The document discusses business plans, including their purpose, importance, typical format, and common pitfalls. It notes that a business plan is a formal written document that describes the strategy and operations of a proposed venture. The plan typically includes sections on management, products/services, marketing, financial projections, and other relevant elements. Developing an effective business plan is important for securing financing, guidance, and communicating the business idea to stakeholders.
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Sir Richard Branson
on Entrepreneurship, and Business Plans
3. Syllabus coverage
• What is a BP?Why is it important? Who prepares it?
• Typical BP format
oFinancial aspects of the BP
oMarketing aspects of the BP
oHuman Resource aspects of the BP
oTechnical aspects of the BP
oSocial aspects of the BP
• Preparation of BP - Common pitfalls to be avoided in
preparation of a BP
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4. Learning objectives
• The importance of writing a business plan
• The elements of a business plan
• Writing a business plan
• Questions around a business plan
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5. Business plan
• A formal written expression of the
entrepreneurial vision, describing the
strategy and operations of the proposed
venture.
• Could take the shape of a /an
o Loan proposal
o Investment prospectus
o Venture plan
• A Business plan is a:
o Written document describing all relevant
elements involved in starting a new venture. It
is an integration of various other plans (e.g..
Marketing, finance, technology, HR etc)
o Road map for accomplishing the
entrepreneurial pursuits.
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6. Purpose & importance of a BP
• The important purposes are to explain and describe the:
oIdea behind the business
oProduct and services of the business
oBackground (s) and experience (s) of the entrepreneur (s) who are starting
the business
• Importance of a BP
oProvides guidance for entrepreneurs in planning
oHelps to secure finance
oHelps to communicate ideas to bankers,VCs, angels, consultants,
potential team members etc
oTool to manage the business
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7. Elements of a BP
• History and background
• Goals and objectives
• Products / Services
oCompetition
oGrowth potential
oEconomic / technology trends
• Form of ownership
• Staff and management
• Marketing
• Financial statements (current / projected)
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8. Preparing a BP – Introductory elements
• Cover letter
• Cover sheet
• Executive summary
• Main body
• Appendix
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Who prepares a
BP?
•Expected to be the
entrepreneur.
•Consultation may
be provided by
lawyers,
accountants,
consultants, etc
9. Preparing a BP – A typical BP format
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What?
Product
Need
Where?
Location
Who?
Ownership
How much?
Cost
Funding
Pattern
Assistance
Summary
• Current domestic and international industrial scenario
• Rationale for project selection
Project
Introduction
Promoter(s)
• Educational qualifications,Work experience, domain experience
• (If state is one of the promoters) Experience state has in projects
of this type
• Description of the project
• Installed, and operating capacity
• Unique proposition, and positioning
• Legal requirements / stipulation
• Required clearances
Plant &
Machinery
Location
Land &
Building
• Location
• Criteria for selection
• Alternatives examined
• Locational advantages
• Area
• Constructed area
• Type of construction
• Cost
• Capacity
• Equipment balancing
• Suppliers
• Cost
• Alternatives available
• Criteria for choosing
10. Preparing a BP – A typical BP format
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Project
Introduction
Promoter(s)
Plant &
Machinery
Land &
BuildingSummary
Location
Production
Process
Assets
Production
Programme
• Nature of assets
• Itemised description along with source and
cost of procurement
• Description of production process
• Process flow chart
• Details of technology
• Indigenous technology, bought or imported
• Technical know-how
• Evaluation of alternatives
• Potential technological disruption
• Various process parameters
• Time required to produce one unit
• Production schedule for foreseeable time
• Input output ratio
• Quality standards / benchmarks to be
followed
11. Preparing a BP – A typical BP format
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Summary
• List of raw materials needed
• Per unit, quantity required
• Requirement schedule per output
• Quantity specs
• Source of procurement
• Cost of raw materials per schedule
• Available supply
• Required tie ups
• Alternate sources
• Any evaluation done
Plant &
Machinery
Land &
Building
Location
Production
Process
Assets
Production
ProgrammeProject
Introduction
Promoter(s)
Manpower
Utilities
• Requirements of power, water etc
• Quality, value per schedule
• Source of utilities
• Specific arrangements for alternate power
• Schedule of requirements, cost & type of
manpower for next 10 years
• Requirement of administrative,
managerial staff
• Assumed availability
• Training scheme for non-available
Raw
Materials
12. Preparing a BP – A typical BP format
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Plant &
Machinery
Land &
Building
Location
Production
Process
Assets
Production
Programme
Project
Introduction
Promoter(s)
Manpower
Utilities
Raw
Materials
Funds
Req-
ments
Working
Capital
Req-
ments
Cash Flow
Statements
Cost of
Production.
Profitability
• What stock level of raw materials?
• Stock level of work in progress, and finished goods
• Inventory maintenance cost
• Credit line extended to customers
• Calculation of working capital and source of the same
• Details, in case forex is required
• Credit line extended by suppliers
• Cost of the projects including cost of land, building,
machineries, other assets, technical know-how fees, pre-
operative expenses, contingencies and margin money
• Funding pattern for cost of setting up from different
financial institutions to cover CAPEX
• Contribution from promoters
• Other sources of funds
13. Preparing a BP – A typical BP format
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Plant &
Machinery
Land &
Building
Location
Production
Process
Assets
Production
Programme
Project
Introduction
Promoter(s)
Manpower
Utilities
Raw
Materials
Funds
Req-
ments
Working
Capital
Req-
ments
Cash Flow
Statements
Cost of
Production.
Profitability
Marketing:
Prospective
Marketing:
Current
Implem-
entation
Schedule
Break
Even
Analyses
• Major uses of product
• Any substitute product available
• Similar products available
• Product differentiation & strengths
• Major buyers
• Purchase influencers
• Major purchasing factors
• Competitor strengths / weaknesses
• Competitor trade practices, trade channels
• Geo-spread of market
• Distribution channels
• Trade practices
• Market entry strategy, promotions
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Calculating Break Even Point
15. Preparing a BP – Financial plan
• The financial plan comprises of:
oQuantum of fund inflow
oSchedule of inflow
oUsage of funds
oCash availability
oProjected financial position
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STARTUP COSTS
CASHFLOW
STATEMENT
INCOME
STATEMENT
BALANCE SHEET
One time expenses – preliminary assets, building, computers, vehicles etc.Describes inflow and outflow of cash
proforma
Essentially, the profit & loss statement
Assets = Liabilities + owners equity
More assets => +ve net worth
16. Preparing a BP – Marketing plan
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CUSTOMER PROFILE
MARKET SEGMENTS
KNOW YOUR
COMPETITION
IDENTIFY YOUR
TARGET MARKET
UNDERSTANDYOUR
CUSTOMER
4
3
5
2
1
MARKET RESEARCH
DEFINE
PURPOSE
SELECT
METHOD
COLLECT
DATA
ANALYZE
DATA
CONCLUDE
17. Preparing a BP – HR plan
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NEED
Summary
RECRUIT
& HIRE
PAY &
MANAGE
MOTIVATE
TRAIN
EVALUATE
18. Preparing a BP –Technology plan
• Need for a tech plan
• Steps for technology
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ASSESS
BUSINESS
NEED
WRITETHE
PLAN
PROCUREMENT
SOURCE
TECH
CONSIDERATIO-
NS
PROCURE
19. Preparing a BP – Social plan
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SOCIAL
RESPONSIBILITY
CUSTOMERS
SUPPLIERS
CREDITORS /
INVESTORSCOMMUNITY
ENVIRONMENT
BUSINESS ETHICS
20. Preparing a BP – Common pitfalls
• Capacity – utilization estimates – unrealism
• Capacity computation – miscalculation
• Market study – neglected task
• Machinery selection – serious errors
• Technology oriented products – a shaky arrangement
• Project running & resource straining – safe limits exceeded
• Project cost – an underestimate
• Location selection – some temptations
• Selling price – unfounded optimism
• Cashflow in initial years – poor detail
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21. Further readings / viewings
• Kiki’s delivery service – Japanese animated fantasy feature film.
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