components of business plan

1. GROUP MEMBERS :
SHAYAN JAVED
HUMERA AHSAN
ZAHID HUSSAIN
SAAD REHAN

2. LEARNING OUTCOMES :
 To define what the business plan is, who prepares it, who reads it,
and how it is evaluated.
 To understand the scope and value of the business plan to
investors, lenders, employees, suppliers, and customers
 To identify information needs and sources for each critical section
of the business plan.
 To enhance awareness of the ability of the internet as an
information resource and marketing tool.
 To present examples and a step by step explanation of the business
plan.
 To present helpful questions for the entrepreneur at each stage of
the planning process.
 To understand how to monitor the business plan

3. DEFINITION:
It is a document prepared by and entrepreneur that describes,
 The set of business goals,
 reason for viability,
 Functional plans for achieving the goals,
 relevant external and internal elements involved.
It is an integration of functional plans and also contains background information
about the organization and team.
 Business plan is not absolute but iterative.

4. SET OF BUSINESS GOALS;
It gives idea about,
 Product being made
 Target consumer
 Market size
 Production quantity and quality
REASONS FOR VIABILITY;
Why are these goals achievable
 Potential customer
 Availability of potential capital
 Available suppliers
 Market demand

5. FUNCTIONAL PLANS FOR ACHIEVING GOALS;
 Road map, guidance or structure in each particular area of business
such as
 Marketing
 Financing etc
It is a constant monitoring process(requires review).
These plans will be discussed in the body later
It also addresses both short term and long term decision making at least for the first three
years of operation

6. EXTERNAL AND INTERNAL ELEMENTS;
Business plan is influenced by these factors
External elements include,
 Legal issues and regulations
 Marketing trends (bulls and bears)
 Customer needs
 Competition
 Political/economical environment
Internal elements include,
 Control over manufacturing
 Control over marketing etc
 Personal skills

7. WHO SHOULD WRITE PLAN
The business plan should be prepared by the entrepreneur.
The entrepreneur may consult with many other sources, such as
 Lawyers
 Accountants
 Marketing consultants
 Engineers
 Mentors
These sources can be provided by the services of ;
 Small Business Administration (SBA)
 Service Core of Retired Executives (SCORE)
 Small Business Development Centers (SBDC)
Other sources may be
 Business partners
 Internet
 Friends and relatives

8. Entrepreneurial Assessment is Necessary!!
Tohelp determine whether to hire a consultant or to make use
of other resources,the en- trepreneur can make an objective
assessment of his or her own skills

9. SCOPE & VALUES OF BUSINESS
PLAN
Good business plan should satisfy
 Possible readers and their requirements
(investors, employees, bankers, venture capitalists, suppliers, customers,
advisors, and consultants)
 Perspectives to be considered
 entrepreneurial perspective
 Market perspective (should be customer driven)
 Investors perspective (based on finance)

10. SCOPE & VALUES OF BUSINESS
PLAN contd;
 The depth and detail in the business plan depend on the size and
scope of the proposed new venture.
 Differences in the scope of the business plan may depend whether
the new venture
 is a service,
 involves manufacturing,
 Overall future of business
 Viability of venture in market
 Guidance to managing and organizing functional plan
 Powerful tool to obtain financing
 Who is our customer and competitor etc

11. PREREQUISITES (INFORMATION AND DATA REQUIRED)
Steps followed,
 Define goals and objectives
Business plan must reflect reasonable goals
 Strategy of achieving the goals
 Feasibility study
Quick feasibility study of the business concept to see whether there are any possible
barriers to success
 Information should focus on:
 Market
 Operations
 Financial aspects

12. Market Information :

13. MARKET INFORMATION;
For a defined market we gather information about,
 Market potential
 Size of market
 Collect market data
(from market associations and sources)
 Market competitors

14. Figure 7.1 - An Upside-Down Pyramid
Approach to Gathering Market Information

15. OPERATIONAL INFORMATION;
Depending on nature of business, the entrepreneur may need
information on the following
 Location
 Manufacturing operations
 Raw materials
 Equipment
 Labor skills/expertise
 Space (land building etc.)
 Overhead
Research should be made by keeping targeted readers in mind.

16. FINANCIAL INFORMATION NEEDS:

17. FINANCIAL INFORMATION;
For gathering financial information the pre requisite is the budget of
enterprise.
Budget includes
 List of expenditure
 List of revenue and funds
Forecasted based on market data
Now the financial information required is
 Available equity
 Required balance
 Sources
• Available sources
• Selection of best sources
 Industry benchmarks can be used in preparing the final pro-forma
statements in the financial plan

18. INFORMATION SOURCES;
Different information resources include
 Friends
 Internet
An entrepreneur can access:
 Popular search engines.
 Competitors’ Web sites.
 Social networks, blogs, and discussion groups.
 In addition to websites, the entrepreneur can also investigate newsgroups to gather
information anonymously from experts and customers on competitors and market needs.
 Relatives
 Mentors
 Professional support system
 Customers and distributors etc
 General observation

19. EVALUATION ;
Business plan should meet the needs of readers (evaluators)
Business plan should reflect,
 Strength of management or personnel
 Strength of product or service
 Strength of available resources
 Entrepreneur makes plan by keeping viewpoint of
 Customer
 Investor
 Investors focus on
 Payback time
 Collateral equity

20. 4 C’S OF CREDIT
Lenders and investors usually focus on
 Character of entrepreneur
Entrepreneur credit history(focused more by investor than lender)
 Cash flow
Entrepreneur ability to meet debt and interest payment
 Collateral
Security given to banks or lenders
 Contribution of equity
Amount invested by investor, payback time etc

21. Presentation Of Plan

22. PRESENTATION
 It is an oral presentation
 Its purpose is to convey our idea to audience(investers) in limited time frame
 Time frame is usually 20-30 minutes
 The entrepreneurs are expected to “sell” their business concept in this short time period
 Some investors describes these presentations as “elevator plans”
 Typically the focus is on
 why this is a good opportunity
 an overview of the marketing program (addresses how the opportunity will convert to reality).
 The results of this effort (sales and profits).
 Concluding remarks might reflect the recognized risks and how the entrepreneur plans to
address them.
Example
Forums held by different institutions e.g. MIT
Benefits of these forums are
 Financial rewards in case of wining
 Identification of draw backs and customer needs

23. WRITING THE
BUSINESS PLAN
.

25. WRITING THE BUSINESS PLAN;
 It is the much time consuming phase of new venture.(may take
hundreds of hours)
 Time taken depends on experience & knowledge of
entrepreneur.
QUALITIES;
It should,
 Be comprehensive
 Fulfill aspects and purposes of business
 Convey a complete picture fo business to targeted people
(investers,customers,employees)

26. BODY OF BUSINESS PLAN;
Body consists of following.
I. Introductory page
II. Executive summary
III. Environmental and industry analysis
IV. Description of venture
V. Production plan
VI. Operational plan
VII. Marketing plan
VIII. Organizational plan
IX. Assessment of risk
X. Financial plan
XI. appendix

27. INTORDUCTORY PAGE;
It is a title or cover page giving a brief summary.
CONTENTS;
Its contents are,
 Name & address of company / business
 Name & address of principles (entrepreneur/partners)
 Nature of business(one short paragraph)
 Statement of finance needed
 Statement of confidentiality
 It reflects nature of business and financial needs.

28. EXECUTIVE SUMMARY;
This section of business plan consist of 3-4 pages and is written at the end.
PURPOSE;
should stimulate the interest of potential reader( investors, customers etc.)
QUALITIES;
It should,
 Be attractive enough to compel reader for further reading.
 Highlight the key point in business.(entrepreneurial background)
 Should contain supportive evidence (market suveys,contracts)

29. ENVIRONMENAL AND INDUSTRY ANALYSIS;
ENVIRONMENTAL ANALYSIS;
It is assessment of external uncontrollable variables that may
impact business plan.
Some variables are,
 Economy (trends in GNP, income per capita)
 Culture (nature of native population)
 Technology (technology development, competitors, trends of
customer)
 Legal concerns (product specs, distribution and promotion)
 Though controllable but know how of these factors helps in making
a good business strategy.

30. Table 7.5 - Critical Issues for
Environmental and Industry Analysis

31. INDUSTRY ANALYSIS;
It should be conducted to find industry trends like,
o INDUSTRY DEMAND;
It shows
 trends in market (bulls and bears)
 No of competitors
 Possible changes in customer needs
o COMPETITORS;
Mostly threat to an entrepreneur is from large
corporation. So necessary to identify
 competitors(internet, customers, advertisements, journals)
 Their weakness and strengths

32. DESCRIPTION OF VENTURE;
It provides a complete overview of products, services and operations
of new service.
It includes
 Mission statement
 It defines nature of business in one statement
 Key factors to provide clear description (product,
services,location,size of business etc.)
 Description of venture is function of nature of business.
Venture may be
 Product manufacturing
 Service providing

33. Table 7.6 - Describing the
Venture

34. Production Plan
 Manufacturing process (amount subcontracted)
 Physical plant
 Machinery and equipment
 Names of suppliers of raw materials
MANUFACTURER
 Nature of product ( what will be made)
 Quantity of production
 High production
 Low production
 Services to customers
(warranty, maintenance, parts supply)

35. PRODUCTION PLAN Contd.
SERVICE PROVIDER
 Nature of service (Hospital, transport, courier service)
 Location of offices etc.
 Macro overview(Location and infrastructure in city)
 Micro details
Parking, u turn
 Office equipment and personnel
 Manufacturing plants
 Technology acquired
 Introduction to business partner
 Background
 Legal issues

36. Table 7.7 - Production Plan

37. OPERATIONAL PLAN
It is one step beyond to manufacturing.
It describes the flow of goods or services
As the business may be
 Product manufacturing
 Service industry
Product MANUFACTURING
In this case points to be described are
 Inventory/storage
 Shipping
 Inventory control procedure
 Customer support service

38. SERVICE INDUSTRY
In this case the points to include in business plan are
 Purchases of products
 Shipment of products
 Storage of products
 Delivery to customer
 Transaction mechanisms
 Operational plan is greatly influenced by
 location
 Dealings of personnel's

39. MARKETING PLAN;
It describes market condition and strategy related to how the
products and services will be distributed, priced and
promoted.
PRICING;
It is influenced by
 Culture
 Per capita income
Distribution;
Distribution mechanism includes
 Selection of different markets
 Shipment methods/contracts
 Feasible and customer attractive

40. Promotion;(way of product introduction)
Methods of promotion are
 Electronic media
 Print media
 Sponsoring events etc.
PRODUCT FORECAST;
This section include
 Sales of products
 Product modification regarding market
 Marketing plan should be reviewed accordingly with
time.

41. ORGANIZATIONAL PLAN;
It describes form of ownership and lines of authority and
responsibility of members of new venture.
New venture may be
 Partnership
(includes terms of partnership)
 Corporation
(includes name addresses, resumes of directors of
corporation)
A chart indicating the lines of authority and responsibility should be
provided
 Organizational plans gives a clear view about
 who will be controlling the organization
 what would be responsibilities of members

42. ASSESMENT OF RISK
This section identifies the potential hazards and
alternatives strategies to meet the business plan
Risk should be assessed in the following way
 Identify and indicate risk
 Define their effect on venture
 Strategies to minimize or overcome risk
 These risk might rise due to
 Competitors reaction
 Weaknesses of management team
 Advancement of technology in market etc.

43. FINANCIAL PLAN
This section includes projection of key financial data that determines the
economic feasibility and necessary financial investment commitment
It summarizes forecasted sales and expenses for at least first three years
(first year projection is provided monthly)
 Forecasted product, administrative expenses and taxes are discussed
 At last financial conditions are discussed
 Assets of business
 Investments of entrepreneurs and partners
 Application of funds
 Comulative profit or loss
 Breakeven analysis

44. Appendix;
This section provides extra material to backup your
business plan
This includes
 Letters from customers, distributors & subcontractors
etc.
 Research data to support plan decisions
 Leases, contracts and agreements etc
 Price list from suppliers and competitors

45. Using and Implementing the
Business Plan
 The business plan is designed to guide the entrepreneur through the
first year of operations.
 The strategy should contain control points to ascertain progress and
to initiate contingency plans if necessary.
 Without good planning employees will not understand the
company’s goals.
 Businesses fail due to entrepreneur’s inability to plan effectively.

46. Using and Implementing the
Business Plan (cont.)
Measuring Plan Progress
 Business plan projections are made on a 12-month schedule but the
entrepreneur should frequently check on:
 Profit and loss statement.
 Cash flow projections.
 Inventory control.
 Production control.
 Quality control.
 Sales control.
 Disbursements.
 Web site control.

47. Using and Implementing the
Business Plan (cont.)
Updating the Plan
 Entrepreneurs must be sensitive to changes in the company, industry,
and market.
 Determine what revisions are needed if changes are likely to affect the
business plan.
 This helps entrepreneurs to:
 Maintain reasonable targets and goals.
 Keep the new venture on a course to high probability of success.

48. Why Some Business Plans Fail
 Goals are unreasonable.
 Objectives are not measurable.
 Entrepreneur has not made a total commitment to the business or to
the family.
 Lack of experience in the planned business.
 No sense of potential threats or weaknesses to the business.
 No customer need was established for the proposed product or
service.