Business Plan

Blueprint of step-by-step procedure followed

to convert business idea into a successful
business venture.
First of all Identify an innovative idea,
researches external environment to list O&T,
identifies internal strength and weakness,
assesses feasibility of the idea and than allocate
resources( production /operation, finance, HRs)
A business plan is a written description of the
goals and objectives of the business and how
they are going to be achieved. It includes the
mission of the business along with the
production, organizing, marketing, and
financing intentions
Is it feasible to operate my own business?
Is my business idea feasible?


Why Develop a Business Plan? Or objectives of a business plan
A business plan is a very important tool if you are starting a
new business or expanding an existing one.
The business plan communicates to others how successful
you are going to be.
Lending institutions require them to support loan
applications.
Experience shows that successful businesses have a plan;
the majority that fail do not.
A good business plan is your road map to success!
Implementing the plan
Objective evaluate the prospects of the business - SWOT
Resource requirement for implementation
To document owenership arrangement, future prospects,
and projected growth rate.

BP Process
Preliminary Investigation

Idea Generation

Environmental Scanning

Feasibility Analysis

Project Report Preparation

Evaluation Control and Review
I. Idea Generation
Innovative idea, new concept, product or service also
incremental value addition.
Sources of new ideas consumers, existind
companies, R&D, employees, dealers, retailers.
Methods of generating new ideas brain storming,
GD, data collections, feedback, invitation of ideas
through advertisements, mails or internet, market
research, commercializing inventions, business
contests, fests, business bazigar on Star TV- contest
business plans

II Environmental Scanning
After idea generation, next phase,
Environment scanning - both external and internal
that includes analysis of perspective SWOT of
business enterprise.
Sources of information can be both informal(family,
friends and colleagues) and formal(bankers,
magazines, newspapers, govt deptts, seminars,
suppliers, competitors, dealers.
Environment scanning focus on maximizing
information because more supportive the information,
greater is the confidence regarding the success of the
business.
External Environment
1. Socio-cultural Appraisal : Social and cultural
norms, beliefs, value system, open or close culture,
level of rigidity/flexibility of a society toward product
/service/concept. Eg Americans are experimenting
and adventurous whereas Arabs are conservative.
For a innovative product like Bungee jumping
acceptability would be more in USA than UAE.
2. Technological know-how to convert the idea into a
product, modern technologies expected in the
future. Eg. Idea of manufacturing tobacco-free
cigarettes, technological appraisal can assess
whether this kind of a product is possible or not.
3. Economic Appraisal : Assessment of economy in a
given society in terms of inflation, per capita
income and consumption pattern, balance of
payment, consumer price index etc. Healthy
economy offers greater opportunities for growth
and development of industry together with
confidence to the entrepreneur about the success of
his business venture.
4. Demographic Appraisal : OA population pattern in
a given geographical region. It includes variables
like age, profile, distribution, sex, education
profile, income distribution etc. Demographic
appraisal help in identifying size of target market
5. Government Appraisal : Assessment of legislation,
policies, incentives, subsidies, grants, procedures
etc. formulated by government for a particular
industry. For eg. Government policies of subcidised
electricity in Uttranchal is an added advantage for
setting up industry due to its heavy dependence on
power. Whereas in UP, electricity is not only
expensive but is also of acute shortage, which led
entrepreneurs to depend on personal generators,
increases cost of the product. Uttranchal is a
proffered state for setting up manufacturing units in
comparison to UP.
Outcome of the other policies too be taken in to
consideration while conducting govt appraisal.
Internal Environment
Raw Material : Assess availability of raw material
at present and future, if not adequate/ shortage,
serious concern, where is the nearest source and
cost involved therein.
Production/Operation : Availability of
machineries, equipments, tools and techniques
required for production/ operations.
Finance : Assessment of total requirement of
finances in terms of start-up expanses, fixed
expanses and running expanses. It also indicates
source of finance that can be approached for
funding
Market : It asses the present, potential and future
demands of the market.
Human Resource : Assessment of the kind of the
human resources required and its demand and
supply in the market. This helps in estimating the
cost and level of competition in hiring and
retaining the human resources.

Objective of the environment scanning should be
Maximizing information from maximum sources
for enhanced possibility of success in the business.
III Feasibility Analysis
Feasibility study is done to find whether the
proposed project (considering the above discussed
environment appraisal) would be feasible or not.
Feasibility study is dependent on environment
appraisal yet it is far more descriptive.
The variable/dimensions of feasibility analysis -
1. Market Analysis
2. Technical/Operational Analysis
3. Financial feasibility
4. Drawing functional plan

Market Analysis
M A is conducted to estimate the demand and market
share of the proposed product/service in future.
Demand analysis and market share is based on number
of factors - consumption pattern, availability of substitute
goods/service, competition etc.
A preliminary discussions with consumers, retailers,
distributors, competitors, suppliers is carried to
understand consumer preferences, existing and potential
demands, strategy of competitors, and practices of
distributors, retailers etc., present and prospective
consumers, geographic and seasonality distribution of the
demand, marketing mix of competitors, accepted
marketing mix of consumers.
Technical/Operational Analysis
Done to assess operational ability of the proposed
business enterprise.
Key questions to be answered are- what are the
technological and equipments needs, from where
this technology and equipments be obtained, from
where the raw material be obtained.
T/O analysis collects information about :
a) Material availability & requirement planning
b) Plant location
c) Plant capacity
d) Machinery and equipment
e) Plant layout
a) Material availability & requirement Planning
Assessment of the raw material required for
production of goods/service.
Quality and quantity of raw material
Factors influencing availability of raw material
Price sensitivity of raw material
Perishable time of raw material
Material Requirement Planning i.e. quantity of
material required to let the production run
smoothly.

b) Analysis of choice of technology
Identify whether product developed at the idea
generation stage is technologically feasible or not.
Answers whether a technology for the product
exists or not, if exists in more than one form,
which one would be more profitable to the
company.
Choice of the technology would be affected by ;
capacity of the plant, amount of investment,
production cost, latest development, quantity of
planned production, impact of environment.

Plant location : Area(broad) where the enterprise
is to be established, like city, industrial zone or
coastal area. Plant location is the physical layout
of the business and is affected by process of
production, safety of personnel, minimum
production cost, scope of expansion, proper space
utilization etc. Location choice is influenced by
following factors :
i) Proximity to raw material and markets
ii) Availability of infrastructure like power,
transportation, water, communication means.
iii) Favorable government policies
i) Other factors like climate conditions, availability
of manpower etc.
Machinery and equipment : Machinery and
equipment is dependent on production technology,
plant capacity, investment cost of buying, ,
maintenance and running cost.

Financial Feasibility
Financial feasibility is done for financial
assessment of the proposed business venture.
Following cost estimates have to be carried out :
i) Cost of land and building depending upon the
requirement and availability of funds, the land and
building can be hired, taken on lease or purchased.
ii) Cost of plant & machinery-estimating cost of plants
& machineries and their running & maintenance.
iii) Preliminary cost estimation cost required for
conducting market survey, preparing feasibility
report, registration expenses, expenses involved in
raising capital from public & other misc expanses.
iv) Provision of Contingencies : Needs to be made to
cover certain unexpected expanses which can
emerge due to change in external environment like
increase in the price of the raw material, petrol
price, transportation costs.
v) Working capital estimates for running the business
are also made.
vi) Cost of Production It include raw material cost,
labour cost, overhead expanses, utilities like
power, water, fuel etc.
vii) Sales and Production estimates : Based on the
plant capacity the production and sales estimates
are made which help in estimating profitability.
vii) Profitability projections are made on the following
parameters
a. Cost of production
b. Sale expenses
c. Administrative expanses
d. Expected sales
e. Calculation of the above gives gross profit

Drawing Functional Plan
After feasibility study, functional plans are drawn
which means developing plans and strategies for all
operational areas : marketing, finance, HR and
production.
a) Marketing Plan : MP lays down the strategies of
marketing (Marketing mix) which can lead to success
of business. From the market feasibility study and
marketing research, potential/present demand of
customers, which helps in laying down the strategies
for market segmentation, identification of target
market and laying down strategies for the target
market.
b) Production/operation Plan : Production plans are
drawn for manufacturing whereas operational
plans are for service sector. It includes strategies
for following parameters :
1. Location and reasons for selecting the locations
2. Physical layout
3. Cost & availability of machinery, equipments, raw
material
4. List of suppliers and if possible, distributors.
5. Cost of manufacturing / running operations
6. Quality management
7. Production scheduling, capacity mgt,inventory mgt
c) Organisational Plan : Defines the type of
ownership, organization structure and proposes
HRM practices that would govern the successful
running of proposed business enterprise.
d) Financial Plan : Financial Plan indicates the
financial requirement of the proposed business
1. Cost incurred in smooth running of all the plans
financial, marketing, operations and HRs.
For eg. Cost incurred in the marketing plan would
include forecasting sales, for production plan it
includes cost of goods, for organizational plans it
includes cost of compensation to employees.
2. Projected cash flows.
3. Projected income statement
4. Projected break-even point
5. Projected ratios.
6. Projected Balance sheet.
IV Project Report Preparation
Written document that describes sep-by-step,
strategies involved in starting and running a business.
Project report helps to understand the opportunities,
problems and weakness of the business.
It guides the entrepreneur in actually starting up and
running the business venture.
Helps to monitor whether the business is going to be
as projected in the business plan or not.
Helps in documenting cost estimates of the business.
Handy tool to persuade investors and financial
institutions to fund a project.
Helpful in proper utilization of the resources.
Finally lead to sustainable development of the
organisation.
Essentials of a Project Report
1. The project report should be sequentially arranged.
2. It should be exhaustive(covering all the details).
3. Should logically & objectively explain projections
4. Projections should be appropriately for 2 to 10 yrs
5. Should professionally made to demonstrate that
promoters posses entrepreneurial acumen, experience.
6. Should justify financial needs & financial positions
7. Should also justify market prospects and demands
8. Should be attractive to the financial agencies and
investors.
9. Should also have a high aesthetic value.
Preparing a Project Report
1. Cover Sheet : It mentions the name of the project,
address of the headquarters (if any) and name and
address of the promoters.
2. Table of Contents : A Good Project report should
be divided in to sections eg. 1,2,3 or I, II, III or
A,B,C and each section into subsections eg. 1.1,
1.2, 1.3 or I-i, I-ii,I-iii or A-a.A-b,A-c. No matter
which method is used for classification but once a
method is selected than uniformly adopted for
entire project report.

3. Executive Summary : A brief summary should
about 2 to 3 pages. Briefly describe the company,
mention some financial figure and some salient
figures of the project. Generating interest in the
minds of the readers is the prime motive of the
executive summary.
4. The Business : This will give the details about the
business concept. It will discuss the objective of
the business, brief history about the past
performance, form of ownership along with the
proposed headquarters.
5. Funding Requirement : To address to the investors
and financial institutions, a careful, well planned,
funding requirement should be documented. It is
also necessary to project how these requirements
would be fulfilled. Debt equity ratio can give an
indication about how much finance would
company require and how it would like to fund the
project.
6. The Product/Services : Description of product/
service, features, product range, and advantages in
comparison to available product in market.It also
give details about patents, trademarks, copyrights,
franchise & licensing agreements.
7. Function plans : Functional plans for Marketing,
finance, human resources, and operations.
a. Marketing Plan : Marketing mix strategies on the
basis of MR MR market characteristics and
demography, SWOT of market and competitors.
Marketing mix strategies for product/service,
price, promotion, distribution. The budget for the
marketing plan are drawn at an end.
b. Operational plan : Give information about i) plan
location, reason for the selection thereof vicinity
of the market, suppliers, labour, availability of raw
material, machinery, or does it have advantages of
the govt. subsidies or any other. ii) Plant layout to
provide a pattern of arrangement of the
organisation and would indicate exhaustive
planning of the business. iii) Plan for material
requirement, inventory management and quality
quality control are drawn for identifying further
costs and intricacies of the business. Finally the
budget for operational plan is also drawn.

c. Organisational Plan : The organisationa plan
indicates the pattern of flow of responsibilities and
duties amongst people in the org. Detail about the
BOD, it can also enlist the manpower plan that
would be required to put life into the company and
it will also enlist laws that would be governed in
managing the employees of the org. In the end the
org plan is also budgeted.
d. Financial Plan : Usually drawn for 2 to 5 years for
a existing company. A summary of financial data
is given, whereas for new org, the following
projections are drawn ;
i) Projected sales
ii) Projected Income and expenditure statement.
iii) Projected break even point
iv) Projected profit and loss statement.
v) Projected Balance sheet.
vi) Projected cash flows.
vii) Projected fund flow.
viii)Projected ratios.


8. Critical Risks : The investors are interested in
knowing the tentative risks to evaluate the viability
of the project and to measure the risk involved in the
business.
9. Exit Strategy : Details about how the organization
would be dissolved, what would be the share of the
each stakeholder in case of winding-up of the
organization. It further help in measuring the risk
involved in investing.
10. Appendix : Information about the CV of the owners,
ownership agreement, certificate from pollution
board, MOU, AOA and all other supporting
agreements/documents that can help in marketing
the project viability at large.
Key Components of a Business Plan
The business plan covers six key areas:

The Industry, the Company, and the Products

Market Research and Analysis

Marketing Plan

Operating Plan

Management Team

Financial Plan
The Industry, the Company, and the Products
This section of the business plan describes the business
venture in a detailed but concise manner. You must clearly
describe:


The nature of the industry

The proposed business

The product the business
plans to offer
The Industry
Present the current status and outlook for the industry in
which the business will operate.

New products and developments

New markets and customers

General trends affecting the business

Identify sources of information used to describe trends
The Company
Write a detailed description of the proposed business
venture, the products and services it will offer, and the
principal customers.

Mission statement with goals and objectives

Ownership and legal form of the company

Reasons why the business will be successful
The Products or Services
Describe in detail the products or services to be sold, as
well as the application of the product or service.

Benefits to the customers

Competitive advantages

Unique features

Current state of development
Market Research and Analysis
This section of the business plan presents enough facts
obtained through market research and analysis to
determine if the product or service has a substantial
market in a growing industry despite a competitive
market.

Customers

Market Size and Trends

Competition

Market Share and Sales
Types of Market Research
PRIMARY RESEARCH = DO IT YOURSELF:

Observation
Surveys
Interviews

SECONDARY RESEARCH = USE EXISTING DATA:

Public Library
College or Universities
Chamber of Commerce
Business Publications
Trade Shows
The Internet
Census Information
Sales Tax Data
Types of Market Analyses
The information obtained through primary and secondary
research techniques can be analyzed in a variety of ways.

Economic Trend Analysis

Political and Social Analysis

Customer Analysis

Market Potential Analysis

Competitive Analysis
Customers
Identify your target market and develop a customer
profile.

Demographic profile

Lifestyle patterns

Expectations
Customer Profile
Age
Income
Education
Gender
Stage of business
Type of business
Size of business
Location
Behavior patterns
Customer expectations
Other ???
Who is your target audience?
How will you reach this audience?
Market Size and Trends
Describe the primary market for the product, both
geographically and in terms of sales volume.

Describe seasonal fluctuations

Discuss potential for growth

Discuss factors affecting growth
Competition
List the strengths and weaknesses of competitive
products and services and list the companies that supply
them.

Identify and list current and future competitors

Assess the competition on the basis of price, quality,
performance, service, etc.

Discuss advantages and disadvantages of competing
products or services
Market Share and Sales
Summarize what it is about your product or service that
will make it sell in the face of current and future
competition.

Identify and list major customers and estimate potential
sales

Estimate share of the market

Estimate sales in units and dollars for the next two to
five years
Marketing Plan
This section of the business plan describes the companys
marketing goals and objectives and how they will be
achieved.
Overall Market Strategy

Pricing

Sales Tactics

Advertising and Promotion

Packaging

Marketing Plan Outline
Overall Market Strategy
Describe the general marketing philosophy and strategy of
the company.

Derived from market research and analysis results

Include discussion of markets targeted for sales
promotions

List short-term and long-term marketing objectives

Discuss specific marketing tactics
Pricing
The pricing strategy selected can mean the difference
between success and failure.

Provide a detailed description of the pricing strategy
for each product or service

Outline factors considered in developing pricing
strategies

Discuss wholesale vs. retail pricing strategies

Discuss price levels, geographic terms, discount
policies, etc.


Sales Tactics
Describe specific actions that will be taken to generate sales
and distribute the product or service to customers.

Analyze effectiveness of everything available within the
sales system

List channels such as salespeople, agents, dealers, and
direct mail services

Describe methods that will be used to distribute products
to customers

Describe merchandising techniques
Advertising and Promotion
Describe approaches the company will use to bring the
product or service to the attention of the target market.

List advertising methods along with benefits and costs

Discuss promotional efforts and strategies

Publicity
Packaging
Describe how the product will be packaged for the target
market.


Package design

Package labeling

Packaging materials
Marketing Plan Outline
A marketing plan outline is a useful tool for pulling
together information related to the marketing plan. The
marketing plan outline should include information on the
following:
Marketing situation

Marketing objectives

Marketing Strategies

Budget

Action plan

Evaluation