UNIT 4 Develop a Business Plan PDF

UNIT 4. Develop a Business Plan Desired Learning Outcomes At the end of the Unit, the students must have: 1. explained the purpose of writing a good business plan; 2. described the importance of a business plan 3. explained the components of a business plan...

UNIT 4. Develop a Business Plan Desired Learning Outcomes At the end of the Unit, the students must have: 1. explained the purpose of writing a good business plan; 2. described the importance of a business plan 3. explained the components of a business plan PRE ACTIVITY: Develop a Business Plan As part of your initial activity, try to evaluate your prior knowledge about the business plan. Answer Task 1. Task 1. Matching Type Directions: Match the components of the business plan in Column A with their meaning in Column B. Write the letter of the correct answer on the space provided before each number. A B ___1 Executive summary A. covers the market research and competitor analysis ___2 Target market B. written document that provides details of a proposed venture ___3 Organizational C. Clear, concise description of the business & overview of structure market potential. ___4 Market analysis D. detailed description of products or services you plan to sell ____5 Appendix E. Where you can find the mission, vision and goals are stated ____6 Financial F. Identify the key functions in your start up and assign responsibilities accordingly. ____7 Marketing and Sales G. company’s process of identifying and creating a customer base ____8 Products/services H. Provides specific information that certain individuals (such as creditors) may want review. ____9 Business plan I. Sometimes called a “pro-forma projection” ___10 Company description J. customer personas and market size  How well did you do? How do you feel about the test? Did it make you feel confident or insecure? Your feelings will be your guide to go slow or breeze through this module. Below is the answer key to your pre-test. Answers: Task 1 1. C 2. J 3. F 4. A 5. H 6. I 7. G 8. D 9. B 10. E A perfect score 10 makes you a good business planner. Kindly, continue to study this module as a review. If you go lower than 10, studying this module is very important. Now let us begin the exploration of this Module. Lesson 1. Purposes and Importance of a Business Plan Introduction: In this module, you will be learning the importance of a business plan, its essential components and on how to create an effective one. It will help and guide you in coming-up a simple business plan as an output of this module. Likewise, this module will encourage you to think about if what business will you produce, who will buy and run your products or services, how your business will succeed in earning a profit and so on. In short, it will inspire you to be an effective business planner. There three (3) major questions to know and answer in this module, to wit; 1. Why business plan is important in entrepreneurship? 2. What goes into a business plan? and; 3. How to create an effective business plan? To begin with this module, let’s first understand what business plan is all about. Why should you make a Business Plan in venturing a business? Well, of course you don't need a Business Plan if you wish to employ in other business firm just to earn a living. But, if you want to earn income from your own products or services, you will hardly be able to avoid a Business Plan. The following explanations and information will help you if you are thinking about or have already decided to start a business seriously. You will learn how to position yourself professionally in order to be an entrepreneur. You will recognize many things once you have planned the things that you are going to do entrepreneurship. A business plan is a written document that describes in detail how a business—usually a new one—is going to achieve its goals. It lays out a written plan from a marketing, financial and operational viewpoint. This term, which started from the USA, is used as synonym for "company concept" or "business concept". A Business Plan describes your business idea with the aim of implementing this idea in your proposed project. The Business Plan comprises two:  Written formulation of your business idea with regard to your proposed business products, services, customers, and marketing. This is a text section of your business plan  Planning for financing, planned revenue and expenditure, (financial part). To be a successful entrepreneur, you need to have a business plan. A business plan is a document that contains your company’s background, product description, marketing plan, competitor analysis, SWOT analysis, operational plan and financial plan. It is a very important strategic tool for entrepreneurs. The business plan serves three important purposes. 1. The business plan explains the idea behind your business and spells out how your product or service will be produced and sold. 2. It sets specific objectives and describes how your business expects to achieve them 3. It describes the backgrounds and experience of the leadership team of the business. Having a business plan will help you to focus on how to operate your new business, and give it the best chance for success. Therefore, business plan writing is quintessence of any curriculum on entrepreneurship training. Below are few importance of a Business Plan to an Entrepreneur:  Writing a business plan allows you to have a clear indication of what you’re doing, and where you are going; you get more clarity about an idea, as well as the execution plan.  A business plan helps you to understand the industry you are venturing into, in an in- depth manner, before your start-up.  It will enable you to brain-storm on things you may not have, and think critically about and the industry (business) you are going into. A lot of ideas sound great on paper and even in discussion, until when you start adding the numbers.  A business plan makes you to think through the numbers, making sure of the possibility to hit your revenue and profit goals.  Writing a business plan is an ideal way to ensure that everyone in your team is aligned with the current and future plans for the business.  A business plan ensures that you think and create a long-term vision and strategy for your idea.  It helps you stay organized, remain on track and remain committed to your business’ long-term goals. It provides benchmarks that you can use to track your performance and make mid-course corrections, in the course of business.   A business plan can be used as a résumé; you can design one to introduce your business to investors, suppliers, vendors, lenders and others.  It is a necessity to raise funds for a start-up business, because a business plan is the document that gives the details on the commercial potential of your idea or business, based on which financing decisions are made.  A business plan is the written guide to your business’ success. You can have others prepare it for you, but it is advisable to be the one developing the plan; using others for assistance, because the plan reflects your image and views of the business. The process of developing the plan is perhaps, much more valuable as a learning experience than the plan itself. The entrepreneur doing the “road map”.  A good business plan not only helps entrepreneurs to focus on the specific steps necessary for their to make business ideas succeed, but it also helps them to achieve both their short-term and long-term objectives. According to Benjamin Franklin, “Don’t start a business without a business plan because, If you fail to plan, you are planning to fail!” Activity 1 Video Presentation Directions: Answer the following guide questions on a separate sheet of paper after watching the video. Form your group (3 members/group). Share your answers and discuss online with your classmates. Click the video. “How the Starbucks Really Became a Coffee Giant” Questions: 1. Why do you think Starbucks was a successful company? 2. Do you think success comes quickly for most entrepreneur? 3. What do you think Starbucks first business plan included as his vision for the company ? How was your experience in answering the guide questions with your classmates? Were you able to benefit from them? What were the insights you have realized? Task 2. Guide Questions Direction: The following are guide questions which cover the entire module. Write your answers on your assignment notebook. 1. What are the importance and purposes of writing a business plan? 2. Describe each component of a business plan. After answering the guide questions, share, compare and discuss these with your classmates through messenger or any used platforms. Lesson 2. Components of a Business Plan In this topic, we will tackle about step by step components of a business plan. Before, we formally discuss the topic, let me show a short video to motivate you in studying this lesson. Watch this: https://www.youtube.com/watch?v=Fqch5OrUPvA The created business plan ends up becoming the entrepreneurs "road map." Doing this will help the entrepreneurs identify opportunities and potential pitfalls, assess the overall market potential, determine financial requirements, develop opportunity strategies, and guide in the management of the venture. The business plan maybe simple or complex depending upon the product or service. The entrepreneur doing the “road map” gets to:  See the product and service in detail  Do self-assessment  See obstacles  Assess cash and other resource requirements As you look at the diagram below, it shows the detailed components and process in making a business plan. This is usually used for funding purposes.  The completed and printed Business Plan should comprise a maximum of 30 to 35 pages in total, so that it can be read by possible donors, such as banks or promotion agencies, in a short time. This is to be written for three to five years into the future. You should plan in the first year on a monthly basis, in the following years you can also plan annually. However, it is impossible to be prescriptive in the content of a business plan since every business plan will be different and will be designed for different requirements like the number of pages, budgetary requirements and contents in the diagram above. Yet, there are a number of standard sections that are normally included in a business plan. Basically, the contents of a Business Plan are: Introductory Elements  Cover sheet The cover sheet should include the name of the business, the names of the directors, addresses, and number of the business and directors.  Table of Contents It is a list of the chapters or sections given at the front of a business plan. This section should not be more than one page. The purpose of the table of contents is to help the reader to locate the section of interest easily.  Executive Summary This section highlights briefly and convincingly the different parts in the business plan. It sums up the following areas such as:  purpose and objectives of a plan,  market opportunity,  management,  financial projection and funding requirements. This section should not be completed until the business plan is written. Main Body  Introduction (Description of the venture/project ) It provides complete picture or description of the products and services and their unique features. In your description, you consider the following aspects: a. Description of the people involved in starting your business b. Products and Services - what your product or service is and what it does:  Background to its development  Benefits and features  Unique selling points  Advantages to customers and others  Disadvantages or weak points  Future developments c. Objectives of the Venture/Project - state the specific milestones to be achieved over the next five years d. Long Term Aim of the business – state the long-term of the project  Operating Plan This part gives the detail of how products are to be manufactured. The merchandising plan for trading business shows in detail how the products are to be acquired.   Marketing Plan It describes market conditions and strategy related to how products and services will be priced, distributed and promoted. Further, this section covers your market research and competitor analysis. You must show that you have done the market research to justify the projections made in your Business plan. a. Target Market The market to which you are planning to sell your products or services. Analyse the segments of your market as follows: (Market Segment defines who your potential buyers. For example, women with children under 18, college students, etc. Gather demographic, behavior, and psychographic information on your market segment)  Size of each market segment  Is this segment growing or declining  Characteristics of potential customers in each segment  Special needs of potential customers b. Total market valuation It shows the total potential value of the market for this type of product or service in all your target market areas. c. Target revenue These figures are the basis for the income figures in your financial projections and must be based on realistic assessments. Include average deal size, length of income cycle, recurring revenues d. Market Trends You analyse what is happening in the market like:  Recent changes (e.g. what does the Philippine General Data Protection Regulation mean for your business)  Future prediction (e.g. how relevant will Intellectual Property Rights issues be for your business)  Drivers such as demographic changes, economic and legislative factors (e.g. how will you consider the needs of disabled and elderly persons?)  Your plans to meet demand and changes in the market e. Profile of Competitors It is the analysis of your competitors in the market. These are some of the things to be considered:  What are the competing products and services?  Profile of key players (company size, turnover, profitability, Etc.) and their market share)  Advantages and disadvantages of the competitors’ offerings f. Competitive advantage This is your assessment of why potential customers will choose to buy your cultural products or services in place of those profiled above. Advantages may include:  Unique features  Price  New technologies or systems   Better value for customers  Include any independent validation of case studies. g. Benefits to clients This is what your cultural product or services provides to potential customers in terms of their expectations and needs. What will buying your product or services actually do for your customers? This aspect maybe very important to certain clients, e.g. elderly persons, disabled persons, etc. In here, you explain what you will do specifically for them and demonstrate with supportive data if any.  Marketing Strategies/Sales This section sets out your strategies for reaching out market, raising their interest in your product or service, and actually delivering the product or services to them in sales. These are the things to be considered: a. Marketing Strategy How will you position your product or service in the market and differentiate it from its competitors:  Which segment of the market will be targeted?  How will this be developed to reach the full target market  How will you differentiate your products or service?  What key benefits will be highlighted?  Which potential customers have your already targeted?  What contacts can be used to generate market awareness and sales?  Who will do the marketing staff, agency, representative? b. Sales Strategy How will you sell your product or your service to the target market?  Directly  Retail  Agent/Sales agent  Website  Revenue sharing partners Also, in doing so you state the advantage/s or disadvantage/s of the methods you have chosen to sell your products or service. c. Pricing How you will set the price charged from your products or service. Considerations include:  Competitors’ prices  Level of completion in the market  Perception of quality/price relationship by customers  Production costs and overheads  Chain of distribution and the added value at each stage  The extent to which the buyer can control the price State how each product or service will be priced referring to the income sources stated above.  d. Marketing and Communication Strategy How you will promote your product or service in the market  Advertising – where, when, how, to whom  Public relations  Direct Marketing  Website and internet marketing  Exhibitions and conferences  Special groups (e.g. disabled persons)  Word of mouth  Organization and Management Plan This section describes the form of ownership and lines of authority and responsibilities of the people in the organization. This is where you will outline the intended structure of your project in terms of management, number of employees, their skills and qualification, and the physical operational requirements to produce or supply your products or service. Things to be considered are: a. Management Organizational Chart You include a diagram of the way in which the management of new venture will be organized. This should show the areas of responsibility of each manager and employees. b. Staffing State what employees will be taken on over the next three years, with which skills, in which areas of the business. Describe your own qualification(s), skills and experiences as well. c. Training Plans Outline the planned employee and management development to be undertaken in order to maintain a skilled workforce. This should also tie with future market developments and any new product or service developments. d. Operations State the physical requirements of the business:  Premises  Equipment  Production Facilities  Infrastructure  Communication facilities  Costs Involved  Suppliers  Financial Management/Analysis This section reviews the key assumption used in the financial projections. It is a guide to explain how key figures in the financial projections were arrived Likewise, it explains how the company is expected to perform financially over the next several years. (Sometimes called a “pro-forma projection.”) Because investors and lenders look closely at this projection as a measure of your company’s growth potential, professional input is strongly recommended. Included here should be items such as:  Income sources  Number of employees projected for each year and their intended salaries  Projected investment in equipment and salaries   Depreciation allowed for  Expected rent and rates charges  Creditors days expected and debtor days allowed  Expenses calculations This section should be brief and to the point. Further details regarding these items can be placed in the Appendices a. Profit and Loss Account Attach here projected profit and loss accounts for the first three years of the operation of your proposed project. b. Balance sheet Attach here projected balance sheets for the first three years of your proposed project. c. Cash flow Attach here a monthly cash flow prediction for the first two years of your project’s operations Appendix of Supporting Documents  Appendices or Annexes The appendix to the business plan includes supporting documents that provide additional information and back-up statements made in the body of the report. The back-up materials that support the text of the business plan include:  Resumes of key personnel and partners  Letter of reference  Details of market studies  Copies of licenses, permits, leases, contracts, etc. Activity 2 Directions: Based on the video “How Starbucks really Became a Coffee Giant” that you have seen, answer the following guide questions on a separate sheet of paper. Share and discuss your answers with your group mates. 1. Write a description of the product or service and its unique features of Starbucks. 2. Identify its mission, vision, and objective/s. 3. Describe the market conditions and strategy/ies related to how products and services are priced, distributed and promoted. Lesson 3. How to create an effective business plan? Research the business plan Your business plan needs to convince readers that you have come up with practical business idea. To do this you must include information and data from objective sources to show that your idea is founded on solid evidence. The information that you will need to write your business plan involves researching all aspects of your business. For example, from leasing space or equipment to determining what you will charge what you will charge from your products or services to dealing with competitors.  Available research resources for business plan  Community, government and professional resources When writing a business plan, you will likely need to seek out advice from others. People from many organizations can help in crafting a business plan. Like for instance, DTI, NEDA, professional consultants and any successful business groups/individuals.  Print Resources Information for your business plans can come from any print resources like books, magazines, government documents and many more.  Online resources Much of the information can be taken from various websites. These can help you crafting your business plan with less time consumed since there are several websites about entrepreneurship can be browsed.  SWOT Analysis The SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is one of the strategic planning tools that is utilized by businesses and other organizations to ensure that there is a clear objective defined for the project or venture, and that all factors related to the effort, both positive and negative, are identified and addressed. In order to accomplish this task, the process of SWOT involves four areas for consideration: strengths, weaknesses, opportunities, and threats. It should be noted that when identifying and classifying relevant factors, the focus is not just on internal matters, but also external components that could impact on the success of the project. In doing this, analyze the strengths and weaknesses of your proposed project and products or services, the opportunities that exist in the market, and the threats to the viability of the project.  When we talk about:  Strengths – these are attributes of your project which are helpful to achieving the objective  Weaknesses - attributes of your project which are harmful to achieving the objective  Opportunities - external conditions which are helpful to achieving the objective  Threats – These are external conditions which could damage to your project’s performance. Risk Analysis A systematic process is necessary to ensure that all relevant sources of risk are identified. Sources of risk have changed, so an important part of the monitoring and review process is to identify new hazards which might change have emerged for your project. You should also indicate the potential to be affected by a risk (risk susceptibility) and how quickly your system can recover from failure (resilience). The risk analysis should also contain a risk mitigation plan. Donors (or funding institutions) always ask for risk mitigation, because they do not fund or invest in a project that has no exit strategy. Your risk mitigation plan should identify the objectives to be achieved, actions to be undertaken to achieve these objectives, timelines for these actions to be undertaken, person(s) responsible for each of these actions, and means to assess the success of this plan. Mistakes in Business Planning To create an effective business plan, avoid the following common mistakes: 1. Unrealistic financial projections Many investors will go straight to the financial section of the business plan, so it is very important for the projections to be realistic. Projections should be based on solid evidence for the potential growth of the company. 2. An Undefined Target Market. You must clearly define your market and give an accurate picture of your potential customers. You explain why these customers will buy your product 3. Poor research Many potential business owners do not spend the time necessary to do good research. Use up to date research information and verify the facts and figures in your business plan 4. Ignored Competition Do not overlook the completion and do not focus only on what the competition has done wrong. Outline how you will differentiate yourself from the competition. 5. Inconsistences in the business plan 6. You should review your final business plan to be sure it is well written and formatted in an attractive style. Be sure that information provided is consistent from section to section.  ACTIVITY PROPER 3: How to create an effective business plan? Directions: Read a story below and answer the guide questions. Discuss your answers with your group mates and present to the class. Michelle loved working with children. All of the parents in the neighbourhood wanted her to babysit for them. She was always thinking up fun games to play and creative activities for the children to do. She wondered if she could do even more with these activities to earn money for college. She talked with her mother and some of the parents and came with an idea. She would run an ice cream parlor where she could host parties and let the children make their own ice cream sundaes, play games, and watch movies. Once Michelle came up with a business idea, she knew it was time to make a detailed plan. However, she didn’t know how to get started on a plan. Questions. 1. What kind of information do you think Michelle needs to gather? 2. Where might Michelle find this information and whom might she talk with to learn more about starting a business? Assess your Knowledge Direction: Answer the following questions 1. Why business plan is important in putting up a business? 2. Discuss the essential parts of a business plan 3. How can you say that your business plan is an effective one? References Medina, Roberto G., 2014. Entrepreneurship and Small Business Management Greene, C., 2013. Entrepreneurship Scarborough, N., 2011. Essential of Entrepreneurship and Small Business Management, Sixth Edition Banastao, C. and Frias, S, 2008. Entrepreneurship Internet Sources: https://articles.bplans.com/how-to-write-a-business-plan/ https://www.entrepreneur.com/article/247574 https://www.google.com/search?q=business+plan+meaning&oq=business+plan+meaning &aqs=chrome..69i57j0l7.5965j1j7&sourceid=chrome&ie=UTF-8 https://entre3jean.weebly.com/business-plan https://www.thebalancesmb.com/why-write-a-business-plan-2948013 https://www.godfreylegal.com/why-a-business-plan-is-important-for-entrepreneurs/ https://www.google.com/search?q=swot+analysis+of+jollibee&sxsrf