What is a Business Plan?

 The business plan is a document that

helps the small business owner
determine what resources are needed to
achieve the objectives of the firm, and
provides standard against which to
evaluate result
 The business plan is a sort of a business
blueprint and it keeps the entrepreneur on
the right track. It gives a sense of purpose
to the business. It also provides guidance,
influence, and leadership, as well as
communicating ideas about goals and the
means of achieving them to partners,
associates, employees, and others.
 Purposes of a
Business Plan
 to serve as management’s
guide during the lifetime of the
business; and
 to fulfill the requirement for
securing lenders and investors.
The Plan as a Guide
 In the course of writing the business plan, the
small business operator (SBO) is afforded
sufficient time to consider all factors relevant to
operating the business.
 Through analysis of the environment and
derivation of what can be expected to happen,
decisions about various aspects of business
operations can be considered in advance.
 A Tool for Securing Funds

 When the SBO needs initial or additional

funding for his business venture, the business
plan is a handy means for convincing lenders
and inventors. In many cases, the business plan
indicates that the proponent SBO is fully aware
of what he is getting into. Lenders will be more
comfortable to see various documents that
indicate the borrower can repay the loan.
Revising the Plan

 A business plan is prepared in

consideration of the current and
expected situation. In the process of
implementing the plan, however, the
expected development or changes in
the environment may not happen fully
or even partially.
 Parts of the Business Plan
1. Title page and contents
2. Executive summary
3. Description of the business
4. The product or service
5. Market strategies
6. Analysis of the competition
7. Operations and management
8. Financial data
9. Supporting documents
 Contents
 The name of the business
 The name or names of the proponents (in this case the
SBO)
 Address
 Telephone number
 E-mail and website address
 The date
 The name of the person who prepared the business
plan
 The Executive Summary

The executive summary is a

portion of the business plan that
summarizes the plan and states
the objectives of the business.
If the SBO is intending to borrow money or is
seeking capital from investors, the following
must be indicated:
The capital needs of the business
How the money will be used
What benefits will be derived by the business
from the loan or investment
In case of loan, how it will be repaid with
interest, and in the case of outside investment,
how profits will be generated.
 Description of the Business
 This particular portion of the business plan
is very useful to the SBO, as well as
prospective investors and lenders.
THIS IS DIVIDED INTO TWO PARTS:
1. A short explanation of the industry
2. A description of the business
 Description of the Product or Service

 The important features of the product or service,

such as the maintenance free feature of the
product, or the home delivery service for
products ordered through the phone.
 A detailed description of how the product is
used.
 What makes the product or service different from
others available in the market.
 Market strategies refer to what the SBO plans to
do achieve the market objective of the firm.
Market strategies consist of the following:
Definition of the market
Determination of the market share
Positioning strategy
Pricing strategy
Distribution strategy
Promotion strategy
 The objective of market definition is
to determine which part of the total
potential market will be served by the
firm. The market must be defined in
terms of size, demographics, structure,
growth prospects, trends and sales
potential.
 Determination of the Market Share

To determine the firm’s market share, the

following steps may be used:
o Determine the number of prospects in the
target market
o Determine the number of times the product or
service is purchased by the target market
o Figure out the potential annual purchase
o Determine the percentage of the potential
annual purchase that the firm can attain.
 Positioning Strategy

 Positioning refers to how the firm

differentiates its product or service from those
of the competitors and serving a niche.
 Is one where the firm identifies a target market
segment and develops a strategy mix to
address the desires of that segment. The
objective of positioning is to establish the
firm’s product or service identify in the mind
of the buyer.
 Pricing Strategy

 How the firm prices its products or

service is a very important component
of the business plan. If the firm wants
to achieve its objectives, the right price
for its product or service must be
maintained.
 The firm’s price may be established through any of the
following methods:

1. Cost plus pricing- this method covers all costs, variable

and fixed, plus an extra increment to deliver profit.
2. Demand pricing- this is a method of pricing where the
firm sets prices based on buyer desires.
3. Competitive pricing- this method of pricing calls for
price-setting on the basis of prices charged by competitors.
4. Market pricing- this is a form of cost-oriented pricing in
which the firm sets prices by adding per-unit merchandise
costs, operating expenses and desired profit.
 Distribution Strategy

 Distribution refers to the process of

moving goods and services from the
firm to the buyers. The distribution
channel that will be adapted must
provide a strategic advantage to the
firm.
 Common distribution channels are the following:

1. Direct Sales- If the plan is to move goods directly to the

ultimate users, this is the most effective channel.
2. Original equipment manufacturer sales- this channel
involves selling a manufactured product to another
manufacturer who, in turn, incorporates the same to his
product and which is later sold as a finished product to the
end user.
3. Manufacturer’s representatives- they are wholesalers
employed by one or several producers and paid on
commission according to quantity sold.
4. Wholesalers- these are channel members that sell to
retailers or other agents for further distribution through the
channel until they reach the final users.
5. Brokers- they are distributors who buy directly from
distributors or wholesalers and sell to retailers or end users.
6. Retailers- they sell directly to consumers.
7. Direct mail- these are printed materials used in a targeted
campaign to consumers. These are sent directly to
consumers. These include catalogs, letters, e-mail, and other
direct appeals.
 Promotion Strategy
1. Advertising aspects
a. advertising budget
b. positioning message
c. first year’s media schedule
2. Packaging which describes how the company’s products
will be packaged.
3. Public relations- this will be a detailed presentation of the
publicity strategy of the firm. This will include a list of
media that will be tapped to convey the firm’s message to
the target market.
4. Sales promotions- these are means used to support the sales
message like special sales, coupons, contests, premium
awards, trade-in, among others.
5. Personal sales- these present the sales strategy including
a. Pricing procedures
b. Rules on returns and adjustments
c. Method of sales presentations
d. Generation of leads
e. Policies on customer services
f. Compensation of salesmen
g. Responsibilities of the salesmen.
 Analysis of the Competition

 The small business operator (or the

entrepreneur) will find it difficult to
compete if his competitors are
unknown to him. This makes it
necessary to make an analysis of the
competitors.
Operations and Management

 How the firm will be operated on a continuing

basis is an important component of the
business plan. As such, the plan must contain
the following:
1. Organizational structure
2. Operating expenses
3. Capital requirements
4. Cost of good sold
 Financial Data
 Financiers are most interested in the financial
aspects of the business plan.
To satisfy this requirement, the following
statements must be presented in the business
plan:
1. The Income Statement – shows the income,
expenses, and profits of a firm over a period of
time. It is also alternatively called “statement of
earnings.” it may cover a certain year, quarter,
or month.
2. TheBalance Sheet – is that type of
financial statement that shows the financial
condition of the business as of a given date.
The information provided by this
statement is useful not only to the
entrepreneur but also to the prospective
creditors.
Assets
Liabilities
Owner’s equity
 The Assets – the assets portion of the balance sheet lists the
asset of the firm in order of liquidity, from the most liquid to
the least liquid.
This portion is subdivided into the ff:
Current Assets
a. Cash
b. Accounts Receivable
c. Inventory
Fixed Assets
a. Capital and plant
b. Investments
 The Liabilities - the liabilities portion of the balance sheet is
classified as current or long term.
Current liabilities are due in one year or less and they include
the ff:
Accounts payable
Accrued liabilities
Taxes that are due and payable
Long term liabilities are due in more than one year. They include
the ff:
Bonds payable
Mortgage payable
Notes payable
 The Owner’s Equity – this section refers to how much
the owner has in the business. It provides a useful
means in evaluating the company.
 The Cash Flow Statement – is also a very useful tool
for business planners. It projects what the business plan
means in terms of pesos. It is used for operational
planning and estimates the amount of cash inflows and
outflows of the business during a specified period of
time.
 Supporting Documents

 The business plan would be more meaningful is supporting

documents are included. The documents usually consist of the ff:
1. The owner’s resume
2. Contracts with suppliers
3. Contracts with customers or clients
4. Letters of reference
5. Letters of intent
6. A copy of the firm’s lease
7. A copy of copyright or patent acquired, if applicable
8. Tax returns for the past three years

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Thanks for Listening!!!!
 QUIZ :

 1. How important is the Business Plan to

Entrepreneurs? Explain.

 2. What are the five types of Small Business? Explain

each.