The Business Plan is documented 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.

PURPOSES OF BUSINESS PLAN

1.To serve as management guide during the lifetime of the business2.To fulfill the requirement for securing lenders and investors

THE PLAN GUIDE

The Small Business Operator (SBO) is afforded sufficient time to consider all factors relevant to operating the business. As periodic objectives are accomplished one at a time, the business plan serves as a useful tool for comparing what was planned against what is achieved.

A TOOL FOR SECURING FUNDS

The business plan is a handy means for convincing lenders and investors. Lenders will be more comfortable to see various documents that indicate the borrower can repay the loan

REVISING THE PLAN

A business plan is prepared in consideration of the current and expected situations. The implication is that even with a business plan, the SBO must strive to be well informed about what is happening to his business and to the industry where his business belongs.

PARTS OF THE BUSINESS PLAN

1.Title page & contents2.Executive summary3.Description of business4. the product or service5.Market strategies6.Analysis of the competition7.Operations and management8.Financial data9.Supporting documents

TITLE PAGE & CONTENT

1.Name of the business2.Name /Names of proponents3.Address4.Telephone number5.E-mail & website address6.The date7.Name of the person who prepared the business plan

THE EXECUTIVE SUMMARY

Is a portion of the business plan that summarizes the plan & states the objectives of the business.1.The capital needs of the business2.How the money will be used3.What benefits will be the derived by the business from the loan or investment.4.In case of loan, how it will be repaid with interest & in the case of outside investment, how profits will be generated

DESCRIPTION OF THE BUSINESS

1.A short explanation of the industry2.A description of the business

In describing the industry, it is important to present the current situation & the outlook for the future. Information must be provided regarding the various markets within the industry as well as new products or developments that could affect the business.

STATEMENTS ABOUT THE FOLLOWING WILL BE USEFUL IN

DESCRIBING THE BUSINESS:

1.The industry sector where the business falls into2.Whether the business is new or established3.The ownership status of the business4.Information on who the costumers are5.Information on size of the market6.Information on how the product or service is distributed.

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:

1.The important features of the product or service, such as the maintenance-fee feature of the product, or the home delivery service for the products ordered through the phone2.A detailed description of how the product is used3.What makes the product or service different from others available in the market.

POSITIVE FACTORS THAT ARE WORTH DESCRIBING ARE:

1.Superior organization of the company2.The latest equipment that are currently used by the company3.The superior location of the company 4.The fair price of the product or service5.The superior customer service offered by the company

MARKET STRATEGIES:

1.Definition of the market2.Determination of the market share3.Positioning strategy4.Pricing strategy5.Distribution strategy6.Promotion strategy

DEFINITION OF THE MARKET

The objective of market definition is to determine which part of the total potential market will be served by the firm. Hence, the market must be defined in terms of size, demographics, structure, growth prospects, trends and sales potential.

CompanyA

CompanyB

CompanyC

Other Companies

SALES

50,000 units

65,000 units

80,000 units

10,000 units

205,000 units

The marketfor

product XFigure 21. The market for product X

DETERMINATION OF THE MARKET SHARE

The business plan will be more useful to reader, especially lenders & investors, if the projected market share of the firm is presented.

To determine the firm’s market share, the following steps may be used:1.Determine the number of prospects in the target market.2.Determine the number of times the product or service is purchased by the target market3.Figure out the potential annual purchase4.Determine the percentage of potential annual purchase that the firm can attain. (table 5)

No. of prospects in the target market 1,000 families

Frequency of purchase per year (average) 48 time

Total number of purchase per year 48,000

Average payment per purchase P1,000

Projected total industry sales per year P48,000,000

Percentage the firm can attend 58%

THE FIRM’S MARKET SHARE P24,000,000

Positioning StrategyPositioning refers to how

the firm differentiates its product or service from those of the competitors and serving a niche.

Pricing StrategyHow the firm prices its

product or service is a very important component of the business plan.

1.The customer’s perception of value in the firm’s kind business2.The costs involved such as, overhead, storage, financing, production & distribution.3.The profit objectives of the firm.

The firm’s price may be established through any of the following methods:1.Cost plus pricing- the method covers all cost, variable & fixed, plus an extra increment to deliver profit.2.Demand Pricing- this is the method of pricing where the firm sets prices based on buyer desires.3.Competitive pricing- this method of pricing calls for pricing setting on the basis of prices charged by competitors4.Market pricing- this is a form of cost-oriented pricing in which the firm sets prices by adding per-unit merchandise cost, operating expenses & desired profits.

Producer

Ultimate user Representative

ManufacturerOriginal Equipment Manufacturer

Final Product Manufacturer

End user

1. Direct sales Channel

2. Original equipmentManufacturer sales channel

Wholesaler/retailer

End user

3. Manufacturer’s representative channel

If the plan is to move goods directly to the ultimate users, this is the most effective channel.

the channel involves selling a manufactured product to another manufacturer who, in turn, incorporates the same to his product and which is later sold as finish product to end user.

they are wholesalers employed by one or several producers and paid on commission according to quality sold.

Distribution StrategyDistribution refers to the process of moving goods & services

from the buyers.

Common distribution channels are the following:

Manufacturer

Wholesaler

Retailer

End User

4. Wholesaler channel 5. Broker Channel

Distributor/ Wholesaler

Broker

Retail/End user

these are channel member that sell to retailers or other agents for further distribution through the channel until they reach the final users.

they are distributors who buy directly from distributors or wholesaler & sell to retailers or end users.

Common distribution channels

Retailer

Consumer

Company

Consumer

6. Retail Channel 7. Direct Mail Channel

they sell directly to consumers.

these are printed materials used in a targeted campaign to consumers. These are sent directly to consumers. These include catalogs, letters, e-mail, & other direct appeals

Common distribution channels

Promotion StrategyHow the company’s products or

services will be promoted is an important component of the marketing strategy. The promotion strategy must include the following:1.Advertising aspects

a. Advertising budgetb. Positioning messagec. First year media schedule

2.Packaging- which describes how the company’s products will be package.3.Public Relations- this will be a detailed presentation of the publicity strategy of the firm.

4. Sales promotions- these are means used to support the sales message like special sales, coupons, contest premium awards, trade-in, among others.

5. Personal Sales- these present the sales strategy including…a. Pricing procedureb. Rules on returns & adjustmentsc. Methods of sales representationsd. Generation of leadse. Policies on costumer servicesf. Compensation of salesmeng. Responsibilities of the salesmen.

Analysis of the CompetitionThe Small Business Operator will find

it difficult to compete if his competitors are unknown to him.

In competitive analysis, the following must be determined:1.The strengths and weakness of the firm’s competitors2.Strategies that will give the firm a competitive advantage3.Barriers that can be developed to prevent competitors or would-be competitors from exploiting the firm’s market4.Any opportunity that can be exploited

Key assets & skills Our company Competitor A Competitor B

Superior Product Strength Weakness Strength

Good Business Location Weakness Strength weakness

Strong sales team Weakness Strength Strength

Strong financial capacity Strength weakness weakness

Table 6A competitors of the strengths & weaknesses of competing firms

Operations & ManagementHow 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:

1.Organizational structure2.Operating expense3.Capital requirements4.Cost of gold sold

Organizational StructuralA well-defined & realistic

organizational structure is an important element of the business plan.Generally, they will be concerned how the firm is organized along the following concerns:

1.Marketing2.Production3.Research & development4.Management5.Human resources

Operating ExpenseProjections of operating expenses are

important aspects in the preparation of a business plan. This is prerequisite in projecting financial statements. Lenders & Investors are especially interested in scrutinizing such statements. Overhead, which may be fixed or variable, includes the following:

1. Rent2. Advertising & sales promotion3. Supplies4. Utilities5. Packaging & shipping6. maintenance & repair7. Equipment leases8. payroll

9. Payroll taxes & Benefits10.Bad debts11.Professional services12.Insurance13.Loan payments14.Depreciation15.travel

Capital RequirementsAre necessary items in operating

business. The business plan will not complete unless a listing of capital equipment needed to be purchased is drawn up.

Cost of GoodsBusiness which carry inventories like

those engaged in manufacturing & trading must provide a list showing of goods.

These expenses include the following:1.Material2.Labor3.Overhead

Financial DataFinanciers 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:1.The income statement2.The balance sheet3.The cash flow statement

The Income StatementThe income statement

shows the income, & profits of a firm over the period of time.

Gross Annual Sales P 12,000,000

Less:

food cost 4,800,000

Gross profit P 7, 200,000

Less:

Operating Cost

Rent 864

Salaries 1,920,000

Utilities, Insurance

Overhead 600,000

Owner Salary 2,400,000

Net Profit 5,784,000

P 1,416,000

MDM food shopProjected income Statement

For the year ending Dec. 31,2012

The Balance SheetIs that type of financial statement

that shows the financial statement that shows the financial condition of the business as of a given date.

A summary of financial information about the business is contained in the balance sheet and are broken down into three areas, namely:1.Assets2.Liabilities3.Owner’s equity

The AssetsThe assets portion of the balance

sheet lists the assets of the firm in order of liquidity

1.Current Assetsa. Cash- which includes cash checking,

savings, & short-term investment accounts

b. Accounts receivable- these refer to income derived from credit accounts

c. Inventory- this refers to inventory of materials used to manufacture a product not yet sold.

2. Fixed Assets- These are durable assets and will last more than one year. These consist of the following:a. Capital & plant- this refers to

the book value of all capital equipment & others such as land & building, if owned by the firm, less depreciation.

b. Investments- these are investments accounts owned by the company that con not be converted to cash less than a year.

The LiabilitiesThe liabilities portion of the balance sheet

is classified as current or long-term.

1.Accounts payable- these refer to all expenses incurred by the business that are purchased on an open account from suppliers & are due for payment.2.Accrued liabilities- theses refer to operational expenses that are not yet paid.3.Taxes that are due and payable-

Long term liabilities are due in more than one year. They are include the following:

1. Bonds payable- these are bonds due and payable over one year

2. Mortgage payable- this refers to loans used for the purchase of real estate and is repaid for a period of over one year.

3. Notes payable- these are loans represented by a written document which is payable for a period over one year.

The Owner’s EquityThis section refers to how much the owner has in the business.

Assets

Cash P 70,450

Accounts Receivable 2,406,130

Inventories 2,608,791

Prepaid Expenses 9,437

Not Fixed Assets 289,003

Total Assets P5,383,811

Liabilities & Owner’s Equity

Notes Payable P497,643

Accounts Payable 47665

Accrued Liabilities 112,164

Long term debt 2,638,737

Total Liabilities P3,296,209

Owner’s Equity P2,087,602

Total Liabilities & Owner’s Equity P5,383,811

Mikaela Manufacturing EnterprisesProjected Balance Sheet Statement

As of Dec. 31, 2012

The Cash Flow Statement

Is also a very useful tool for business planners. It projects what the business plan means in terms of pesos. It is use for operational planning and estimates the amount of cash inflows and outflows of the business during a specified period of time

Listed in a cash flow statement

1.Cash2.Cash Sales3.Recievables4.Other income5.Total Income6.Materials or merchandise7.Direct Labor8.Overhead 9.Marketing Expenses10.Research and Development Expenses11.General and Administrative Expenses12.Taxes13.Capital14.Loan Payments15.Total Expenses16.Cash Flow17.Accumulative cash flow

Supporting Documents

The business [plan would be more meaningful if supporting documents are included.

• The owners resume• Contracts with supplier• Contracts with customers and suppliers • Letters of reference • Letters of intent• A copy of the firms list• A copy of copyright or patent acquired, if applicable • Tax returns for the past three years