MODULE 3

BUSINESS PLAN PREPARATION

AND WRITING

Lesson 1 The Concept of Business Plan

Lesson 2 Planning the Business

Lesson 3 Writing the Business Plan

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MODULE 3
BUSINESS PLAN PREPARATION AND WRITING

 INTRODUCTION

Venturing into a new business or doing any form of innovation or expansion in

a business organization requires a plan. A properly done business plan is a vital tool
for entrepreneurs as it provides guide in decision making. It is like a roadmap to
success, providing greater clarity on all aspects of a business.
Only a small fraction of entrepreneurs successfully steer their way to a stable,
profitable and viable enterprise. Even with a great original concept, technological
capacity and an available market, success of the business venture is not a sure thing.
One of the reasons why businesses particularly the smaller ones fail and have been
unable to access funds and are being turned down by financial institutions is because
of poor business plan (Aldaba, 2012).
Preparing a business plan is not easy. It is a well-researched and well-written
document prepared by the entrepreneur that will help convince the investors to
invest as well as to sell the business story to financial institutions. Creating a robust
business plan is a forcing function and the entrepreneur has to sit down and think
about major components of the business before getting started. Thus, entrepreneurs
must be equipped with the skills on how to prepare a business plan.

OBJECTIVES

At the end of this module, you will be able to:

1. Identify the key concepts and elements required in preparing and writing a
business plan;
2. Understand the importance of developing a business plan in starting-up a
business venture;
3. Discuss the principles of business planning and criteria of effective planning;
4. Outline the basic contents of a business plan; and
5. Create a business plan for a chosen potential business.

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Lesson 1

 THE CONCEPT OF A BUSINESS PLAN

Learning Outcomes:
At the end of the lesson, you should be able to:
1. Define what is a business plan
2. Determine who are the users of a business plan
3. Identify the internal and external goals in the business plan process
4. Discuss the importance of preparing a business plan

What is a Business Plan?

In the launching of any new venture
or expanding an existing one, the most
important stage is the construction of a
business plan. Such a plan must include
the short and long term goals for the

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enterprise; a description of the products
or services to be offered and the market
opportunities that have been anticipated
for them; and finally, a clear explanation
of the needed resources and means to be
employed in order to achieve goals in the
face of possible competition (Barrow,
2008). Research studies reveal that the
absence of a written business plan leads
to a higher incidence of failure for new
and small businesses, as well as inhibiting
growth and development.
A business plan is a document in which a business opportunity is identified,
described and analysed, examining its technical, economic and financial feasibility.
As the Department of Trade and Industry (DTI) puts it, the document allows
entrepreneurs to find out whether or not their business idea will bring in more money
than how much it costs to start and run it. The business plan involves all the
procedures and strategies necessary in order to convert the business opportunity
into an actual business project. It is an essential tool in starting up a business,
regardless of the size of the project and/or amount of business experience of the
entrepreneur.
A business plan is the “battle plan” of the entrepreneur in running his business
and effectively competing in the industry. It represent his map that points out where

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he is at a particular moment, and where he wants his enterprise to be in the future.

This business plan, also termed by some as the entrepreneur’s business bible, is the
entrepreneur’s vehicle for describing the goals of the business, why the set goals
are technologically and economically feasible, and how these set goals can be
reached over coming years.
More than just a document, the business plan helps business owners in figuring
out the key aspects of an enterprise, including the following:
• Business goals and strategies to meet them
• Competitive edge and how to leverage it
• Potential problems and how to solve them
• Funding required to start the business
• Equipment, facilities, and manpower needed for operations
A business plan is also designed to outline individual responsibilities of the
entrepreneur and his (future) employees, project the enterprise’s sales, expenses
and cash flows, explain to employees what is expected of them, improve overall
company performance, assist managers in decision making, plan for new products
and/or innovated products, and possibly raise capital for one’s business.
The entrepreneur’s business plan is not merely supposed to be a document
made and shelved. This means that it should be a source document which the
entrepreneur would like to use and work on regularly (i.e., monthly, weekly or even
on a daily basis). A good business plan guides the entrepreneur through each stage
of starting and managing the business. The business plan will be used as a roadmap
for how to structure, run, and grow the new business. It’s a way to think through
the key elements of the business.
Who Needs a Business Plan?
Every aspiring entrepreneur who will spend a great amount of money, time,
and energy to earn a profit needs a business plan. Business planning is a crucial part
of starting an entrepreneurial journey, no matter how small or big a business is.
Never skip this step—as they say, failing to plan is planning to fail.
The following are the entities that benefit much from business planning:
 Start-ups – the classic
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business plan writer is

an entrepreneur of a
start-up business
seeking sources of
funds to begin their
new venture, hence a
need for a business
plan that explains the
nature of the business
venture, how it will achieve its goals, and why the founders are

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the best people to lead the company. The start-up business plan should
specify the capital needed to jumpstart the new business.
 Existing Businesses - Not only do start-ups gain advantage from a
business plan—existing enterprises need it, too. But business plans for
growing businesses serve a different purpose. Usually, it helps a
middle-stage business raise funds for additional facilities, equipment,
manpower, and others needed for expansion. This document also
defines strategies for growth and allocates resources based on
strategic priorities. Growing businesses also use business plans to
communicate their vision to various stakeholders such as customers,
business partners, potential investors and lenders, employees, and
suppliers. For such needs, a business plan for existing businesses lays
out the goals, strategies, and metrics to evaluate success,
responsibilities, and resource allocation.
 Social Enterprises - Social enterprises may not be as profit-driven as
other business types, but that doesn’t mean they need business
planning any less. A social enterprise needs to prepare a business plan
to achieve its social objectives and keep empowering the communities
it’s supporting. This document is what government agencies and donor
agencies require and evaluate when approving grants for funding a
social project. A social enterprise business plan determines the social
issue that a business idea will solve, its beneficiaries, products or
services, target market, and sales projections, among many others.
 Non-Profit Organizations/NGOs - Like social enterprises, non-
governmental organizations (NGOs) can also use business plans to
source funds for their campaigns and projects. A non-profit business
plan discusses the problems an NGO is trying to solve through a certain
project, as well as how it will do that and how much resources are
needed. It also helps the organization and its board members to
prepare for risks by making projections on how likely the activities will
push through and how the current sources of funds will continue to
yield a certain level of revenue. Most importantly, the business plan
defines the Plan B if the original plan ends up failing.

Goals of the Business Plan Process

Any business plan has two purposes to serve. To begin with, it helps you run
your business with a cohesive vision based on where you would want to see the
business in a year from now. It serves as a roadmap to achieve the business goals you
have set for yourself.
Another purpose that you need to have a business plan is to show to the
financial institutions and banks that you have access to the business roadmap. Banks
want to make sure that you have a clear vision for developing your business ahead
so that their risk factors are mitigated to a greater extent.

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Objectives of Business Plan

 Dedicating enough time for planning – A workable business plan
cannot be created overnight. It is bound to take its own time to
develop. So, a perfect business plan will attempt to spend enough time
and hard work to achieve successful implementation. This should be
one of the crucial stages in a business plan. A complete analysis of the
current situation is the key to evolving plans. Review the situation
through brainstorming and other techniques to define the goals.
 Create goals and objectives - An organization depends heavily on the
business plan to arrive at the description of business it performs. There
are several areas that a company will focus on if it wants to realize its
objectives, understand the market that it is planned to operate in and
the strategy to achieve the goals. Lack of a business plan will leave the
management without any means to check out the theories on how to
operate the business. In essence, a business plan will help a company
to test different methods in reaching the best standards and policies.
 Evaluating performance - A business needs proper planning and
control over the activities for enhanced performance. It will be an
essential step towards achieving the long term survival of the
organization as a whole. The business plan also comes with a financial
part to it and used for comparing the actual performance with the
estimated one. The ability and provision for such a control and
evaluation procedure are what offers you a great advantage in
checking the success of the operations. This way, you will be able to
detect issues like production or delivery delays, or even increasing
production costs.
 Gauging business strategy and applying due correction - A Business
plan is what would assist you in assessing the efficiency of your
strategies for achieving business goals. In an ideal condition, a business
needs to have the planned results with which the actual results can be
compared, and the way forward is decided. If any of the strategies are
found to be unsuccessful in achieving the relevant results, it may be a
perfect idea to ditch the strategy or take corrective actions. It is wise
to have a good business plan so that the management does have
a reference with which it can have a healthy comparison of the actual
result achieved.
 Arranging financial resources - A business plan can be much helpful
and instrumental in acquiring adequate business financing. Like we
stated already, banks and lenders look for a proper business plan
before lending you any sort of finance. A business plan should be
prepared in such a manner that the banks will have a clear
understanding of the business perspective that the owner has. The
lenders will be able to get to the root of the actual vision shared by
the promoters and the methods of operation that will be employed.

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Being financially viable is one of the prime objectives of a good

business plan.
 Stay consistent - This should be yet another objective that a business
plan needs to be focused with is being consistent. A good business plan
should place proper value on the exact process and its adherence to
the planned goals. Sticking to a consistent schedule will work wonders
in achieving the planned goals effectively. This will also help the
employees and other staff to fall into a proper routine. This will help
the concept of planning to be a part of your business culture.
 Keep your goals ‘SMART’ - No, we are not referring to SMART as in
the word intelligent. We mean your goals in the business plan should
be S-M-A-R-T (Specific, Measurable, Actionable, Realistic, and Time-
Bound) to achieve success. This will help you achieve the business goals
as laid out in the business plan effectively and efficiently. It would be
practical to have your team member analyze the goals set so that you
will get back to a realistic approach.
 Performing SWOT - SWOT Analysis is one of the best options you
would want to go with when it comes to focus on an effective business
plan. Having perfect knowledge of the strengths and weaknesses of
your organization helps you come up with a better insight into the
realistic goals. The SWOT analysis also takes into account
the opportunities and threats that the organization can come to face
to face. This will assist you to focus on the positive factor and take
corrective actions against the negatives.
 Marketing Analysis - Marketing forms an integral part of a business
and so does with the business plan. This part of the business plan should
be focused on determining the potential of your product or service
while letting the business owners know more about future customers.
The marketing analysis part of the business plan should ideally provide
you with a means of understanding your industry as a whole.

Importance of Preparing a Business Plan

There are number of important benefits from preparing a business plan:
 A business plan enables an entrepreneur to make mistakes on paper,
rather than in the marketplace. While business plans have many
purposes, the primary importance of a business plan is that they help
business owners make better decisions. According to data from CB
Insights, some of the most common reasons of failure in business
include: no market need, lack of capital, inadequate team, stiff
competition, and pricing. However, these mistakes can be avoided if a
business plan is created.
 Once completed, a business plan will make an entrepreneur feel more
confident about his/her ability to set up and operate the venture.

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While business plans have many purposes, the primary importance of a

business plan is that they help business owners make better decisions.
 The business plan will show how much money is needed, what it is
needed for and when, and for how long it is required. Potential
investors or lenders want a written business plan before giving out
money. A mere description of the business concept is not enough.
Instead, the entrepreneur must ensure he/she have a thorough
business and financial plan that demonstrates the likelihood of success
and how much will be needed for the business to take off. As under-
capitalization and early cash-flow problems are two important reasons
why new business activities fail, it follows that those with a soundly
prepared business plan can reduce these risks of failure. It will,
however, help display the entrepreneurial ability and managerial
talent to the full and to communicate ideas to others in a way that will
be easier for them to understand – and to appreciate the reasoning
behind those ideas. These outside parties could be bankers, potential
investors, partners or advisory agencies.
 Preparing a business plan will provide an insight into the planning
process. It is this process that is important to the long-term health of
a business, and not simply the plan that comes out of it. Businesses are
dynamic, as are the commercial and competitive environments in
which they operate. No one expects every event as recorded on a
business plan to occur as predicted, but the understanding and
knowledge created by the process of business planning will prepare the
business for any changes that it may face, and so enable it to adjust
quickly.
 Through the business plan, the entrepreneur can plan for the lean
months and ensure that the business will have enough resources to
meet business obligations during the periods when sales are low. In the
same manner, the business plan will help the entrepreneur get ready
for the peak production months to avoid losing any business
opportunity.
 Having a business plan helps an entrepreneur define and focus on
his/her business ideas and business strategies. The plan will serve as a
road map to an unfamiliar territory and as such, minimize or avoid
unpleasant surprises. It will also allow an entrepreneur to estimate
how the business will perform in the future and to prepare for
contingencies in case things will not turn out as planned. Having a
business plan helps an entrepreneur identify potential pitfalls in the
business idea. It can be shared with others who can give their opinions
and advice.
 A business plan will enable an entrepreneur to set targets in terms of
sales volume and revenues, as well as expenses, among others. Once
the business is put up, the entrepreneur can always go back to the
business plan to measure actual performance against the set goals. A
business plan is a communication tool that can be used to secure

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investment capital from financial institutions or lenders. It can also be

used to convince people to work for your enterprise, to secure credit
from suppliers, and to attract potential customers.
Characteristics of a Sound Business Plan
Business plans are required whenever money is to be raised, whether from a
bank, a finance house, or a provider of equity capital. In order to win the interest
of these institutions, the business plan must possess the following characteristics:
 Clarity – the language used in the business plan should be kept simple and
should avoid trying to get too many ideas into one sentence. It should let one
sentence follow on logically from the last. It should go easy on the adjectives,
and tabulate whenever appropriate.
 Brevity – if the banker gets bored while reading the business plan, it is
unlikely to get a favorable response. The plan should be as short as possible,
leaving only the essentials of what the reader ought to be told.
 Logic – the facts and ideas presented will be easier to take in and make more
impact if they follow one another in a logical sequence.
 Truth – the entrepreneur should not overstate his/her case
 Figures – the banker or investor is more interested with numbers. Hence, a
clear explanation is important.

LEARNING ACTIVITY
Interview an entrepreneur within your community who has a well-established
business (at least 5years) and ask if a business plan was prepared before pushing
through with the business venture. If yes, what were the major considerations and
area/s what were given focus in the preparation of the plan? If not, what were the
preparations done in lieu of a business plan?
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Lesson 2

 PLANNING THE BUSINESS

Learning Outcomes:
At the end of the lesson, you should be able to:
1. Describe the common principles of business planning
2. Discuss the stages of business plan development
3. Explain the criteria of effective planning
4. Discuss the steps in business planning

Principles of Business Planning

Here are some principles of planning which have general application
particularly for micro and small business:
a) Planning must be realistic. It must be based on the available resources:
human, financial, and physical resources
b) Planning must be based on felt needs. The objectives of an
entrepreneur should fit the needs of the people in a community. It can
be known through observation, personal interview and questionnaires
c) Planning must be flexible. Resource needs and economic conditions
change. Planning should be adjusted to such changes to be effective
and relevant
d) Planning must start with simple projects.
Hindle and Mainprize (2006) suggested that business plan writers must strive
to effectively communicate their expectations about the nature of an uncertain
future and to project credibility. The liabilities of newness make communicating the
expected future of new ventures much more difficult than for existing businesses.
Consequently, business plan writers should adhere to five specific communication
principles.
First, business plans must be written to meet the expectations of targeted
readers in terms of what they need to know to support the proposed business. They
should also lay out the milestones that investors or other targeted readers need to
know. Finally, writers must clearly outline the opportunity, the context within the
proposed venture will operate (internal and external environment), and the business
model (Hindle & Mainprize, 2006).
There are also five business plan credibility principles that writers should
consider. Business plan writers should build and establish their credibility by
highlighting important and relevant information about the venture team. Writers
need to elaborate on the plans they outline in their document so that targeted

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readers have the information they need to assess the plan’s credibility. To build and
establish credibility, they must integrate scenarios to show that the entrepreneur
has made realistic assumptions and has effectively anticipated what the future holds
for their proposed venture. Writers need to provide comprehensive and
realistic financial links between all relevant components of the plan. Finally, they
must outline the deal, or the value that targeted readers should expect to derive
from their involvement with the venture (Hindle & Mainprize, 2006).
Stages of Business Plan Development
1. Essential Initial Research
 A business plan writer should analyze the environment in which they
anticipate operating at each of the levels of
analysis: Societal, Industry, Market, and Firm. This stage of planning
is called the Essential Initial Research stage, and it is a necessary first
step to better understand the trends that will affect their business and
the decisions they must make to lay the groundwork for, which will
improve their potential for success.
 In some cases, much of this research should be included in the
developing business plan as its own separate section to help show
readers that there is a market need for the business being considered
and that it stands a good chance of being successful.
 In other cases, a business plan will be stronger when the components
of the research are distributed throughout the business plan to provide
support for the outlined plans and strategies outlined. For example,
the industry- or market-level research might outline the pricing
strategies used by identified competitors, which might be best placed
in the Pricing Strategy part of the business plan to support the decision
made to employ a particular pricing strategy.
2. Business Model
 Inherent in any business plan is a description of the Business
Model chosen by the entrepreneur as the one that they feel will best
ensure success. Based upon their analysis from the Essential Initial
Research stage, an entrepreneur should determine how each element
of their business model—including their revenue streams, cost
structure, customer segments, value propositions, key activities, key
partners, and so on—might fit together to improve the potential
success of their business venture
 For some types of ventures, at this stage an entrepreneur might launch
a lean start-up and grow their business by continually pivoting, or
constantly adjusting their business model in response to the real-time
signals they get from the markets’ reactions to their business
operations. In many cases, however, an entrepreneur will require a
business plan. In those cases, their initial business model will provide
the basis for that plan.
 Throughout this and all of the stages in this process, the entrepreneur
should seek to continually gather information and adjust the plans in

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response to the new knowledge they gather. The business plan

developer might need to conduct further research before finishing the
business model and moving on to the initial business plan draft.
3. Initial Business Plan Draft
 The Initial Business Plan Draft stage involves taking the knowledge
and ideas developed during the first two stages and organizing them
into a business plan format. Many entrepreneurs prefer to create a
full draft of the business plan with all of the sections, including the
front part with the business description, vision, mission, values,
value proposition statement, preliminary set of goals, and possibly
even a table of contents and lists of tables and figures all set up
using the software features enabling their automatic generation.
Writing all of the operations, human resources, marketing, and
financial plans as part of the first draft ensures that all of these
parts can be appropriately and necessarily integrated. The business
plan will tell the story of a planned business start-up in two ways:
1) by using primarily words along with some charts and graphs in
the operations, human resources, and marketing plans and 2)
through the financial plan. Both must tell the same story.
4. Making the Business Plan Realistic
 The first draft of a business plan will almost never be realistic. As
the entrepreneur writes the plan, it will necessarily change as new
information is gathered. Another factor that usually renders the
first draft unrealistic is the difficulty in making certain that the
written part—in the front part of the plan along with the operations,
human resources, and marketing plans—tells the exact same story
as the financial part does. This stage of work involves making the
necessary adjustments to the plan to make it as realistic as
possible.
 The Making Business Plan Realistic stage has two possible feedback
loops. The first means going back to the Initial Business Plan Draft
stage if the initial business plan needs to be significantly changed
before it is possible to adjust it so that it is realistic. The second
feedback loop circles back to the Business Model stage if the
business developer needs to rethink the business model.
5. Making Plan Appeal to Stakeholders and Desirable to the Entrepreneur
 A business plan can be realistic without appealing to potential
investors and other external stakeholders, like employees,
suppliers, and needed business partners. It might also be realistic
(and possibly appealing to stakeholders) without being desirable to
the entrepreneur. During this stage, the entrepreneur will keep the
business plan realistic as they adjust plans to appeal to potential
investors, stakeholders, and themselves.
 If, for example, investors will be required to finance the business’s
start, some adjustments might need to be relatively extensive to
appeal to potential investors’ needs for an exit strategy from the

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business, to accommodate the rate of return they expect from their

investments, and to convince them that the entrepreneur can
accomplish all that is promised in the plan. In this case, and in
others, the entrepreneur will also need to get what they want out
of the business to make it worthwhile for them to start and run it.
So, this stage of adjustments to the developing business plan might
be fairly extensive, and they must be informed by a superior
knowledge of what targeted investors need from a business
proposal before they will invest. They also need to be informed by
a clear set of goals that will make the venture worthwhile for the
entrepreneur to pursue.
6. Finishing the Business Plan
 The final stage involves putting the important finishing touches on
the business plan so that it will present well to potential investors
and others. This involves making sure that the math and links
between the written and financial parts are accurate. It involves
ensuring that all the needed corrections are made to the spelling,
grammar, and formatting. The final set of goals should be written
to appeal to the target readers and to reflect what the business
plan says. An executive summary should be written and included as
a final step.
Criteria of Effective Planning
 The plan should state clearly its objectives. Such clear statement is necessary
so that those who will be involved in the execution of the plan will
understand, accept, and support it.
 The plan should provide measures for a satisfactory accomplishment of the
objectives in terms of quantity, quality, time and cost.
 The plan should state the policies, which should guide people in attaining the
objectives.
 The plan should indicate what department or unit would be involved in
accomplishing the objectives. It may or may not spell out the procedures for
performing the required work.
 The plan should indicate time, which should be allowed for each activity. It
may be necessary to establish a target data for completing the activity.
 The plan should specify the required resources and their corresponding costs.
 The plan should designate the officers who will be held accountable for the
accomplishments of the objectives.

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STEPS IN BUSINESS PLANNING

1. Evaluate your personal resources and interests, and the resources of
the community.
 Do you have the necessary funds?
 Do you have skills or management experience?
 Does the government provide financial and technical assistance?
 Are raw materials available?
 Are you interested in such business?
 Do you have good human relations?
2. Analyze your market.
 Is there a good demand for your product?
 How many competitors are there in the market?
 What is your estimated share in the market?
 Who are your customers?
 Are they interested in existing products or services?
 IS it possible for you to offer better quality or a lower price?
 Is there a reasonable profit?
3. Choose a proper business location.
 Is it near your perspective customers?
 Are there facilities like electricity, water, transportation, and
communications?
 Is the place clean, decent, and peaceful?
 Do you have a good alternative in case the best location is expensive?
 Is it accessible to raw materials and other suppliers?
4. Prepare a financial plan.
 What are your objectives?
 How much money do you need?
 How will you spend the money?
 Where will you get the money?
 What are your expenses?
 How soon can you recover your money or investment?

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5. Prepare a production plan.

 Is it economical to rent or buy production equipment?
 Can you ensure or improve the product design or quality?
 Can your production facilities meet demand?
 Do you have inventory control?
 Do you have proper scheduling of production?
6. Prepare an organizational plan.
 What type of business organization is most suitable?
 Do you know the corresponding laws, policies, requirements of your
business organization?
 Who will be the officers and employees of your enterprise?
 What are their duties and responsibilities?
7. Prepare a management plan.
 What are your goals and objectives?
 What are your strategies?
 Do you have business policies for your customers?
 Do you have human resources development for your employees?
 What is your program responsibility?

Watch: 9 steps in creating a business plan

(https://www.youtube.com/watch?v=FjWLdTHnbMg)
Watch: How to write a business plan
(https://www.youtube.com/watch?v=Fqch5OrUPvA)

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Lesson 3

 WRITING THE BUSINESS PLAN

Learning Outcomes:
At the end of the lesson, you should be able to:
1. Identify the different sections a business plan
2. Discuss the components of a business plan
3. Create a business plan for a chosen potential business

COMPONENTS OF A BUSINESS PLAN

A business plan is basically composed of the following:
1. Executive Summary
This is the most important
portion of a business plan because it is
the part that persuades a reader to
spend time to find out about the
different aspects of the business

https://iconscout.com/icon/project-brief-1
venture (Abrams, 2003). The goal in
writing the executive summary is to
motivate and entice the reader. Most
of the time, capitalists, investors and
bankers prefer to receive just the
executive summary before going
through the entire plan. This is the part
where the entrepreneur make a whole
out of the disparate parts of the
business.
Although it appears first in the completed document, it is imperative
that the executive summary should be written last. It contains everything that
is relevant and important to the business plan audience. It is the synthesis of
the entire plan. It gives the general idea about the contents of the plan. It
also states the name of the person who is planning to set up the business,
form of ownership, the business address, type of project, objective(s) of the
business, and the total cost.
The executive summary must contain the major argumentations of the
business proponent on why the business will work and succeed. It should
provide the business plan audience the overview on why investors or
financiers should invest in the business venture.

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The executive summary should then highlight the good qualities of the
business proponents and their partners, the enterprise organization and its
capabilities, the technology providers and their expertise and experiences,
and the suppliers and all the major service providers.
In a short space, the executive summary must let the reader know that:
 The basic business concept makes sense.
 The business itself has been thoroughly planned.
 The management is capable.
 A clear-cut market exists.
 The business incorporates significant competitive advantage.
 The financial projections are realistic.
 Investors or lenders have an excellent chance to get their money back.

If the business plan audience reading the executive summary concludes that
all the elements above exist in the proposed business, that person will most likely
commit to reading the rest of the parts of the plan.

Depending on the nature of the business and the capability of the writer,
executive summary can be written in two approaches:

 The Synopsis Summary – it is more straightforward and it simply relates,

in abbreviated fashion, the conclusions of each section of the completed
business plan. This approach is easier to prepare and does not require a
talented writer. It briefly covers all aspects of the business plan and
treats each of them relatively equally.
 The Narrative Summary – this approach is more likely telling the reader
a story. It demands a capable writer to prepare a narrative summary that
communicates the necessary information and stimulates enthusiasm.
This approach is more useful for businesses that offer new product, new
market, and new operational techniques which requires further
explanation. This approach has fewer sections but it has greater
emphasis on the business’ concept and unique features and less
attention is given to operational details.

The following details should be at the top page of the executive summary:

• Company name, address, phone number

• Name and position of contact person at your company
• Date of preparation of the business plan

It will then be followed by these information:

a) Description of the Business. This briefly describes the nature of your

product or service, unique selling proposition (for goods) or unique
selling features (for services), and what you hope to accomplish over
the next 5 to 10 years.
b) Strategic Direction. This portion identifies the current stage (e.g.,
start-up development, turn around) of the business. Briefly describe

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the overall strategic (or long –ranged) direction of the company for the
next 1 to 5 years.
c) Market. The market simply refers to the clientele of the business
enterprise. Very rarely do businesses cater to homogeneous customers
(customers with the same characteristics and consume the same
products regardless of their characteristics). It is more common that
various businesses cater to various markets with heterogeneous
characteristics. Usually, market segmentation strategies are used to
properly define who the market is, and what characteristics they have.
The more identified the market, the easier to push products to them.
d) Marketing. This section briefly describes the market segment and the
techniques employed to reach this market segment. Techniques may
range from advertising campaigns, promotional gimmickry, publicity
stints, and others.
e) Management. Management briefly describes the background and
responsibilities of the founders, managers and employees of the
company. It also present scope of authority of these position properly
execute the stated responsibilities.
f) Financial features. This section states expected revenues and profits
for this year, next year, and for five years in the future. It also provides
similar information on your projected assets, liabilities and net worth.
It also allows estimation on how much capital you will need and how
you intend to use the proceeds. In many instances projected financial
statement (which include the balance sheet, income statement and
each cash flow) shown.
g) Financial Arrangement/Exit. This section answer questions, such as:
for debt funding, what will be used as collateral? For equity funding,
how much (or percentages) equity you give up in exchange for such an
investment? What is the expected annual return for the investors? How
many investors are sought? What is the minimum investment required
per investor? Financial arrangement also explains when and how the
investors will get their money out of the business (e.g., through buy
back, acquisition, pubic offering, etc.) In the case multiple sources of
financing, the sources and amounts of founding are summarized.

2. Company Description
This is the section of a business plan
that requires the least amount to prepare.
https://www.iconfinder.com/icons/3834145/busi

The Company Description communicates the

basic details of the business in a brief form.
Only one aspect of this part is likely to
require additional preparation, but it is an
important one. The Statement of Mission
provides focus for the business venture and
should be the guiding principle for its
operations in the next few years. Having this
means that the entrepreneur understands

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the focus of the business and can articulate the objectives concisely.

Other key elements found in this section are the following:

 Company name (legal name, brand or trade name, or subsidiary
company names)
 Legal form of business (sole proprietorship, partnership, or
corporation)
 Management/leadership
 Business location
 Development stage – indicate phase of development: a seed company
(without a product or service even finalized); a start-up (in early stages
of operation); expansion (adding new product, services, or branches);
retrenchment (consolidating or repositioning product lines); or
established (maintaining market share and product positioning).
 Financial status
 Products and services (can be included either in the company
description section of the business plan or a separate section)
 Patents and licenses

3. Industry Analysis
An industry consists of all companies supplying a similar product or
service, other businesses closely related to that product or service, and supply
and distribution systems supporting such companies. Every business is part of
an overall industry, so the forces that affect the industry as a whole will have
an effect on a certain business. Hence, there is a need for the entrepreneur
to evaluate its industry’s standards, trends and characteristics as it increases
the knowledge of the factors that contribute to the business’ success and
shows potential investors that the entrepreneur understands external
business conditions.
In the industry analysis section of the business plan, the writer needs
to do some research and focus on the following:
 A description of the industry
 Current trends in the industry
 Strategic opportunities that exist in the industry

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It is important to

new-tools-democratizing-data-analysis-visualization/
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consider the trends in the
economic sector where the
business venture belongs. The
four general sectors are 1)
service; 2) manufacturing; 3)
retail; and 4) distribution. It is
not necessary to have a
detailed analysis of a certain
sector, but there must be a
clear understanding of its past
performance and future
projections.

The business venture may also be part of two or more industries (e.g.
electronics and automobile industry). Hence, research must be done in each
industry where the business intersects. The entrepreneur must pay attention
to the rate at which the industry is expanding because this gives an insight into
the opportunity available for the business. It is also crucial to understand how
vulnerable the industry to economic downturns. Considering the economic
conditions or cycles that affect the business will help entrepreneur anticipate
and plan for unforeseen events.
The seasonality and technological changes must also be considered by
the entrepreneur. For number of industries, certain times of the year yields
higher revenues than others. Thus it is necessary that the entrepreneur
understands and gives account for the seasonal factors that may give an effect
on the financial performance of the business. Technological advances also
affect every industry; thus it is useful to take note of the trends of the last
five or ten years. Some technological changes may give an entrepreneur with
strategic opportunities to be emphasized when writing the business plan.
Part of the industry analysis is government’s regulation. Some
regulatory measures of the government may also provide strategic
opportunities. For instance, strict environmental regulations of the
government have opened up new industries that deal with waste management
and energy conservation. Another major consideration that is crucial in
determining the business’ success is the industry’s supply and distribution
channels. An entrepreneur must carefully consider when entering industries
with extremely limited supply or distribution system. Some industries
experience difficulty in the access to distribution while others may have few
reliable sources of supply. Costs may remain lower in industries with large
number of suppliers and distributors.

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4. Target Market
It is essential for an
entrepreneur to have a thorough
understanding of his/her

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customers because one of the key
to the success of the business is
being able to meet customer’s
needs. Defining the nature and
size of the market is also critical
because many investors normally
invest with companies that are
market-driven. Being in harmony
to the market may cause the
entrepreneur to make changes in
its marketing activities like advertising, packaging, location, sales structure,
and even the features of the product or service being offered.
Analysis of market is not the same with marketing plan. Market analysis
enables the entrepreneur to identify and understand the target customers
while marketing plan tells how the entrepreneur is going to reach the
customers. In case the product or service goes to retail outlets or distributors
rather than directly selling it to end-users, both of the markets should be
analyzed because the two may have different demands and needs.
In defining the target market, the entrepreneur needs to identify the
particular market segments the business wishes to reach. These segments
describe distinct, meaningful components of the overall market and gives a
set of specific characteristics by which to identify the target market. The
definition of the target market must meet the following criteria (Abrams,
2003):
 Definable. It should have specific characteristics identifying what the
potential customers have in common
 Meaningful. The characteristics meaningfully relate to the decision to
purchase
 Sizable. It must be large enough to profitably sustain the business
 Reachable. Both the definition and size must lead to affordable and
effective ways to market to the potential customers
After defining the market, the entrepreneur should assess its size and
trends, evaluate its competitors for that particular market, and probe the
market for strategic opportunities. A concise description and understanding
of the target market will give focus when developing the product or service
as well as in designing the marketing plan and in forecasting sales and
expenses.

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5. The Competition
When preparing the
competitive analysis portion of the
business plan, the following are the
points to be considered:

https://images.app.goo.gl/nZNmyAdBq9gCNK6F7
 Who are the major competitors
of the business
 On what basis is the business
competing
 How the business and
competitors compare
 Potential future competitors
 Barriers to entry for new
competitors

When doing the analysis, the following customer perception factors

should be considered:
 Product/service features
 Indirect/peripheral costs
 Quality
 Durability/maintenance
 Image/style/perceived value
 Customer relationships
 Social image

Some internal operational factors that increase competitiveness

include:
 Financial resources
 Marketing program/budget
 Economies of scale
 Operational efficiencies
 Product line breadth
 Strategic partnership[s
 Company morale/personnel
Companies that generate a significant portion of all sales to the target
market must be carefully considered because they generally define the
standard features of the product or service. These companies also
substantially influence the perception of the product or service by customers
and they usually devote considerable resources to maintaining their market
share. Thus, the entrepreneur must plan on committing the resources
necessary to obtain, preserve and expand its market share.

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6. Marketing Plan
Many investors read the marketing plan portion first or second because
they want to know that the entrepreneur has a realistic and price-conscious
plan to get the product or service into the hands of the customers. The
marketing plan should be able to define:
 How customers get aware of the product or service.
 What message is to be conveyed to customer about the product,
service or the company itself.
 Specific methods to be used in the delivery and reinforcement of the
message.
 How to secure actual sales.

Note that marketing and

sales are two different activities.

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Marketing involves activities that
increase customer awareness about
the product or services such as
advertising, and public relations,
while sales encompasses direct
actions taken to solicit and procure
customer orders like telemarketing,
outbound sales calls, and direct-
mail solicitations.

Traditional marketing experts emphasize the four P’s of marketing:

Product; Price; Place; and Promotion (this will be discussed further in the
next module). Customers nowadays not only look for products just to fill a
need but they are also concerned about how the product or service will affect
their lives. Hence, the marketing message must tell customers what they get
like security or an enhanced self-image. The Five F’s below are a convenient
way to sum up what customers want (Abrams, 2003).
 Functions. How does the product or service meet their concrete needs?
 Finances. How will the purchase affect their overall financial
situations?
 Freedom. How convenient is it to purchase and use the product or
service? How will they gain more time and less worry in other aspects
of their lives?
 Feelings. How does the product or service make customers feel about
themselves, and how does it affect and relate to their self-image, and
will they like and respect the salesperson and the company?
 Future. How will they deal with the product or service and company
over time, whether support and service will be available? How will the
product or service affect their lives in the coming years, and will they
have an increased sense of security about the future?
Most customers would want to receive benefits in all the areas
mentioned, therefore, the entrepreneur should be aware of how the product

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or service fulfils the entire range of their needs. But the primary message
must concentrate on one or two of these benefits that most effectively
motivate the customers and that will improve the competitive position of the
business.
After clarifying what the
entrepreneur want to tell to the
customers about the product or
service, how to disseminate that
information will be the next concern.
Some of the marketing vehicles that
can be used are the following:
 Brochures
 Print media
 Broadcast media
 Advertising specialties
 Direct mail
 Public relations
 Sampling
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 Informal marketing/networking

Different marketing tactics can also be employed in addition to

marketing vehicles mentioned. These tactics include, but not limited to
media advertising (social media, print media, TV, radio), customer-based
marketing (point-of-purchase promotion), strategic partnerships, special
offers/promotions, and premiums.
Finally, sales process needs to be identified. Although this information
may not be included in a business plan intended for external funding
purposes, the data on sales productivity is necessary in developing realistic
forecasts. Some of the aspects to be considered in evaluating sales process
include:
 Cold-calling
 Leads
 Productivity
 Order-fulfilment
 Goals
 Follow-up efforts
In preparing the marketing section of the business plan, it is important
to put emphasis on the marketing and sales planning in a concise and
compelling way. The entrepreneur must also make a few reasonable
predictions of what the competition is going to look like in the future.

7. Operations Plan
The operations section describes how the products are made or
services are delivered, how orders are fulfilled, how quality standards are
assured and how outputs are met. The operations plan will highlight the
logistics of the organization such as the various responsibilities of the

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management team, the tasks assigned to each division within the company,
and capital and expense requirements related to the operations of the
business.
It is the section where the day-to-day functions in the business will be
explained. The details in the operations section of the business should be
limited to those issues that are essential to the nature and success of the
company, those that provide a distinct competitive edge for the business, and
those that overcome a frequent problem in the kind of business being
ventured in.
Thus, if the business is
manufacturing in its nature
wherein distribution is critical,

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there should be an emphasis on
this that would clarify the
company’s improved approach
in this issue. However, if the
business is retail, distribution
may not be an issue and it no
longer needs to be discussed. If
the business is an enterprise
that develops or relies heavily
on new technology, this aspect
should be thoroughly explained.
Operations have many financial implications, hence the information
included in the business plan should be clear. For new businesses, the start-
up costs should be included. For both new and existing businesses, a schedule
for equipment can be created.
The important elements to be considered in preparing the operations
section of the business plan are the following:
 Facilities – considering the location, terms and length of lease,
improvements, and utilities/maintenance.
 Production – must look into the various stages involved in creating the
product or service, how workforce are organized and deployed,
utilization of technology, labor and technological productivity and
capacity, quality control, and equipment and furniture.
 Inventory control – one of the approaches to inventory management
is “just-in-time” inventory control.
 Supply and distribution – select suppliers that understands the
business’ needs, and ensure reliable distribution.
 Order fulfilment and customer service – assess the methods by which
goods are prepared and delivered to customers.
 Research and development – the entrepreneur must always be
updated with new developments that are going to affect the business.
 Financial control – set up procedures to ensure that financial
information is handled promptly and accurately.

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 Other operational issues – a variety of other operational concerns may

also be highlighted such as protecting the safety of workers, protecting
the environment, dealing with government regulations, arranging
insurance protection, or exporting goods.

The aim of the operations section is to show that the entrepreneur

have a firm grasp on the operational necessities of carrying put the business
and to show understanding of how those operations relate to the overall
success of the business. It is not necessary to present a step-by-step
explanation of how the business or company functions or go into specific
details of activities as these could be reflected in the internal procedures
manual.

8. Management and Organization

Management is the key to success for every business (Abrams, 2003). It
takes capable people, with appropriate experience and abilities, to develop
both a management structure and style that make full use of the personnel
and financial resources of the business and keeps the company focused on its
mission.
Many investors base
their investment decisions
almost entirely on the
strength of the people
involved in the business.
Experience, skills and

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personalities of the
management team have a
great impact on the long-
term fortunes of a company
than the product or service
provided. Investors and
lenders carefully scrutinize
the qualifications of the
people behind the business.
Hence, particular care in crafting the management section is needed. In
developing the management plan, entrepreneur must focus on two main
areas; 1) the people who run the business; and 2) the management structure
and style.
In evaluating the management team, the following personnel are to be
included:
 Key employees/principals – the most important person in a business is
the founder/s, especially for start-up companies, who is the first one
to be evaluated in terms of experience, successes, and education.
Other managers to evaluate in the business plan include: top decision
makers (president, CEO, division president); key production personnel
(COO, plant manager, technical director); principal marketing staff;

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primary human resources staff; and head of research and development.

The compensation and incentives offered to the key employees also
need to be discussed, such as salary, bonuses, commission, profit
sharing, equity and stock options.
 Board of directors
 Advisory committee
 Consultants and other specialists
 Key management personnel to be added

A company’s organization and management style act as powerful

invisible force shaping both the daily working atmosphere and future of the
company. In looking at the company’s structure, there is a need to examine
both the formal lines of authority that exist and the informal ways in which
decisions are made and employees are treated. The easiest way to
communicate the management structure is through a graphic organizational
flow chart. Short narrative description should be provided explaining the
relationships shown on the chart.
All managers have management styles, even if they’ve never thought
about their approach to management. The management style should reinforce
the corporate culture and company message.
The five most important elements of management style are:
a) Clear policies
b) Communication
c) Employee recognition
d) Employee’s ability to affect change
e) Fairness

How the entrepreneur prepare the management section of the business

plan depends a great deal on whether it is being written for internal use only
or whether it will be submitted to outside investors. If the plan is for internal
use, management aspects which center on structure, style and gaps in
personnel need to be emphasized. However, for plans used for financing
purposes, focus should be on the relevant backgrounds of the management
team members.

9. Financial Plan
This is the most crucial part of the business plan. The tone of this
section will depend on who the recipient of business plan is. If the recipient
of the business plan is a lender, the entrepreneur need to show that the
business is going to be stable, profitable and cash generative and that the
entrepreneur is not going to take too much risks. If it is an equity investor the
entrepreneur need to show that the business can become big and cash
generative enough to make it easy to sell and enable him to reach his target
return.

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As a minimum, a full set of financial statements (to be discussed

further in the next module) over three years and a monthly cash flow
statement needs to be shown (for existing business). It is also a good practice
to show a monthly financial statement for the first year. The reason why
investors like to see monthly numbers for the first year is that it is going to
be the most critical year as it is the year the business is most vulnerable and
any delay or underperformance will have some repercussions over the next
few years.
Although your hopes
and plans for financing the

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business will be set out in all
the cash flow forecasts and
the like, which will be
attached as appendices, it
will be helpful to give a brief
summary now of the
important points. No matter
how small the business, it is
expected to show:
 the expected turnover for the first year;
 the expected net profit for the first year;
 how much of the loan will be paid off in one year;
 when you expect to pay off the loan entirely;
 what you hope for in the second year (when payments from the
Business Start-up Allowance, if any, will no longer be coming in).
The financial plan translates into monetary terms the various plans for the
business. Among the financial schedules to be presented in the Total Project Cost,
which is made up of the following items: total fixed assets, the working capital, and
the pre-operating expenses. Examples of fixed asset include building, land, and
equipment used in the business. Working capital refers to amount of funds needed
to pay for expenses, such as material and supplies, labor, and utilities needed for
production within a relatively short period (every two weeks or one month) after
which the products can be sold. Examples of pre-operating expenses are registration
fees and fees paid to a consultant or researcher who prepared the feasibility study.
The following are elements in the financial plan:
Source of financing. This section of the financial plan will simply indicate
where the funds for the business will come from. This presupposes that the
proponent has determined the total project cost. The funds may come from the
owners or co-owners, if any, in which case they are known as equity contribution. It
may come from barrowing money from relatives, friends, banks, and other sources.
These sources of borrowed funds are known as creditors.
Financial statements. In a financial plan, all the statements prepared are
projections or expectations of what the enterprise intends to sell or to spend, how
much will the assets be worth, and how much will be put into the business in terms

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of owner’s equity and loans from creditors. The plan usually includes the following
financial statements (to be discussed further on the next module):
 Profit and Loss Statement (P&L) or Income Statement
 Balance Sheet or Statement of Financial Position
 Cash Flow Statement
Financial Analysis. It basically consists of computations of profitability,
liquidity, and marketability of the enterprise based in the information from the P&L
and the balance sheet. Profitability, liquidity and marketability are indicators of
how “fit” or “sickly” a business is.
SAMPLE OUTLINE OF A BUSINESS PLAN
I. Executive Summary
a) Business Mission
b) Business Overview
c) Market Overview
d) Operations overview
e) Financial highlights
II. Company Description
a) Structure and Ownership
b) History
c) Location
d) Management team
III. Product or Service
IV. Industry Analysis
a) Demographics and Segmentation
b) Target Market
c) The Competition
d) Barriers to entry
e) Regulation
V. Marketing Plan
a) Competitive edge
b) Pricing
c) Marketing vehicles
d) Marketing strategies
e) Milestones
VI. Operations Plan
a) Facilities
b) Production process
c) Supply and distribution
d) Inventory control
VII. Management and Organization Plan
a) Form of ownership
b) Personnel Plan
c) Management team background
d) Roles and responsibilities of personnel

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VIII. Financial Plan

a) Source of Financing
b) Financial statements
c) Financial analysis

Learning Activity - Developing a Business Plan

The given format below will help you start your journey in developing a
business plan. Assuming you already have a business concept in mind, create a
business plan that is intended for attracting investors or financial backers, and at
the same time as a road map for your business (you can adopt the sample outline of
business plan provided in the module).

Note: You can click on the video link below to get business ideas.
(https://www.youtube.com/watch?v=G0dzLanYW1E)

Executive Summary:
Company Description
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
What will be the nature of your business? Manufacturing? Retail? Service?
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

Who will be your clientele?

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

What kind of services will you provide?

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

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List your business goals.

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________________

Describe who will be your customers?

_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Describe which services you will be providing or products you will be selling or
creating.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________________
Organization and Management: You must find out what will be the best
organizational and management model for you and your business. Who does what in
your business? What will be the composition of your business team and what will be
their functions and responsibilities.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________________
Service or Product Line: Are you going to sell a product or a service? What will be
the benefit for your customers?
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
________________________________________

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Marketing and Sales: How are you going to drive the sales in your business and keep
your customer loyal? What will be your sales strategy? How are you going to advertise
your business?
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

Funding Request: Do you have enough funding to start your business or are you going
to seek other funding venues such as loans, private investment money, or
partnerships? You may need to calculate the cost of starting your own business. This
may include the expenses for starting up until you start to generate your own capital
and also your assets such as property, equipment, furniture, and inventory.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Identify your funding sources. How are you going to obtain the capital to start
your own business?
Funds Needed Sources

Financial Projections: If you are going to seek any loans, most creditors are going
to ask you to supply prospective financial data in which you will present what you
expect your business to do in the next 3- 5 years.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

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 MODULE SUMMARY

There is a need to plan your business rather than to plunge ahead on to it. In
Module 3, you were able to explore the importance of business planning and putting
it into writing.
There are three lessons in Module 3:
Lesson 1 deals with the concept of a business plan and its importance.
Lesson 2 contains discussions about the principles of business planning and its
step by step process.
Lesson 3 focused on the different sections of a business plan.
Good job! You have just finished Module II. Make sure you are able to answer
each of the learning activities to make your learning experience even more meaningful.

GEEC 112 – The Entrepreneurial Mind Module 3