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UNIT VI. INTRODUCTION TO PREPARING A BUSINESS PLAN

For a given organization, it is possible to find financial plans, marketing plans, production
plans, and sales plans, to name a few. Plans may be short-term or long-term, or they may be
strategic or operational. Plans will also differ in scope, depending on the type and size of business.

This unit will give you an overview of how to prepare a business plan. Please read the
following learning objectives that must be met:

At the end of the unit, I am able to:

1. explain what a business plan is, its focus, types, and content;
2. discuss the different contents of a business plan;
2. distinguish the difference between a business plan and a feasibility plan; and,
3. determine the possible product/service that will meet peoples' needs by accomplishing
the new product/ new service template.

Activating Your Prior Knowledge

Direction: Encircle the correct answer.

1. What's a typical timeframe that a business plan addresses?

a. One year c.. At least five years
b. The anticipated life of the business d. At least five years

2. What's the biggest mistake you can make when preparing a business plan?
a. Not telling a compelling story c. Forgetting the executive summary
b. Forgetting the executive summary d. Failing to have a clear vision of the business

3. Why complete a Business Plan?

a. To get finance c. To set out clear goals for your startup
b. To impress your mum d. To make sure you know what you are doing

4. According to research, without a business plan, firms are more likely to close down.
a. True b. False

5. Preparation of a business plan is optional for some small businesses?

a. True b. False

6. In order to test your understanding of your market, the safest approach would be to:
a. Rely on your personal instinct. c. Test market your product or service.
b. Conduct a survey among your friends. d. None of the Above

7. The best place to find more information on designing your own individualized plan is:
a. Your lawyer
b. Your accountant
c. The Public Library, industry, or government "Business Plan" Web sites, or bookstores
d. Business Planning Consultants

8. The financial data section of the Business Plan contains the following elements:
a. Break-even Analysis, Cash Flow Statements, Start-Up Budget
b. Financial Write-Up
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c. Balance Sheet and Income Statements (Profit/Loss)
d. All of the above

9. The ''Opportunities'' and ''Threats'' of the Business Plan can be found in the _____________ portion
of the SWOT Analysis.
a. External Audit c. Industry Analysis
b. Internal Audit d. Market Segmentation

10. . An important element of the Business Plan is the _______________, which is a statement that
specifies the company's time-based goals that can be monitored and measured.
a. Mission Statement c. Objective Statement
b. Executive Summary d. Company Description

11. Why do projects need a project feasibility study?

a. In order to ensure you have enough people to work on the project.
b. To provide detailed information on the budget required for the project
c. To provide accurate information as to whether the project will succeed.
d. To conduct research on your competitors

12. When you have a feasible business concept, the next step is to develop a/an__________________.
a. business plan c. feasibility analysis
b. financial analysis d. Industry

13. A feasibility study is an evaluation or analysis of the potential impact of a proposed project
related to financial and operational impact and will include the advantages and disadvantages of
both the current situation and the proposed plan.
a. True b. False

14. A business plan should be used only when setting up a new venture. True/False?
A. True b. False

15. Why is a Feasibility Study prepared?

a. Achieved maximum profit Achieved maximum profit
b. Increase construction cost according to design criteria, quality & space Increase construction cost
according to design criteria, quality & space
c. Reduce social benefits
d. Maximize risks & uncertainty

Robert D. Hisrich and Michael P. Peters defined a business plan as a written document that
describes all the relevant external and internal description that a business plan is also referred to as
game plan or road map that answer the questions as to: Where am I now? Where am I going? How
will I get there? Even potentials investors, suppliers, and even customers prepare a business plan to
ensure that the business will become a successful one.

Lesson Proper

What is a Business Plan?

A business plan is "a formal statement of a set of business goals, the reasons why they are
believed attainable, and the plan for reaching those goals. It may also contain background
information about the organization or team attempting to reach those goals."

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The Importance of Business Plan

The business plan is valuable to the entrepreneurs, potential investments, or even for the
review of new personnel who are trying to familiarize themselves with the business and its goal
and objectives.
1. A reference or important tool in obtaining bank or financing.
2. A guide or reference for policy formulation.
3. A guide to determine the viability of the business in a designated market.
4. A guide in implementing the project or business.
5. An overall guide for the owner of the business.

According to David Gumpert, a business plan is a selling point. With a business plan, you sell
the entire company as a package. Gumpert cited the following reasons for doing a business plan.
They are as follows:
1. To sell yourself of the business.
2. To obtain bank financing.
3. To obtain investment funds.
4. To arrange a strategic alliance.
5. To obtain large contracts.
6. To attract key employments.
7. To complete mergers and acquisitions.
8. To motivate and focus your management team.

Focus of a Business Plan

Externally focused plans target goals that are important to external stakeholders,
particularly financial stakeholders. They typically detailed information about the organization or
team attempting to reach the goals.
An internally focused business plan targets intermediate goals required to reach the
external goals. They may cover the development of a new product, a new service, a new IT system, a
restricting of finance, or the refurbishing of a factory.

Categories of a Business Plan

1. Business Plan for Profit - Typically focuses on financial goals.

2. Marketing Plan - Targets changes in perception and branding as its primary goals.
3. Project Plan - Describes the goals of a particular project.
4. Business Plan for Non-Profit and government agency - Tends to focus on service goals.
5. Operational Plans - Describes the goals of an internal organization, working group, or
department.

Contents of Business Plan

A business plan had the following parts:

1. Executive Summary
It guides proponents or investors on the feasibility of the proposed project at a glance. It
summarizes the major highlights and findings of each major aspect of the study. The conclusions of
the study are its focal point.

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2. Project Background History
It narrates the project conceptualization and details the events that led to the study. It also
presents the project proponents, the proposed name of the project, the type of business
proposal/project, the project location.

3. Management and Personnel Feasibility

It pinpoints the project's general to specific market feasibility topics. It presents the market
and an analysis of past, present, and future demand and supply situations for the particular
product(s). If the conditions presented are feasible, then a look at the marketing practices of your
competitors will be studied. It presents a summary of sales projections of the project study's entire
duration and the project's marketing system and forms design.

4. Production Feasibility
This refers to the manufacturing aspects of the product. It includes the details of what the
products are and how they will be produced/raised using the proposed location, production size
(capacity), and lay-out. It also looks into the types of machinery and equipment, raw materials, and
workforce requirements, as well as the detailed civil engineering and lay-outing of the project, as
applicable. It also presents the project utilities, wastes and wastes management methods, and the
production system's documentation and forms.

5. Financial Feasibility
It enables the entrepreneur to know how much capitalization will be needed to finance the
project and who will be the project's financiers. It determines the most adaptable financing scheme
in terms of the financier's terms and conditions of repayment.
It identifies the financial soundness of the business plan with a presentation of some
assumptions to the financial projections as well as the protected financial statements and financial
analysis including financial ratios, break-even points, sensitivity analysis, project rate of return, and
payback period to prove the financial feasibility of the project.

6. Socio-Economic Feasibility
This is viewing the project's feasibility only from the point of view or from the standpoint of
the project's proponents/investors. This part presents the project's feasibility as to how it will be
beneficial to other people and entities.

7. Project Implementation and Timetable

These include the details of all activities to consider during the project's pre-investment and
pre-operating phase and also the timetable of each of these activities. Sometimes, this is included in
the Management and Personnel Feasibility to distinguish pre-operating from normal operating
activities.

Although there is no fixed way of writing a business plan, the introduction provides a
positive overview of the entire study. In includes the mission statements which answers the
following questions;
• Who is the customer?
• What do they need?
• What's in it for the customer?
• How does the company satisfy its stakeholders?

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A description of the product or service must be stated in the introduction as well as the market, the
company, anticipated sales, and profits summarized form the income statement and required
financing.

Feasibility Study
The preparation of a Business Plan complements the project feasibility study. The feasibility
study is a major information source in making a critical decision of whether to go or not to go into
the business.

The advantage of writing down the results of the feasibility study are as follows:
• The findings can be set out in a clear and logical way so that potential lenders can
understand the business and its likely risks/ advantages. The document helps the
entrepreneur to clarify and focus his/her ideas.
• It is a reference material that can be used to plan long term development of the business.
• The plan can be regularly consulted and updated as a guide to business development.
• Mistakes can be made on paper rather than in the operation of the business.
• When the plan shows that a successful business is possible, it makes the entrepreneur feel
more confident to succeed.
• It helps the entrepreneur to decide on how much money is needed, and if properly
prepared, it gives the loan agency confidence that their money will be repaid.

Most leaders have little understanding of the business, and the entrepreneur should,
therefore, write the business plan in a simple way, avoiding jargon and technical language as much
as possible. If lenders can understand what is involved in the business, most likely, they will
approve the loan.
It is important to include as much as possible and, if necessary, do thorough research first. It
is also important to look outwards from the business to judge what competitors will do and how
the business will develop to become sustainable.

As a requirement, a detailed business plan is prepared before its implementation.

1. Conducting a Feasibility Study

An idea for a business is not sufficient reason to begin production straight away without
having thought clearly about the different aspects involved in actually running the business. Too
often, people invest money in a business only to find out later that there is insufficient demand for
the product or that is not the type that customers want to buy.

To reduce this risk of failure and losing money, potential procedures should go through the
different aspects of running their business in discussion with friends and advisers before they
commit funds or try to obtain a loan. This process is known as doing a feasibility study, and when
the results are written down, the documents are known as a business plan.

Here is a Feasibility Study Checklist. It consists of questions to be answered in order to

determine the feasibility is known for a business plan.

Conducting a feasibility study need not be difficult or expensive, but the most important
aspects should all be taken into account to ensure that potential problems are addressed. These are
summarized in the Feasibility Study Checklist given below.
Questions that can be answered by a feasibility study are addressed:
• Is there a demand for the product? (Find out the characteristic's required of the product
and the size and value of the market).
• Who else is producing similar products? (Determine the number and type of competitors).

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• What is needed to make the product? (Find the availability and cost of staff, equipment,
services, raw materials, ingredients, and packaging).
• What is the cost of producing a product? (Calculate the capital costs of getting started and
the operating costs of production).
• What is the likely profit? (Calculate the difference between the expected income from the
sales to an estimated share of the market and the costs of production).

Each of these aspects should be looked at seriously. When all the information has been
gathered and analyzed, it is time to make a decision on whether the producer's money could be
better into account when an existing entrepreneur wishes to diversify production or make a new
product.

2. Comparison between a Feasibility Study and a Business Plan

a. a feasibility study is conducted before a decision to proceed (go/no go).

b. a business plan is prepared after a decision to proceed (go/no go).
c. a feasibility study provides an investigative function.
d. a business plan provides a planning function.

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 ACTIVITY 6

Name ___________________________________________________________ Score ___________________

Year & Section _________________________________________________ Date ____________________

Direction: Think of a product/service you want to introduce in the market by accomplishing

the New Product/ Service Template below.

NEW PRODUCT/ SERVICE TEMPLATE

A. What is my product/service?

B. What does my product/service?

C. How is it different or better than other

products/services?

D. Who will buy the product/service?

E. Why will they buy the product/service?

F. How will the product/service be promoted

and sold/offered?

G. Who are my competitors?

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References:

De Guzman, Ines Alcantara (1991 ) A Module in Entrepreneurship Manila Saint Bernadette

Publications
De Guzman, Angeles A. (2018), Entrepreneurship. Lorimar Publishing, Inc., Quezon City
Fajardp, Feliciano R. (1994 ) Entrepreneurship ( 1st ed. ) Pasig City Capitol Publishing House, Inc.
Fajardp, Feliciano R. (1997 ) Management ( 1st ed. ) Pasig City Capitol Publishing House, Inc.
Gallardo, M. et al. (20118) Entrepreneurship. Anvil Publishing, Inc., Mandaluyong City
Kimwell, M. B., (2005), Fundamentals of Accounting. GIC Enterprise & Co.Inc. 2017 C.M. Recto
Avenue, Manila Philippines.
Liquigan, Rosario, et al., ( 1998 ) Philippine Entrepreneurship in the New Millennium ( 1st ed)
Manuel, Z.V., (2017), "Accounting Process, Basic Concepts and Procedures, Int' l Edition." Raintree
Trading & Publishing, Inc.
Medina, R.G. (2014), Entrepreneurship and Small Business Management, Third Edition, Rex
Publishing
Morato, Jr, Eduardo A. (2016) Entrepreneurship. Rex Publishing, Quezon City
Orcullo, N.A. ( 2000 ) Contemporary Entrepreneurship ( 1st printing ) Quezon City Academic
Publishing Corp.

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