THE BUSINESS PLAN

Scope and Meaning

• Although some new ventures simply “wing it” and start doing
business without the benefit of formal planning, it is hard to find an
expert who doesn’t recommend preparing a Business Plan.
• A business plan is a written narrative, typically 25 to 35 pages long,
that describes what a new business intends to accomplish and how it
intends to accomplish it.
• a detailed account of how the entrepreneur plans to convert his ideas
and vision into real, functioning business. It is a document that
outlines all the steps that the entrepreneur intendeds to follow to
achieve the objectives or goals he has already
envisioned/planned/proposed for his business.
• For most new ventures, the business plan is a dual-purpose
document:
– Inside the firm, it helps the company develop a “road map” to
follow in executing its strategies and plans.
– Outside the firm, it introduces potential investors and other
stakeholders to the business opportunity the firm is pursuing and
how it intends to pursue it.
Purpose/Importance of a Business Plan
• To determine/decides/agree on the road map of a
business
• Better understanding for the business
• Work plan for the operations of the business.
• It is a selling document for the new venture (marketing)
• A tool for Management
• Provides room to understand risks involved
• A way to convince private investors to invest their money
in new ventures, obtain capital...
• It sets you apart from the crowd:(Even if some banks do
not request for business plans, companies that present
business plans stand higher chances of getting the funds
they seek)
• It sets a basis for trust.
• Communication tool
• Reference tool
Guidelines for witting a Business Plan
• It is important to remember that a firm’s
business plan is typically the first aspect of a
proposed venture that will be seen by various
stakeholders.
• It is important to be sensitive to the structure,
content and style of your business plan before
sending it to an investor or any one else who
may be involved with your firm.
Structure /arrangement of a Business Plan:
• To make the best impression, a business plan should
follow a conventional structure.
• Although some entrepreneurs want to demonstrate
creativity in every thing they do, departing from the
basic structure of the conventional business plan
format is usually a mistake.
• Investors are very busy people and want a plan
where they can easily find critical information. If any
investor has to hunt for something because it is in an
unusual place or just isn’t there, he /she might simply
give up and move on to the next plan.
Content:
• The business plan should give clear and concise/summarized
information on all the important aspects of the proposed
venture.
• It must be long enough to provide sufficient information yet
short enough to maintain the reader’s interest.
• Normally 25-35 pages are sufficient, supporting documents
such as resumes(CVs) can appear in an appendix.
• Content may be less or more depending on the intent of the
planner.
• Whether brief or detailed, make sure that the major parts are
taken into consideration and the target audience will easily
understand it.
• After a business plan is completed, it should be reviewed for
spelling and grammar and to check whether no critical
information has been omitted.
• Imagine if you focus on the content of the plan and forget to
Style of the business plan:
• The appearance of the business plan must be
carefully thought of.
• It should look sharp but not give an impression that a
lot of money was spent on it.
• When writing the plan, avoid getting carried away
with the design elements included in word
processing programs such as word art, different font
sizes and colors…
• Overuse of these tools makes a business plan look
amateurish/unprofessional rather than professional.
The Business Plan Outline
F. Brief Summary of Financial
COVER PAGE projections ( The amount of
TABLE OF CONTENTS capital needed and what the
capital will be used for)
I. EXECUTIVE SUMMARY
II. THE BUSINESS DESCRIPTION
A. The Opportunity (Problem to
A. The Opportunity (problem to
be solved or need to be filled) solve or need to be filled)
B. The Description of the B. The Description of the
Business(How the proposed Business(How the proposed
business solves the problem business solves the problem or
or fills the need) fills the need, brief company
C. Competitive Advantage history or background,
D. The Target Market C. company vision, mission goals
E. The Management Team objectives, ….)
D. Competitive advantage/core
strategy (e.g. cost leadership,
uniqueness,….)
III. MANAGEMENT TEAM V. INDUSTRY ANALYSIS
• Management • Trends, attractiveness-
• Experience, ability, technical (growing, mature or in
expertise. decline?)
• Board of Directors, if any • Profit potential
(Composition of the Board, • Target Market
Number of directors…) • Competitive Position within
• Board of advisers the target market.
(composition of the • Key success factors(
advisory board…) V. MARKETING PLAN
IV. COMPANY OWNERSHIP • Product (concept testing,
• Organizational structure usability…).
• Legal form of • Pricing strategy
ownership( Sole • Channels of distribution
proprietorship, company,
• Promotions &Advertisement
partnerships…)
VII. OPERATIONS PLAN • Projected cash flow
• Methods of Production statements
• Quality control • Payback strategy
VIII. FINANCIAL PLAN • Exit strategy
• Capital requirements for VIII. CRITICAL RISK FACTORS
the next 3 to 5 years • Management risks
(sources and uses) • Marketing risks
• Overview of financial • Operating risks
projections( assumptions on • Financial risks
how financial statements
• etc
are prepared)
• Projected Income
statements
• Projected balance sheets
ix. APPENDICES
• Any materials that does not easily fit into the
body of a business plan should appear in an
appendix. These may include resumes,
photos, product prototypes, certain financial
data, ….
• The appendix should not be bulky and add
unnecessary length to the business plan.
Presenting the business plan to investors
• If the business plan successfully elicits the interest of
a potential investor, the next step is to meet with
them and present the plan in person.
• When given an opportunity to present your business
plan to an investor , you should prepare a set of
PowerPoint slides that will fill the time slot allowed
for the presentation portion of the meeting.
• The key topics to cover include the Company, the
Opportunity, the Strength of the management team,
industry analysis, financials, payback, exit strategy….
Key/Power points to include in an investor
presentation:
Topic Explanation
•Title: •Introduce the presentation with the company
name , the names of the founders and the
company logo if available.

•Problem: •Briefly state the problem, opportunity or gap

to be filled

•Solution: •Explain how the firm will solve the problem

and how it will satisfy the need or fill the gap.
•Business •How will the company make money and the
Model: essence of its business model.

•Management •Each manager’s competencies, qualifications,

Team: skills and how they strengthen the firm.
Key/Power points to include in an investor
presentation: cont’d
Topic Explanation
•Industry and target •The industry the firm will be competing
market: in, the segment of the industry the firm
will target, and how it will be positioned
within its target market.
•Competition •The firm’s competitive advantage and
how it will compete against more
established competitors
•Intellectual Property •Explain the intellectual property the
firm owns or will own pending approval.
•Current status,
amount of money •Discuss the current status of the firm,
requested and the its accomplishments to date, the amount
projected use of funds of money required , amount of money
acquired, projected use of funds etc.
•Exit strategy.
Five-year Trading, Profit and Loss
Statement(Format)
Year 1 Year 2 Year 3 Year 4 Year 5

Sales / Revenue
Cost of Sales

Gross Profit

Sales, admin. & Distr.

Expenses

Other Operating
Expenses

Profit Before Tax

Tax
Profit After Tax/
(Net income or loss)
Five-years Profit and Loss
Year 1 Year 2 Year 3 Year 4 Year 5

Sales / Revenue

Cost of Sales

Gross Profit

Sales, admin. & Distr.

Expenses

Other Operating Expenses

Profit Before Tax

Tax

Profit After Tax/

(Net income or loss)

Five-year Balance Sheet

Year 1 Year 2 Year 3 Year 4 Year 5

Fixed Assets
Current Assets

Current
Liabilities

Net Assets
Financed By:

Long-term Loans
Shares
Retained Earning

SHF
Five-years Cash Flow Projection
Year 1 Year 2 Year 3 Year 4 Year 5
Cash Inflows

Total Cash Inflows

Cash Outflows

Total Cash Out Flows

Net Cash Flows

Cash B/F

Cash C/F
Risk Analysis and Management

Risk Consequence Mitigating Action Plan