This document provides an overview of business plans, including their purpose, scope, required information, and structure. It discusses how business plans are used to integrate various functional plans, address short and long-term decision making, and obtain financing. The document outlines the typical sections of a business plan, including executive summary, industry and market analysis, product/service description, operations, marketing, financials, and risk assessment. It emphasizes that a business plan should guide operations and be implemented through progress checks and contingency planning.
New Enterprise Innovation Management Business Plan
1. NEW ENTERPRISE AND
INNOVATION MANAGEMENT
NE & IM - Dhaval Motwani, MEFGI
SESSION 7:
BUSINESS PLAN: CONCEPT,
METHODS, ANALYSIS AND
INTERPRETATION
Prepared by: Dhaval Motwani
2. BUSINESS PLAN: INTRODUCTION
A written document describing all relevant internal
and external elements and strategies for starting a
new venture
NE & IM - Dhaval Motwani, MEFGI
Integration of various functional plans like marketing
plan, financial plan, manufacturing plan and human
resources plan
Addresses both short term and long term decision
making for the venture.
Integrates and co ordinates business objectives and
strategies when venture contains a variety of
products and services.
Important to potential investors and even customers
Helps to keep in mind external factors like new
regulations, competition, social changes, new
technology, changes in customer needs etc.
3. WHO WRITES A PLAN?
Entrepreneur himself
Lawyers, accountants, marketing consultants,
NE & IM - Dhaval Motwani, MEFGI
engineers help in writing a plan with their inputs
Internet also helps provide good inputs
Also inputs from partners whose core competence
are in a specific area, ie. Those competencies that
an entrepreneur doesn’t possess
4. SCOPE AND VALUE OF BUSINESS
PLAN
Who reads...?
Employees, investors, bankers, venture capitalists,
suppliers, customers, advisors and consultants
NE & IM - Dhaval Motwani, MEFGI
All the issues and concerns must be addressed as all
the above groups will read it from different
perspectives
Three perspectives to be considered while preparing
the plan
Entrepreneurs perspective: who understands the creativity
and technology involved in the new venture
Clear articulation about what the venture is all about
5. Marketing perspective: the viewpoint of the customer to be kept in
mind
Investors perspective: the viewpoint of the investor to be kept in the
mind
Sound financial projections required, assistance from external sources
to be taken if the requisite skills missing
Size and scope of the plan depends on the nature of business and product.
Eg: new e-commerce venture will require a different focus than for a
NE & IM - Dhaval Motwani, MEFGI
retail video shop
Size of market, competition and potential growth also affect the scope
A business plan
Determines the viability of venture in a designated market
Provides guidance to the entrepreneur in organizing his/her planning
activities
Serves as an important tool in helping obtaining finance
Potential investors look at a business plan with great interest and detail
It also forces an entrepreneur to assess things like cash flow, cash
requirements and makes him think about the future
Also a self assessment for the entrepreneur and makes him/her think
about the various scenarios and obstacles that might prevent the venture
from being a success
6. EVALUATION OF THE PLAN BY THE LENDERS
AND INVESTORS
The plan needs to focus on all the target groups and purposes of use
Suppliers look at the plan before committing to supply materials on
consignment
Customers review the plan before buying a product that may require
significant long term commitment like high-technology telecommunications
NE & IM - Dhaval Motwani, MEFGI
system.
Attention on the entrepreneur’s experience and projection of the market
place
Lenders are interested in the ability of the new venture to pay back debt
including interest within a stipulated time period
Banks want objectives analysis of the business opportunity and potential
risks
7. EVALUATION OF THE PLAN BY THE
LENDERS AND INVESTORS
The 4 Cs that lenders look at
Character: entrepreneur’s credit history
Cash flow: the ability of the entrepreneur to meet the debt and
NE & IM - Dhaval Motwani, MEFGI
interest payments
Collateral: tangible assets being secured for the loan
Contribution of Equity: amount of personal equity that
entrepreneur has invested
Investors emphasize on the entrepreneur’s character and spend much
time in conducting background checks.
Investors play an important part in the management of the business
so want to make sure that the entrepreneur is compliant and willing
to accept the involvement, high rate of interest
8. PRESENTING THE PLAN
Oral presentation of the plan before an audience of
potential investors is important.
Entrepreneurs are expected to “sell” the business
NE & IM - Dhaval Motwani, MEFGI
plan, invite queries and solve them so as to invite
investments
In specific forums, the entrepreneurs can present the
plan in front of more than one investors who can
request negotiations and can lead to final investment
Likely that venture capitalists or angel group would
ask the entrepreneur to present to their partners
before the final investment
Typically the focus is on
Why is this a good opportunity
An overview of the marketing program which addresses
how the opportunity will be converted into reality
Results of this efforts in terms of sales and profits
9. INFORMATION NEEDS
A proper feasibility study of the business concept
required
NE & IM - Dhaval Motwani, MEFGI
Helps to identify possible barriers to success
Information about various facets like marketing,
finance, production and operations
Clearly defined goals and objectives would prove
a good guide
Also provide a good framework for the business
plan, marketing plan and financial plan
10. UPSIDE-DOWN PYRAMID APPROACH TO
GATHERING MARKET INFORMATION
General environment and demographic trends
National industry trends
Local environmental and
NE & IM - Dhaval Motwani, MEFGI
demographic trends
Local industry
trends
Local competition : strengths & weaknesses
Market positioning
Market objectives
11. GATHERING INFORMATION
One of the most important information is about
the market potential for the product or service
Well defined market makes it easier to project
NE & IM - Dhaval Motwani, MEFGI
the market size and set goals for the venture.
Information required on industry and
environment
The best way is to visualise the process as an
inverted pyramid
Start with a broad based data and information and
work down until a positioning strategy is developed
Setting of quantifiable goals and objectives
All this information can be used in the industry
analysis and marketing planning sections
12. OPERATIONAL INFORMATION NEEDS
Entrepreneur can need information on the following as far
as operational needs are concerned
Location: company’s location and accessibility to
customers, suppliers, distributors
Manufacturing operations: basic machine and assembly
NE & IM - Dhaval Motwani, MEFGI
and the subcontractors etc
Raw materials: raw materials required and suppliers
name address and costs
Equipment: basic equipment and its cost (purchase cost
or lease cost)
Labour skills: the unique skills needed, personnel, pay
rate and where and how these skills will be obtained
Space: space needed and cost (owned or leased)
Overhead: each support item like tools, supplies, utilities
and salaries
13. FINANCIAL INFORMATION NEEDS
Before preparing a financial plan, the entrepreneur needs to
prepare a budget listing all possible expenditures and all revenue
sources
The budget includes capital expenditures, direct operating
expenses and cash expenditures for non expense items
NE & IM - Dhaval Motwani, MEFGI
Entrepreneur needs to identify the benchmarks in the industry
that can be used in preparing the final pro forma statements in the
financial plan
Such benchmarks help in establishing reasonable assumptions
regarding expenditures based on industry history and trends
Expenditures like rent, utilities, insurance, personnel costs etc
need to be ascertained
Data for financial information can be found from sources like
Financial Studies of the Small Business, Annual Statement
Studies, various trade associations and trade magazines.
Pro forma statements need to be prepared as per the investors
requirements (monthly in the first year, then quarterly or annually
for the next two years)
14. INTERNET AS A RESOURCE TOOL
A very important and cost effective tool
Search engine and source of information on
NE & IM - Dhaval Motwani, MEFGI
almost everything like industry analysis,
competitor analysis, market potential
Competitors websites help gain knowledge about
their strategy
Also helps to distribute, advertise and sell
company products and services
15. WRITING THE BUSINESS PLAN
Very important phase
Time consuming
NE & IM - Dhaval Motwani, MEFGI
Depends on the experience and knowledge of the
entrepreneur and the purpose it intends to serve
16. Introductory page
Titlepage which provides a brief summary of the business
plans contents
Should contain the following
Name and address of the company
NE & IM - Dhaval Motwani, MEFGI
Name of the entrepreneur(s), telephone number, fax number, email
address and website
Paragraph about the company and nature of business
Amount of financing needed
Statement of confidentiality of the report
17. Executive summary
Written after the total plan is written
Stimulates the interest of the potential investor
2-3 pages in length
Investors use this to determine if the entire business plan is
worth reading
NE & IM - Dhaval Motwani, MEFGI
Should highlight in a concise and convincing manner the key
points in the plan
Issues answered by an executive summary
What is the business concept or model?
How is this business concept or model unique?
Who are the individuals starting this business?
How will they make money and how much?
Should highlight the key factors and provide a strong motivation
to the person holding the plan to read it
Eg: if one of the entrepreneurs has been successful in other start-
ups, this persons introduction and background needs to be
emphasized on.
18. Environmental and Industry analysis
Assessment of externally uncontrollable
variables that may impact the business plan
Economy: trends in GNP, unemployment by
geographic area, disposable income, stage of
NE & IM - Dhaval Motwani, MEFGI
economic development
Culture: cultural variables, changes or shifts in
cultural trends etc
Technology: prevalent standards in technology
aspect, potential developments, resources
committed by major industries or government etc
Legal concerns: legal issues, future legislations,
deregulation of prices, restrictions on media
advertising etc
19. Reviews industry trends and competitive strategies
Industry demand: helps ascertain whether market is
growing or declining, number of competitors, possible
changes in consumer needs
Competition: awareness about the competitors, their
strengths and weaknesses,
NE & IM - Dhaval Motwani, MEFGI
20. Description of venture
Provides complete overview of products, services, and operations
of new venture
Begins with mission statement or company mission of new
venture
NE & IM - Dhaval Motwani, MEFGI
Next comes a number of important factors that provide a clear
description and understanding of the business venture
Key elements to be described are the product/service, location and
size of the business, personnel, office equipment, background of
the entrepreneurs, history of the venture etc.
Proper description of the location of the office building, space it
will occupy, parking, access from roadways to facility, access to
customers, suppliers, distributors, delivery rates and town
regulations, etc
Issues regarding legalities of the space, whether owned or rented
or leased
21. Production plan
Should describe the complete manufacturing process
If some part or full process is subcontracted then details
like the name and address of the subcontractor, location,
reasons for his selection, costs, contracts etc need to be
described
NE & IM - Dhaval Motwani, MEFGI
In case of self manufacturing, a plant layout, machinery,
equipment, raw material, suppliers of raw materials, their
names, addresses, terms, costs, contracts, etc need to be
described.
22. Operations plan
Description of flow of goods/services from production to
customer
Might include inventory or storage of manufactured
products, shipping details, inventory and control
procedures, customer support services
NE & IM - Dhaval Motwani, MEFGI
Retail service providers need this section in business pan to
explain the chronological steps in completing a business
transaction
Helps to highlight the help of technology in the overall
process
23. Marketing plan
Describes market conditions and strategy related to how
products and services will be distributed, priced and
promoted
Any market research evidence to support any critical
marketing decision strategy to be described
NE & IM - Dhaval Motwani, MEFGI
Specific forecasts for products/services included here to
project profitability of the venture
Also includes budget and appropriate control steps
Potential investors generally look to this section as critical
to success
A road map for short term decision making
24. Organizational plan
Describes form of ownership and lines of authority and
responsibility of members of new venture
Forms of ownership
Proprietorship
Partnership
NE & IM - Dhaval Motwani, MEFGI
Corporation
For partnership, details and terms of partnership need to
be described
For corporation, the details of stocks, share options, name
and addresses and resumes of directors and officers of the
corporation, organizational chart indicating the line of
authority and responsibilities of the members of the
organization, etc need to be described
Provides the investor with a clear idea about who will
control and how will the interaction between different
members be
25. Assessment of risk
Identifies potential hazards and alternative strategies to
meet business plan goals and objectives
First the entrepreneur should indicate the potential risk to
the new venture
NE & IM - Dhaval Motwani, MEFGI
Next he should discuss what might happen if these risks
become a reality
Finally the strategy to either prevent, minimize or respond
to the risks should be discussed
All potential major risks and minor risks to be described
26. Financial plan
Describes projections of key financial data that determine
economic feasibility and necessary financial investment
commitment
Summary of forecasted sales and approximate expenses for
NE & IM - Dhaval Motwani, MEFGI
the first three years with first years projections monthly
Cash flow figures
Projected balance sheet
27. Appendix
Any backup material that is not necessary in the text of the
document
Letters from customers, distributors, subcontractors to be
included here
NE & IM - Dhaval Motwani, MEFGI
Leases, contract or any other types of agreements that have
been initiated to be included
Price lists from suppliers, competitors etc
28. USING AND IMPLEMENTING THE
BUSINESS PLAN
Designed to guide the entrepreneur through its
first year of operations
NE & IM - Dhaval Motwani, MEFGI
Implementation should contain control points to
ascertain progress and initiate contingency plans
if necessary
Important that the business plan does not end up
in a drawer somewhere but actually implemented
Proper planning ensures proper implementation
Effective implementation can occur by developing
schedules to measure progress and to institute
contingency plans
29. MEASURING PLAN PROGRESS
Points or time intervals should be fixed at the introductory
phases as to when to carry out the check on the schedules
A frequent check on profit and loss statement, cash flow
projections, information on inventory, production, quality,
sales, collection of accounts receivable etc
NE & IM - Dhaval Motwani, MEFGI
Inventory control: helps in maximising service to the
customer. Better inventory control helps in better rotation
of money
Production control: helps match cost figures with day-to-
day operations costs. Also helps to control machine time,
worker hours, process time, delay time and downtime costs
Quality control: helps to make sure that the product
performs satisfactorily
Sales control: gives information on units, price of sales,
meeting of delivery dates, credit terms etc. Also helps to
control bad debts
30. UPDATING THE PLAN
Plans can become out-of-date due to changes in
technology, government regulations, competitors,
changing customer preferences, key employees,
NE & IM - Dhaval Motwani, MEFGI
etc.
Being sensitive to changes in the company,
industry, and market help the entrepreneur to
decide what revisions are required.
31. WHY SOME BUSINESS PLANS
FAIL???
Unreasonable goals
Non measurable goals
NE & IM - Dhaval Motwani, MEFGI
Lack of total commitment to the business
Lack of experience in planned business
No sense of potential threats and weaknesses
Non establishment of customer needs for
proposed product/service