Entrep Lesson 3.3

Module 3:
Planning your
Business
JHEANNE T. LUBIANO, M.M.
Mgmt 112 Business Planning and

Implementation I
Lesson 3.3 The Business Plan
Learning Objectives
1. identify the significance of a business plan; and

2. find a business in their area that used a business
plan.
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 a standard against which to evaluate results.
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
A business plan is written for two main purposes.

They are the following:
1. to serve as management’s guide during the

lifetime of the business; and
2. to fulfil the requirement for securing lenders and
investors.
Parts of the Business Plan
The contents of the business plan will depend upon the
purpose. Usually, however, they contain the following:
1. title page and contents – the business plan must be easily

identifiable through a cover page with a listing of the following:
a) the name of the business;
b) the name/s of the proponents;
c) address;
d) telephone number;
e) e-mail and website address;
f) the date; and
g) the name of the person who prepared the business plan.
2. executive summary – a portion of the business plan that summarizes the
plan and states the objectives of the business. This is usually prepared after
the business plan is written.
3. description of the business – this particular portion of the business plan

is very useful to the small business operator (SBO), as well as prospective
investors and lenders. Statements about the following will be useful in
describing the business:
a) the industry sector where the business falls into (retail, manufacturing,
education, entertainment, and others);
b) whether the business is new or established;
c) the ownership status of the business (sole proprietorship, partnership, or
corporation);
d) information on who the customer are;
e) information on the size of the market; and
f) information on how the product or service is distributed.
4. description of the product or service – the product or service must be
described clearly in the plan. To achieve this, the following must be presented:
a) 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.
b) A detailed description of how the product is used.
c) What makes the product or service different from others available in the
market.
Examples are the availability of the product or service 24 hours a day, or
the water- based feature of the product insect or repellent.
5. market strategies – refer to what the SBO plans to do to achieve the market
objectives of the firm. These strategies are formulated after undertaking
market research. Market strategies consist of the following:
a) definition of the market;

b) determination of the market share;
c) positioning strategy;
d) pricing strategy
e) distribution strategy; and
f) promotion strategy.
6. 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. In competitive
analysis, the following must be determined:
a) strengths and weaknesses of the firm’s competitors;

b) strategies that will give the firm a competitive
advantage;
c) barriers that can be developed to prevent competitors or
would-be competitors from exploiting the firm’s market;
and
d) any opportunity that can be exploited.
7. 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:
a) organizational structure – a well-defined and realistic organizational structure is

an important element of the business plan. Investors and lending institutions
will be interested to look at this particular aspect. Generally, they will be
concerned how the firm is organized along the following concerns such as
marketing, production, research and development, management, and human
resources.
b) operating expenses – projections of operating expenses are important aspects in

the preparation of a business plan. This is a prerequisite in projecting financial
statements. Lenders and investors are especially interested in scrutinizing such
statements. In determining operating expenses, labor and overhead must be
considered. The organizational structure is useful in providing information in the
determination of labor expenses. Overhead, which may be fixed or variable,
includes rent, advertising and sales promotion, supplies, utilities, packaging and
c) capital requirements – are necessary items in operating businesses. The
business plan will not be complete unless a listing of capital equipment needed to
be purchased is drawn up. Equipment needs vary from business to business.
Manufacturing firms will need more elaborate types of equipment. Service
businesses usually require less equipment. A firm engaged in transporting
elementary and high school students, for example, will need buses or jeepneys
only.
d) cost of goods sold – business which carry inventories like those engaged in
manufacturing and trading must provide a list showing cost of goods. The cost of
goods of trading firms consist of products purchased for resale, while the cost of
goods of manufacturing firms refer to total expenses incurred in manufacturing the
products that are intended to be sold. These expenses include the material, labor,
and overhead. In both type of business, all merchandise sold are indicated as cost
of goods, and those that are not sold are categorized as inventory.
8. financial data – finances 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;
a) income statement – shows the income, expenses, and profits of a firm over a period of
time. It is also alternatively called “statement of earnings.”
b) balance sheet – is a 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.
c) cash flow statement – 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.
A proper balance between the cash inflows and outflows will result to profits.
9. Supporting documents – the business plan would be more meaningful if supporting
documents are included. The documents usually consist of the owner’s resume, contracts
with suppliers, contracts with customers or clients, letters of reference, letters of intent, a
copy of the firm’s lease, a copy of copyright or patent acquired, and tax returns for the
past three years.

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Module 3:

Mgmt 112 Business Planning and

1. identify the significance of a business plan; and

The business plan is a sort of a business blueprint and it keeps the

A business plan is written for two main purposes.

1. to serve as management’s guide during the

1. title page and contents – the business plan must be easily

3. description of the business – this particular portion of the business plan

a) The important features of the product or service, such as the maintenance-

a) definition of the market;

a) strengths and weaknesses of the firm’s competitors;

a) organizational structure – a well-defined and realistic organizational structure is

b) operating expenses – projections of operating expenses are important aspects in

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