CHAPTER 3: DEVELOP A BUSINESS PLAN

I. WHY BUSINESS PLAN IS IMPORTANT

A. The Business Plan

Business Plan – is am written document that describes all the steps necessary for opening
and operating a successful business. Business plan does the following:

 Describe what is your business will produce, how you will produce it and who will
buy your product or service.
 Explains who will run your business and who will supply it with goods.
 States how your business will win over customers from competitors and what your
business will do to keep customers.
 Provides detailed financial information that show how your business will succeed in
earning a profit.
 Describes plans for the future growth of your business.

B. Purpose of a Business Plan

The business plan serves three important purposes.
1. A business plan explains the idea behind your business and spells out how your
product or service will be produced and sold.
2. A business plan sets specific objectives and describes how your business expects
to achieve them.
3. A business plan describes the backgrounds and experience of the leadership
team of the business.

C. Importance of Business Plan

The businesses plan in important for several reasons.
1. Makes you think about all aspect of your business.
-It will help you during the development and startup phases of the
business.

2. May help you secure financing for your business.

- A well written business plan shows lenders and investors that you
are serious about your business idea and have spent sufficient time
in the planning process.

3. It can help you communicate your ideas to others.

- If you communicate your ideas well on paper, you will also convince
the readers that your business can succeed. It will give the suppliers
confidence in extending the credit to your company.,

ENTREP Page 1
 II. WHAT GOES INTO A BUSINESS PLAN
A. Basic Elements of a Business Plan
1. Introduction –it contains many details about the proposed business idea.

The following information should be included in the introduction section:

a. Detailed Description
- Something that inspired the idea for your business
- describing how you came up with your idea
- should also outline your short-term goal (3 months to 1 year),
medium-term goal (two to five years) and long term goal (more
than five years)
- Stating goals will help provide you with direction and focus for your
business activities.
b. Ownership and Legal Structure
- There should have a section detailing your form of ownership (sole
proprietorship, partnership or corporation).
- Provide information relevant to your form of business, such as who
will make up your leadership team and how many shareholders you
have.
- This section is important because each legal form of business has an
effect on how the business works and makes profits.

c. Skills and Experience of the Leadership Team

- The written summary of your experience is an essential part of
business plan.
- This part summarized all experience you have that relate to the
business, including paid work experience, volunteer experience
and any hobbies you have that relate to your business.
d. Advantages
- These are the list of your company’s advantages over the
competition. These advantages may include the following:
 Performance
 Quality
 Reliability
 Distribution
 Price
 Promotion
 Public image or reputation
2. Marketing –this section should describe the product and/or services you will
offer, the market, the industry and your location.

ENTREP Page 2
 a. Products/Services –you should describe your product and services and
explain how they differ from those already on the market.
- Highlight the unique features and explain the benefits customers
will receive by purchasing from your business.

b. Market –you will explain who your prospective customers are,

- How large the market is for your product or service
- How you plan to enter that market
- How you plan to deal with competition.

c. Industry – describe the industry in which you will operate.

- To find this information, you will need to perform research.

This section should include the following:

1) External factors affecting your business, such as
competition or a lack of certain suppliers.
2) Growth potential of the industry, including growth
forecasts
3) Economic trends of the industry
4) Technology trends that may affect the industry.

d. Location –describe the location of your business.

3. Financial Management –this section will help determine the financial needs. It
consists of three elements:
a. Identification of Risk
b. Financial Statement

Pro-forma financial statement –a financial statement based on

projected revenues and expenses.

c. Funding Request and Return on Investment

- Indicate how much money is needed to borrow
- How you plan to use the money.

4. Operation –this section will explain how the business will be managed on a day-
to-day basis and discuss hiring and personnel procedures.
- Describe the equipment that will be necessary for production of your
products or services and how the products or services will be produced
and delivered.

ENTREP Page 3
 Harvest strategy or exit strategy –is the way an entrepreneur intends to
extract or harvest his or her money from a business after it is operating
successfully.

5. Concluding Statement – this section summarize the goals and objectives you
have for the business.
- Must also emphasize your commitment to the success of the business

B. OTHER PARTS OF BUSINESS PLAN

1. Introductory Elements
a. Cover letter –a letter that introduces and explains an accompanying
document or set of documents.
b. Title Page –indicates the name of the company, the date, the owner of
the company, the title of the owner and the address and phone number
of the company.
c. Table of Contents –listing of the materials included in the publication.
d. Statement of Purpose – a brief explanation of why you are asking for a
loan and what you plan to do with the money.
e. Executive Summary – an overview with the business plan regarding:
1) Describe your business concept and communicate what is
unique about your idea.
2) Include your projections for sales, costs and profits.
3) State how much you want to borrow.

2. Appendix –it includes supporting documents that provide additional

information and back up statements made in the body of the report.

III. HOW TO CREATE AN EFFECTIVE BUSINESS PLAN

When writing a business plan, likely need to seek out advice from the others. People from many
organizations can help you with your business plan. Other resources include:

1. Small Business Administration (SBA) –is an independent agency of federal

government that was created to help citizens start, build and grow business.
2. Small Business Development Centers (SBDC) –provides management assistance
to current and prospective small business owners.
3. Service Corp of Retired Executive –made up of more than 12,400 retired
executives who volunteer their time to provide entrepreneurs with real-world
advice and know-how.
4. Chamber of Commerce –offers assistance and information to entrepreneurs. It
can provide information on trends affecting local business, local resources and
zoning and licensing information.

ENTREP Page 4
 5. Trade Associations- made up of professionals in a specific industry. They provide
information, educations, and networking opportunities to individuals in their
industry.
6. Professional Consultant –these are experts hired by the company to help them.
7. Financial Institution –These institutions can help an entrepreneur by answering
their questions about loans and financial statements.

Print Resources

Online resources

A. Mistakes in Business Planning

1. Unrealistic financial projection.
- Projection must be based on solid evidence for the potential growth of
the company.
2. An unidentified target market
3. Poor research
4. Ignored Competition
5. Inconsistencies in the Business plan.

ENTREP Page 5