DEVELOPING A BUSINESS PLAN
BUSINESS PLAN: A written document
describing the nature of the business, the sales and marketing strategy, and
the financial background, and containing a projected profit and loss statement.
There are three primary
parts to a business plan:
• The first is the
business concept, where you discuss the industry, your
business structure, your product or service, and how you plan to make your
business a success.
• The second is the
marketplace section, in which you describe and analyse potential customers:
who and where they are, what makes them buy and so on.
• The financial section
contains your income and cash flow statement, balance sheet and other financial
ratios, such as break-even analyses.
OBJECTIVE OR IMPORTANCE OF BUSINESS PLAN
• To monitor the progress
after implementing business plan
• To persuade others to join business
• To seek loans from financial institutions
• To guide entrepreneur
in actual implementation of plan
• To identify actual
strength and weakness of plan
Business plan consists of seven key components:
- ü Executive
summary
- ü Business
description
- ü Market
strategies
- ü Competitive
analysis
- ü Design
and development plan
- ü Operations
and management plan
- ü Financial
factors
- ü a
business plan should also have a cover, title page and table of contents.
BUSINESS PLANNING PROCESS
•
Consumers/ customers
•
Existing companies
• Research and development
•
Employees
•
Dealers, retailers
2: Environmental
scanning: entrepreneur is required to conduct environmental
scanning which includes analyzing external and internal environment that
affects business idea.
1. External
environment comprises of:
a) Socio-cultural appraisal
b) Technological
appraisal
c) Economic
appraisal
d) Demographic
appraisal
e) Economic
appraisal
2. Internal
environment:
a) Raw
material
b) Production
c) Finance
d) Market
e) Human
resource
3: Feasibility analysis:
refers to conducting detailed analysis in relation to every aspect relevant to
business and determining credibility of business.
a) Market
analysis
b) Technical
and operational analysis
c) Marketing
plan
d) Production
plan / operational plan
e) Organizational
plan
f) Financial
plan
4.Project report
preparation: project report is a written document that
describes step by step strategies involved in starting and running business.
5.Evaluation, control and
review: as company operates in dynamic environment company must
monitor and review strategies and policies to stay in line with competition
existing in market.
COMPONENT OF IDEAL BUSINESS PLAN:
A MARKET PLAN
Market plan refers to plan that describes
market condition and strategy related to how products and services will be
distributed, priced and promoted in market.
- Defining business situation
- Defining target market
- Budgeting marketing strategy
- Marketing progress of marketing actions
B PRODUCTION PLAN
Production
plan is the process of converting the input into output through a conversion
process. The inputs are in the form of land, labor, raw material, machinery,
capital and information. Transformation takes place through machinery in
manufacturing unit and through employees skills in service sector.
DIMENSION TO BE COVERED WHILE DRAFTING PRODUCTION OR OPERATION PLAN
❖Plant location
❖Plant layout
❖Inventory management
❖Quality management system
❖Total quality management
❖Budgeting production plan
C FINANCIAL PLAN
it studies total
requirement of finance in terms of start-up expenses, fixed expenses, running
expenses etc. financial plan indicates the requirement of proposed business
enterprise. Which includes fund flow, cash flow statement, break even point,
projected ratio, projected balance sheet.
COMPONENT OF FINANCIAL
PLAN:
❖Operating and capital budget
❖Pro forma of income statement
❖Proforma of cash flow
❖Proforma of balance sheet
❖Break even analysis
❖Proforma for sources and application of
funds
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