READING/LEARNING MATERIALS

Faculty: IT PHEBEUGER M. TORION Subject: TLED 210-Entrepreneurship

Course/Year/ Section: BTLED 2-A, B, C, & D 2nd Semester, AY 2020-2021

Business Plan Preparation

Business Plan

A Business Plan is a formal written document containing business goals, the methods on
how these goals can be attained, and the time frame within which these goals need to be achieved.
It also describes the nature of the business, background information on the organization, the
organization's financial projections, and the strategies it intends to implement to achieve the
stated targets. In its entirety, this document serves as a road map that provides direction to the
business." It is a decision-making tool. A business plan represent all aspect of planning process
declaring vision and strategy alongside sub-plans to cover marketing, finance and operations,
human resources as well as a legal plan, when required. It describes the venture that you will
create to exploit a concept. It serves as the blueprint for a successful business.

Purpose of a business plan

Business Plan serves many masters. These are:

1. The entrepreneur – who must set a navigation course it serves as their guide
2. The investors and cautious financiers - in order for them to evaluate your business
and for approval
3. The managers and staff of organization – for them to know the strategies and
programs of the enterprise

Reasons of preparing a business plan

 Secure Funding. Whether you are starting up a small business or are an established
entrepreneur, banks and other financial institutions want to see that you know where you
are, where you are going and how you are going to get there. financial institutions and
professional money lenders, some investors want to know they’re not throwing money
into the thin air.

 Helps You Decide to Proceed or Stop. It makes you think through the entire business
process so that you do not open the business blindly or lack vital information in opening
and maintaining your business.

 Increase the Odds of Success. To reduce the risk of pursuing the wrong
opportunity. The process of creating the business plan helps to minimize opportunity
costs. Writing the business plan helps you assess the attractiveness of this particular
opportunity, versus other opportunities. It establishes a system of checks and balances
for your business so that you avoid mistakes.
  Helps You Keep on Track. . It provides you with the road map that you need in order to
run your business. It allows you to make detours, change directions and alter the pace
that you set in starting or running the business.

 Improve Your Business Concept. To Position Your Brand & Uncover New Opportunities:
Preparing a business plan can help you know where your business stands in the
marketplace. This is key to knowing how to better present your business to your target
market, position you well against your competition, and show you how to generally strive
for growth. During your market research process, you could also discover new business
opportunities. Looking at your business plan from different angles would give you a
newer perspective on how to address customers. This could show you problems
consumers already face and how to solve them.

Basic Elements of a Business Plan

Different companies require different types of business plan, depending on their financial
model, their revenue structure and many other factors. The actual elements of a business plan
should contain five types of information such as:
• The mission of your business and the objectives you want to achieve;
• Your targeted markets and clients, the products and/or services you will provide and
the position of your competitors;
• The qualitative and quantitative results you expect to achieve;
• The human resources, infrastructure, equipment, raw material and financial
resources you need in order achieve your goal in business;
• The technical, organizational and administrative processes you will apply.

The above information can be conveniently structured in your business plan.

The 5 elements of a business plan that are indisputably important and should be well
considered in the written document are the following:

1. Executive Summary

This represents the first impression that the reader will get from your plan. It
should include key facts about your business (business concept, financial requirements,
current positioning, major achievements…) but most importantly it should contain the
key message for the reader (i.e. what you want from them).

2. Business Overview/Description

After the executive summary, a business plan usually starts with a description of
the industry where your business fits in. This includes its present outlook and its future
direction, data on similar products in the market in order to provide the reader with in-
depth understanding of the industry, with reliable sources and references. When
describing your business, make sure that its structure is clear. Explain who are your
customers, what are your distribution channels, what problem are you solving and what
systems you are putting in place to support your operations.
 Finally, use this section to give the reader some details about your core products
or services. Obviously, as in the whole plan, keep it as short as possible. But still make sure
that there is enough information to understand where your competitive edge lies.
Possibly, explicitly specify how your product is different from the existing ones, and how
it could be more successful.

3. Sales & Marketing Strategy

This section requires a deep understanding of your market space and of the
position of your business within its niche. The strategy should include a definition of your
overall market and your projected market share, a description and profile of your
customers, a detailed positioning and pricing strategy, an overview of your distribution
and promotion infrastructure, sales forecast and competition analysis.

4. Operations & Management

By planning how to run the day-to-day tasks involved with your business, you
should encompass two main sections:
Organizational structure: this is an overview of all the people involved in your
business and their position in relation to each other. It is also often used to predict
salary costs, which are usually the highest operating expense of a business, so be
careful when estimating how much staff you will need in your company.
Capital and expense requirements: this is a summary of all the expenses for big
purchases and day-to-day running costs, which should give the reader an idea of
how much will it cost to run your business.

5. Financial Information

Including a detailed overview and forecasts, usually obtained through financial

modelling, will help you communicate to your investors that the management team has
a clear vision and full control on the business, and that it is prepared to face different
scenarios.
Remember, these are just tips to adjust the form of your plan, but you can never
do without a good product, an efficient business model, and maybe most importantly, the
flexibility and adaptability to change. You can be sure that something will come up at
some point that you did not include in your business plan, and being able to respond to
such change is key to running a successful business.
 Writing a Business Plan

The key elements of the business plan are presented in the order in which they usually
appear in a typical business plan. However, there is no standard format of the business plan. It
may varies in the content and size according to the nature and size of the business concerned. The
key elements and the important information can be structured in a simplified format.

Below is the format of a business plan and the guidelines in writing the business plan for
your enterprise.

Format

Preliminaries
Cover Sheet
Table of Contents

Contents
I. Executive Summary
II. Business/Industry Overview
III. Products and/or Services
IV. Market Plan
V. Ownership and Management Plan
VI. Operating Plan
VII. Financial Plan

Appendices & Exhibits

Guidelines in Writing the Business Plan

Section – Cover Sheet/Title Page

Your title page should include:

 Name of your organization
 Branding information (for example, the company's logo and colors)
 Purpose of the plan (for example, to seek funding, start an organization, grow
the organization, to start a new product or service)
 Date of the plan (this is useful especially to track the version of the plan)
 Terms of confidentiality (for example, if it is not to be shared outside of the
company)
 Contact information (for people to use if they have questions about the plan)
  Copyright terms (for example, that it is not to be copied, distributed or
modified without express permission of someone in the organization)

Section – Executive Summary

Guidelines

The executive summary for a business plan is a brief, positive synopsis of the
business that goes at the beginning of the plan because It is what most readers will
read first. but is written last. because it includes the highlights from other sections
of the plan. However, some prefer to write it first as a means to quickly gather their
most important thoughts about the plan. It should provide a short, concise but
powerful, descriptions of each section that captures the reader's attention and entice
them to take an interest in your business

The executive summary should be not more than two pages long and
contains two-sentence overviews of each section within the plan.

The content of the executive summary will vary between startups and
established businesses. However, there are certain elements common to both:

 The name and location of the business.

 Your company's value proposition (Mission): What sets your company apart
from your competitors?
 Market Opportunity. (the needs of which target markets of customers that you
aim to meet with evidence of that need)
 A brief description of products and service. The way your company's products
and/or services meet that need. (how your enterprise will meet the needs of the
target markets)
 Competitive advantage. A description of your competition and the advantages
your company has over them.
 A solid description of the market. A description of your target customer
 Management expertise. An overview of your company's management team
and how each member contributes to its success. (in producing and providing
the product or service)
 A description of the company's current developmental stage.
 A financial summary, showing projected sales and profits for the next three
years in a way that is both honest and convincing. (forecasts of sales and
profits, balance sheet, and cash flow projections). An overview of funding
requirement.
 If you are requesting money from a financial institution, state the specific
amount you want. For investors, state the percentage stake in the company
you're offering for their financial backing.
 Purpose of the plan. A summary of major milestones so far and your goals for
the future.
 Startups should also include:

 Marketing and sales plans. A brief overview of your sales and marketing
strategy. (how you will appeal to the unique needs of each target market)
 Your implementation plan, describing how you intend to get the business
from planning to opening.

For established businesses, be sure to add:

 Your mission statement, which is a brief description of the purpose and

values of the company.
 A short history of the company, including the products and/or services it
provides and general statistics (number of employees, locations, etc.).
 An overview of how the business has grown, both in terms of revenue and
market share.
 A financial summary for potential investors.
 A business road-map describing your plans for the company. This is also
important for investors. They will want to see how you plan to use their
money to grow the business

The content of the executive summary can be organized into three divisions
as described below:

Purpose of
the business
plan

Financial
requirements

Financial
requirements

A. Purpose of the business plan

This is a short section stating the main purpose for developing and
presenting your business plan. (introductory portion)

 To ensure for yourself the viability of the business you are planning to start
(or expand or simply continue the same way);
 To raise new capital from outside investors or lenders
 To establish the basis for developing a detailed plan of activities.
B. Highlights

The main items to be discussed briefly in the executive summary in order to

give the reader a quick overview (of about a half to one page) of your business are
the following:

 The name and location of the business.

 A brief description of products and service. The way your company's
products and/or services meet that need. (how your enterprise will meet the
needs of the target markets)
 Your company's value proposition (Mission): What sets your company apart
from your competitors?
 Management expertise. An overview of your company's management team
and how each member contributes to its success. (in producing and providing
the product or service)

 Market Opportunity. (the needs of which target markets of customers that you
aim to meet with evidence of that need)
 A solid description of the market. A description of your target customer
 Competitive advantage. A description of your competition and the
advantages your company has over them.

 Marketing and sales plans. A brief overview of your sales and marketing
strategy. (how you will appeal to the unique needs of each target market)
 Your implementation plan, describing how you intend to get the business
from planning to opening.

 Purpose of the plan. A summary of major milestones so far and your goals for
the future.

C. Financial requirements

If one of the main objectives of your business plan is to mobilize

additional funds, this section of the executive summary has to include the
following:

 If you are requesting money from a financial institution, state the specific
amount you want. For investors, state the percentage stake in the company
you're offering for their financial backing.
 For which purpose? (Working capital? Purchase of new machinery?
Development of new products? Refurbishment of plant and equipment?)
 When do you need the funds? (The first part, the second part, etc.?)
 Borrowing. What type of borrowing do you require? (Overdraft? Term loan?)
How and when do you plan to repay the money? What guarantees or
collateral are you able to provide?
 Equity. What kind of capital stock is offered to investors? (Preference
shares? Common shares? Convertible loans? Other?) What is the anticipated
return on
Section – Business/Industry Overview

Guidelines

Business Overview is a brief description of the enterprise. This is where you

discuss the venture you plan on pursuing. This section covers the who, what, where
and how in depth.

The description of this section are can be organized in :

A. Main Products, markets, and clients

 State it briefly here—(you will do a more thorough explanation in the

Marketing Plan section ):

 The most important product or service. What they look like? Their
distinguish features.

 The market. To whom will you market your products? (The

existing target market the size and market share).

 The customers (Consumers? Demographic category)

 Type of industry, for example, construction, computers, education

or manufacturing.

 Competitive Advantage -- Describe your most important company

strengths and core competencies. What factors will make the
company succeed? What do you think your major competitive
strengths will be? What background experience, skills, and
strengths do you personally bring to this new venture?

B. Location and premise

 Location and why it was selected is presented a short summary only in this
section.

C. Legal form, ownership and management

 Legal structure -- Current or planned legal structure of the business. Is the

business a corporation, partnership or a limited company, sole
proprietorship, partnership, S or C? What are the reasons for the form of
constitution?

 The owners, the board of directors and the management -- The human
resources section of your business plan should include detailed. Who owns it?
Who are the shareholders and who holds the majority/control of the
company? Who are the key managers? What is their background and what
 strengths do they bring to the business (experience, expertise, special
abilities, etc.)?

E. Historical development and track record of the business. (If there is any)

F. Business strategy and mission

In this section you should summarize your business strategy and mission.

 Mission statement (or statement of purpose) -- the purpose of your overall

organization, whom it generally serves and how. Keep in mind that a mission
statement is typically one sentence and it defines what your organization is
all about. Many companies have a brief mission statement, usually in 30
words or fewer, explaining their reason for being and their guiding
principles.
 Strategic priorities for the next three to five years

E. General organization/operating units

 Supply chain activities, that is, how products and services are developed and
delivered

 Business model -- that is, how you will make a profit. What type of business
model is employed, example: retail, wholesale, service, manufacturing,
franchising, online and others or a combination

Section – Products and/or Services

Guidelines

This section describe the product or service to be offer and emphasize any
distinguishing features that may give you a competitive advantage. Discuss what
market demand your products or services will meet,

Here especially is where you need to be careful about not referring to terms
that your particular audience might not understand. Also, be careful about making
exaggerations, such as "ensure continued joy throughout their lifetimes" or "will
instantly generate sales more than competitors".

The following specific information should be included and discussed in the

following structure:

 Product or service
Product Description and attributes -- What is the primary product or
service that you plan to sell? What industry is it in? How does it work?
 How long it last? How the product or services will be used? How does it
benefit customers? Write a description of the product's physical
characteristics, including colors, finishes, sizes, specifications and
ingredients (if applicable). Use photographs, diagrams and other graphics
to help the reader learn about the product (technical specifications,
drawings, photos, sales brochures, and other bulky items belong in
Appendices). Describe it in terms that customers will understand.

 Pricing strategy
How will you price it? That depends on your pricing strategy, for
example, is it to quickly get into new markets by offering low prices? Or is
it to convey high-quality by charging slightly more than your competitors?
How much will you charge for the products or services you’re offering?
To answer this question, consider the following:
1. Estimated Cost which includes the cost of product development,
cost of goods, operating expenses and the depreciation and
interest on capital.
2. Pricing must cover the cost and leave a satisfactory profits and
consider how the price variation influence the buying behavior.

 Differentiating from competitors

How does your product stand out from competitors? Do a comparison
of products and services with yours. Think of unique benefits, such as
pricing, access to the product or service, and its ease of use, high quality
and strong customer service, special guarantees and warranties, and
refund arrangements. What makes this product or service unique or
better than what’s already available in the market? Why would someone
choose to buy your product or do business with you over someone else?
Compare the product to those of competitors. Tell how the company's
product is better than competing products. Discuss its potential in the
marketplace. Include the results of any market trials, surveys or focus
groups.

 Prepare for customer demand

How will you manage the demand of customers? If yours is a product,
then you need to ensure sufficient supplies to continue to manufacture that
product. If yours is a service, then you need to ensure sufficient expertise to
continue to provide it.

 Manage for sufficient supplies

How will you ensure sufficient supplies of resources? If you do not have
sufficient supplies, then customer orders will dry up very quickly.

 Manage storage of supplies

How can you manage the supplies during storage to ensure their count
and high quality?

 Order fulfillment
Describe how customer orders will be received and filled. For example,
will you receive them directly or via retail outlets? Will you deliver the
product or service in-person or online? How will you fill orders or deliver the
service? Will you manufacture items yourself or outsource to someone else?
Who will handle distribution, and how?
  Risk management
What liabilities might there be in how customers receive and use the
product or service? How can you avoid or respond to them as they occur?

Section – Market Plan

Guidelines

The key element of a successful marketing plan starts with understanding

your market and the opportunities inherent in that market and to know your
customers -- their likes, dislikes, expectations. By identifying these factors, you can
develop a marketing strategy that will allow you to arouse and fulfill their needs. The
marketing strategy describes the product or service the business are offering, its
pricing structures, the best promotions to use and how it will be distributed -- or
delivered -- to its customers.
In the marketing strategy section of your plan, you'll address issues such as:
 Identification of your target buyers.
 The market segment in which you'll compete.
 The reasons why the product or service you offer is unique.
 Your pricing philosophy.
 Your plans for market research.
 Your ongoing product or service development plans.

Develop a market plan for your business by answering the questions and
structured them according to the outline below:

A. Market characteristics

In market characteristics you describe the market opportunity and identify

the customer as follows:

 Potential target markets -- What new groups (target markets) of customers

might you serve? For example, groups by age, gender, education level, income
level, occupation or location? What are the needs -- or problems -- of each
group? How will our product or service meet those needs or solve that
problem?

 Target markets' demands- What is the size of each of the target markets and
is each growing or declining? What is the likelihood of each target market's
demand (for our product or service) to increase? For example, what affects on
them might there be from technological developments, rules and regulations,
economic changes and global competition?

 Selected target markets – outline the existing and identified target client
groups or major single clients (key accounts). Or to narrow down the range
briefly describe the customers you do not want to reach.

You may consider these questions:

 Which target markets should you pursue and in which order?
 Are there certain types of customers in that market to pursue, for
example, by gender, age or otherwise?
  Who they are?
 Where are they located?
 Why do they buy?
 When and under what circumstances do they buy?
 What types of concerns do they have?
 What is the percentage of that type in each target market?
 What is the median income of each selected market?
 What will each selected target market pay for our product or service?
 What pricing arrangements (structures) should you offer each?
 What are their expectations concerning price, quality and service (are
they primarily cost- or quality-sensitive)?
 How does each selected target market prefer to communicate, for
example, via in-person or Web-based appeals, written advertisements
or videos? How should you appeal to (sell to) the selected target
markets?

B. Competition

Small businesses can be especially vulnerable to competition, especially

when new companies enter a marketplace. it is important to know your
competitors by listing of direct and indirect competitors and why target markets
will buy from you instead. Consider also the following questions:
 Who are the direct competitors in each target market, that is, those
who already sell the same product or service and perhaps to the
same target markets?
 What are the indirect competitors, that is, influences that will
decrease the demand for your product or service?
 What are the strengths and weaknesses of each direct competitor?
 How can you differentiate or position yourself from each competitor?
 How does their product or service differ from yours?

C. Pricing

Pricing. A pricing strategy is a model or method used to establish the best

price for a product or service. It helps you choose prices to maximize profits and
shareholder value while considering consumer and market demand. Here is
where you explain your pricing strategy -- how to achieve the ultimate benefit to
the business from the pricing that you select.

Examples of pricing strategies include:

 Penetration pricing - a low-cost approach intended to quickly penetrate new
markets
 Premium pricing - intended to imply the high-quality of your product or
service. Known as prestige pricing focuses on the perceived value of a product
rather than the actual value or production cost.
 Price bundling - offering a deal if customers purchase, for example, two or
more of the product or a maintenance contract for a service
 New customer pricing - offering a low initial price in order to first establish
a relationship with the customer.
 Cost-Plus Pricing - It’s also known as markup pricing since businesses who
use this strategy “mark up” their products based on how much they’d like to
 profit. To apply the cost-plus method, add a fixed percentage to your product
production cost. Markup on cost ____ What % Markup? ______
 Suggested price
 Competitive/Competition-Based Pricing - Competition-based pricing is
also known as competitive pricing or competitor-based pricing. With
competition-based pricing, you can price your products slightly below your
competition, the same as your competition, or slightly above your
competition.
 Other Dynamic pricing is also known as surge pricing, demand pricing, or
time-based pricing. It’s a flexible pricing strategy where prices fluctuate based
on market and customer demand.
 Hourly pricing - also known as rate-based pricing, is commonly used by
consultants, and other individuals or laborers who provide business services.
 Project-Based Pricing Strategy - A project-based pricing strategy is the
opposite of hourly pricing — this approach charges a flat fee per project
instead of a direct exchange of money for time.

D. Distribution Channel

A distribution channel represents how an organization will make its

product or service available to the end consumer for consumption or use. It can
be direct, which means that the manufacturer sells directly to the customer, or it
can contain intermediaries who may buy and resell the product or indirect. The
links in those chains are intermediaries. You should demonstrate that you have
established appropriate logistics for ensuring that your product will reach the
clients in time, in perfect condition and in a cost-effective way. The types of
distribution channel are:
 Direct
1. Peddling is the oldest form of direct selling.
2. party plan
3. one-on-one demonstrations
4. Personal Selling modern form
5. personal contact arrangements (telephone
6. internet sales. (mail order, or E-mail, web)

 Indirect selling – selling through intermediaries

1. agents/ brokers/ reps and
2. wholesale
3. distributors
4. retailers
 Dual distribution – selling directly to the end users as well as sell to other
companies for resale
1. business format franchising

This section can be described by answering the following questions:

 Which sales channels will you use?
 Will you sell by telephone or will your product be carried in retail outlets?
 Which channel will let you economically reach your target audience?
 E. Promotion

Promotion is a mix of communications designed to convey information

about a company and its products/services to prospective customers. Your
promotion needs to be persuasive enough to elicit a desired response. The
purpose of promotion is either to sell more products or services to existing clients
and/or to acquire new customers.
There are four basic components of a promotion plan:
 Advertising - is paid promotion and includes media such as newspaper,
magazine, radio, television, billboard, subway, direct mail, banner advertising,
flyer advertising etc. For artists, the most effective forms of advertising have
proven to be direct mail, source book advertising and on-line portfolios.
 Personal Selling - A process of helping and persuading one or more prospects
to purchase a good or service or to act on any idea through the use of an oral
presentation. Examples: Sales presentations, sales meetings, sales training
and incentive programs for intermediary salespeople, samples, and
telemarketing. Can be face-to-face or via telephone.
 Sales Promotion - Media and non-media marketing communication are
employed for a pre-determined, limited time to increase consumer demand,
stimulate market demand or improve product availability. Examples:
Coupons, sweepstakes, contests, product samples, rebates, seasonal
discounts, tie-ins, self-liquidating premiums, trade shows, trade-ins, and
exhibitions.

In this section, you describe the type of promotions that you intend to use
with each target market, based on the nature and needs of each (as you learned
during your market research). It is often best to depict your plan with a table of rows
and columns.

Section – Ownership and Management Plan

Guidelines

This section of your plan is to describe how the expertise in your management
staff are fully equipped -- or soon will be -- to cost-effectively develop and deliver your
product or service. In this section concisely describe:

 The expertise needed to cost-effectively develop and deliver the product or

service.
 How the leader of the management team has that expertise. Or, if that
expertise is not currently in the management team, then how you can
promptly get it.
 Other relevant experience, degrees and certifications.
 Include resumes if useful, but focus on skills at least as much as useful
credentials.
 Specify any financial interest or ownership of each manager.
 An organizational chart that depicts how the management team is organized,
showing the management hierarchy and who is responsible for key functions as
well as a description of how the effectiveness of the team will be managed.
 If the business is a corporation, then provide brief experience about each of
the members of the Board of Directors, his or her relevance to the product or
service and each member's financial interest in the business, if applicable.
 Any relevant and involved collaborators, strategic alliances and/or
professionals who will be involved in the business activities.
 End by explaining the staffing (personnel) needs that you expect over the first
year of the business as it gets started and continues to expand. Include position
descriptions for key employees.
 The labor (compensation) costs for all personnel. It can be top level
information here, but should be detailed in the financial section of your
business plan.
Handouts
TLED 210 – Entrepreneurship
Prepared by: It Phebeuger M. Torion

Writing a Business Plan

(Continuation)

Section – Operating Plan

Guidelines

Explain the daily operation of the business, its location, equipment, people,
processes, and surrounding environment.

Develop a market plan for your business according to the outline below:

A. Production
In this sub section, discuss the following:
 How and where are your products or services produced?
 Explain your methods of:
 Production techniques and costs
 Quality control
 Customer service
 Inventory control
 Product development

B. Location
Discuss by answering the guide questions:
 What qualities do you need in a location? Describe the type of location you’ll
have.
 Physical requirements:
 Amount of space
 Type of building
 Zoning
 Power and other utilities

 Access:
 Is it important that your location be convenient to transportation
or to suppliers? Do you need easy walk‐in access?
 What are your requirements for parking and proximity to freeway,
airports, railroads, and shipping centers?

 Include a drawing or layout of your proposed facility if it is important, as it

might be for a manufacturer.

 Construction? Most new companies should not sink capital into construction,
but if you are planning to build, costs and specifications will be a big part of
your plan.
  Cost: Estimate your occupation expenses, including rent, but also including
maintenance, utilities, insurance, and initial remodeling costs to make the
space suit your needs. These numbers will become part of your financial plan.

 What will be your business hours?

C. Legal Environment

Describe the following:

 Licensing and bonding requirements
 Permits
 Health, workplace, or environmental regulations
 Special regulations covering your industry or profession
 Zoning or building code requirements
 Insurance coverage
 Trademarks, copyrights, or patents (pending, existing, or purchased)
(research on topic Business permit application)

D. Facilities and Equipment

List down the Equipment and facilities needed with the specifications or
description and cost.

E. Personnel

This part can be thoroughly discuss by answering the need information

below: To be make it comprehensive, present in table form with brief description.
 Number of employees
 Type of labor (skilled, unskilled, and professional)
 Where and how will you find the right employees?
 Quality of existing staff
 Pay structure
 Training methods and requirements
 Who does which tasks?
 Do you have schedules and written procedures prepared?
 Have you drafted job descriptions for employees? If not, take time to write
some.
 They really help internal communications with employees.
 For certain functions, will you use contract workers in addition to employees?

F. Inventory

Present this part in table form.

 What kind of inventory will you keep: raw materials, supplies, finished
goods?
 Average value in stock (i.e., what is your inventory investment)?

G. Suppliers
Present the following:
 Identify key suppliers:
 Names and addresses
  Type and amount of inventory furnished
 Credit and delivery policies
 History and reliability

 Should you have more than one supplier for critical items (as a backup)?
 Do you expect shortages or short‐term delivery problems?
 Are supply costs steady or fluctuating? If fluctuating, how would you deal
with changing costs?

H. Credit Policies

 Do you plan to sell on credit?

 Do you really need to sell on credit? Is it customary in your industry and
expected by your clientele?
 If yes, what policies will you have about who gets credit and how much?
 How will you check the creditworthiness of new applicants?
 What terms will you offer your customers; that is, how much credit and when
is payment due?
 Will you offer prompt payment discounts? (Hint: Do this only if it is usual and
customary in your industry.)
 Do you know what it will cost you to extend credit? Have you built the costs
into your prices?

Section – Financial Plan

Guidelines

The financials section is where you show that your business idea can make a
profit. The types of financial information that you include in your business plan
depend on the type of business plan that you selected. However, there are types of
important financial plans to include in any type of business plan:
 a 12‐month profit and loss projection,
 a four‐year profit and loss projection (optional) or Three-Year Profit
Projection (Optional) - The 12‐month projection is the heart of your
financial plan. The Three-Year Profit projection is for those who want to
carry their forecasts beyond the first year,
 a cash‐flow projection,
 a projected balance sheet, and
 a break‐even calculation.
Together they constitute a reasonable estimate of your companyʹs financial
future.

The type of financial plan that you will include are the following:

 12-Month Profit and Loss Projection

Many business owners think of the 12‐month profit and loss projection
as the centerpiece of their plan. This is where you put it all together in
numbers and get an idea of what it will take to make a profit and be
successful.
 Your sales projections will come from a sales forecast in which you
forecast sales, cost of goods sold, expenses, and profit month‐by‐month for
one year.
Profit projections should be accompanied by a narrative explaining the
major assumptions used to estimate company income and expenses.

Research Notes: Keep careful notes on your research and assumptions, so

that you can explain them later if necessary, and also so that you can go
back to your sources when it’s time to revise your plan.

 Projected Cash Flow

If the profit projection is the heart of your business plan, cash flow is the
blood. Businesses fail because they cannot pay their bills. Every part of your
business plan is important, but none of it means a thing if you run out of cash.
The point of this worksheet is to plan how much you need before startup,
for preliminary expenses, operating expenses, and reserves. You should keep
updating it and using it afterward. It will enable you to foresee shortages in
time to do something about them—perhaps cut expenses, or perhaps
negotiate a loan. But foremost, you shouldn’t be taken by surprise.
There is no great trick to preparing it: The cash‐flow projection is just a
forward look at your checking account.
For each item, determine when you actually expect to receive cash (for
sales) or when you will actually have to write a check (for expense items).
You should track essential operating data, which is not necessarily part of
cash flow but allows you to track items that have a heavy impact on cash flow,
such as sales and inventory purchases.
You should also track cash outlays prior to opening in a pre‐startup
column. You should have already researched those for your startup expenses
plan.
Your cash flow will show you whether your working capital is adequate.
Clearly, if your projected cash balance ever goes negative, you will need more
start‐up capital. This plan will also predict just when and how much you will
need to borrow.
Explain your major assumptions; especially those that make the cash flow
differ from the Profit and Loss Projection. For example, if you make a sale in
month one, when do you actually collect the cash? When you buy inventory or
materials, do you pay in advance, upon delivery, or much later? How will this
affect cash flow?
Are some expenses payable in advance? When?
Are there irregular expenses, such as quarterly tax payments,
maintenance and repairs, or seasonal inventory buildup, which should be
budgeted?
Loan payments, equipment purchases, and ownerʹs draws usually do not
show on profit and loss statements but definitely do take cash out. Be sure to
include them.
And of course, depreciation does not appear in the cash flow at all because
you never write a check for it.
 Opening Day Balance Sheet

A balance sheet is one of the fundamental financial reports that any

business needs for reporting and financial management. A balance sheet
shows what items of value are held by the company (assets), and what its
debts are (liabilities). When liabilities are subtracted from assets, the
remainder is owners’ equity.
Use a startup expenses and capitalization spreadsheet as a guide to
preparing a balance sheet as of opening day. Then detail how you calculated
the account balances on your opening day balance sheet.
Optional: Some people want to add a projected balance sheet showing the
estimated financial position of the company at the end of the first year.
This is especially useful when selling your proposal to investors.

 Break-Even Analysis

A break‐even analysis predicts the sales volume, at a given price, required

to recover total costs. In other words, it’s the sales level that is the dividing
line between operating at a loss and operating at a profit.

Expressed as a formula, break‐even is:

Break‐Even Sales = Fixed Costs / 1 – Variable Costs

(Where fixed costs are expressed in dollars, but variable costs are expressed
as a percent of total sales.)

Include all assumptions upon which your break‐even calculation is based.

Worksheets
TLED 210 – Entrepreneurship
Prepared by: It Phebeuger M. Torion

Writing a Business Plan

Worksheets

Gather necessary information relevant to your proposed venture. Using the guide questions below.
Your answers are important inputs in developing your Business plan.

MARKET ANALYSIS

A. Target Market - Who are the customers?

1. We will be selling primarily to (check all that apply):
Total Percent of Business
a. Private sector ___________ ____________
b. Wholesalers ___________ ____________
c. Retailers ___________ ____________
d. Government ___________ ____________
e. Other ___________ ____________

2. We will be targeting customers by:

a. Product line/services. We will target specific lines ___________________
b. Geographic area? Which areas? ___________________
c. Sales? We will target sales of ___________________
d. Industry? Our target industry is ___________________
e. Other? ___________________

3. How much will our selected market spend on our type of product or service this coming
year?

B. Competition
1. Who are our competitors?

NAME

ADDRESS

Years in Business

Market Share

Price/Strategy

Product/Service Features
 NAME

ADDRESS

Years in Business

Market Share

Price/Strategy

Product/Service Features

NAME

ADDRESS

Years in Business

Market Share

Price/Strategy

Product/Service Features

2. How competitive is the market?

High ____________________

Medium ____________________
Low ____________________
3. List below your strengths and weaknesses compared to your competition
(consider such areas as location, size of resources, reputation, services, personnel,
etc.):

Strengths Weaknesses

1. ________________________________ 1 ______________________________

2 ________________________________ 2 ______________________________
3 ________________________________ 3 ______________________________
C. Environment

1. The following are some important economic factors that will affect our product or
service (such as country growth, industry health, economic trends, taxes, rising energy
prices, etc.):

2. The following are some important legal factors that will affect our market:

3. The following are some important government factors:

4. The following are other environmental factors that will affect our market, but over
which we have no control:
PRODUCT OR SERVICE ANALYSIS

A. Description

1. Describe here what the product/service is and what it does:

B. Comparison

1. What advantages does our product/service have over those of the competition (consider
such things as unique features, patents, expertise, special training, etc.)?

2. What disadvantages does it have?

C. Some Considerations

1. Where will you get your materials and supplies?

2. List other considerations:

MARKETING STRATEGIES - MARKET MIX

A. Image

1. First, what kind of image do we want to have (such as cheap but good, or exclusiveness, or
customer-oriented or highest quality, or convenience, or speed, or ...)?

B. Features

1. List the features we will emphasize:

a. __________________________________________

b. __________________________________________

c. ___________________________________________

C. Pricing

1. We will be using the following pricing strategy:

a. Markup on cost What % Markup? ________
b. Suggested price
c. Competitive
d. Below competition
e. Premium price
f. Others

2. Are our prices in line with our image?

YES ____ NO _____

3. Do our prices cover costs and leave a margin of profit?

YES ____ NO _____

D. Customer Services

1. List the customer services we provide:

a. _________________________________________
b. _________________________________________
c. _________________________________________

2. These are our sales/credit terms:

a. _________________________________________
b. _________________________________________
c. _________________________________________

3. The competition offers the following services:

a. _________________________________________
b. _________________________________________
c. _________________________________________

1. Advertising/Promotion

4. These are the things we wish to say about the business:

5. We will use the following advertising/promotion sources:

1. Television
2. Radio
3. Direct mail
4. Personal contacts
5. Trade associations
6. Newspaper
7. Magazines
8. Yellow Pages
9. Billboard
10. Other

6. The following are the reasons why we consider the media we have chosen to be the
most effective:

6
INCOME PROJECTION STATEMENT

Industry J F M A M J J A S O N D Annual Annual

% total %

Total net sales

(revenues)
Costs of sales

Gross profit

Gross profit
margin
Controllable
expenses
Salaries/wages

Payroll expenses

Legal/accounting

Advertising

Automobile

Office supplies

Dues/Subscripti
ons
Utilities

Miscellaneous

Total
controllable
expenses

Fixed expenses

Rent
Depreciation

Utilities

Insurance

License/permits

Loan payments

Miscellaneous

Total fixed
expenses
Total expenses

Net profit (loss)

before taxes

Taxes

Net profit (loss)

after taxes
INSTRUCTIONS FOR INCOME PROJECTIONS STATEMENT

The income projections (profit and loss) statement Costs of Sales

is valuable as both a planning tool and a key
management tool to help control business The key to calculating your cost of sales is that you
operations. It enables the owner/manager to do not overlook any costs that you have incurred.
develop a preview of the amount of income Calculate cost of sales of all products and services
generated each month and for the business year, used to determine total net sales. Where
based on reasonable predictions of monthly levels inventory is involved, do not overlook
of sales, costs and expenses. transportation costs. Also include any direct
labor.
As monthly projections are developed and entered
into the income projections statement, they can Gross Profit
serve as definite goals for controlling the business
operation. As actual operating results become Subtract the total cost of sales from the total net
known each month, they should be recorded for sales to obtain gross profit.
comparison with the monthly projections. A
completed income statement allows the Gross Profit Margin
owner/manager to compare actual figures with
monthly projections and to take steps to correct The gross profit is expressed as a percentage of
any problems. total sales (revenues). It is calculated by dividing

Industry Percentage gross profits

total net sales
In the industry percentage column, enter the
percentages of total sales (revenues) that are
standard for your industry, which are derived by
dividing Controllable Expenses

Costs/expenses items x - Salary expenses -- Base pay plus

100% total net sales overtime.

These percentages can be obtained from various - Payroll expenses -- Include paid
sources, such as trade associations, accountants or vacations, sick leave, health insurance,
banks. The reference librarian in your nearest unemployment insurance and social
public library can refer you to documents that security taxes.
contain the percentage figures, for example, Robert
Morris Associates' Annual Statement Studies (One - Outside services -- Include costs of
Liberty Place, Philadelphia, PA 19103). subcontracts, overflow work and
special or one- time services.
Industry figures serve as a useful bench mark
against which to compare cost and expense - Supplies -- Services and items
estimates that you develop for your firm. Compare purchased for use in the business.
the figures in the industry percentage column to
- Repair and maintenance -- Regular
those in the annual percentage column.
maintenance and repair, including
periodic large expenditures such as
Total Net Sales (Revenues)
painting.
Determine the total number of units of products or
- Advertising -- Include desired sales
services you realistically expect to sell each month
volume and classified directory
in each department at the prices you expect to get.
Use this step to create the projections to review advertising expenses.
your pricing practices.
- Car delivery and travel -- Include
- What returns, allowances and charges if personal car is used in
markdowns can be expected? business, including parking, tools,
buying trips, etc.
- Exclude any revenue that is not
- Accounting and legal -- Outside
strictly related to the business.
professional services.
Fixed Expenses

- Rent -- List only real estate used in business.

- Depreciation -- Amortization of capital assets.

- Utilities -- Water, heat, light, etc.

- Insurance -- Fire or liability on property

or products. Include workers'
compensation.

- Loan repayments -- Interest on

outstanding loans.

- Miscellaneous -- Unspecified; small

expenditures without separate
accounts.

Net Profit (loss)

(before taxes) - Subtract total
expenses from gross
profit.

Taxes - Include inventory and

sales tax, excise tax, real
estate tax, etc.

Net Profit (loss)

(after taxes) - Subtract taxes from
net profit (before
taxes)

Annual Total - For each of the sales and

expense items in your
income projection
statement, add all the
monthly figures across the
table and put the result in
the annual total column.

Annual Percentage - Calculate the annual percentage by

dividing

Annual total x 100%

total net sales

- Compare this figure to the

industry percentage in the
first column.
BALANCE SHEET

COMPANY NAME

As of , 19
Assets Liabilities

Current assets Current Liabilities

Cash ________ Accounts payable
Petty cash Notes payable
Accounts receivable Interest payable
Inventory Taxes payable
Short-term investment _ Income tax
Prepaid expenses Sales tax
Property tax
Long-term investments
Payroll accrual
Fixed assets
Land Long-term liabilities
Notes payable
Buildings
Improvements Total liabilities
Equipment
Furniture Net worth (owner equity)
Owner’s equity
Automobile/vehicles
Retained earnings
Other assets
1. Total net worth
2.
Total liabilities and
Total assets total net worth _________

(Total assets will always equal total liabilities and total net worth)

INSTRUCTIONS FOR BALANCE SHEET

Figures used to compile the balance sheet are Current Assets

taken from the previous and current balance
- Cash -- List cash and resources that can
sheet as well as the current income statement.
be converted into cash within 12
The income statement is usually attached to the
months of the date of the balance sheet
balance sheet. The following text covers the
(or during one established cycle of
essential elements of the balance sheet.
operation). Include money on hand and
At the top of the page fill in the legal name of the demand deposits in the bank, e.g.,
business, the type of statement and the day, checking accounts and regular savings
month and year. accounts.

Assets - Petty cash -- If your business has a fund

for small miscellaneous expenditures,
List anything of value that is owned or legally due include the total here.
the business. Total assets include all net values.
These are the amounts derived when you - Accounts receivable -- The amounts due
subtract depreciation and amortization from the from customers in payment for
original costs of acquiring the assets. merchandise or services.
 - Inventory -- Includes raw materials on Liabilities
hand, work in progress and all finished
goods, either manufactured or Current Liabilities
purchased for resale.
List all debts, monetary obligations and claims
- Short-term investments -- Also called payable within 12 months or within one cycle
temporary investments or marketable of operation.
securities, these include interest- or
dividend- yielding holdings expected to Typically they include the following:
be converted into cash within a year.
List stocks and bonds, certificates of - Accounts payable -- Amounts owed
deposit and time-deposit, savings to suppliers for goods and services
accounts at either their costs or market purchased in connection with
value, whichever is less. business operations.

- Prepaid expenses -- Goods, benefits or - Notes payable -- The balance of

services a business buys or rents in principal due to pay off short-term
advance. debt for borrowed funds. Also
- Examples are office supplies, includes the current amount due of
insurance protection and floor total balance on notes whose terms
space. exceed 12 months.

Long-term Investments - Interest payable -- Any accrued fees

due for use of both short-and long-
Also called long-term assets, these are term borrowed capital and credit
holdings the business intends to keep for at extended to the business.
least a year and that typically yield interest or
dividends. Included are stocks, bonds and - Taxes payable -- Amounts
savings accounts earmarked for special estimated by an accountant to have
purposes. been incurred during the accounting
period.
Fixed Assets - Payroll accrual -- Salaries and wages
currently owed.
Also called plant and equipment. Includes all
resources a business owns or acquires for use
in operations and not intended for resale. Long-term Liabilities
Fixed assets may be leased.
Depending on the leasing arrangements, both Notes payable -- List notes, contract payments
the value and the liability of the leased or mortgage payments due over a period
property may need to be listed on the balance exceeding 12 months or one cycle of operation.
They are listed by outstanding balance less the
sheet.
current position due.
- Land -- List original purchase price
without allowances for market value. Net worth

- Buildings Also called owner's equity, net worth is the

claim of the owner(s) on the assets of the
- Improvements business. In a proprietorship or partnership,
equity is each owner's original investment plus
- Equipment any earnings after withdrawals.

- Furniture Total Liabilities and Net Worth

- Automobile/vehicles The sum of these two amounts must always

match that for total assets.
MONTHLY CASH FLOW PROJECTION
Name of Business Owner Type of Business Prepared by Date

Pre-start-up Total Columns

position 1 2 3 4 5 6 1-6

Year Month

Est Actual Est. Actual Est. Actual Est. Actual Est. Actual Est. Actual Est. Actual Est. Actual

1. Cash on hand (beginning 1.

month)
2. Cash receipts 2.

(a) Cash sales (a)

(b) Collections from credit (b)

accounts
(c) Loan or other cash (c)
injections (specify)
3. Total cash receipts 3.
(2a+2b+2c=3)

4.
4. Total cash available
(before cash out) (1+3)

5. Cash paid out 5.

(a) purchases merchandise) (a)
(b) Gross wages (excludes
withdrawals) (b)
(c) Payroll expenses (taxes,
(c)
etc.)
(d) Outside services
(d)
(e) Supplies (office and
(e)
operating)
(f) Repairs and maintenance
(f)
(g) Advertising (g)

(h) Car, delivery and travel

(h)
(i) Accounting and legal
(i)
(j) Rent
(j)
(k) Telephone
(k)
(l) Utilities
(l)
(m) Insurance
(m)
(n) Taxes (real estate, etc.)
(n)
(o) Interest
(o)
(p) Other expenses (specify
(p)
each)
(q) Miscellaneous
(q)
(unspecified)

(r) Subtotal (r)

(s) Loan principal payment

(s)
(t) Capital purchases (specify)
(t)
(u) Other start-up costs
(u)
(v) Reserve and/or escrow
(v)
(specify)
(w) Owner's withdrawal
(w)

6. Total cash paid out (5a 6.

through 5w)

7. Cash position (end of month) 7.

(4 minus 6)

Essential operating data

A
(non-cash flow information)
A. Sales volume (dollars)
B. Accounts receivable (end
B
on month)
C. Bad debt (end of month)
C

D. Inventory on hand (end of

D
month)
E. Accounts payable
E
(end of month)
INSTRUCTIONS FOR MONTHLY CASH FLOW PROJECTION

1. Cash on hand (beginning month) Cash on hand same as (7), Cash position, pervious month
2. Cash receipts
All cash sales. Omit credit sales unless cash is actually
(a) Cash sales
received
(b) Collections from credit accounts Amount to be expected from all accounts.
(c) Loan or other cash injections Indicate here all cash injections not shown in 2(a) or
(specify) 2(b) above.
3. Total cash receipts (2a+2b+2c=3)
4. Total cash available (before cash out)
(1+3)
5. Cash paid out Merchandise for resale or for use in product (paid for in
(a) purchases merchandise) current month).
(b) Gross wages (excludes withdrawals) Base pay plus overtime (if any)
Include paid vacations, paid sick leave, health insurance,
(c) Payroll expenses (taxes, etc.) unemployment insurance, (this might be 10 to 45% of
5(b))
This could include outside labor and/or material for
(d) Outside services
specialized or overflow work, including subcontracting
(e) Supplies (office and operating) Items purchased for use in the business (not for resale)
Include periodic large expenditures such as painting or
(f) Repairs and maintenance
decorating
This amount should be adequate to maintain sales
(g) Advertising
volume
If personal car is used, charge in this column, include
(h) Car, delivery and travel
parking
(i) Accounting and legal Outside services, including, for example, bookkeeping
(j) Rent Real estate only (See 5(p) for other rentals)
(k) Telephone
(l) Utilities Water, heat, light and/or power
Coverage on business property and products (fire,
(m) Insurance liability); also worker's compensation, fidelity, etc.
Exclude executive life (include in 5(w))
(n) Taxes (real estate, etc.) Plus inventory tax, sales tax, excise tax, if applicable
Remember to add interest on loan as it is injected (See
(o) Interest
2(c) above)
Unexpected expenditures may be included here as a
safety factor
(p) Other expenses (specify each)
___________________________________________________ expenses during the month should be included here
___________________________________________________ (non-capital equipment)
________
When equipment is rented or leased, record payments
here
Small expenditures for which separate accounts would
(q) Miscellaneous (unspecified)
be practical
(r) Subtotal This subtotal indicates cash out for operating costs
 Include payment on all loans, including vehicle and
(s) Loan principal payment
equipment purchases on time payment
Nonexpensed (depreciable) expenditures such as
(t) Capital purchases (specify)
equipment, building purchases on time payment
Expenses incurred prior to first month projection and
(u) Other start-up costs
paid for after start-up
Example: insurance, tax or equipment escrow to reduce
(v) Reserve and/or escrow (specify)
impact of large periodic payments
Should include payment for such things as owner's
(w) Owner's withdrawal income tax, social security, health insurance, executive
life insurance premiums, etc.

6. Total cash paid out (5a through 5w)

7. Cash position (end of month) (4 minus 6) Enter this amount in (1) Cash on hand following month--

This is basic information necessary for proper planning

Essential operating data and for proper cash flow projection. Also with this data,
(non-cash flow information) the cash flow can be evolved and shown in the above
form.
This is a very important figure and should be estimated
carefully, taking into account size of facility and
A. Sales volume (pesos) employee output as well as realistic anticipated sales
(actual sales, not orders received).

Pervious unpaid credit sales plus current month's credit

B. Accounts receivable (end on month) sales, less amounts received current month (deduct "C"
below)
Bad debts should be subtracted from (B) in the month
C. Bad debt (end of month)
anticipated
Last month's inventory plus merchandise received
D. Inventory on hand (end of month) and/or manufactured current month minus account sold
current month
Previous month's payable plus current month's payable
E. Accounts payable (end of month)
minus amount paid during month.
Established by your accountant, or value of all your
F. Depreciation equipment divided by useful life (in months) as allowed
by Internal Revenue Service