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The Business Plan :The Business Plan :Creating and Starting TheCreating and Starting The

VentureVenture

MASTERS OF MANAGEMENTMASTERS OF MANAGEMENT

ADMINISTRATION(BIRLAADMINISTRATION(BIRLASCHOOL OF MANAGEMENT)SCHOOL OF MANAGEMENT)

EntrepreneurshipEntrepreneurship

MASTERS OF MANAGEMENTMASTERS OF MANAGEMENT

ADMINISTRATION(BIRLAADMINISTRATION(BIRLASCHOOL OF MANAGEMENT)SCHOOL OF MANAGEMENT)

EntrepreneurshipEntrepreneurship

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Learning ObjectivesLearning Objectives

To define what the business plan is, who prepares it,To define what the business plan is, who prepares it,

who reads it, and how it is evaluated.who reads it, and how it is evaluated. To understand the scope and value of the businessTo understand the scope and value of the business

plan to investors, lenders, employees, suppliers, andplan to investors, lenders, employees, suppliers, andcustomerscustomers

To identify information needs and sources for eachTo identify information needs and sources for eachcritical section of the business plan.critical section of the business plan.

To enhance awareness of the ability of the internetTo enhance awareness of the ability of the internetas an information resource and marketing tool.as an information resource and marketing tool.

To present examples and a step by step explanationTo present examples and a step by step explanationof the business plan.of the business plan.

To present helpful questions for the entrepreneur atTo present helpful questions for the entrepreneur ateach stage of the planning process.each stage of the planning process.

To understand how to monitor the business plan.To understand how to monitor the business plan.

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Planning as Part of The BusinessPlanning as Part of The Business

OperationOperation Planning is a process than never ends for aPlanning is a process than never ends for a

business.business.

It is extremely important in the early stages ofIt is extremely important in the early stages of

any new venture when the entrepreneur willany new venture when the entrepreneur willneed to prepare a preliminary business plan.need to prepare a preliminary business plan.

As the venture grow up to mature business,As the venture grow up to mature business,planning will continue planning will continue

Plan may be short term or long term, strategicPlan may be short term or long term, strategicor operational.or operational.

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What is Business Plan?What is Business Plan? The business plan is a written documentThe business plan is a written document

prepared by the entrepreneur that describes allprepared by the entrepreneur that describes allthe relevant internal and external elements andthe relevant internal and external elements andstrategies for starting a new venture.strategies for starting a new venture.

It is a integration of functional plans such asIt is a integration of functional plans such asmarketing,marketing,

finance,finance,

manufacturing,manufacturing,

sales andsales and

human resources.human resources.

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DefinitionDefinition--Business PlanBusiness Plan

Document that can convince the readerDocument that can convince the readerthat the business can produce enoughthat the business can produce enough

revenue to make a satisfactory profit andrevenue to make a satisfactory profit andtherefore attractive as an investmenttherefore attractive as an investmentopportunityopportunity

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Who should write the plan?Who should write the plan?

The business plan should be prepared byThe business plan should be prepared bythethe entrepreneurentrepreneur..

The entrepreneur may consult with manyThe entrepreneur may consult with manyother sources in its preparation, such asother sources in its preparation, such as

lawyers,lawyers,

accountants,accountants,

marketing consultants and engineers.marketing consultants and engineers.

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Who is it for?Who is it for?

SelfSelf

Investor/Venture capitalistsInvestor/Venture capitalists

DebtDebt EquityEquity

Key employeesKey employees

Significant others ( suppliers, bankers)Significant others ( suppliers, bankers)

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Scope and Value of the Business PlanScope and Value of the Business Plan WhoWhoReads The Plans?Reads The Plans?

The business plan may be read byThe business plan may be read by employees,employees, investors, venture capitalistsinvestors, venture capitalists bankers, suppliersbankers, suppliers customers, advisors, and consultantscustomers, advisors, and consultants & by the entrepreneur himself& by the entrepreneur himself

There are three perspectives should be consideredThere are three perspectives should be consideredin preparing the plan :in preparing the plan : Perspective of the entrepreneurPerspective of the entrepreneur Marketing perspectiveMarketing perspective Investors perspectiveInvestors perspective

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Scope and Value Scope and Value

The business plan is valuable to theThe business plan is valuable to the entrepreneurentrepreneur,,potential investorspotential investors, or, or even new personneleven new personnel, who are, who aretrying to familiarize themselves with the venture, ittrying to familiarize themselves with the venture, it

goals, and objectives.goals, and objectives. It helps determine the viability of the venture in aIt helps determine the viability of the venture in a

designated marketdesignated market

It provides guidance to the entrepreneur inIt provides guidance to the entrepreneur in

organizing his or her planning activitiesorganizing his or her planning activities It serves as an important tool in helping to obtainIt serves as an important tool in helping to obtain

financing.financing.

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Presenting The PlanPresenting The Plan

It is often necessary for an entrepreneur toIt is often necessary for an entrepreneur toorally present the business plan before anorally present the business plan before anaudience of potential investors.audience of potential investors.

In this typical forum the entrepreneur would beIn this typical forum the entrepreneur would beexpected to provide a short (perhaps 20expected to provide a short (perhaps 20--minutesminutes

or halfor half--hour) presentation of the business plan.hour) presentation of the business plan.

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Information NeedsInformation Needs Before committing time and energy to preparingBefore committing time and energy to preparing

a business plan,a business plan, the entrepreneur should do a quick feasibility studythe entrepreneur should do a quick feasibility study

of the businessof the business conceptconcept The information, obtainable from many sourcesThe information, obtainable from many sources

should focus onshould focus onmarketing (segmenting, targeting, andmarketing (segmenting, targeting, and

positioning),positioning), finance (list of all possible expenditures,finance (list of all possible expenditures,

demand forecast, revenue),demand forecast, revenue), and production (location, manufacturingand production (location, manufacturing

operations, raw materials, equipment, laboroperations, raw materials, equipment, laborskills, space, overhead) .skills, space, overhead) .

Internet can be a valuable resource.Internet can be a valuable resource.

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Outline of a Business PlanOutline of a Business Plan

Introductory PageIntroductory Page

Name and address of businessName and address of business

Name(s) and address(es) of principal(s)Name(s) and address(es) of principal(s)Nature of businessNature of business

Statement of financing neededStatement of financing needed

Statement of confidentially of reportStatement of confidentially of report

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Outline Outline

Environmental and Industry AnalysisEnvironmental and Industry Analysis Future outlook and trendsFuture outlook and trendsAnalysis of competitorsAnalysis of competitors Industry and market forecastsIndustry and market forecasts

Description of VentureDescription of Venture Product(s)Product(s) Service(s)Service(s)

Size of businessSize of business Office equipment and personnelOffice equipment and personnel Background of entrepreneursBackground of entrepreneurs

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Outline Outline

Production PlanProduction Plan Manufacturing process (amount subcontracted)Manufacturing process (amount subcontracted) Physical plantPhysical plant Machinery and equipmentMachinery and equipment Names of suppliers of raw materialsNames of suppliers of raw materials

Operational PlanOperational Plan Description of companys operationsDescription of companys operations Flow of orders for goods and/or servicesFlow of orders for goods and/or services

Technology utilizationTechnology utilization

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Outline Outline

Marketing PlanMarketing Plan PricingPricing DistributionDistribution PromotionPromotion Product forecastsProduct forecasts ControlsControls

Organizational PlanOrganizational Plan Form of ownershipForm of ownership Identification ofIdentification of

partners or principalpartners or principal

shareholdersshareholdersAuthority of principalsAuthority of principals ManagementManagement--teamteam

backgroundbackground Roles andRoles and

responsibilities ofresponsibilities ofmembers ofmembers oforganizationorganization

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Outline Outline

Assessment of RiskAssessment of Risk

Evaluate weakness of businessEvaluate weakness of business

New technologiesNew technologies

Contingency PlansContingency Plans

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Outline Outline Financial PlanFinancial Plan

Pro forma income statementPro forma income statement

Cash flow projectionsCash flow projections

Pro forma balance sheetPro forma balance sheet

BreakBreak--even analysiseven analysis

Sources and applications of fundsSources and applications of funds IRR and NPV projectionsIRR and NPV projections

BudgetBudget

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Outline Outline

Appendix (contains backup material)Appendix (contains backup material)

LettersLetters

Market research dataMarket research data Leases or contractsLeases or contracts

Price lists from suppliers.Price lists from suppliers.

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Using and Implementing TheUsing and Implementing The

Business PlanBusiness Plan The business plan is designed to guide theThe business plan is designed to guide the

entrepreneur through the first year ofentrepreneur through the first year ofoperations.operations.

Implementation of the strategy containImplementation of the strategy contain control point to ascertain progress andcontrol point to ascertain progress and to initiate contingency plan if necessary.to initiate contingency plan if necessary.

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Measuring Plan ProgressMeasuring Plan Progress

Entrepreneur should checkEntrepreneur should check the profit and loss statement,the profit and loss statement,

cash flow projections, andcash flow projections, and

information on inventory, production, quality, sales,information on inventory, production, quality, sales,

collection of accounts receivable, and disbursementscollection of accounts receivable, and disbursementsfor the previous month.for the previous month.

Inventory controlInventory control

Production controlProduction control

Quality controlQuality control

Sales controlSales control

DisbursementsDisbursements

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Updating the PlanUpdating the Plan

The most effective business plan can become outThe most effective business plan can become out--ofof--date if condition change.date if condition change.

If the change are likely to affect the business plan,If the change are likely to affect the business plan,the entrepreneur should determine what revisionsthe entrepreneur should determine what revisions

are needed.are needed. In this manner, the entrepreneur can maintainIn this manner, the entrepreneur can maintain

reasonable targets and goals and keep the newreasonable targets and goals and keep the newventure on a course that will increase probabilityventure on a course that will increase probabilityof success.of success.

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Why Some Business Plans Fails?Why Some Business Plans Fails?

Goals set by the entrepreneur are unreasonable.Goals set by the entrepreneur are unreasonable. Goals are not measurableGoals are not measurable The entrepreneur has not made a total commitment toThe entrepreneur has not made a total commitment to

the businessthe business

The entrepreneur has no experience in the plannedThe entrepreneur has no experience in the plannedbusiness.business.

The entrepreneur has no sense of potential threats orThe entrepreneur has no sense of potential threats orweaknesses to the business.weaknesses to the business.

No customer need was established for the proposedNo customer need was established for the proposed

product or service.product or service.

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Packaging the PlanPackaging the Plan

It is a living documentIt is a living document

No right/wrong way: the need of reader isNo right/wrong way: the need of reader is

essentialessentialWhat are the challenges/ questions thatWhat are the challenges/ questions that

can be raised by reader: answer these.can be raised by reader: answer these.

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