Unit IV:

Business plan
preparation for new
venture
 Business Plan
• A business plan is considered to be an
important device for any business. It is a
document in writing which illustrates in detail
the nature, objectives and financial position of
a business, particularly a new one and the way
it will achieve its objectives. A business plan
can also be prepared for an established
business which is changing its area of
operation or applying for a business loan or
funding request.
 Types of Business Plan

• Business plans can be basically of two types:

• Formal Business Plan: A detailed document
mainly prepared for the purpose of ensuring
outside finance for the business.
• Informal Business Plan: A rough plan which
may contain hand-written notes helping the
owners in the daily functioning of a business
and planning for expansions.
 Basic Components/ Elements of a Business Plan

• A formal business plan should state that the

business will produce sufficient revenue to
meet up the expenses and will generate a
mentionable profit for the investors. The basic
components of a business plan are briefly
discussed below.
• Executive Summary: It focuses on the
objectives of the plan and the selling
proposition in less than two pages.
 Conceiving of a Business and Developing a Business Plan to Raise Capital

• Access to Capital
• Capital is money necessary for purchase of the
physical assets needed for the business, to cover
a beginning period when revenues are likely to be
less than expenditures, and to cover the fact that
producing your goods and services will require
expenditures first and their sale will produce
revenues only later. Capital can come in the form
of equity ownership or debt.
• A Sound Business Model
• By far the most important element of your venture is the
“business model" of your enterprise or your “mission”,
which is essentially:
• who you are or are going to be,
• what you are going to do,
• how you are going to do it,
• how is it going to meet a need that is not being
adequately met (often referred to as the “value
proposition”), and
• why you expect to succeed.
• The business model needs to be well thought out and
compelling enough to elicit strong interest from skeptical
investors and help attract a talented and experienced
management team and employees.
 Business Nimbleness, Viability and Sustainability

• In the introduction we discussed the probabilities of

success but did not consider how to keep a business viable
over time. In some sense your business plan itself needs
to evolve over time. To make a business sustainable, it has
to be nimble and you have to keep an eagle eye on the
market and changes in the marketplace. Successful
businesses continue to grow by developing their original
products or services or by creating new supplemental
products that compliment or replace the original ones.
Consider how your customer’s needs evolve and how
market forces change. Do you think Apple would be in
business today if it were still selling the Apple 1?
• Your sales and marketing departments and
your employees providing direct client
services to customers should be a primary
source of feedback about your customers and
whether you are meeting their needs and
considering products to meet their wishes.
Also, over time, customer demands and
interests change, as 1) new products and
services are developed by competitors, and 2)
technology improves and paves the way for
new opportunities and breakthroughs.
• Summary of the Company: It provides an accurate illustration
of the company, its ownership, and the historical background.
• Products or Services: This part gives a brief description of the
products and/ or services and their merits or strengths.
• Analysis of the Market: It gives a summary of the existing
customers, market size, competitive landscape and probable
growth of the market.
• Marketing Strategy and Implementation: This section explains
the marketing strategy of the products and/ services and its
implementation and future possibilities.
• Summary of the Management: This part briefly summarizes the
background, experiences and key achievements of the
management team.
• Financial Projections: This section consists of financial
statements such as balance sheets, income statements, cash-
flow statements and funding request (if required).
 Objectives of a Successful Business Plan

• A successful business plan has the following

objectives:
• Providing a clear business concept written in an
understandable and precise language.
• The business plan should have a logical
structure.
• Explaining the management’s capability to
achieve success.
• Showing profitability so that investors will be
interested to invest in the business.
 Ways of Creating a Business Plan

• A business plan can be created by following

any of the following ways:
• Appointing a Professional:
• You can appoint or hire a qualified
professional consultant who will prepare a
business plan for your business. You still have
to understand the plan properly and have to
modify it if necessary. You have to discuss with
the consultant about it and make sure that the
plan clearly defines your business concept.
• Buying or Downloading a Book:
• There are various good books available in the
market or online from where you can buy one
or download some. You can get a good idea of
creating a good business plan from there.
• Using Business Planning Software:
• Nowadays different business planning
software is available. You can select a suitable
business planning software package which will
provide you the format of a well and
professional business plan which will save
your time and energy.
 Merits of Creating a Business Plan
• Creating a business plan serves a business with
the following merits:
• Provides assistance while applying for a
business loan.
• Helps in raising equity funding.
• Sets and defines objectives and design program
to attain those objectives.
• Provides a scope for regular modification of the
plan and business review.
• Clarifies agreements between partners (if any).
• Defines the value or principle of a business for sale
or legal processes.
• Analyze the scope for promotion and expansion of
the existing business.
• A business plan should be dynamic in a sense that
it will grow and change with the growth of the
business as well as with the requirement of time
and technology. An effective business plan and its
proper implementation can lead a business to the
success. So a business owner should be very
careful while creating a business plan that it
properly defines its objectives and effectively
helps to achieve those.
 Common Pitfalls To Be Avoided In Preparation Of Business Plan

• 1. The Plan is Poorly Written

• Spelling, punctuation, grammar, and style,
SWOT analysis, and strategic planning are important
when it comes to getting your business plan written.
Investors are looking for clues about the underlying
business and its leaders when they’re studying your
plan.
• When they see one with spelling, punctuation, and
grammar errors, they immediately wonder what else is
wrong with the business and what are the
weaknesses opportunities, and threats.
• 2. Incomplete Business Plan
• The plan is incomplete. Every business has
customers, products and services, operations,
marketing and sales, a management team, and
competitors. At an absolute minimum, your plan
must cover all these areas including the common
weaknesses of a business.
• A complete plan should also include a discussion of
the industry, particularly industry trends, such as if
the market is growing or shrinking. Finally, your plan
should include detailed financial projections–
monthly cash flow and income statements, as well as
annual balance sheets, going out at least three
years.
• 3. General Assumptions In A Business Plan

• The plan makes unrealistic assumptions. By their very

nature, business plans are full of assumptions. The
most important assumption is that your business will
succeed! The best business plans highlight critical risks,
common small business mistakes, and provide some
sort of rationalization for them.
• The worst business plans bury these risks throughout
the plan so no one can tell where the assumptions end
and the internal and external factors begin. Market
size, acceptable pricing, customer purchasing behavior,
these all involve assumptions. Wherever possible, make
sure to tie your assumptions to facts.
• 4. Sticking to the plan
• No matter how well a business plan is written,
it’s certainly not going to appeal to everyone.
Because of that, it’s recommended that you
consider picking a single business model and
sticking with it.
• Don’t focus on solving multiple problems and
focus on multiple industries: one is always
enough and highly recommended. If you don’t
take this advice seriously, then you’re going to
spread yourself too thin and make a bad first
impression by coming up with a sprawling
business plan.
• 5. Don’t Let Your Business Plan be Boring
• If one of your potential clients has read a few
pages of your business plan and got bored,
that’s a big red flag. In fact, you want them to
feel exactly the opposite and make them feel
pulled in by the great and
well-written business ideas you have.
• To make that happen, you need to write a very
catchy executive summary and
business plan title page . Sometimes, a
well-designed logo can also go a long way.
• 6. Being too Optimistic When Measuring Your
Market Size
• You may think that projecting great revenue
potential and vast markets to your potential
investors sounds impressive, but most of the
time such estimates won’t appeal to them as
much as you think.
• In fact, when you use big numbers too often,
you appear as an amateur or someone who
doesn’t really know what he’s talking about,
because you don’t sound realistic.
• 7. Not Having the Confidence to Sell Your Service or
Product
• The last thing you want your
potential investors to feel is that you don’t really
have confidence in your product. And if you also
ignore the competition your business faces, it shows
you are not sophisticated.
• There are no or very few ideas that face
no competition and even though you may think your
concept is 100% original, there are always forces that
can compete with your service or product that needs
to be taken into consideration. If you don’t do so,
then don’t expect to find investors who are willing to
financially support your idea anytime soon.
• 8. Being Inconsistent
• You’d be surprised how many entrepreneurs
who choose to write their own business plans
contradict themselves. When you do that, it
immediately shows that you don’t have a good
grasp of how you want\should run your business
and this deters investors from seriously
considering financing you.
• Also, make sure that each fact concerning your
main competitors, your market, and your
industry is readily verifiable and also accurate. If
they’re not, then investors won’t be happy
about it.
• 9. Considering Too Many Perspectives
• While it’s important to have someone else vet
your business plan, you should not exaggerate
by identifying possible flaws in your thinking
to the point where the reader is going to find
it impossible to follow the narrative thread.
Yes, sure, you do need and should address
some possible investor objections, but try to
be objective and clear in order to make sure
you’re successful with making a persuasive
pitch.
• 10. Being Unable to Acknowledge the
Competition
• Remember that when writing a business plan,
you don’t need to make it look like any other
out there. All that matters is that you come up
with a proposal that stands out and clearly
expresses your personality and idea. By doing
so, you’re certainly going to feel a lot more
comfortable when you’ll need to present it in
front of a group of investors.
• Bottom Line
• Writing a business plan is hard work, many people
spend a year or more writing their plan. But the
hardest part is developing a coherent picture of the
business that makes sense, is appealing to others,
and provides a reasonable road map for the future.
• Your products, services, business model,
weaknesses of a business, customers, marketing
and sales plan, internal operations, management
team, common small business mistakes, and
financial projections must all tie together
seamlessly. If they don’t, you may not ever get
your business off the ground.
 Conceiving of a Business and Developing a Business Plan to Raise Capital

• Access to Capital
• Capital is money necessary for purchase of the
physical assets needed for the business, to
cover a beginning period when revenues are
likely to be less than expenditures, and to cover
the fact that producing your goods and services
will require expenditures first and their sale will
produce revenues only later. Capital can come
in the form of equity ownership or debt.
• A Sound Business Model
• By far the most important element of your venture is the
“business model" of your enterprise or your “mission”, which is
essentially:
• who you are or are going to be,
• what you are going to do,
• how you are going to do it,
• how is it going to meet a need that is not being adequately
met (often referred to as the “value proposition”), and
• why you expect to succeed.
• The business model needs to be well thought out and
compelling enough to elicit strong interest from skeptical
investors and help attract a talented and experienced
management team and employees.
 Business Nimbleness, Viability and Sustainability

• In the introduction we discussed the probabilities of

success but did not consider how to keep a business viable
over time. In some sense your business plan itself needs
to evolve over time. To make a business sustainable, it has
to be nimble and you have to keep an eagle eye on the
market and changes in the marketplace. Successful
businesses continue to grow by developing their original
products or services or by creating new supplemental
products that compliment or replace the original ones.
Consider how your customer’s needs evolve and how
market forces change. Do you think Apple would be in
business today if it were still selling the Apple 1?
• Your sales and marketing departments and
your employees providing direct client
services to customers should be a primary
source of feedback about your customers and
whether you are meeting their needs and
considering products to meet their wishes.
Also, over time, customer demands and
interests change, as 1) new products and
services are developed by competitors, and 2)
technology improves and paves the way for
new opportunities and breakthroughs.
• You need a sales and marketing group that
understands this important function. Your
business should develop both formal and informal
feedback loops that regularly meet to discuss
what customers are asking for, what
improvements, enhancements or new products
and services are on the horizon to meet those
changing needs and demands. Stay on top of your
competition. There is room for many competitors,
as long as their products or services remain in
high demand, evolve over time and don’t become
obsolete. Change and adaptability aren’t simply a
key to survival but are at the very crux of success.
 Factors affecting Business Plan

• People
• A prudent business owner must consider the
people he will need to help him achieve his goals.
That includes employees or independent
contractors, consultants, lawyers, bookkeeping
professionals and possible business partners. It also
includes the people he plans to turn into
customers. It's important to get a clear idea of the
company's target market for its various products
and services in the planning stages of the business.
• Location
• Whether it's an online or offline business,
location is key. An offline business, such as a
retail store or business office, must perform
planning and research activities to determine
an ideal physical location for the company.
Online business owners must also decide in
advance on an ideal domain name and format
for the website, as well as techniques to draw
traffic into this online location.
• Marketing
• Planning for marketing success involves the
four Ps of the marketing mix—product, price,
promotion, and place. The smart business
owner will take plenty of time to develop his
product or service, decide on a price that
people would be willing to pay for the item,
come up with a well-designed promotional or
advertising campaign, and also figure out how
he will distribute the product to the public.
• Competition
• Business coach Bill Dueease of The Coach
Connection suggests that you "face" and then
"embrace" your competition to use them as a
springboard for your own company. Examining
the actions, successes and failures of
competition can help you learn what might
work for your own business. It's also
important to include a competitive analysis in
your business plan to assure that your
company can enter the market successfully.
 Environmental scanning?

• Environmental scanning is the continual

analysis of the environment inside and outside
of your organization. An environmental scan is
used to evaluate potential opportunities,
threats and markets, and to learn any number
of lessons that can affect your company.
• Identifying these factors allows you to do the following:
• Respond appropriately by creating strategies to combat
potential threats before they affect your company
• Make optimal decisions based on changing market
landscapes
• Develop strategies that meet the marketplace demands
of your industry
• Environmental scanning is not just something that large
organizations perform. It’s an absolute must for
companies of every size, from small, locally owned shops
—and even entrepreneurs—all the way up to
multinational corporations.