preparing the final pro-forma statements in the financial plan

INFORMATION SOURCES;Different information resources include

Friends Internet

An entrepreneur can access: Popular search engines. Competitors’ Web sites. Social networks, blogs, and discussion groups.

In addition to websites, the entrepreneur can also investigate newsgroups to gather information anonymously from experts and customers on competitors and market needs. Relatives Mentors Professional support system Customers and distributors etc General observation

EVALUATION ;Business plan should meet the needs of readers (evaluators)Business plan should reflect,

Strength of management or personnel Strength of product or service Strength of available resources

Entrepreneur makes plan by keeping viewpoint of Customer Investor Investors focus on

Payback time Collateral equity

4 C’S OF CREDITLenders and investors usually focus on

Character of entrepreneurEntrepreneur credit history(focused more by investor than lender)

Cash flowEntrepreneur ability to meet debt and interest payment

CollateralSecurity given to banks or lenders

Contribution of equityAmount invested by investor, payback time etc

Presentation Of Plan

PRESENTATION It is an oral presentation Its purpose is to convey our idea to audience(investers) in limited time frame Time frame is usually 20-30 minutes The entrepreneurs are expected to “sell” their business concept in this short time period Some investors describes these presentations as “elevator plans” Typically the focus is on

why this is a good opportunity an overview of the marketing program (addresses how the opportunity will convert to reality). The results of this effort (sales and profits). Concluding remarks might reflect the recognized risks and how the entrepreneur plans to

address them.

Example Forums held by different institutions e.g. MITBenefits of these forums are

Financial rewards in case of wining Identification of draw backs and customer needs

WRITING THE BUSINESS PLAN.

WRITING THE BUSINESS PLAN; It is the much time consuming phase of new venture.(may

take hundreds of hours) Time taken depends on experience & knowledge of

entrepreneur.QUALITIES;It should,

Be comprehensive Fulfill aspects and purposes of business Convey a complete picture fo business to targeted people

(investers,customers,employees)

BODY OF BUSINESS PLAN;

Body consists of following.I. Introductory pageII. Executive summaryIII. Environmental and industry analysisIV. Description of ventureV. Production planVI. Operational planVII. Marketing plan VIII. Organizational planIX. Assessment of riskX. Financial plan XI. appendix

INTORDUCTORY PAGE;It is a title or cover page giving a brief summary.

CONTENTS;Its contents are, Name & address of company / business Name & address of principles (entrepreneur/partners) Nature of business(one short paragraph) Statement of finance needed Statement of confidentiality

It reflects nature of business and financial needs.

EXECUTIVE SUMMARY;This section of business plan consist of 3-4 pages and is written at the end.

PURPOSE;should stimulate the interest of potential reader( investors, customers etc.)QUALITIES;It should,

Be attractive enough to compel reader for further reading. Highlight the key point in business.(entrepreneurial

background) Should contain supportive evidence (market suveys,contracts)

ENVIRONMENAL AND INDUSTRY ANALYSIS;

ENVIRONMENTAL ANALYSIS;It is assessment of external uncontrollable variables that may impact business plan.Some variables are,

Economy (trends in GNP, income per capita) Culture (nature of native population) Technology (technology development, competitors, trends of

customer) Legal concerns (product specs, distribution and promotion)

Though controllable but know how of these factors helps in making a good business strategy.

Table 7.5 - Critical Issues for Environmental and Industry Analysis

INDUSTRY ANALYSIS;It should be conducted to find industry trends like,o INDUSTRY DEMAND;It shows

trends in market (bulls and bears) No of competitors Possible changes in customer needs

o COMPETITORS;Mostly threat to an entrepreneur is from large corporation. So necessary to identify

competitors(internet, customers, advertisements, journals) Their weakness and strengths

DESCRIPTION OF VENTURE;It provides a complete overview of products, services and operations of new service.It includes Mission statement

It defines nature of business in one statement Key factors to provide clear description (product,

services,location,size of business etc.) Description of venture is function of nature of business. Venture may be

Product manufacturing Service providing

Table 7.6 - Describing the Venture

Production Plan Manufacturing process (amount subcontracted) Physical plant Machinery and equipment Names of suppliers of raw materials

MANUFACTURER Nature of product ( what will be made) Quantity of production

High production Low production

Services to customers (warranty, maintenance, parts supply)

PRODUCTION PLAN Contd.SERVICE PROVIDER Nature of service (Hospital, transport, courier service) Location of offices etc. Macro overview(Location and infrastructure in city) Micro details

Parking, u turn Office equipment and personnel Manufacturing plants Technology acquired Introduction to business partner Background Legal issues

Table 7.7 - Production Plan

OPERATIONAL PLANIt is one step beyond to manufacturing.It describes the flow of goods or servicesAs the business may be

Product manufacturing Service industry

Product MANUFACTURINGIn this case points to be described are Inventory/storage Shipping Inventory control procedure Customer support service

SERVICE INDUSTRYIn this case the points to include in business plan are Purchases of products Shipment of products Storage of products Delivery to customer Transaction mechanisms Operational plan is greatly influenced by

location Dealings of personnel's

MARKETING PLAN;It describes market condition and strategy related to how the products and services will be distributed, priced and promoted.PRICING;It is influenced by

Culture Per capita income

Distribution;Distribution mechanism includes

Selection of different markets Shipment methods/contracts Feasible and customer attractive

Promotion;(way of product introduction)Methods of promotion are

Electronic media Print media Sponsoring events etc.

PRODUCT FORECAST;This section include Sales of products Product modification regarding market Marketing plan should be reviewed accordingly with

time.

ORGANIZATIONAL PLAN;It describes form of ownership and lines of authority and

responsibility of members of new venture.New venture may be Partnership

(includes terms of partnership) Corporation

(includes name addresses, resumes of directors of corporation)A chart indicating the lines of authority and responsibility should be provided Organizational plans gives a clear view about

who will be controlling the organization what would be responsibilities of members

ASSESMENT OF RISKThis section identifies the potential hazards and alternatives strategies to meet the business plan

Risk should be assessed in the following way Identify and indicate risk Define their effect on venture Strategies to minimize or overcome risk

These risk might rise due to Competitors reaction Weaknesses of management team Advancement of technology in market etc.

FINANCIAL PLANThis section includes projection of key financial data that determines the economic feasibility and necessary financial investment commitment

It summarizes forecasted sales and expenses for at least first three years (first year projection is provided monthly) Forecasted product, administrative expenses and taxes are discussed At last financial conditions are discussed

Assets of business Investments of entrepreneurs and partners Application of funds Comulative profit or loss Breakeven analysis

Appendix;This section provides extra material to backup your

business planThis includes Letters from customers, distributors & subcontractors

etc. Research data to support plan decisions Leases, contracts and agreements etc Price list from suppliers and competitors

Using and Implementing the Business Plan

The business plan is designed to guide the entrepreneur through the first year of operations.

The strategy should contain control points to ascertain progress and to initiate contingency plans if necessary.

Without good planning employees will not understand the company’s goals.

Businesses fail due to entrepreneur’s inability to plan effectively.

Using and Implementing the Business Plan (cont.)

Measuring Plan Progress Business plan projections are made on a 12-month schedule but the

entrepreneur should frequently check on: Profit and loss statement. Cash flow projections. Inventory control. Production control. Quality control. Sales control. Disbursements. Web site control.

Using and Implementing the Business Plan (cont.)

Updating the Plan Entrepreneurs must be sensitive to changes in the company,

industry, and market. Determine what revisions are needed if changes are likely to affect

the business plan. This helps entrepreneurs to:

Maintain reasonable targets and goals. Keep the new venture on a course to high probability of success.

Why Some Business Plans Fail

Goals are unreasonable. Objectives are not measurable. Entrepreneur has not made a total commitment to the business

or to the family. Lack of experience in the planned business. No sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or

service.