Management Science II Dr.T.J.

Kamalanabhan

MODULE 7

Business Plan

A business plan is a statement depicting the nature and objectives of

business and the ways of achieving them.

Benefits

• Business planning states clearly the basic goals and essential

policies of the business.
• Business plan provides a sound organizational structure.
• Business plan provides the requisite motivation for successful
operations

Requisites Of A Business Plan

• Business plans quantifies the targets for the enterprise.

• A business plan considers all aspects requisite of incorporating and

running an enterprise.

• Business plans communicates the ideas and goals across all functions
effectively.

• Business plans are holistic.

Steps In Preparing a Business Plan

• Conduct a SWOT Analysis

• Conduct an Environmental Analysis

• Conduct a Market Research

• Prepare Financial Forecasts

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Management Science II Dr.T.J.Kamalanabhan

• Identify Sources of Finance

• Develop Business Strategies

Outline Of A Business Plan-Prolouge:

• Name of the business

• Official address of the business

• Ownership pattern of the business

• Names and addresses of the owners

• Nature of the business

Outline of A Business Plan-Executive Summary:

• Vision and Mission statements

• Summary of the operation plan

• Summary of the marketing plan

• Summary of the Financial plan highlighting the sources of finance

Outline of a Business Plan-Business Objective:

• Vision statement

• Mission Statement

• Business Goals

Vision statement

A vision statement gives the direction of the business and is intended to

evoke emotional feeling among the members of the business.

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Management Science II Dr.T.J.Kamalanabhan

TCS

Mission statement

A mission statement defines the purpose of the business. This outlines

the future course of action for the business.

TCS
To help customers achieve their
business objectives by providing
innovative, best-in-class
consulting, IT solutions and
services. Make it a joy for all
stakeholders to work with us.

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Management Science II Dr.T.J.Kamalanabhan

Business goals

• Business goals are targets set by the business team for a future time
duration.

Outline Of A Business Plan

• Industry Analysis
• Structure of Industry
• Intensity of Competition
• Market capacity
• Industry Forecasts
Structure of industry

• Industry segmentation

• Product differentiation in the industry

• Number of participants in the industry

Intensity of competition

• Major players in the industry

• Number of players in the industry in the same size category as

the proposed business

• Market share of competitors

Market capacity

• Trend of new products introduction in the industry

• Trend of product modification in the industry

Industry forecasts

• Historical industry turnover

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Management Science II Dr.T.J.Kamalanabhan

• Forecasted industry growth rate

• Details on competitor turnover and profits

Outline of A Business Plan-Business Description:

• Product / service portfolio

• Proposed size of operation

• Entrepreneurial creative outcome explicit in the business

• Background of the entrepreneur and others associated with the

business

Product / service portfolio

• Quality of materials

• Product style

• Product features

• Product options

• Brand name

• Packaging

• Warranty and product support service

Production / operation plan

Description of plant and equipment required

Description of production / operation process
Required inputs for the business
• Raw material
• Skilled personnel

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Management Science II Dr.T.J.Kamalanabhan

Sources of the inputs for the business

Environmental assessment

Environmental assessment

• Economy

• Culture

• Technology

• Legal concerns

Outline Of A Business Plan-Marketing Plan

• Forecast of market for the business

• Marketing zones for the business

• Product / service pricing Methodology

• Product / service promotion policies

• Selection of distribution channels

Forecast of market for the business

• Market segments

• Description of major product / service users

• Quantitative measures of market potential

• Number of potential customers

• Volume of business in terms of monetary value

• Trend analysis of historical data

Product / service pricing methodology

• Quality image

• Cost plus / margin pricing etc.

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Management Science II Dr.T.J.Kamalanabhan

• Discounts

• Promotional quantity and price concessions

• Credit terms and collection period

Product / service promotion policies

• Media choice

• Media message

• Media budget

• Publicity measures

• Propagation measures (coupons, displays, freebees)

Distribution channels

• Type of Wholesaler

• Choice of Retailer

• Geographic boundary

• Logistics

Outline Of A Business Plan-Personnel Plan

• Proposed form of business

• Description of the management team

• Organizational structure

• Formal designations, authority and responsibility at different levels in

the organization

• Remuneration and personnel development policy

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Management Science II Dr.T.J.Kamalanabhan

Personnel policy

• Defined roles and responsibilities of personnel

• Remuneration and incentive schemes for personnel

• Growth path of personnel in the business

Outline Of A Business Plan-Financial Plan

• Forecasted income statement

• Forecasted balance sheet

• Forecasted cash flow statement

• Financial details of organizational assets

• Statement giving the proposed sources of finance

• Break even analysis and growth forecasts

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Income statement

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Balance Sheet

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Cash Flow Statement

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Break Even Analysis

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Growth Forecast

sales

Time

sales

Time

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Management Science II Dr.T.J.Kamalanabhan

Outline Of A Business Plan

Financial Borrowing

• Sources of borrowings

• Type of borrowings

• Estimated costs of borrowings

• Estimated repayment plans for the borrowings

Outline Of A Business Plan -Working Capital Needs

• Estimating the working capital requirement

• Preparation of working capital needs seasonally, if needed.

• Probable sources of finance for the working capital needs

Estimating the working capital requirement

Item Formula Used No.of days

for union
carbide
1 Raw M aterial in Store 105
365 X Average Stock of Raw M aterial
Annual Consumption of Raw M aterial

2 Work-in-Progress (Conversion Process)

14
365 X Average Stock of Work-in-Progress
Cost of finshed goods purchased

3 Finished goods in store 23

365 X Average Stock of Finished goods
Cost of goods sold
4 Receivables 16
365 X Average Receivables
Sales during the year

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Total 156

Less: Paybles 55

Working capital requirement 103

Projected sales X Rs. 1310

Working capital requirement =
365/103 lakh

Estimating the working capital requirement

(Rs. in lakh)

Average stock of raw material 545.80

Average work-in-progress 140.00

Average stock of finished goods 262.40

Average receivable 210.00

Average gross current assets 1158.20

Less: Average sundry creditors (converting 55 days credit to

285.70
consumption of raw materials as in the example

Average net current assets or net working capital level for 1970 872.50

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Management Science II Dr.T.J.Kamalanabhan

Risk Assessment

• Performance of SWOT (Strengths, Weaknesses, Opportunities and

Threats) analysis for the business

• Presentation of contingency plans

Swot

Risk Management

• Management of Revenue Decline

• Management of Cost Escalation

• Management of Decline in Market Share

• Management of Technology Changes

• Management of other Risks Specific to the Business

Hints For Preparation Of A Business Plan

• Clear and Simple language

• Only facts are presented in the business plan not dreams

• The method or process used to achieve the business goals have to be

stated explicitly

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Management Science II Dr.T.J.Kamalanabhan

• Present the details wherever required

• Focus on the essential business actions

• Present in measured quantities

• Business plans should be able to help the organization to review its

performance latter

Hints For Preparation of A Business Plan(Cont...)

• Use simple charts / graphs when presenting the financial plan

Providing the optimistic, normal and pessimistic financial
scenarios will strengthen the financial plan

• Give notes to the financial tables in terms of the assumptions

made while computing the data

Appendices

• Market research details

• Details of specific item categories in the Financial Statements

• Resumes of key personnel in the business

• Patents, Permits, Licenses, Audits, Lab Reports, Maps, and similar

documentary evidence

• Any Reference Material, especially those used in industry forecasts

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