ENTREPRENEURIAL VENTURE AND BUSINESS PLAN

WHAT IS BUSINESS PLAN

The Business plan is a written document prepared by an entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. Describes both short term and long term decision making It is also called venture plan, a loan proposal, or an investment prospect. Depth and Detailed of the business plan is depends on size and scope(Manufacturing, service, or consumer goods or industrial goods) of the new venture

BUSINESS PLAN IS..

1. 2. 3.

A road map or game plan answers questions like: Where I m now? Where I m going? How will I get there?

WHO REQUIRE OR REQUEST FOR BUSINESS PLAN

Potential Investors Bankers Venture capitalists Suppliers Customers

It is important to these people: Why?????????? It helps in determining the viability of the venture in designated market It provides guidance to the entrepreneur in organizing his or her planning activities It serves as an important tool in helping to obtain financing

WHO SHOULD WRITE THE PLAN

It should be prepared by the entrepreneurs He or she may consult other sources like: - Lawyers - Accountants - Marketing Consultant - Engineers

THREE PERSPECTIVE OF BUSINESS PLAN

Fist perspective Entrepreneur - Who understands better than anyone else creativity and technology involved in new venture - The entrepreneur must be able to articulate what the venture is all about Second Perspective Marketing - Entrepreneurs must try to view their business through the eyes of their customers Third Perspective Investors - Sound financial projections are required

WHY SOME BUSINESS PLAN FAILS

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Goals set by the entrepreneur are unreasonable Goals are not measurable The entrepreneur has not made a total commitment to the business or to the family The entrepreneur has no experience in a planned business The entrepreneur has no sense of potential threats or weaknesses to the business. No customer need was established for the proposed product or service.

GUIDELINES TO REMEMBER
Keep the plan respectably short Organize and package the plan appropriately Orient the plan toward the future Avoid exaggeration Highlight critical risks Give evidence of an effective entrepreneurial team Do not over diversify Identify the target market Keep the plan written in the third person Capture the readers interest

COMPLETE OUTLINE OF THE BUSINESS PLAN

Section I: Executive Summary Section II: Business Description Section III: Marketing Plan Section IV: Operations Plan Section V: Management Plan Section VI: Financial Plan Section VII: Critical Risks Section VIII: Harvest Strategy Section IX: Milestone schedule Section X: Appendix or Bibliography

SECTION II: BUSINESS DESCRIPTION

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General Description of the business Industry background Goals and potentials of the business Uniqueness of the business

SECTION III: MARKETING PLAN

A. Research and Analysis 1. Target market (Customers) identified 2. Market size and trend 3. Competition 4. Estimated market share B. Marketing Plan 1. Marketing strategy sales and distribution 2. Pricing 3. Advertising and promotion

SECTION IV: OPERATIONS PLAN

A. Identify Location 1. Advantages 2. Zoning 3. Taxes B. Proximity to suppliers C. Access to transportation

SECTION V: MANAGEMENT PLAN

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B.
C.

Management tea, - key personnel Legal structure Board of directors, advisors, consultants

SECTION VI: FINANCIAL PLAN

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Financial Forecast 1. profit and loss 2. Cash flow 3. Break even analysis 4. Cost controls 5. Budgeting plans

SECTION VII: CRITICAL RISKS

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B.
C.

Potential problems Obstacle of business strategy Identify courses of action

SECTION VIII: HARVEST STRATEGY

Transfer of asset Continuity of business strategy Identify successor

SECTION IX: MILESTONE SCHEDULE

Timing and objective Deadlines and milestones Relationships of events

Introductory Page
The name and address of the company The name of the entrepreneur(s), telephone no., fax no., e-mail address, and website address if available A paragraph describing company and the nature of the business The amount of financing needed. The entrepreneur may offer a package, that is stock, debt, and so on. A statement of confidentiality of the report.

Section I: Executive Summary

It is a clever snapshot of the entire plan Should no longer than two to three pages Should be written only after entire business plan has been completed It should touch - Venture itself - Market opportunity - Financial needs and projections - Technology associated - Risks involved

Section II: Business Description

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General description of the business: What is vision & mission of the business? What is the goal of business? What are your reasons for going into the business? Why will u be successful in this venture? What are your product(s) and service(s)? Describe them. Where will the business be located? Will place be on rent or purchased? Will equipment be purchased or leased? What experience do you have and/or will you need to successfully implement the business plan?

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Industry background What are the major economic, technological, legal, and political trends on a national and international level? What are total industry sales over the last five years? What is anticipated growth in this industry? How many new firms entered into this industry in the past three years? What new products have been recently introduced in the industry? Who are the nearest competitors? How will your business operations be better than this? Are sales of each of your major competitors growing, declining or steady? What trends are occurring in your specific market area? What is the profile of your customers? How does your customer profile differ from that of your competitors?

Section III: Marketing Plan

Research and analysis 1. Target Market: Group of people who have need for the newly proposed product or service. Mention: Bases for customer purchase decisions like: - Price - Quality - Service - Availability of the product - Product performance - Preferences 2. A. Sales potential: Sales projections at least for three years. B. Factor affecting market growth: Industry trend, socioeconomic trends, government policy, population etc.

c. Mention sources of all projections d. Market share and sales in terms of unit, dollor and/or rupees. Competitive analysis: a. Assess strengths and weaknesses of the competitors products/services on the bases of: - Price - Performance - Service - Warrantees b. Gather information regarding each competitors share in the market their sales, distribution, advertising etc related strategies.

Pricing Policy When setting a pricing entrepreneur need to consider three element: Cost, Markups or margins, Competition Distribution: Making product available to the customers Degree of directness of channel
- Market condition - Product attributes - Cost benefits - Venture attributes

Number of channel members - Intensive - Selective - Exclusive

Criteria in selecting channel members - Reputation - Service provided Number of channels - One channel for one target market or multiple target market - Multiple channel for one target market or multiple target market Advertising - Take the decision which media to select to reach to particular market

SECTION IV: OPERATIONS PLAN

All businesses manufacturing and nonmanufacturing should include an operations plan as a part of the business plan. Describes flow of goods and services from production to customer. Includes: - Inventory - Storage - Shipping - Customer support services etc. For retailers/non-manufacturer needs to explain the transaction in a chronological steps in completing a business transaction. For service industry need to focus on Location, personnel, facility layout, service quality etc.

Production Plan For manufacturer

Will you be responsible for all or part of the manufacturing operations? If some manufacturing is subcontracted, who will be the subcontractor? Why were these subcontractors selected? What will be the layout of the production process? What equipment be needed immediately for manufacturing? What raw material will be needed for manufacturing? Who are suppliers for raw material? What is the cost of raw material? What are the costs of manufacturing products? Which are the future capital equipment needs of your venture?

If Retail or service than:

From whom will merchandise be purchased? How will the inventory control system operate? What are the storage needs of the venture and how will they be promoted? How will the goods flow to the customers? What are the steps involved in the business transaction? What are the technology utilization requirements to service customers effectively?

Location How much space is needed? Should I buy or lease the building? What are the cost per square foot? Is the site zoned for commercial use? What town restrictions exists for signs, parking and so forth? Is renovation of the building is necessary? Is there adequate parking? Will the existing facility have room for expansion? What is the economic and demographic profile of the area? Is there an adequate labor pool is available? What are local taxes? Is electricity adequate?

SECTION V: MANAGEMENT PLAN

Organization structure Management team and critical personnel Experience and technical capabilities of the personnel Ownership structure and compensation agreements Board of directors and outside consultants and advisor

MANAGEMENT TEAM MUST BE ABLE TO

INCORPORATE THREE BASIC FUNCTIONS: Execute the business plan Identify fundamental changes in the business plan Make adjustments to the plan based on changes in the environment and market that will maintain profitability

IMPORTANT CONSIDERATION IN CREATING

EFFECTIVE MANAGEMENT TEAM The entrepreneurs desired culture must match the business strategy outlined in the business plan The leader(s) of the organization must lead and be role model for their employees The entrepreneurs must be flexible enough to try different things It is necessary to spend extra time in the hiring process. The entrepreneur needs to remember that it is desire to change a persons behavior than to change the persons attitude

ROLE OF BOARD OF DIRECTORS

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Functions of board of directors: Reviewing operating budget Developing longer-term strategic plans for growth and expansion Supporting day to day activities Resolve conflicts among owners or shareholders Ensuring the proper use of assets Developing a network of information source for the entrepreneurs

CRITERIA FOR SELECTING BOARD OF DIRECTORS:

Select individuals who can work with a diverse group and will commit to the venture mission Select candidates who understand the market environment or can contribute important skills to the new ventures achievement of planning and goals Select candidates who will show good judgment in business decision making

SOURCES
Referrals of business associates External advisor such as banks, lawyers, accountants, or consultants

COMPENSATION Stock Stock options Direct payment

BOARD OF ADVISOR
Loosely tied with the organization Would serve the venture only in and advisory capacity for some of the functions or activities described Has no legal status Compensation: - May be on per meeting basis - Stock - Stock options More desirable alternative than board of directors: - Flexible - Number of meetings - Compensation

OUTSIDE CONSULTANTS OR ADVISORS

Accountants Lawyers Bankers Advertising agency Market researchers

SECTION VI: FINANCIAL PLAN

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Entrepreneurs needs to prepare: Sales budget one year Capital budget Production or manufacturing budget - one year Operating budget one year

Based on all the above information, prepare: 1. Income statement one year or three years 2. Statement of cash flow 3. Balance sheet 4. Determine break-even point

BREAK-EVEN FORMULA
By definition break-even is where, Total revenue (TR) = Total costs (TC) TR = Selling price (SP) * Quantity (Q) and TC = Total fixed costs (TFC) + Total Variable cost(TVC) Thus, SP * Q = TFC + TVC Where TVC = Variable cost/unit (VC/Unit) * Quantity (Q) Thus, SP * Q = TFC + VC/Unit*Q SP*Q - VC/Unit*Q = TFC TFC = Q (SP VC/unit) Q = TFC/(SP VC/unit)

SECTION VII: CRITICAL RISKS

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Risks should be identified such as: Effect of unfavorable trends in industry Manufacturing costs that have gone over estimates Competition Delays Inaccurate projections

Come up with the alternative courses of action to recover from critical risks.

SECTION VIII: HARVEST STRATEGY

Insight into future harvest strategy Useful to keep alive dream of an entrepreneurs, to ensure the security of their investors, strengthen their business in process. - Deal with issues like management succession and change management planning - Issues like: - Orderly transfer of the company assets if ownership of the business changes - Continuity of business strategy during transition - Designation of key individuals to run the business if the current management team changes

SECTION IX: MILESTONE SCHEDULE

Provide investors with a timetable for various activities to be accomplished Important to show realistic time frames, with interrelationships of events Time frames may be quarterly, monthly, or weekly