Neen eee ieee eco Se eee eects Ree ee eee Les Prepare, write, and present a business plan. Pee eee ee un LEARNING OBJECTIVES Ree Eee eo be {NtRoDUCTION ‘business plan is a roadmap and blueprint of the project. A business plan is a written document describes in detail how a business is going to achieve its goals. It is a document that explains a ness opportunity, identifies the market to be served, and provides details about how the entre frencurial organization plans to pursue it.' Ideally, the business plan describes the unique qualifica ins that the management team brings to the effort, explains the resources required for success, and ides a forecast of results over a reasonable time horizon. A business plan is based on estimates. is chapter explains the importance and purpose of a business plan, provides the contents of a bu: 3s plan, and gives the process of preparing and presenting a business plan. It includes two sample ness plans and gives a step-by-step procedure for starting a business enterprise. 2URPOSE OF A BUSINESS PLAN business plan is the written representation of an entrepreneur's vision for his/her business. A ‘ness plan is a written document between 20-40 pages in length that describes where a business heading and how it hopes to achieve its goals and objectives. “A workable business plan should termine the direction of the company; highlight the challenges in the path of the business; and mulate strategies and contingencies to keep the business on track in order to reach predetermined ls and objectives. "A business plan isnot just for a start-up company but also for those which are growing. It pre- ces for a spin-off from a parent firm, or even for a project within an established organization. It be used to establish realistic goals or targets to achieve, and to determine the current postion. business plan is used to help make crucial star-up decisions, to reassure investors, to measure tional progress, to test planning and assumptions, to adjust forecasts, and to set the standard ‘good operational management?160 / PART 2: NEW VENTURE CREATION Table 8.1 Contents of a Business Plan The reasons for preparing a business plan are given below: ‘= Entrepreneurs reap benefits from the planning activity itself = A business plan is used to get finance from banks or to get equity funding from angel investon or venture capitalists. = Itcan also be used to attract business partners and key employees or to make business alliances. If the business plan is prepared within a large organization, then it enables the board of directo to make capital investment decisions. The act of writing the plan will force the entrepreneur and his team to think through all the key ‘elements of the business. "The plan provides a basis for measuring actual performance against expected performance. The plan’s financial projections can be used as a budget. Actual results that fall short of planned results will prompt the entrepreneur to investigate and take corrective action, "The plan acts as a vehicle for communicating to others what the business is trying to accomplish, CONTENTS OF A BUSINESS PLAN ‘Business plans follow a broadly similar structure. The key sections in a business plan along withthe average number of pages to be included in each section are given in Table 8.1. Most business plant contain the following components. Cover Page and Table of Contents Every business plan should have a cover page. The cover page presents the first impression of your business plan to readers. This is just like a newspaper headline that gives quick information 10 readers, which helps the reader to decide whether to read the complete article. The cover page should have a clean and professional appearance and should contain the following information: = Name of the business or project. The company’s name, logo, address, telephone and fax numbers, Web site address, e-mail address. The name and designation of the contact person. ‘The table of contents is usually on the second page of the business plan and gives ata glance the topics covered in the business plan. The table of contents should be written for easy navigation to the rest of the plan by numbering each topic. 1 Cover page and table of content 2 Executive summary 2 Business concept ‘ Management summary ‘ 2 4 4 4 Business strategy Marketing plan 2. 3. 4 5. 6 Operations plan z 8 Financial plan 8 Appendices 10INESS PLANS / 161 | Executive Summary The executive summary is a standalone document two or three pages long and is probably the most important section ofthe business plan. It is designed to be a complete yet concise business plan by iwelf It is a snapshot ofthe entire business plan and usually written last, The executive summary ie tconcise presentation of the main points ofthe business plan and gives a brief overview of the ssaallianc@)Wisiness venture. The purpose of the executive summary isto give the reader a quick understanding {the business proposal and provide the whole picture.? Bankers and venture capitalists generally do not read through the entire business plan when itis fwesented to them. They go through the executive summary. In a number of business plan competi ‘ll the Mil ons around the world, the finalists are shorlisted on the basis of their executive summary. A full huis pian is required tobe submitted only bythe shortlisted finalists. The main objective of the of direct mance. ive summary is to entice the reader to go through the entire plan. The executive summary is a ary tof plannf_ fia statement and should includ the following information: 4 Acbrief description of the industry and market environment in which the business opportunity accomplifg Will develop and flourish Witte uniqueness of the business opportunity and the key strategies for success # Profiles of the company's management team. {| Financial requirements and budget allocation # Te anicipate risk and reward of the business. Business Concept {hia is another summary and gives the history of the business, the basic nature, and the purpose of {he business. It clearly states the business objectives. There is no point in starting or expanding a busi- formation] taajupless the entrepreneur has identified a lucrative opportunity. This section describes the business ity It analyses the economics underlying the opportunity and the key factors that will drive fiygucess, such as market penetration and product innovation. This section is used to describe the xy and to explain how it is organized. It gives the usage, description, and specifications of the me services to be offered. If the product/service prototype is ready, high-quality photographs ed. Diléiness Strategy Tila fection provides the SWOT analysis of the firm and analysis of the business environment. It (W¥bldes information on the nature of the industry, competition within the industry, anticipating bar- fiatito entry, the market, and the customers within the market. The industry background provides (tation to understand the shape, size, trends, and key features of the industry and to understand ‘vompany’s product or service will fit into that industry. The goals of the company and the strategy are explained in this section. Strategy is the game plan of the business, Its about tion and competitive advantage. This section should give the mission, vision, future plan, it strategy of the business. agement Summary agement team is very important in any business. The success of the business mainly depends lity ofthe management team. Investors are also keen to know about the people behind the who they see as key assets. It is a well-known fact that without the right team, none of the = really matter. This section should be able to answer the following questions. In this see- formation regarding the description of the form of organization and ownership is explained. ‘Wistection will answer questions such as162 / PART 2: NEW VENTURE CREATION "= What is the profile of the founders, the team’s m: the business community? zement philosophy, and their reputation in © Who are the current owners, and what percentages do they control? "= How is ownership evidenced—for example, in terms of common and preferred stock? ‘Have any options, warrants, or convertible bonds that could expand ownership been issued’ = Which owners are involved in the day-to-day working of the business? Marketing Plan ‘The term “market” is often used to describe the various elements of the total business environment The market is where the company's product or service will be sold. The marketing plan is written after conducting a market analysis, This section provides information on assessing the market's sire and growth, defining the target market, and articulating the value proposition. The value proposition fives the unique set of benefits that the customers will get if they choose to purchase the company's offerings over its competitor's offerings. Stakeholders know that marketing is the activity most associated with success or failure. A com Pany that is not able to connect with its customers will fail even if it offers attractive products ot Services. A sound and realistic marketing plan is the best guarantee that a solid customer connection will be made. The marketing plan should be supported with a solid market intelligence report forthe Plan to be credible. The plan should be clear about all aspects of marketing, including price, posi- tion, promotion, place, and customer value proposition. The marketing plan provides strategies to sell the company’s product or service. The marketing plan should be a dynamic plan used to moniter the progress of the business. Operations Plan Operations deals with the transformation of ideas or raw materials into products or services to he sold to the customer. It gives an overview of the flow of the daily activities of the business operation and the strategies to support them. The operations plan should focus on the critical operating factory that will make the proposed business a success. ‘The operations plan section of a business plan describes the physical necessities ofthe business's ‘operation, such as the business's physical location, raw materials, technology, human resource facilities, and equipment. Information about inventory requirements, suppliers, and employees my be included depending on the kind of business. An operations plan provides a description of the break-even analysis, quality control measures, and the manufacturing process. Financial Plan The financial plan is a eritical section of the business plan as it translates all the other parts of the business into anticipated financial results. The financial plan section is the section that determines whether or not your business idea is viable, and is a key component in determining whether or not your business plan is going to be able to attract any investment in your business idea. Basically, the financial plan section of the business plan consists of an analysis of financial statements such a3 the income statement, the cash flow projection, projected balance sheet, break-even charts, cost of the project, sources, and uses of funds. Appendix This section contains document attachments and the milestones ofthe project. Tis comes at the end ofthe busines plan, It contains the market survey report, financial projections, product and technological specifiations, process flow chars, photograis ofthe existing or proposed firm lisa of plans and machinery, organizational chars, and résumés of each member ofthe management team, The milestones plan lists the major events inthe business's development such as prototypeBUSINESS PLANS / 163 lopment, installation of plant and equipment, market test and penetration, recruitment of key | jnnel, funding from investors, and the break-even point. It includes only major events and the le ofthe project that the entrepreneur can meet. This may impress investors and improve the Ore a ata = What is the purpose of a business plan? = What are the contents of a business plan? = Discuss the significance of the executive summary in a business plan. RESENTING A BUSINESS PLAN siness plan should be well-written in crisp and to the point language and should not contain ant information. It should be written in a professional manner. The contents of the plan are Biticai; the document should be attractive, impressive, and easy to read. The writing style should be ation ‘and concise. The business plan should be printed on plain white bond paper of A4 size using cctors If MMggéod quality printer. Each page should follow a standard layout with clear headings. Each new jction should begin on a fresh page, Information stich as document ttl, date, page number, and tess's Thame should be included either in the header or in the footer. Dividers can be used to make the sures ts of the document more accessible. may he business plan should be written by one or two key people from the thanagement team (en- Sreneur). However, individual sections should be writen by those responsible for implement- ‘the plan. The services of professional consultants may be taken while preparing the document. ‘business plan is a dynamic dociiment and each version of the document should be clearly belled and old versions of the document should be maintained as back-ups. tis appropriate to nly monitor it and update it to help track the progress of your business. The contact details i the people responsible for the business plan should be easily accessible. It is generally advis- le to use generic dates such as tronths rather than actial dates in the milestones portion of the business plan. “A B6od business plan can be the most impértant factor in the success ofthe bisiiess. It should be ‘cleat, and properly organized. Before writing your business plan, itis necessary to know for hot itis written. Business plans usually take from one week to three months to write. A business plan {s tot only a too! for raising money; it also helps the entrepreneur to identify and define business goals and to determine the best methods for achieving those goals. A business plan should highlight the points ‘hat can attract investors. The assumptions made in preparing the business plan should be realistic. ‘The executive summary should be a concise presentation of the major points of a business plan and is written once the rest of the business plan is complete.‘The executive summary is the first sec tion to be read and must engage readers and excite them about the potential business idea. It should bbe the most carefully written of all the sections. An executive summary is a written version of what is sometimes referred to as an elevator pitch. It should be able to explain the key ideas and features type _of the business concept in two or three minutes.164 / URE CREATIO Oral and Visual Presentation re for an oral presentation of a business plan, The oral presentation is requir ses such as when the entrepreneur is participating in a B-plan competition; in front of potent I customers and other stake holders in the business. The present tation should be carefully structured and a script can be prepared. A good set of slides should prepared to support the oral presentation.‘ The visual presentation enables the presentation of visu information such as product images, charts, graphs, and numerical tables, Itisnecessary to pr Partners and investors; for poten WSS WHY DO SOME BUSINESS PLANS FAIL? Like any other project, writing a business plan needs careful planning and systematic execution, ‘Some business plans fail because of the following reasons.* Dera ay of business plan competitions are conducted by technical institutions and business schools around the world. Some of these give very good prize money to the winners. Some well-known business competitions conducted at the national and international level are discussed here. Business plan competitions have become an important part of the curriculum at the Harvard Business School, The competition has two tracks: business venture track and social venture track. This competition is conduct- ed under the Harvard Business School's Arthur Rock Genter for Entrepreneurship and the Social Enterprise Initiative. The competition is funded by the Rock Center, Which was created through the generosity ofthe promi- nent venture capitalist Arthur Rock. Many of the past Participants of the contest have executed their plans after graduation. Some examples include MyHappy- Planet, Bluesolid, Bang Networks, Chemdex, Ventro Corporation, www.suppliermarket.com, and Modula ‘among others, TIE Global, in association with Rice University (USAl, ‘conducts the All-Asia Business Plan Competition, which Provides @ mentoring platform by TiE members (senior entrepreneurs} and venture capitalists from TiE. Other ‘well-known international 8-plan competitions are: the Berkeley Gusiness-Plan Competition, the DFJ Venture What are the points to be considered while writing a business plan? What are the points to be considered while presenting a business plan? SU ace ay Challenge, and HKUST MBA International Business Plan | Competition, i Eureka is an international business plan competition organized by the e-cell at IIT Bombay. This competition ‘alms at encouraging people from across the globe to form international enterprises that combine vision, business acumen, and technology. The e-cell of NIT Trichy organ- izes Ventura, a B-plan competition where the top three business plans are successfully converted into start-ups, The Department of Science and Technology (Government of India) and Intet in partnership with NSRCELE@IIM Ban- galore conduct a B-plan competition called the Next Big Idea. IIT Madras conducts Breakthrough, a B-plan com- petition which focuses on initiating innovations. The S. P. Jain Institute of Management and Research conducts Ud- dayam, an annual B-plan competition. Some well-known B-plan competitions in India are: Empresario, conducted by IIT Kharagpur; Vishishth, conducted by the entrepre- ‘eurship cell of IIT Delhi; Conquest, conducted by BITS. Pilani; and Eximius conducted by 1IM Bangalore, Sources: www hbs.edulentrepreneurship/opar/ last accessed in March 2013}; wot. org/nitiative/TiE-Internationl. Business-plan-compettion last accessed in March 2013), cell infeurekal i llast accessed in March 2013); www twentyt9.com ‘opportunties/organiser/nit-trichy/ventura-12llat accessed in March 2013); and wew.nextbigidea.in/Champion php last ‘accessed in March 2013ess Plan} petition, apetition etoform, ausiness. yorgan- op three tart-ups. ernment IM Ban- Next Big an com= The s.P. ucts Ud- J-known inducted ntrepre- by BITS cessed 13k; ecall ‘y19.coml sed in ast BUSIN failure to address the customer's problems and needs: The business plan should address the nmer’s problems/needs/wants. It should clearly state how big the business opportunity is, entrepreneur should document customer pain points before preparing the plan. Customer nrealistic goals set by the promoters: Setting goals requires the entrepreneur to be well informed about the type of business and the business environment. The goals set by the entre- preneur are based on data and the business plan is no good if it does not include @ lot of data [the goals set by the entrepreneur should be Specific, Measurable, Achievable, Realistic, and {Time-bound (SMART). The financial and market projections should be realistic, logical, and reasonable. Lack of commitment to the business by the promoters: The promoters must make a total com- ‘mitment to the business in order to be able to meet the demands of a new venture. Investors will not be interested in a venture that docs not have committed promoters. Investors also expect the | promoter to make a significant commitment to the business. Its also required to have complete166 / PaRT2 eee aeons ‘A business plan should have all the relevant sections: Ensure that your business plan has a professional out- | {ook and contains all the sections such as the cover page and table of contents; executive summary; business concept; business strategy; management summary; marketing plan; operations plan; financial plan and the appendix. You may also use a B-plan software program for preparing your plan. 1 Describe the oportunty Every business pan shoud start with the problem yu are saving. The tgger he | ron eg ees cru. shag egnton ure sustoah heen | Cleary eine the customer, channel and revenve mel essed witht saaion Explain the business model: Start with the industry, market, and competition in which you are operating and | the markt size. Explain how your busines wl make money provide the fnancal forccat and yours margins. Explaathe reveve, profi, and volume growth ear + Teams include ke industy people a advisory member. Investors invest in peopl. Describe ther experiance and eadersip uses, Describe the organizational plan suportedby an orgotational hart + strategy Explain he uniqueness of your business and how it's geing ob a diflerentatr and provide com- pettve advantage. State the vison, mission, and values ofthe business. len your preferred ent ststyy Explain how your rate of return wold be atracive tometer focus on the business especially if itis a new venture and promoters should not be over enthus: astic in trying to do all things at once. = Lack of experience of the promoters: A lack of experience will result in failure unless the entrepreneur can either attain the necessary knowledge or team up with others who already hive experience in this area * Lack of professionalism: The business plan should be brief, clear, and nicely organized. i should highlight those points that can attract investors, The assumptions made in preparing the business plan should be realistic PROCEDURE FOR SETTING UP AN ENTERPRISE The formalities for seting up of a business enterprise are shown in Figure 8.1 and discussed below. Selection of a Project A strong entrepreneur is the most vital aspect of every successful project. In order to set up « business enterprise, a suitable project has to be decided upon. This involves selecting a produxt or service, and a location for the unit. Based on these selections, a project feasibility study hax to be conducted and then a brief profile has to be prepared for the proposed project. Then an entrepreneur has to prepare a business plan, Depending on the type of project, location, invest ment involved, and so on, the entrepreneur has to proceed to take further steps in establishing the unit Project selection is the initial decision that an entrepreneur has to make, Project selection a! preliminary activities involve the following: Product or service selection. * Location selection. = Project feasibility study. = Business plan preparation = Preparation of a project profile.BUSINESS PLANS / 167 | Product or Service Selection The product or service is selected by the entrepreneur depending on the existing business opportunity, The entrepreneur has to make a careful analysis in choosing the luctservice. While choosing the product or service, the entrepreneur has to consider factors such experience of the promoters, marketability of the product or service, availabilty of raw material, ‘AVailability of technology, investment capacity, and availability of infrastructural facilities. Location Selection While selecting the location for the project, the entrepreneur has to consider factors such as proximity to the market; government policy; incentives and subsidies; the avail- ability of suitable infrastructural facilities for the project; the availability of raw material and labour, and the availability of transportation and communication facilites Project Feasibility Study A project feasibility study is an analysis that involves finding and documenting potential solutions to a particular business opportunity. The project feasibility study involves market analysis, technical analysis, financial analysis, economic analysis, and ecolog- ical analysis. Market analysis deals with understanding the potential market and market share.2: NEW VENTURE CREATION {echnical analysis deals with finding the technical viability of the project and making sensible choices. Financial analysis involves calculating the risk and return of the project. Economie analy Sis involves finding benefits and costs in terms of shadow prices and other impacts. Ecological analysis involves assessing the environmental damage caused by the project and the restoration measures to be carried out. Business Plan Preparation “Once the project is found feasible, the next step isthe preparation of 4 business plan. A business plan is a blueprint of the project. A business plan is a document which Provides a roadmap tothe project. It usually keeps the business on track to reach its planned goals, Xt determines where the company needs to go; forewams about the possible roadblocks along the ay, and formulates responses to contingencies. The details of the preparation of a business plan have already been explained in this chapter. Preparation of Project Profile A project profile is a summary ofa detailed projectreport. Iisa ‘snapshot ofthe project." It isthe frst step towards the development of a detailed projest report A Project profile usually comprise five parts: introduction othe project; business opportunity; deteils of promoters; cost ofthe project and means of finance; and risk and return Decide on the Constitution |n order to set up an enterprise, the entrepreneur has to decide on the constitution of the unit at the initial stages of the project. The various types of constitution of the enterprise are sole proprietor ship, partnership, limited company (private/public), cooperative, and franchising. The details of these constitutions are explained in Chapter 10. Obtain Registration The sole proprietor has no legal formalities. Usually MSME choose to register with the District Industries Centre for obtaining various facilites and incentives. Partnership firms are governed by the Indian Partnership Act, 1932. The terms and conditions of partnership are contained inthe par. nership deed. Companies register with the registrar of companies and cooperatives register with the registrar of cooperatives. The details of registration are explained in Chapter 10. Obtain Clearances from Departments as Applicable For setting up a new enterprise in India, a number of clearances and approvals are required from Concerned authorities depending on the type of enterprise. The approvals and clearances that may be required from various departments are given in Table 8.2. Arrange for Land/Shed For any industrial project, a suitable industrial site ora ready industrial shed is required, The promot 18 of the unit could consider taking an industrial site and constructing a shed as per their require ‘ments, Alternatively, they could consider taking a ready industrial shed on ownership basis, Industrial Land Once the location of the unit is decided, the land for the project could be conve niently taken from the State Industrial Areas Development Board. However, private land could also be purchased, but it has to be converted for industrial purpose and other necessary legal/formalitcs Will have to be completed. Industrial Shed For setting up an enterprise, the promoters could consider using a ready industri al shed. This could be on rent oF on ownership basis. Rental sheds have to be arranged from private own wundecase industry is located outside an areal JoC and consent under Water and Air Bllution Controt Acts proval of construction activity and building t report. ” ity; detail ction of power f¢ and storage of explosives filer Inspection Certificate gistration under States Sales Tax Act and ntral and State Excise Act € Distr verned by tthe part with the traction of minerals §| Certificate uality Marking Certificate Weights and measures de number for export and import BUSIN' egistrar of Companies DIC for MSME/SIA for large and medium industries State DY/SIDC/Infrastructure Corporation /SSIOC ® State Directorate of Industries = Dept. of Town and Country Planning Local Authority/District Collector State Pollution Control Board = Town and country planning = Municipal and tocal authorities = Chief Inspector of Factories Pollution Controt Board Electricity Board State Electricity Board Chief Controller of Explosives Chief inspector of Boilers SFC/SIDC for term loans For loans higher than €150 lak, financial institutions like 1DBI, ICICI, IFCl, etc. Sales Tax Department Central and State Excise Departments State Director of Mines and Geology Regional Office of the Bureau of Indian Standards (BIS) Quality Marking Centre of the State Government Inspector of Weights and Measures Regional Office of the Director General of red from Farsin rote tmay be Poirce: nip. sizcmeme govin/publications last accessed in March 201) GWrers. The purchase of industrial sheds has to be arranged from private owners. This is possible Promot- | @ader an outright purchase or a hire purchase scheme. require Application Formalities Application in the prescribed form is to be submitted along with the fol- lowing documents: tuld also | ® A copy of the Provisional Registration Certificate (PRC). smalitics |W" detailed projectreport. 1 Certified copies in support of educational qualification, experience, and other categories as may naka be applicable private | # “Applicable earnest money deposit SSPLANS / 169 Table 8.2 ‘Approvals and Clearances Required from Various Departments170. / PART 2: NEW VENTURE CREATION Arrange for Plant and Machinery The plant and machinery required for the project could be purchased from recognized manufacturers dealers. The plant and machinery could be taken on a direct or hire purchase scheme Direct Purchase The entrepreneur has to select and buy the required plant and machinery from recognized and approved manufacturers or dealers. Banks and the State Financial Corporations maintain @ list of approved machinery suppliers. The entrepreneur is advised to refer to such a lst before deciding on the supplier. ‘The entrepreneur should compare the quality, performance, and service terms, price, and other de. {ails ofthe alternate plant and machinery that may be available in the market. Then they should decide ‘on an appropriate plant and machinery for their proposed project. Detailed quotations should be taken for preparing the projectreport and also for submission to State Financial Corporations along with the loan application. Some items of plantand machinery may have tobe fabricated against orders. For such item the entrepreneur should seek quotations from reputed and experienced fabricators and get ther equip ‘ment fabricated as per the required specifications. Entrepreneurs have to take steps to order their plant ‘and machinery from the selected suppliers/fabricators after the State Financial Corporations and benks sanction the loans, NSIC Hire Purchase Scheme In the hire purchase scheme offered by NSIC, the required plant and machinery will be the asset of NSIC and they will lease it to the promoters of the industrial unit As Per the NSIC scheme agreement, once the required lease installment is pad, the assets (plant and ina chinery) will become the property ofthe industrial unit. The hire purchase scheme requires earnest money deposit to be brought in by the promoters of the unit. Arrange for Infrastructure The main infrastructure facilites required for an enterprise are land or shed for the project, power connection, water supply, and telephone facility. Single Window Agencies (SWA) are setup atthe district level for the benefit of MSME. The SWA provide clearances for various infrastructure and other facilities for MSME. The assistance provided by the SWA is given below: "Grant of land in industrial areas and allotment of sheds in the industrial estates forall MSME. Grant of power up tothe limit prescribed by the state government. = Review and recommendation of sanction of term loans and working capital loans by the State Financial Corporation and commercial banks within the district for the new and existing MSML "© Grant and disbursement of all incentives and concessions for MSME. * General review of the position regarding problems faced by entrepreneurs and existing MSME within the district and doing such other work as may help promotion of the enterprises, Land and Construction of Building After deciding the location and site, three important factors have to be kept in mind before purchasing/leasing the land. = Availability of basic amenities like power and water. = Connectivity to nearest rail, road, or port. © Price of the land, The purchase or lease of land must be done after careful analysis because of the long-term nature of the commitment. After an industrial plot for the unit is secured, the next step is to find a suitable architect to design the outlay of the area and factory. The design of the factory building has to be in consonance with the type of industry. An appropriate plant layout must be selected, If a home business is being set up, the area which is to be used as the production centre or office should beBUSINESS PLANS / 171 .d carefully. The services of a professional may be used to ensure that the area is utilized ally. An architect's estimate of building construction is essential for loan applications. An elow: ilding F gitess plan is the blueprint of a project. It is a document that explains a business opportunity, tities the market to be served, and provides details about how the entrepreneurial organization to pursue it. A business plan is the written representation of an entrepreneur's vision for his/her piness. Every business, whether itis a start-up company, an expansion of an existing business, a fof from a parent organization, or a project within an established corporation, needs a business yas a roadmap. ation business plan should have a professional outlook and contain all the relevant sections such See ‘the cover page and table of contents, the executive summary, the business concept, the busi- strategy, the management summary, the marketing plan, the operations plan, the financial in, and an appendix. There are a number of B-plan software programs available for preparing ss plan. The executive summary is a standalone document two or three pages long and is fobably the most important section ofthe business plan. It is designed to be a complete yet con- fixe business plan by itself. It is a snapshot of the entire business plan and is usually written last, ‘The procedure for setting up a business enterprise involves various phases such as sélection of project, decision about the constitution, obtaining registration, obtaining clearances from depart- {Rents as applicable, arranging for land and shed, arranging for plant and machinery, arranging for {nfrastructure, preparing a project report, applying for and obtaining finance, proceeding towards Implementation, and obtaining final clearances. 2 Break-even Point: The number of units of the product or service that must be sold in order to have fevenues equal to the operating costs for producing that product or service. ichincry] Biiiness Concept: The section of the business plan that summarizes the basic nature and the pur- lant and | pose of the business and states the business objectives. aupplicd rer!) Business Opportunity: The terms “industry” and “market” describe parts of the total business envi- ronment. The area of interaction between industry and market represents business opportunity—the a ‘space in which customer needs and the product or service meet. illave | gusiness Plan: A writen document ofan entrepreneur's vision for his business. +d qual ed with] Busittess Strategy: The section of a business plan which provides the SWOT analysis of the firm and the analysis of the business environment. BUSINESS PLANS / SUMMARY 173176 | PART 2: NEW VENTURE C Executive Summary: A complete yet concise business plan by itself; often preceding the rest of the business plan Financial Plan: Its a critical section of the business plan, which translates all the other parts ofthe business into anticipated financial results and determines the viability of the business idea. Industry: The industry is the group of companies that produce and sell products or services to a particular market; it includes both colleagues and competitors. Management Team: The management team consists of people that make a business work. Market: The various elements of the total business environment where products or services will be sold determines the opportunity and customers. ‘Marketing Plan: The marketing plan includes all that the enterprise proposes to do to promote and sell its products or service. Milestones: The list of the major events in the business's development. Operations Plan: The section of a business plan that describes the physical necessities ofthe bus: ness’s operation, such as the business's physical location, raw materials, technology, human re source, facilities, and equipment. It gives an overview of the flow of the daily activities of the busi ness operation and the strategies to support them. Organizational Chart: A chart representing the structure of an organization in terms of ranks, roles, and reporting relationships. ‘Value Proposition: The unique set of benefits your customers will get if they choose to purchase your offering over competitors’ offerings. ee Effective Paperless Administration in Educational Institutions Introduction: The executive summary of a business plan on effective paperless administration in educational institutions is discussed in this case study. This executive summary is a hypothetical business plan prepared for effective paperless administration and is designed to be a complete yet concise business plan by itself at Belgaum. Need and Social Cause: Since educational institutions create future citizens of the country, it is very essential for them to function efficiently and effectively. The twenty-first century demands that cit zens be environmentally conscious. Tapping these two necessities, we can use the latest technology. i.e. use a new concept called cloud computing and design a cost-effective software program that will censure lean administration of an educational institution and also cut down on the usage of paper to the maximum extent. Product Description: The software (application) will be used in the overall administration of an educational institution. The sample process for the administration of an institution offering an MBA ‘course is shown in Figure 8.01 Benefits: The software eliminates repetitive processes, ensures better time management, creates 3 paperless office, and improves human resource utilization, which results in cost reduction. ‘Advantages and Strengths of Cloud Computing: In the ordinary course, an investment of 81 lakh is required for hardware and £30,000 to £300,000 is required for software licensing. Howeve the use of cloud computing will relieve us of these costs as costs do not have to be incurred for purchasing hardware or software. The product can be provided to any customer who has @ computer, with Intemet facility being the only requirement, which is a de facto standard in any school or col lege. This implies that the investment for the customer, other than buying the produet, is nil176 | PART 2: NEW VENTURE CREATION “The software program can be accessed and maintained from anywhere in the world where therfjg Yu is an Intemet service, unlike other software programs that have to be accessed and fixed fro specific computers in which they are installed. ‘Market Potential: Belgaum has about 120 schools and colleges still using paper in the process ‘administration, The entire sandbox region has schools and colleges constituting @ potential marke for this software program. Further, this application can replace other school or college administra tion software programs as we will be using cloud computing. This may be extended to other region in the next phase. Figure 8,02 describes the market potential of the business in detail Product Pricing: The initial pricing ofthe software program will range from €5,000 to €50,000)9§ The product priced at %5,000 will have minimum features. If any client customization is re quire, tat feature will be charged depending on the complexity of the requirement from €10,0009§ onwards Product Launch: The marketing of the product would start from Belgaum, covering 120 school and colleges. If we capture 10 per cent of the market in the first six months, assuming the averagd price for each sale to be £10,000, and assuming linear growth, we will break even for the initial § Tivestment in the fourth month. The graph in Figure 8.02 shows growth in INR. We will ent « ‘other regions in the sandbox starting with the Hubli-Dharwad region from the 7th month and will be expecting a similar growth from the 7th to the 12th month. At the end of a year, we will have + approximate cash reserves of €267,400. F Upscaling: After 15 months of operations, we can market the product in different domains such at ‘small offices, industries, and banks, for which we can design ERP software using cloud computing Management Team: The management team comprises software engineers Amit M. Charantimath, ‘Chetan Doddamani, and Manoj Bableshwar. All hold Bachelor of Engineering degrees from RVCE. “Amit is pursuing a diploma in entrepreneurship from the Entrepreneurship Development Institute of J Tndia and Mang} is doing his masters in business law from the National Law School of India Unie | versity, Bangalore, Chetan is doing a course in cryptography and network security from the Indian Institute of Science, Bangalore. Figure 8.02 Se Ee oS Market Potential Engraue produ vpn nd a sess graduates for markcting are to : the producto oer domains and increase || Ini, expensive the market size in Kamataka (15th month | | Malnrames were ‘and wl revolutionize | ‘software services, | | |; eee foe recor | Tomanagenertwan| [| ord sppteatoe, Hower | Dundetake matatng | fe 1 |Rocatstottime | | reemeee || eee ener | [ee | |e Stepentice: | | f ———— i i ics. a Somegeos | | Pare = (7-15 months) Kader Growin] | Sooomeumne or ut > Y axis;Time. temkiloniaed: a5 1 ‘communication, we Ae __ memes” | | inl invoatnent €76 600, ] computing in sealable | | 4 1 Remea enemies couentrtte Srteaes meted Senge | |BUSINESS PLANS / 175 € + the rea carts of ration in othetical plete yet itis very that citi nology, that will paper to on of an am MBA Figure 8.01 Sample Process for Administration reates a RL lakh | cowever, | The product can be easily upscaled with no additional investment for hardware; other software rred for programs in the market require a server for upscaling, which would be expensive. Upscaling is eas- puter, | ily achievable with the use of cloud computing. Google offers cloud computing for developers; its ‘or col. | free for some amount of resources. IF it exceeds the resources, a monthly bill similar to a phone bill is generated which is very marginal.BUSINESS PLANS / 17 are the main strengths and weakness of the proposed business? ‘are the questions raised by the executive summary, which can be answered by a full busi- plan? any additional information you would have added in the executive summary? Pe et ne is a business plan? What does the reader expect to lear from a business plan? a structure fora business plan. are the uses of a business plan? his the executive summary considered to be the most important par ofa business plan? ile discussing the management team, what information should be included inthe business plan? puss the various B-plan software programs available in the market. Which one will you ye and why? Blain the procedure for setting up a business enterprise with the help ofa schematic diagram. splain the significance of a project report. aah Bed AVite a bank manager from a local bank and request him to address your class to find out fit they look for in a business plan, Find out whether they have a prescribed format for the ness plan. load a business plan from the business plan archive and critically evaluate the business plan. eas follow the guidelines given inthe chapter and prepare a business plan for your intended business. Dreanize a B-plan competition in your class. Ask your professors to lend help. Obras) vello, Joseph and Brian Hazelgren (1998). Your First Business Plan. Naperville, IL: Source jooks. {iDeThomas, Arthur and William B. Fredenberger (1995). Writing a Convincing Business Plan rppauge, NY: Barrons. Gumpert, David E. (1999). How to Really Create a Successful Business Plan: Step-by-Step poGuide. Boston: Inc. Publishing, 4OHBS Toolkit, available at wwo-alumnihbs.edu/new_alumni/toolkit (last accessed in March 2013). §, Sahiman, William A. (1997). “How to Write a Great Business Plan,” Harvard Business Review. July-August | 6, Harvard Business School Press (2007). Creating a Business Plan. Harvard Business School Press (Pocket Mentor series)178 / PART 2: NEW VENTURE CREATION BUSINESS PLAN I: MICRO, SMALL, AND MEDIUM ENTERPRISES (MSME) CLINIC TABLE OF CONTENTS 1 Executive summary Business concept 2, 3. Management summary 4 Operations plan 5. Marketing plan 6 Strategic plan 2. Financial plan 8 Appendices EXECUTIVE SUMMARY The Firm Micro, Small, and Medium Enterprises Clinic is a Belgaum-based partnership firm of fering training and business solutions under one roof to MSME located in the Belgaum district, Tw market is untapped and there is an urgent need for a single-window business solution provider this region, Target Market | The firm has already started its operations in Belgaum district and during upscl ing will penetrate other districts such as Dharwad, Haveri, Gadag, and Uttara Kannada districts of the North Kamataka region, Vision The firm’s vision is to be the preferred total business solution providers in the Norther Karnataka region by 2020, Mission The firm’s mission is to provide need-based, cost-effective, total business solutions for nurturing the growth of MSME in the North Karnataka region, ‘dentification of Business Opportunity and Customer Pain Points An essential problem con fronting MSME in a developing country like India is that they are unable to hire consultancy st vices from big consulting houses unlike the large units. They need training and consultancy servic to nurture them throughout the entire life cycle of the unit. Presently, MSME in this region wt ‘vailng consultancy services on an ad hoe basis from some consultancy agencies ata higher cos There i a need fora single-window approach for providing complete business solutions. Most of | the consultancy firms are from Pune, Mumbai, and Bangalore. The services are atthe convenience of sevice providers and not at the convenience of customers. Moreover, it is not a cost-effective so tution. The dissatisfaction faced by customers from the existing service providers supplies a window of opportunity for the MSME Clinic to provide total business solutions under one eof, ' | Solution |The MSME Clinic offers a solution inthe form of consultancy and training services |» nurture the growth of MSME inthis region. The services may be in areas such as the preparation | ‘ business plan for start-ups, quality management, strategic management, and traning