USINESS PLAN BUSINESS PLAN

CHAPTER 3: DEVELOPING BUSINESS PLAN

Introduction:

For any business to be successful, it must be started and operated with a clear
understanding of its customers, its internal strengths, its competitive environment, and a vision
of how it will evolve to compete in the future. A business also needs money to start, to operate,
and to grow. By expending the effort to develop a comprehensive business plan, you will have a
powerful tool for attracting investors. Your business plan is the roadmap for your company. It
clearly states where you are, how you got there, and how you plan to proceed.

Objectives:

1. Develop a realistic Business Plan.

2. Generate and analyze Guidelines for developing a Business plan.

Lesson Proper

WHAT IS A BUSINESS PLAN?

A business plan is a formal statement of business goals, reasons they are attainable, and
plans for reaching them. It may also contain background information about the organization or
team attempting to reach those goals.

WHY WRITE A BUSINESS PLAN?

Business plans are prepared as a necessary instrument for raising capital from potential
investors, bankers and other lenders. It is an essential document when taking your business
public or selling all or part of a company. In fact, without one, soliciting a bank for funds is
pointless. To lenders or potential investors, it not only provides information and reveals an
evaluation of your venture's feasibility, but also reflects your management abilities. Preparing a
business plan will take time, but it is well worth your investment in the long run. Not only will this
document provide valuable information to outside investors and lenders, it will lay out the game
plan from which to operate your firm. This is, by far, the most important use for your business
plan. It will become your blueprint and direct you towards achieving your overall business goals.

DEVELOPING A BUSINESS PLAN

An important task in starting a new venture is to develop a business plan. As the phrase
suggests, a business plan is a "road map" to guide the future of the business or venture.
The elements of the business plan will have an impact on daily decisions and provide
direction for expansion, diversification, and future evaluation of the business.

Business plans are "living" documents that should be reviewed and updated every year or
if an opportunity for change presents itself. Reviews reinforce the thoughts and plans of
the owner and the business, and aid in the evaluation process. For an established venture,
evaluation determines if the business is in need of change or if it is meeting the
expectations of the owners.

TYPICAL STRUCTURE FOR A BUSINESS PLAN FOR A START UP VENTURE

 Cover page and table of contents
 Executive summary
 Mission statement
 Business description
 Business environment analysis
 SWOT analysis
 Industry background
 Competitor analysis
 Market analysis
 Marketing plan
 Operations plan
 Management summary
 Financial plan
 Attachments and milestones

HOW TO WRITE A BUSINESS PLAN

Creating a business plan will help you achieve your entrepreneurial goals. A clear and
compelling business plan provides you with a guide for building a successful enterprise focused
on achieving your personal and financial goals. It can also help persuade others, including
banks, to invest in what you are creating.

PART 1
Doing your Homework
 Analyze the potential markets for your business. Consider which segment of the local or
international population will be seeking to use your products or services. This needs to
be more than mere guesswork and involves doing accurate and intelligent research. You
need to analyze secondary research collected by outside observers, as well as getting
primary research that you collect yourself, with your own methods and observations.
Consider the following areas of inquiry:
 Is there a viable market for the product or service you want to sell?
 How old are your potential customers?
 What do they do for a living?
 Is your product or service attractive to a particular ethnic or economic population?
 Will only wealthy people be able to afford it?
 Does your ideal customer live in a certain type of neighbor or area?
2. Establish the size of your potential market. It’s important to be as specific as possible in
regard to your market and your product. If you want to start a soap business, for
example, you may believe that every dirty body needs your product, but you can’t start
 with the entire world as your initial market. From there, you can analyze demographic
information more specifically:
 How many car mechanics are in need of soap in any community?
 How big are your potential competitors?
3. Identify your company’s initial needs. What will you require to get started? Whether you
want to buy an existing company with 300 employees or start your own by adding
An extra phone line to your home office desk, you need to make a list of the materials
you’ll need.
4. Prepare product samples. What materials will you need?
5. Research possible locations for your business.
6. Determine your start-up cost. Make a list of all the tangible and intangible resources you
need to get your business going.
Don’t aim for the best of everything at the beginning. You can forgo the expensive
trimmings of an office of a more well-established company and stick to the basics at the
beginning. Get what is affordable, works and is actually needed and don’t buy frills.
7. Put yourself in the shoes of potential investors. Gather as much helpful and credible
information as you can. Depending on your product, you may need to search long and
hard for relevant information.
8. Identify potential investors. Banks and other funding sources don’t lend money because
people with interesting business ideas are nice. Lenders will typically look to the
company’s Capital, Capacity, Collateral, Conditions, and Character or what is known as
the 5C’s of lending when underwriting a loan. You’ll need to have covered all these
bases well before seeking funding.

PART 2
Structuring Your Business
1. Define your company. A business plan won’t be useful until you’re certain what your
company exists for. What will you accomplish for others? What products and services
will you produce or provide? Write down all the specific needs your company will satisfy.
Potential investors need to know that your business will be meaningful and marketable
to people who can use your product or service. So concentrate on the external needs
your company will meet.
 What will your product or service enable people to do better, more cheaply, more
safely, or more efficiently? Managers right aw
2. Choose a winning strategy. Once you’ve established the competitive advantage your
business offers, you will be able to select the best strategy to reach your goal. How will
you’ve reCHEDyou distinguish your product or service from others? The first step in
selecting an effective strategy is to identify a competitive advantage for your product or
service.
 Your competitive advantage may include designing special features not found in
rival products. It may entail superior service characteristics such as speedier
delivery, a lower price, or more attentive sale people. Even where your product or
service is already well established, perhaps you’re establishing an image or
brand of exceptional quality or reputation.
3. Design your company. Consider how will you hire and organize your workforce. By the
time you’ve reached this stage of thinking about your potential business concept, you’ll
probably have a good idea of the number of people you’ll need and the skills they’ll
require to get your enterprise up and running.
4. Consider the practical issues of running a business. Think about your role as leader or
boss of the business. Decide how will you handle your employees’ entitlements. For
 example, salaries and wages, their insurance and retirement benefits, as well as
analyzing the extent of your knowledge of tax related issues.
 Investors will want to know if you’re capable of running the business. Do you
need to bring in experienced managers right away. Will you keep some of the
existing employees or hire all new people? And where do you find these potential
employees.
5. Decide on a marketing plan. One of the most common flaws in plans is the
entrepreneur’s failure to describe exactly how customers will be reached and how
products will be presented to them. Potential investors, staff, and partners won’t be
convinced that your idea can succeed until you’ve established well-researched and
effective methods of contacting your customers—and the assurance that once you’ve
reached them, you can convince them to buy your product or service.
 Consider how will you reach your customers. What will you say to persuade and
convince customers that your product or service is better value, more timely,
more useful, etc. to the consumer than the rival product or service? If it currently
has no rival, how will you properly explain the purpose of and the consumer’s
need for the product?
 What advertising and promotional efforts will you employ?
6. Build a dynamic sales effort. The word “sales” covers all the issues related to making
contact with your actual customers once you’ve established how to reach them through
your marketing campaign.
 What will your basic sales philosophy be? Building long-term relationships with a
few major clients or developing a clientele of many short-term customers?

PART 3
Writing the Business Plan
1. Organize all the relevant information about your business. Begin creating section
headings and putting the appropriate information under the appropriate headings.
Effectively separating your business’ unique approach to each of these headings will
organize your plan in away investors find useful:
 Title Page and Table of Contents
 Executive Summary, in which you summarize your vision for the company
 General Company Description, in which you provide an overview of your
company and the service it provides to its market
 Products and Services, in which you describe, in detail, your unique product or
service
 Marketing Plan, in which you describe how you’ll bring your product to it’s
consumers
 Operational Plan, in which you describe how the business will be operated on a
day-to day basis.
 Management and Organization, in which you describe the structure of your
organization and the philosophy that governs it
 Financial Plan, in which you illustrate your working model for finances and your
need from investors
2. Write the executive summary last. The executive summary is basically your big appeal to
investors, or really anyone who reads your business plan, that should summarize and
articulate what it is that’s great about your business model and product.
3. Gather all the information together and prepare multiple drafts. It’s time to put the
business plan together and articulate all your thinking, research, and hard work into a
comprehensive description of your structure and service.
 4. Sell yourself and your business. The idea of the business plan is to present yourself in
the best light. Keep in mind that investors invest in people more than ideas. Even if your
potential business has many competitors or is not on the cutting edge of an industry, the
qualifications and commitment you demonstrate in your plan can convince others to
proffer their support.
5. Present and explain your financial data. How will you convince others to invest in your
endeavor? By having clear, transparent, and realistic financial information that shows
you know what you’ve talking about and that you’re not hiding anything.

REMEMBER!!! Remember, a business plan is a "road map" that will guide the future of the
business. Once the plan is in place, the business will have a better chance of future
success.

GUIDELINES FOR CREATING A GOOD BUSINESS PLAN

The following are some pointers to consider before creating your business plan:

 Very few people would argue that planning is unnecessary. However, it involves a great deal of
work. Be prepared to spend weeks — or months — completing your plan.
 While this undertaking may appear overwhelming at first, don't get discouraged. Break the
project into manageable chunks. One effective approach is to put each of the following steps
behind a separate tab in a three-ring binder. Fill in your plan, making steady progress toward
your goal.
 Although you may have volumes of supporting material, aim for a plan that is brief and succinct
but includes everything important to the business. A proposal of 10-15 typed pages, double-
spaced is often ideal. Leave secondary issues and details for discussion for a later meeting.
 Focus on your intended reader. Use the plan to organize your effort around your objectives is to
ensure that you have all the bases covered. Investors or lenders are interested in determining
whether you will be able to achieve your objectives.
 Avoid highly technical descriptions of your products, processes, and operations. Use layman's
terms.
 A business plan is a "living" document. Update it as your knowledge grows and whenever your
strategies become more concrete.
 Be realistic — base your projections on the results gathered from your analysis. Be honest
about positive and negative findings.
 Discuss your company's business risks. Your credibility can be seriously undermined if existing
risks and problems are uncovered by lenders or investors on their own.
 Don't make vague or unsubstantiated statements. For example, do not just say that sales will
double in the next two years or that you are adding new product lines. Back up your statements
with underlying data and market information.

Activity
Please watch this video to those who have internet access:
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To those who have no internet access please read:

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small

Post Test/Quiz

Direction: Read the statement carefully. Write the correct letter for each
statement.2 points each.

_____1. It is a written document that describes in detail how a business—usually a startup.

a. Feasibility
b. Business Plan
c. Balance sheet
d. Income statement

____2. A business plan is a ___to guide the future of the business or venture.

a. Income
b. Road map
c. Plan
d. Collateral

____3. Business plans are prepared as a necessary instrument for raising capital from
potential?

a. Investors, bankers
b. Buyers
c. Resellers
d. Traders

____4. It is placed at the front of the business plan, but it should be the last part written.

a. Financial Plan
b. Marketing Plan
c. Executive Summary
d. Organizational Plan
____5. It is a statement which is a summary of the income (revenue) and expenses for a
given accounting cycle.

a. Financial Plan
b. Marketing Plan
c. Executive Summary
d. Income Statement

____6. It is a snapshot of a business's assets and liabilities and its owner's equity at a
specific point in time.

a. Marketing Plan
b. Balance Sheet
c. Executive Summary
d. Income Statement

____7. It is one of the foremost reasons new businesses fail is not having enough startup
capital or inadequate planning to cover all expenses and be profitable.

a. Financial Plan
b. Marketing Plan
c. Executive Summary
d. Income Statement

___8. Every purchase decision that a consumer makes is influenced by the marketing
strategy or plan of the company selling the product or service.

a. Marketing Plan
b. Balance Sheet
c. Executive Summary
d. Income Statement

____9. This section of the plan describes the current or planned business structure, the
management team, and risk management strategies.

a. Financial Plan
b. Marketing Plan
c. Executive Summary
d. Organizational Plan

____10. This portion should include information regarding the history of the industry, the
current state of the industry, and information from reputable sources concerning the future
of the industry.

a. Financial Plan
b. Background Information
 c. Executive Summary
d. Organizational Plan

REFERENCES:

BOOKS:

Allison Morrison, Mike Rimmington, Claire Williams., Entrepreneurship in the Hospitality,

Tourism and Leisure Industries.,1999

Hugh Melville.,Entrepreneurship.,2012

On-LINE:

https://edwardlowe.org/how-to-develop-and-use-a-business-plan/

https://extension.psu.edu/developing-a-business-plan#section-2

https://www.youtube.com/watch?v=FjWLdTHnbMg&ab_channel=ChinkPositive

https://business.inquirer.net/273445/eight-successful-filipino-entrepreneurs-who-started-small