BUSINESS PLAN FORMAT Cover letter Front...

ENGINEERING ENTREPRENEURSHIP

SK,FPT,UTHM July 2008 1

BUSINESS PLAN FORMAT

1. Cover letter

Cover letter is a letter that stating the general purpose of business plan.

2. Front cover

Title of Business plan

Name and address of business

Writer’s name

Date

Example: ABS BUSINESS PLAN

AISHA BEAUTY SALON (ABS) P.O Box. 211

Sri Gading, Batu Pahat, Johor

Plan prepared by

Sri Aisha Iskandar, General Manager

7.7.2008

3. Content’ page

4. Executive summary/synopsis

An executive summary is an introductory part that gives snapshot of the idea. It

discusses the following items.

a. The overview of business idea and goal.

b. The summary of marketing, operations and financial plan.

Example: ABS

Aisha Beauty Salon is a limited Partnership to be establishes in 2009. it is located in between of main city of Batu Pahat and Sri Gading Industrial area. The company is seeking business financing in the amount of RM45,000 for the purpose of start-up operations and to cover estimated operating expenses for a three-month period.

5. Purpose of Business Plan

The purpose of a business plan basically is to obtain financing help from the

respective parties such as (Bank/Financial institutions/others) or for the other

reasons.



Example;

i. To apply loan from respective financial institutions.

“This Business plan is prepared by XXX Sdn Bhd for the purpose

of applying business loan from SME Bank at a total amount of

RM50,000”

ii. As a guideline to handle the business.

“This Business plan is prepared by XXX Sdn Bhd for the purpose

of a guideline to running a new business.”

6. Background of the company

i. Company’s name

ii. Address/phone number

iii. Form of business

iv. Main activity

v. Date of business commencement

vi. Business’s number

vii. Business’s/ market prospect in the future

7. Company/owners’ profile

i. Partners’/Owners’ name

ii. IC number

iii. Address

iv. Phone Number

v. Marital status

vi. Academic background

vii. Skills/experience

8. Management and organizational plan

i. Vision, Mission statement/goal

Vision defines a long-term goal of a company. It is a short, succinct, and

inspiring statement of what the organization intends to become at some

point in the future. It is broad, all-inclusive and forward thinking.

Mission is an organization's vision translated into written form. It makes

concrete the top management's view of the direction and purpose of the

organization. A mission statement should be a short and concise statement

of goals and priorities



Company’s goal and objectives

Company’s goals are specific objectives that relate to specific time periods

and are stated in terms of facts. The primary goal of any business is to

increase stakeholder/owner value

ii. Organizational structure (refer to appendices)

An Organization Chart is a diagram displaying the relationship between

work Positions (or roles) in a Business. It starts at the top with the highest

management position (usually the CEO) and progresses down through the

management positions and on to the technical and administrative

positions.

Aisha Beauty Salon

Manager Worker Worker Worker

iii. List of number of employees/workers and its job scope.

- Administration tasks

- Marketing tasks

- Operation tasks

- Financial tasks

iv. Salary/remuneration of each employees/workers

Example,

List of number of employees/workers

No. Position Number of

employees

1 Top Manager 1

2 Vice manager 2

3 Accountant 1

4 Marketing executive 1

5 Operation’s manager 1

6 Administrative clerks 3



7 Direct labor 7

Job scope

No. Position Number ofemployees

1 Manager To plan, organize, implement and control the overall

operations.

Responsible for the whole performance of the company

To handle problems from the internal and outside of the

company.

2 Accountant Responsible for the reporting the financial performance

of the company to the top manager.

Salary/remuneration

No. Position No. Monthly

salary

(RM)

EPF

(13%)

(RM)

SOCSO

(2%) (RM)

Total

(RM)

1 Manager 1 5,000 650 100 5,750

2 Vice manager 2 6,000 780 120 6,900

3 Accountant 1 3,000 390 60 3,450

4 TOTAL xx xx xx xx xx

9. Marketing plan/ strategies

Marketing activities are all those associated with identifying the particular

wants and needs of a target market, and try to give services better than the

competitors. This involves by doing a market research on customers, analyzing

their needs, and then making strategic decisions about product design, pricing,

promotion and distribution. The goal of a market analysis is to determine the

attractiveness of a market and to understand its opportunities and threats as they

relate to the strengths and weaknesses of the firm.

Components in the marketing plan are as following:

i. The information of product/services

Explain in detail the product/services that you are going to sell.

Example: ABS

Product /Services

Service charge

Average Daily customer

Monthly customers

Average Monthly income

Facial treatment Normal Facial Sauna Aromatherapy

60 50 10 30

2 2 1 1

50 50 25 25

3,000 2,500 250 750

TOTAL 6,500



ii. Target market

Target market is the market segment to which a particular good or service is

marketed. It focuses on a subgroup of people or organizations sharing one or

more characteristics that cause them to have similar product needs.

Market segment

a. Consumer market

Consumer market can be segmented according to:

1. geographic (region, population, climate)

2. demographic (age, gender, income level, occupation, education,

stage in the family cycle, and household size)

3. psychographic (interest, opinions, lifestyle, activities)

4. behavioural (price sensitivity, brand loyalty and usage rate)

b. Business/corporate market

Business market can be segmented according to:

1. geographic (customer concentration, industrial growth)

2. Customer type (size of the organization, its industry, etc)

3. Purchasing behaviour (loyalty to supplier, usage pattern and order

size)

Example: ABS

Consumer market

i. Area : Parit Raja to Batu Pahat

ii. Age : 20 - 40

iii. Gender : Female

iv. Income level : RM1,000 and above (medium – upper level)

v. Occupation : College & University students, Industrial workers, professionals, teachers, business

owners and households

vi. Habit : Beauty and face treatment, style and fashion, and appearance

vii. Behavioral : warm service, brand loyalty and quality.

iii. Market Size (RM) The size of the market is the present sales and on potential sales of the

product/services. It is represented in a form of RM. The following are some

information source for determining the market size:

Government data

Trade association

Financial data from major players

http://en.wikipedia.org/wiki/Market_segment



Customers survey

Example: ABS

The market size for the beauty industry in the area of Batu Pahat, is range

from 2,000 customers to 3,000 customers (plus the repetitive customers).

This equal to RM300,000 which is (3,000 customers * RM100/head) per

year . These numbers include all the competitors’ sales.

iv. Competitors Identify the existing competitors in the target market. It can be tabulated as

following:

Example: ABS

Find out the strengths and weaknesses of each competitor and try to

differentiate from them.

v. Market share (%) Market share is proportion of the total market segment that is being serviced

by a company. It can be computed as a company's sales revenue (from that

market) divided by the total sales revenue available in that market.

Example: ABS

ABS is planning to grab 25% of total market share from the existing competitors. It can be shown as below:

Proportion of market share ( Before market entry by ABS) Shadira: 40% RM120,000 Felisa: 30% RM90,000 Others : 30% RM90,000 Total 100% RM300,000

Competitor’s name

Expected sales

%Market share

Estimated Sales Loss Because of You

Shadira RM120,000 40% RM70,000

Felisa RM90,000 30% RM60,000

Others RM90,000 30% RM50,000

TOTAL RM300,000

http://en.wikipedia.org/wiki/Market_segment



Before market entry by ABS

Proportion of market share ( After market entry by ABS) Shadira 30% RM90,000 Felisa 20% RM60,000 Others 20% RM60,000 ABS 30% RM90,000 Total 100% RM300,000

After market entry by ABS

RM90,000 expected sales of ABS is represented by 900 customers on average. (900 *RM100=90,000)

Others

30% Shadira:

40%

Felisa:

30%

Shadira:Felisa:Others

Felisa 20%

Shadira 30% Others 20%

ABS 30%

Shadira

Felisa

Others

ABS



vi. Forecasted Sales

ABS Enterprise

Month Quantity Average price/ Total sales *Average Cost/ Total Cost Gross Profit

(customer) (1) Quantity(RM)(2) (1)x(2) Quantity(RM) (1x4) (3-5)

1 30 100 3,000 52 1,560 1,440

2 20 100 2,000 52 1,040 960

3 50 100 5,000 52 2,600 2,400

4 70 100 7,000 52 3,640 3,360

5 80 100 8,000 52 4,160 3,840

6 90 100 9,000 52 4,680 4,320

7 90 100 9,000 52 4,680 4,320

8 90 100 9,000 52 4,680 4,320

9 90 100 9,000 52 4,680 4,320

10 90 100 9,000 52 4,680 4,320

11 100 100 10,000 52 5,200 4,800

12 100 100 10,000 52 5,200 4,800

TOTAL 900 100 90,000 52 46,800 43,200

*refer to the notes: calculation of cost of production.

vii. Marketing Mix Strategy

A good Business Plan will take account the aspects of products/services to

be offered - prospects and customers, benefits and advantages, ease of

availability, location, advertising & promotion and competition. 4 marketing

mix are Product, Promotion, Price and Place.(4Ps). The goal is to make

decisions that center the 4 Ps on the customers in the target market in order

to create a perceived value and generate a desirable response.

a. Product/Service

Products refer to tangible product as well as services. Product decisions

can be made on:

Brand name

Functionality

Styling

Safety

Packaging

Repairs and support/warranty

Accessories and services



b. Price

Some examples of price decisions to be made include:

Pricing Strategy

Suggested retail price

Volume discounts and wholesale pricing

Cash and early payment discounts

Seasonal pricing

Price flexibility

There are many methods of establishing prices. Below are the examples

of pricing methods.

1. Cost-plus pricing is pricing method whereby a standard profit

margin is added to the estimated cost of the products. It is

calculated by dividing a total cost of production (fixed and variable

cost) to a total number of units to be produced per year. Once the

cost per unit is determined the profit margin will be mark-up to

obtain the selling price of a product.

2. Demand pricing: the price is determined based on demand. This

may because the different type of cost and materials used for the

product.

3. Competitive pricing. This method is used by companies that are

entering a market where there is already an established price and it

is difficult to differentiate one product from another.

c. Distribution (Place)

Distribution is about getting the products to the customer. Some of the

more common distribution channels include:

1. Direct sales. Direct sales is a distribution channel where the

product will be directly sold to the end-user.

2. Manufacturer’s representatives. This channel will appoint

salespeople who operate out of agencies that handle the selling of

manufacturer’s products.

3. Wholesale distributors. a manufacturer sells to a wholesaler, who

in turn sells it to a retailer or other agent for further distribution

through the channel until it reaches the end user.

4. Brokers: Third-party distributors who often buy directly from the

distributor or wholesaler and sell to retailers or end users.



5. Retailers: the business can distribute their product to the

retailers/business who will sell the products to the end users. It is

important if the end user of a product is the general consuming

public.

6. Direct mail: this channel is done by selling to the end user using a

direct mail campaign.

d. Promotion

Promotion is the communication of information about the product with

the goal of generating a positive customer response. Marketing

communication decisions include:

1. Advertising. Advertising can be done via electronic media and

non-electronic media. It delivers a creative message(s) and try to

persuade potential customers to purchase a particular brand of

product or service.

2. Packaging. Packaging includes labels, trademarks or service of a

company. It protects a products for distribution, storage, sale, and

use

3. Sales promotions: Establishes the strategies used to support the

sales message. This includes a description of a schedule of planned

promotional activities such as special sales, coupons, contests and

premium awards.

4. Public relation and publicity: A complete account of the publicity

strategy including a list of media that will be approached as well as

a schedule of planned events.

5. Personal selling and sales force

Promotional media

Printing/Publication/Broadcasting (newspaper, TV, Radio)

Out-of-home/Internet marketing

Digital marketing

Word of mouth

http://en.wikipedia.org/wiki/Printing

http://en.wikipedia.org/wiki/Publication

http://en.wikipedia.org/wiki/Broadcasting

http://en.wikipedia.org/wiki/Out-of-home_advertising

http://en.wikipedia.org/wiki/Internet_marketing

http://en.wikipedia.org/wiki/Digital_marketing

http://en.wikipedia.org/wiki/Word_of_mouth_marketing



10. Operation plan

The operational plan deals specifically with the internal operations and

equipment necessary to produce a product or service. The following are selected areas that need to be addressed in this section.

a. Location

- space of the office, warehouse, or a combination (what square footage needed)

- what is the advantage of your location

- provide Office/factory layout ( in the appendice)

b. Equipment - Outline the equipment needed including cost (purchase or

lease)

No. Items RM Financing type

1. Machineries and equipment 10,000 Bank loan

2. Furniture and fittings 10,000 Bank loan

3. Car 30,000 Hire purchase

- Example: lorry, machines, tools, building, computers and so

on.

c. Labor - How many labors do you need? (Full time or part time)

- Break them out by function, and hourly pay.

d. Raw Material

No. Items Monthly Quantity

(Cost) RM

Supplier

1. Facial Scrub 1 50 Nona Roguy

2. Collagen gel 1 100 Sendayu Tinggi

3. Face cream 1 50 Others

4. Foundation 1 100 Nona Roguy

5. Treatment set 1 100 Sendayu Tinggi

6. Normal set 1 100 Others

Total 500



e. Layout (refer to appendices)

Layout refers to the arrangement of machineries, equipment, workers and

other facilities used in the operation.

The layout can be based on:

1. Product- according to the sequence of activity to produce the product

2. Process- based on production process. It is suitable for business that

produces several products which need similar process.

3. Marketing- this layout is to utilise the available space to display

products. Mainly for retail business, wholesale, bookshop and so on.

f. Manufacturing & Services process Suppliers

Identify the list of suppliers that will support your operations.

Suppliers Address Materials Expected purchased volume

Nona Roguy

Nona Roguy HQ, SB. Cheras, Kuala Lumpur

Beauty product

RM3,000

Sendayu Tinggi

STSB HQ, SB. Petaling Jaya, Selangor

Beauty product

RM3,000

Others Kuala Lumpur Beauty product

RM5,000

Process flowchart

Process flowchart starts from the production process of a product until

its delivery to the store or to the customers. Company should develop a

process flowchart or process chart to clearly visualize the operations process.

A process flowchart symbol is shown in appendice.

Transformation process

Input Transformation Process Output

g. Expected monthly overhead cost Overhead cost is a monthly cost that the business has to commit. It will affect to the cost of product per unit. Overhead

expenses usually include the following travel, maintenance and repair,

equipment leases, rent, advertising & promotion, supplies, utilities,

packaging & shipping, payroll taxes and benefits, professional

services, insurance, loan payments and depreciation.



Example; Operational Overhead

Total Monthly Cost

Raw materials 500

Utilities 100

Rent 500

Labor 2,400

Maintenance 100

Depreciation* 897

TOTAL 4,497

* refer to depreciation schedule in financial plan.

Total of production per year

Total production cost per year is a total operation cost incurred per

year.

For ABS the production cost RM41,100 (refer to Cash flow) +

6,095 (depreciation) = RM47,195

Cost of production per unit

Unit Production Cost = Total production costs per year

Production’s Volume.

ABS = RM47,195 /900 customers = RM52/customer

h. Legal environment

Your operations might need a license or permit from the local

authority or from the relevant ministries.

11. Financial plan



Financial planning is the task of determining how a business will afford to

achieve its business goals and objectives. It will determine the following items:

a. Cost of project

b. Working Capital Table

c. Sources of financing

d. Loan amortization schedule

e. Depreciation schedule

f. Forecasted financial statement

g. Forecasted cash flow

h. Forecasted Balance sheet.

Cost of Project

Cost of project or known as Project Implementation Cost (PIC) is an initial

capital expenditure needed to start the business. 4 components that Hill be

determined in cost of project are:

i. Total Fixed Asset

ii. Total Working Capital

iii. Others Expenditure

iv. Unexpected Expenditure

1.0 Cost of Project RM RM

(I) Total Fixed Asset

Machines and Equipments 10,000

Furniture and Fittings 10,000

Vehicles-car 25,000

Renovation 6,000

Signboard 2,000 53,000

(II) Total Working Capital

Marketing Expenditure * 3,300

Operational Expenditure ** 10,600

Administrative Expenditure *** 4,800 18,700

(III) Others Expenditure

Deposit-Rent 1,000

Deposit-Water & Electricity 300

Registration cost 200 2,100

TOTAL 73,800

(IV) Unexpected Expenditure (5%) 3,690

GRAND TOTAL 77,490



2.0 Working Capital Table

Type of Expenditure RM RM RM

*

Marketing expense

Promotion (RM800* 3 months) 1,500

Traveling (RM300*3 months) 900 3,300

**

Operational expense

Raw materials (500* 3 months) 1,500

Utilities (100*3 months) 300

Rent (500*3) 1,500

Labor (2,400* 3 months) 7,200

Maintenance 100 10,600

***

Administrative expense

Salaries (RM1500*3 months) 4,500

Utilities (100*3 months) 300 4,800 18,700

3.0 Financing Sources

No. Item Total (RM)

1 Owners’ Equity

- Working Capital 10,000

2 Debt: Account Payable (Working Capital) 1,500

3 Debt: Bank Loan

-Fixed Assets (machines, furniture, renovation) 28,000

-Working Capital (Balance) 7,200

- Others expenditure 2,100

-Down payment- Car 2,500

-Unexpected expense 3,690

4 Debt: Hire Purchase - Car 22,500

77,490

4.0 Loan amortization schedule I



Total loan 45,000

Interest rate 5%

Payback Years 5 years

Year Interest Principal Total Current

repayment Balance (RM)

0 45,000

1 2,250 9,000 11,250 36,000

2 2,250 9,000 11,250 27,000

3 2,250 9,000 11,250 18,000

4 2,250 9,000 11,250 9,000

5 2,250 9,000 11,250 -

Total 11,250 45,000 56,250

Annual interest = 5%*45,000 2,250

Annual principal = 45,000/5 9,000

Total annual repayment 11,250

Total monthly repayment= 11,250/12 938

4.0 Loan amortization schedule II

Total loan RM22,500

Interest rate 4%

Payback Years 5 years

Year Interest Principal Total Current

repayment Balance (RM)

0 22,500

1 900 4,500 5,400 18,000

2 900 4,500 5,400 13,500

3 900 4,500 5,400 9,000

4 900 4,500 5,400 4,500

5 900 4,500 5,400 -

Total 4,500 22,500 27,000

Annual interest = 4%*22500 900

Annual principal =225000/5 4,500

Total annual repayment 5,400

Total monthly repayment = 5,400/12 450



5.0 Depreciation schedule I

Asset name Car

Purchase cost RM25,000

Useful life 7 years (salvage value RM8,000)

Year Annual Accumulated Book value

depreciation depreciation

0 25,000

1 2,500 2,500 22,500

2 2,500 5,000 20,000

3 2,500 7,500 17,500

4 2,500 10,000 15,000

5 2,500 12,500 12,500

6 2,500 15,000 10,000

7 2,500 17,500 7,500

Annual depreciation =(30,000-8,000)/7 2,429

Monthly depreciation =2,429/12 202

5.0 Depreciation schedule II

Asset name Machines and equipment

Purchase cost RM28,000

Useful life 6 years salvage value:RM6,000)

Year Annual Accumulated Book value

depreciation depreciation

0 28,000

1 4,760 4,760 23,240

2 4,760 9,520 18,480

3 4,760 14,280 13,720

4 4,760 19,040 8,960

5 4,760 23,800 4,200

6 4,200 28,000 -

Annual depreciation =28,000-6,000/6 3,667

Monthly depreciation =3,667/12 306

FINANCIAL STATEMENT



Beauty Salon Enterprise

Pro Forma Income Statement

For the year ended 31 December 2009

RM RM

Sales revenue

* 90,000

Less: Cost of goods sold 46,800

Gross Profit 43,200

Less: Selling and administrative expense

Administrative 19,200

Marketing 6,000

Others 2,100

Interest 3,150

Depreciation 6,095 36,545

Net profit 6,655

Beauty Salon Enterprise

Pro Forma Balance sheet

As at 31 December 2009

ASET

Current asset

Finished inventory 2,000

Cash 25,450

Total current asset 27,450

Fixed asset

Machines/equipment/others 28,000

- accumulated depreciation 4,760

Book value of

machineries/others 23,240

Car 25,000

- accumulated depreciation :

car 2,429

Book value for car 22,571

Total fixed asset 45,811

TOTAL ASSET 73,261

LIABILITY



Current liability

Account payable 2,607

Long term liability

Bank loan 36,000

Hire purchase 18,000

Total Long Term liability 54,000

TOTAL LIABILITY 56,607

OWNER'S EQUITY

Beginning capital 10,000

Net profit 6,655

ENDING CAPITAL 16,655

TOTAL LIABILITY AND EQUITY 73,262



Pro Forma Cash Flow Statement AISHA BEAUTY SALON 31 DECEMBER 2009

Month 0 1 2 3 4 5 6 7 8 9 10 11 12 TOTAL

A CASH INFLOW

Beginning balance - 18,400 14,213 9,025 6,838 5,950 7,263 9,575 11,888 14,200 16,513 18,825 22,138 -

Owner's capital 10,000 10,000

Cash sales - 3,000 2,000 5,000 7,000 8,000 9,000 9,000 9,000 9,000 9,000 10,000 10,000 90,000

Collection of account receivable - - - - - - - - - - - -

TOTAL CASH INFLOW 10,000 21,400 16,213 14,025 13,838 13,950 16,263 18,575 20,888 23,200 25,513 28,825 32,138 100,000

B CASH OUTFLOW -

Operation expense -

Labor 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 28,800

Raw material payment 1,500 300 300 300 300 300 300 300 300 3,900

Utilities 100 100 100 100 100 100 100 100 100 100 100 100 1,200

Rent 500 500 500 500 500 500 500 500 500 500 500 500 6,000

Maintenance 100 100 100 100 100 100 100 100 100 100 100 100 1,200

Marketing expense -

Advertising and promotion 1,100 1,100 1,100 300 300 300 300 300 300 300 300 300 6,000

Administrative expense -

Salaries 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000

Utilities 100 100 100 100 100 100 100 100 100 100 100 100 1,200

Fixed asset purchase -

Machine & equipment 10,000 10,000

Furniture &fitting 10,000 10,000

Signboard 2,000 2,000

Renovation 6,000 - - - - - - - - - - - - 6,000

Down payment-car 2,500 2,500

Others -

Deposit -rent 1,000 1,000

Deposit –water& electricity 300 300

Registration fees 800 800

TOTAL CASH OUTFLOW 32,600 5,800 5,800 5,800 6,500 5,300 5,300 5,300 5,300 5,300 5,300 5,300 5,300 98,900

C SURPLUS/DEFICIT (22,600) 15,600 10,413 8,225 7,338 8,650 10,963 13,275 15,588 17,900 20,213 23,525 26,838 26,838

D Loan 43,500

Financial expense -

Interest+ principal of hire purchase 450 450 450 450 450 450 450 450 450 450 450 450 5,400

Interest+ principal of bank loan 938 938 938 938 938 938 938 938 938 938 938 938 11,250

E Short term financing - - - - - - - - - - - - - -

F ENDING CASH BALANCE 18,400 14,213 9,025 6,838 5,950 7,263 9,575 11,888 14,200 16,513 18,825 22,138 25,450 25,450



12. Attachment

a. Agreement

b. Reference

c. Research finding

d. Business registration certificate

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