Module 3

Business Planning Process

Topics
Meaning of Business Plan Business Plan Process Advantages of Business Planning Marketing Plan Production/ Operation Plan Organizational Plan Financial Plan Final Project report with feasibility study

Business Plan
Written document describing all relevant internal and external elements and strategies for starting a new business. Who should write the plan? Who reads the plan? How do potential lenders and investors evaluate the plan?

Who should write the plan?

1. Entrepreneur 2. Consult: Lawyers, Accountant, Marketing consultants, Engineers 3. Services are also offered by:
SBA: Small Business Administration SCORE: Service Core Of Retired Executives SBDC: Small Business Development Centre

Who reads the plan?

Employees, Investors, Advisors, consultants It should address all their issues Sound financial projections are required Market, competition and potential growth affect the scope of the plan 3 perspectives:
Clearly articulate what the venture is all about View it from consumers perspective View from investors perspective

How do potential lenders and investors evaluate the plan?

Lenders are interested in the ability to pay back the debt including the interest with in designated period Focus on 4 C : Character, Cash Flow, Collateral and Equity Contribution

Business Plan Process

1. 2. 3. 4. 5. 6. Preliminary investigation Idea generation Environmental scanning Feasibility analysis Project report preparation Evaluation, control and review

Business Plan
1. Introductory page
a) b) c) d) e) Name and address of Business Name and address of principals Nature of business Statement of financing needed Statement of confidentiality of report

Business Plan
2.Executive Summary- Summarizing Business Plan 3. Industry Analysis:
a) b) c) d) Future outlook and trends Analysis of competitors Market segmentation Industry forecasts

Business Plan
4. Description of venture: a) Product b) Service c) Size of Business d) Office Equipment and Personnel e) Background of Entrepreneurs

Business Plan
5. Production Plan: a) Manufacturing Process b) Physical Plant c) Machinery and Equipment d) Names of suppliers of raw material

Business Plan
6.Marketing Plan: a) Price b) Distribution c) Product Forecast d) Promotion e) Controls

Business Plan
7.Organizational Plan: a) Form of ownership b) Principal Shareholders c) Authority of Shareholders d) Management Team Background e) Roles and responsibilities of members

Business Plan
8. Assessment of risk: a) Evaluate weakness of Business b) New Technologies c) Contingency plan 9. Financial Plan: a) Income statement b) Cash Flow Projections c) Break-even Analysis d) Sources and Application of Funds

Business Plan
10.Appendix (Back up Material): a) Letters b) Market Research Data c) Leases or Contracts d) Price Lists from Suppliers

Advantages of Business Planning

To determine viability of the venture in designated market Guidance to the entrepreneur Tool to obtain finance

Feasibility study
A feasibility study is an evaluation of a proposal designed to determine the difficulty in carrying out a designated task. In other words, a feasibility study is an evaluation or analysis of the potential impact of a proposed project.

Feasibility study
Five common factors (TELOS)
1.Technology and system feasibility
The assessment is based on an outline design of system requirements in terms of Input, Processes, Output, Fields, Programs, and Procedures. Can be quantified in terms of volumes of data, trends, frequency of updating, etc. in order to estimate whether the new system will perform adequately or not. It is carried out to determine whether the company has the capability, in terms of software, hardware, personnel and expertise, to handle the completion of the project

Feasibility study
2.Economic feasibility Also known as cost/benefit analysis, the procedure is to determine the benefits and savings that are expected and compare them with costs. If benefits outweigh costs, then the decision is made to design and implement the system. An entrepreneur must accurately weigh the cost versus benefits before taking an action. Cost Based Study: It is important to identify cost and benefit factors, which can be categorized as follows: Development costs and Operating costs. Time Based Study: This is an analysis of the time required to achieve a return on investments.

Feasibility study
3.Legal feasibility Determines whether the proposed system conflicts with legal requirements, e.g. a data processing system must comply with the local Data Protection Acts. 4.Operational feasibility Is a measure of how well a proposed system solves the problems, and takes advantage of the opportunities identified during scope definition and how it satisfies the requirements identified in the requirements analysis phase of system development.

Feasibility study
5.Schedule feasibility
project will fail if it takes too long to be completed before it is useful. Typically this means estimating how long the system will take to develop, and if it can be completed in a given time period using some methods like payback period. Schedule feasibility is a measure of how reasonable the project timetable is. Given our technical expertise, are the project deadlines reasonable? Some projects are initiated with specific deadlines. You need to determine whether the deadlines are mandatory or desirable.

Other feasibility factors

1. 2. 3. 4. Market and real estate feasibility Resource feasibility Cultural feasibility Output

Why some Business Plan Fail?

1. 2. 3. 4. 5. Goals unreasonable Goals are not measured Not total commitment towards Business No previous experience of the entrepreneur Potential threats and weaknesses not identified 6. Customer needs not established

Questions
1. State advantages of business plan. 2. Explain institutions supporting exports in India. 3. Explain contents of a project report in detail.

Thank you