THE BUSINESS PLAN: CREATING AND STARTING THE VENTURE

Planning as Part of the Business Operation

 Planning is a process than never ends for a business.
 As the venture grow up to mature business, planning will continue.
Information Needs:
 Before committing time and energy to preparing a business plan, the entrepreneur should do a
quick feasibility study of the business concept to see whether there any possible barriers to
success.
 Feasibility study is another written document that must be prepared and is of equal importance
as the business plan. It serves as the forerunner of the business plan. Primary objective is to
determine whether the proposed business is feasible or not in all areas. If the outcome is
positive, then the entrepreneur prepares the business plan.
 Two test conducted:
Test of possibility – should have positive results, to proceed with the next test.
Test of feasibility – to test the viability.
What is a Business Plan?
 A business plan is a detailed and integrated written document prepared by the entrepreneur
that describes all the various activities involved in opening and operating a new entrepreneurial
venture.
 It is an integration of functional plans such as marketing, finance, manufacturing, sales and
human resources.
Who should write the plan?
 The business plan should be prepared by the entrepreneur.
 Though the perspective of the entrepreneur has the major influence on the business plan,
he/she nonetheless must still consider the views of customers, creditors, and even employees
and staff.
Who Reads The Plans?
 The business plan may be read by employees, investors, bankers, venture capitalists, suppliers,
customers, advisors, and consultants.
 There are three perspectives should be considered in preparing the plan :
 Perspective of the entrepreneur
 Marketing perspective
 Investor’s perspective
Why Have a Business Plan?
 The business plan is actually the roadmap of the new business. It is the only single written
document that must be prepared before opening a new business or expanding an existing
business. It provides a clear direction to any uncertain business endeavor.
 The business plan is valuable to the entrepreneur, potential investors, or even new personnel,
who are trying to familiarize themselves with the venture, it goals, and objectives.
o It helps determine the viability of the venture in a designated market
o It provides guidance to the entrepreneur in organizing his or her planning activities
o It serves as an important tool in helping to obtain financing.
Presenting the Plan
 It is often necessary for an entrepreneur to orally present the business plan before an audience
of potential investors.
 In this typical forum the entrepreneur would be expected to provide a short (perhaps 20-
minutes or half-hour) presentation of the business plan.

PARTS OF A BUSINESS PLAN

PART I. Introduction or the Cover Page
PART II. Table of Contents
PART III. Executive Summary
PART IV. Business Description
PART V. Market and Industry Analysis
VI. Sales and Marketing
VII. Production and Technical Plan
VIII. Management Plan
IX. Financials
X. Appendix

LAY-OUT OF A BUSINESS PLAN

PART I. Introduction or the Cover Page
 The purpose of a cover page is to tell the reader what he or she is about to read and how to
reach the writer. Your cover page is also a way to get your business plan noticed.
 Your cover page should say the words "Business Plan," and should include:
o Name of the owner or owners
o Business Name
o Business Logo
o Address of the business
o Telephone or Contact number
o Email address
o Date
PART II. Table of Contents
 All pages of your business plan should be numbered and the table of contents should include
page numbers.
 Be sure to list headings for major sections as well as for important subsections.
PART III. Executive Summary
 The executive summary is what most readers will go to first. If it is not good, it may be the last
thing they read about your company. Lenders in particular read executive summaries before
looking at the rest of a plan to determine whether or not they want to learn more about the
company.
 Your goal in this section is to generate enough interest to make someone want to read further
for more detail.
 It points out the overall highlights of the business plan as well as the bird’s- eye view of its
section. It must be written in simple language that can be easily understood at the same time
attract the attention and influence the decision of the reader.
 This section should answer briefly the basic questions a venture capitalist would ask.
o Who is on the team?
o What business is your company in?
o Why should we invest in your product or service?
o How will you achieve the potential in your business model?
o How much money is required?
 Three to four pages summarizing the complete business plan. For this reason, it is often easier to
write this section last.
PART IV. Business Description
 An overview of the Business
 Vision/Mission/Goals/Objectives (VMGO) Statement
 Business Description
 Type of business: Is your business retail, wholesale, service, manufacturing, construction,
professional, or import and export?
 Business Name: Make your name memorable. Your name should be appealing and easy to use.
 Business Location: Choose the Location of Your Business Wisely
 Product Description: Be specific in showing how you will give your business a competitive edge.
Stress Your Products Uniqueness (UPS – Unique Selling Proposition)
 Position: how you want the market and your competitors to perceive your product or service.
 Pricing Strategy: what you will charge for your product or service and how you derived the price.
PART V. Market and Industry Analysis
 Customer Profile: This description defines the characteristics of the people you want to sell to
and should indicate, among other things, whether your customers are cost or quality conscious,
under what circumstances they buy, and what types of concerns they have.
 Segment Description: describe your target customers in terms of common identifiable
characteristics.
 Needs and Description: always focuses on customer needs. Why do they need your product or
service? What is going to make them buy?
o Who are they?
o Where are they?
 o What do they need?
o How do they make their buying decisions?
o Where do they buy?
o How do you reach them with your marketing and sales messages?
 Market Size/Trends: defines the total market size as well as the slice of the market your business
will target.
 Competition: indicates where your products or services fit in the competitive environment.
Present a short discussion of each of your primary competitors.
 Labor Requirement: provides details of other labor you will need to start up and run your
business.
 Estimated Sales: based on your assessment of the advantages of your product or service, your
customers, the size of your market, and your competition. Use a one-paragraph summary to
justify your projections.
VI. Sales and Marketing
 Strategy: action plan for how you will get customers to buy your products.
 Methods of Sales: Describe available distribution channels and how you plan to use them. Will
you be selling directly to your customers? Will you be using sales representatives, distributors,
or brokers?
 Advertising and Promotion: how you communicate information about your product or service.
include a description of all advertising vehicles you plan to use newspapers, magazines, radio &
TV, Yellow Pages, etc. - as well as your public relations program, sales/promotional materials
(such as brochures and product sheets), package design, trade show efforts, and the like.
 Slogan/Tagline: a catchphrase used in advertising; Coca-cola “open happiness”; “Nike: Just Do
It”; Jollibee: “Bida and Saya”; McDonald’s: “Love ko To”
VII. Production and Technical Plan
 Production Schedule: presents the total number of goods to be produced, and the expected
time to produce them. (demand for the product, availability of resources, capacity of the plant)
 Production Process: a schematic diagram showing the procedural steps/stages involved in the
production of goods. (Exact processing procedure; materials, parts, or ingredients required;
expected time to process the product)
 Sources of Materials: the quality of raw materials plays very significant role in the production of
quality products. Get materials from reliable and reputable suppliers. (Proximity of the source to
the processing plant; payment terms and conditions; discount and damages; terms of shipment)
 Production Cost: estimated cost of production. List all materials used in production of goods and
provided with the cost which will serve as the basis in setting its selling price. (labor; direct
materials; factory overhead)
VIII. Management Plan
 Organizational Structure: Organizational chart. Defines the hierarchy of the different positions in
the organization.
 Roles and Responsibilities: must be defined clearly in order to minimize and avoid
misunderstanding and overlapping of functions. (Job specifications and job description)
 Profit and Loss Sharing: How the profit and losses be divided?
IX. Financials
 Expenses and Capital Requirements: pull together the expenses incurred in running your
business and the amount of money you will need to procure the equipment used to start up and
continue operations of your business
 Sources of Funds: How will the business be funded?
 Financial Plan
o Projected Income Statement
o Projected Cash Flows/Statement of Changes in Owner’s Equity
o Projected Balance Sheet
o Financial Statement Analysis
X. Appendix
 contains backup material
 Letters
 Market research data
 Leases or contracts
 Price lists from suppliers.
USING AND IMPLEMENTING THE BUSINESS PLAN
 The business plan is designed to guide the entrepreneur through the first year of operations.
 Implementation of the strategy contain control point to ascertain progress and to initiate
contingency plan if necessary.
 Business plan not end up in a drawer somewhere once the financing has been attained and the
business launched.

Measuring Plan Progress

 Entrepreneur should check the profit and loss statement, cash flow projections, and information
on inventory, production, quality, sales, collection of accounts receivable, and disbursements for
the previous month.
o Inventory control
o Production control
o Quality control
o Sales control
o Disbursements
Updating the Plan
 The most effective business plan can become out-of-date if condition change.
 If the change are likely to affect the business plan, the entrepreneur should determine what
revisions are needed.
 In this manner, the entrepreneur can maintain reasonable targets and goals and keep the new
venture on a course that will increase probability of success.
Why Some Business Plans Fail
 Goals set by the entrepreneur are unreasonable.
 Goals are not measurable
 The entrepreneur has not made a total commitment to the business or to the family.
 The entrepreneur has no experience in the planned business.
 The entrepreneur has no sense of potential threats or weaknesses to the business.
 No customer need was established for the proposed product or service.

CHAPTER 2: OPPORTUNITY SEEKING, SCREENING, AND SEIZING

2.1 Opportunity Seeking
 Entrepreneurs are innovative opportunity seekers, separating them from ordinary businessmen
whose main objective is simply to earn profits from producing, buying, and selling goods.
 Entrepreneurs introduce new products, innovate product features, and improve their products’
operational capability.
 Entrepreneurs may totally change the existing business paradigm by rendering it obsolete
through the introduction of new technologies, processes, and systems.
 Essential to an entrepreneur’s opportunity seeking are the Entrepreneurial Mind Frame, Heart
Flame, and Gut Game.
Entrepreneurial Mind Frame
 This allows the entrepreneur to see things positively in the midst of crisis.
In fact, in Chinese writing, crisis is composed of two characters. The first means danger and the
second means opportunity.
Entrepreneurial Heart Flame
 This is what an inventor and entrepreneur have common. It is also defined as passion.
Passion is the great desire to attain a vision or fulfill a mission. Despite several setbacks, an
entrepreneur is rather driven to persevere even more.
 The heart flame is also the emotional intelligence or EQ, which is manifested in the
entrepreneur’s efforts to nurture relationship with customers, employees, and suppliers. This
creates synergy among the group to work toward a certain mission.
Entrepreneurial Gut Game
 This refers to the entrepreneur’s ability to sense without using the five senses. This is also
known as intuition.
 The gut game also connotes courage or “lakas ng loob”.
The Many Sources of Opportunities:
 Macro Environmental Source of Opportunities
1. Socio-Cultural Environment
This includes demographics and cultural dimensions.
It helps the entrepreneur assess trends and dynamics of the bigger consumer population, their
beliefs, tastes, customs and traditions.
2. Political Environment
The political environment defines the governance system of the country or the local area of
business.
It includes all the laws, rules, and regulations that govern business practices as well as the
permits, approvals, and licenses necessary to operate the business.
3. Economic Environment
Supply and demand forces mainly drive the macroeconomic environment. They are the
Same factors that drive the interest and foreign exchanges rates that fluctuate with the movement of
the market forces.
4. Ecological Environment
This includes all natural resources and the ecosystem, habitat of men, animals, plants, and
minerals.
Opportunities abound for greener, cleaner, and healthier products, whose objectives are to save
the planet and prolong lives.
5. Technological Environment
New scientific and technological discoveries, which often lead to the launch and
commercialization of new products with superior attributes, are the entrepreneur’s nightmares.

 Industry Sources of Opportunities

The next biggest sources of opportunities are the industry and the market. One of the most difficult
aspects about industry analysis is defining what constitutes an industry in the first place.
Industry Sources of Opportunities
Participants in an industry include:
 Rivals or competitors in a particular type of business (e.g., Jollibee vs. McDonald’s, Coca-Cola vs.
Pepsi, Samsung Galaxy vs. Apple’s iPhone, etc.). True rivals or competitors are those competing
for the same or similar markets.
 Suppliers of input (e.g., fuel, electricity, raw materials) to rivals as well as suppliers of machinery
and equipment, suppliers of manpower and expertise, and suppliers of merchandise.
 Consumer market segments being served by rivals or competitors.
 Substitute products or services, which customers shift or turn to.
 All other support and enabling industries.
Defining an Industry
 The most common way of defining an industry is according to product types or according to the
functions of the product or service.
 Another way is by tracing the industry from its most basic raw material down to its various
consumer applications, or the product or value-added chain.
 Market Sources of Opportunities
 The entrepreneur must also be able to measure the actual demand and supply as well as the
potential demand and supply of the industry that the enterprise belongs to.
 Equally important is the monitoring of the prevalence of product substitutes and their market
impact on the existing players in the industry.
 Micromarket
 Micromarket refers to the specific target market segment of a particular enterprise.
 Consumer Preferences, Piques and Perceptions
 Consumer preferences refer to the tastes of particular groups of people. The consumer’s age,
culture, and status affect their preferences.
 In contrast, consumer dislikes refer to the things that irritate customers.
 Both preferences and dislikes can bring opportunity to entrepreneurs.
 Because of many choices that customers have to struggle with every day, a product or service
must be able to win the battle for the customers’ mind.
How to win it?
 First: Generate awareness about the new product or service.
  Second: Arise customers’ interest to buy.
 Third: Evaluate the product.
 Last: Decide to purchase the product.
Other Sources of Opportunities
 Customer preferences change over time.
 People’s tastes in clothes, music, shoes, entertainment, dance, sports, hobbies, and even
careers have evolve over the years.
 What piques customers is a great source of opportunity.
 Before the customer is won over; there is first a battle for the mind. Next, there is a battle for
the heart. Finally, there is a battle for the wallet.
 The longer the customer wants to use the product, the greater the chances of creating lasting
loyalty.
 Opportunities has abound in shaping consumer perceptions or occupying spaces in their minds
or places in their hearts that have not yet been filled.
 New inventions, new systems and work processes, new insights about the human psyche, new
applications for old knowledge, new revelations about how the physical world works, new
interpretations, new combinations based on the convergence of previous technologies, new
outlooks about life should be led, and a host of other new things are tremendous sources of
opportunity.
 Determining personal preferences and competencies lay the foundation for a new business
venture.
 Unexpected occurrences in both the external and internal environment of the enterprise
indicate that significant changes are happening and opportunities are sprouting.