2. Why make a business plan?
A business plan is a Road Map of a business. Regular
reviews of a business plan are a must for a business as
it guides the entrepreneur to take the right measures
and make the right strategies for his business.
Every business must have a business plan for it
irrespective of whether the business needs financial
assistance or not.
Irrespective of the size of the business, it is important
for an entrepreneur to make a formal business plan
because:
It helps the entrepreneur and his management to clarify,
focus and research their business.
3. Why make a business plan
It provides a considerable and logical framework within
which business can develop and pursue strategies over
years.
It serves as a basis of discussions with third parties such
as shareholders, agencies, banks, investors etc.
Offers benchmark against which actual performance can
be measured and reviewed after suitable intervals.
No two business plans can look alike, as no two
businesses are alike. Some issues can be relevant for
some business but need not be relevant for every
business. Tailoring contents into the business plan as
per requirement is therefore an art.
4. Business Plan Outline
Cover Sheet:
Name(s) of the owner(s), Name of the
business/venture, Address, Phone
Numbers, Fax Numbers, e-mail address
etc.
5. Statement of purpose
Statement of purpose: your business plan should
start with a simple statement of purpose. The
statement of purpose should be brief but with clarity
and logic. It should specify details such as:
The amount of loan required
The amount of money you are putting in
The loan period – for how many years you require the loan
amount for
The impact of the loan and the purpose it will have on your
business
The collateral that will be used to support the loan
Table of Contents:
6. Description of what the
business does:
Your business description is your corporate vision, which should
be the first point to be written in your business plan. Your
corporate vision should include a wholesome picture of your
strengths and how best you will make use of them. The language
has to be simple, understood by everybody.
Many entrepreneurs make a mistake of operating without a
vision. When they don’t have vision, they tend to stumble. A
vision gives an ability to grow and prosper. When an
entrepreneur does not have a vision he tends to give a hazy or
blur picture of his enterprise. He just uses big jargons and goes
on giving rambling description of his business. AN ideal Business
Description should discuss the following points in detail:
7. Description of what your business
does
An overview of the industry in
which in the entrepreneur plan to
begin his venture
Discuss the company/venture in
detail
Description of the product/service
Positioning plan of the product
Pricing strategy
8. Financial Data:
Source of funding
Application of funding
Capital equipment and furniture list
Projected balance sheet
Break-even analysis
Projected income statement for 1st year, 2nd year and 3rd year
Notes on explanation on the figures
Cash-flow projections for 1st year, 2nd year and 3rd year
Details by month for 1st year, 2nd year and 3rd year
Notes on explanation
Tax returns of all principals (you and your partners) for last three years.
Personal financial statement (all banks have these forms)
Copy of proposed lease or purchase agreement for building space
Copy of licenses, patents, and other legal documents
Copy of the resumes of all principals
Copies of letters of intent from suppliers, etc.
9. Supporting Documents along with
the financial data:
Personal CV, personal financial statement,
credit reports, bank statements, letters of
references, credit reports, letter of intent,
lease deeds, contracts, other legal
documents and any other document of
relevance.
10. The Market
The competition and feasibility study, describe here again your
product/service
Competition: who are your five nearest competitors, list them in
order, how will you operate better than them, how is their
business growing, if their growing – why and if they are not
growing – why so, how are their operations similar or dissimilar to
yours, what are their strengths and weaknesses, what have you
learnt by watching them, their operating style, what controls you
wish to adopt for studying the competitors.
Market: Start by defining group of customers or organizations
that is interested in a product/service and has the resources to
purchase it. You should discuss here how large is the potential of
the market, how many businesses are operating in it, how many
prospects can use your product, is the market growing, flattening
or shrinking.
11. Market segmentation: almost every market has some major and
distinctive segmentation. The probability that it could or will be is a
good sign. This is particularly true id the market place for your
product or service is multi-regional or multi national. If it so then
segmentation is necessary especially, for a small firm to be
competitive.
You will need to discuss segmentation within your business category
and how you intend to do so. This may have any positive or
negative affects on your business category. As when those affects
take place how you intend to cope with it. Almost all markets are
segmented by price and quality issues. Generally, price and quality
issues do not provide the most clear or definite market
segmentation. Much stronger segmentation can usually be found
through evaluation of product or service uses and importance to
various consumers.
12. Establish marketing goals that are quantifiable
Describe your customer profile – the demographic and psychographic profile
What is the present size of the market
What percent of the market share you are going to have
What is the market growth potential
As the market grows your market share will increase or decrease?
How will you attract customers – here spell out your marketing and sales strategies
How are you going to price your product/service
With your pricing are you going to make profits
Is your price competitive
Why should your customer agree to pay you the price which you are demanding
Why did your arrive at this price
What special advantages you will be offering your customers – justify your price
Are you going to offer credit to your customers
Is it really necessary – are your competitors offering credit to their customers
Justify whether you are in a position to offer credit
13. Location:
your business location is more than just choosing a place for doing
business, be it a building or an office space. Besides the commercial
factors, psychological factors, status, safety and security are equally
important for the business. First and foremost the location has to
be liked by you, because you will have to go and work there
everyday. Your comfort level is of utmost importance. Then you
have to think of your customers. The customer is the king/queen.
Your customer will visit the place if only he/she is comfortable to
visit your location. To attract good employees and retain them again
your location is one of the key factors. Strategic partners are not
considered a key issue, but it is a reality why some locations are
developed into hubs; it is purely because of the easy accessibility of
the strategic partners a business mushrooms. E.g: Gurgaon. Your
potential investors also look at the long-term value of the business.
Location thus is an important factor of the business. The following
points decide the worth of the location.
14. Factors…
They are:
Cost: the cost of the premise should suit your, your employees and customer’s
budget.
Convenience: your business location should be convenient for you as well as your
customers.
Safety: find out whereabouts of the area. Is the area safe from communal violence,
crime, how is the law and order in the area, you have to look after the safety of both
your employees and customers.
Prestige: your business location should add credibility to your business
Transportation: You business location should be connected by the local
transportation easily.
Facilities: water supply, electrical supply and sanitation are very important for
running the business.
Zoning: Many cities have strict zoning requirements. Make sure that you are
operating your business in commercial zone. Make sure of the zone before you sign
the deal.
15. Management:
The management team of your business is
important for your business to prosper. You need
to form a team of like-minded people. The
management team shapes up the business. The
management team does the mentoring job for the
employees as well as it does the networking for
your business, gives direction from time to time, it
also helps to deal with the change management.
It gives a purpose to the business and helps in
persisting your goals and vision. Therefore picking
up the right people is your responsibility. While
mentioning about your management team you
need to mention the following points:
16. What is your business background
How will it help you in running the business
What management experience do you have? From where did you
acquire it
Is it helpful in a particular way in your business
What are your weak areas as far as this business is concerned?
Are you going to appoint consultants/employees to overcome those
weaknesses
What are your educational qualifications (mentions both formal and
informal), which have bearing on your managerial abilities or
knowledge?
Personal Data: age, residential address, special abilities and
interests and reasons for going for business
Your physical strengths and weaknesses
17. What skills and qualities of your can make your business successful
Who is on your managerial team
How are they qualified to help you venture
What are their business backgrounds, their qualifications
What duties have you allotted to each one of them
Are these duties clearly defined
Who does what?
Reporting system: who reports to whom
Who will take the final decision
How do plan to pay the management?
What additional human resource you have arranged for the
business? (Accountant, Lawyer)
18. It is important that these biographies are not
merely resumes that include the educational
backgrounds and previous job titles and
responsibilities of the team members. Rather,
biographies should highlight the most relevant
past positions that the individuals have held and
specific successes in each. These successes
could include launching and growing new
businesses or managing divisions of established
companies
19. Staff:
is defined is filling, and keeping vacancies filled.
This includes identifying work-force requirement,
inventorying people available, selecting, recruiting,
placing, and training, promoting, appraising and
planning their careers. Staffing must be closely
linked to the structure of your business. The
following points need to be described in your
business plan:
20. Staff
What are your present staffing needs
What are going to be your immediate future staffing needs (after 3
and 5 years)
What skills must your employees possess
How many full-time and how many part-time vacancies you have
What salary structure you want to offer
Are you aware of the employee befits rules and regulations
Are you going to provide any fringe benefits to your employees
If yes, which ones
Have you calculated the cost of the fringe benefits
Are you going to utilize over time
Are you ready for the OT benefits to be paid
What about the training needs of your employees both in operation
as well as management?