entrep. report chapter 5

1. CHAPTER 5
The Business Plan
Presented by: Mae Casumpang

2. “ a well written business plan is one that contains all the information necessary
for financing source to make a decision even without talking to the entrepreneur”.

3. Coverage of Chapter 5
5.1 Concept of a business plan
5.2 Why the need for a business plan
5.3 Writing the business plan
5.4 A well – written business plan
5.5 Some Rules to be observed
5.6 The Financiers Viewpoint
5.7 business plan format
5.8 The financial plan
5.9 The principle of due diligence
5.10 The Feasibility study or project study

4. Coverage of Chapter 5
5.11 Formats and contents of the feasibility study
5.11.1 Project summary
5.11.2 Market Study
5.11.3 Technical study
5.11.4 Financial aspect
5.12 Musts for business plans and feasibility study
5.13 Who should prepare the plan or project study?
5.14 The role of consultants
5.15 Summary and conclusion

5. Hisrich and Peters
5.1 Concept of Business Plan
- They defined or described the business as a written
document prepared by the entrepreneur that
describes all the relevant external and internal
elements involved in starting a new venture.
- It also addresses both short-term and long-term
decision making for the first three years of operation.
- Road map that answer the questions: “Where am I
now?” “Where am I going?” “How will I get
there?”, etc.

6. 5.1 Concept of Business Plan
• The business plan covers a wide range of
details that should justify the “raison d’etre”
(reason for being) of the business and how to
make the business and how to make the
business a continuing or an on going concern.

7. 5.1 Concept of Business Plan
• When funds from external sources is
necessary, the proponent has to live with
various requirements one of which is a
business plan or feasibility study. In order to
raise any capital, the business proponent must
be able to put in writing what particular
business endeavor will be pursued.

8. 5.1 Concept of Business Plan
• The Business Plan is a written story of the
business plan includes a detailed analysis of
the market, production process and service
delivery system, management, organizational
structure and many other information that
could help the financiers to decide on funding
the project.

9. 5.1 Concept of Business Plan
• Needs external funding, the business plan is a
marketing tool.
• The business plan is guerilla marketing
weapon created to sell a business proposition
to a lender or investor.

10. 5.1 Concept of Business Plan
David E. Gumpert
Has the following concept and definition of a
business plan.
Good definition:
A business plan is a document that convincingly
demonstrates the ability of a business to sell
its products or services to make satisfactory
profit and be attractive to potential backers.

11. 5.1 Concept of Business Plan
Better definition:
A business plan is a selling document that
conveys the excitement and promise of your
business to any potential backers or
stakeholders.

12. 5.2 Why the need for business plan?
• A written business plan or feasibility is necessary or
needed for the following reasons:
a. To project a general picture of the business project
b. To serve as a guide in implementing the business or
project
c. To serve as major input to investment decisions or
major expenditures.

13. 5.2 Why the need for business plan?
d. To serve as references or guide to policy formulation
and development.
e. To serve as a guide for operational matters
f. To serve as reference for bank loan or financial
purposes.
g. To determine/estimate the detailed technical and
financial requirements
h. To serve as an overall guide for the proponent or
entrepreneur

14. 5.2 Why the need for business plan?
• For David Gumpert, a business plan is a selling
point.
Gumpert cited following reasons for doing a
business plan as follow:
a. To sell yourself on the business
b. To obtain a bank financing
c. To obtain investment
d. To arrange strategic alliance

15. 5.2 Why the need for business plan?
e. To obtain large contracts
f. To attract key employees
g. To complete mergers and acquisition
h. To motivate and focus your management
team

16. 5.3 Writing the Business Plan
• Writing a business plan effectively can spell out a big
difference between a success and a failure in raising
a capital for the business and operating a business
itself.
• Blechman and Levinson puts it, communication is
the key. These authors point that financiers will base
50% of the decision to lend or to invest in a project
on the presentation it receives, both oral and
written.

17. 5.4 A well-written Business Plan
• Someone said that a well written business plan is
one that contains all the information necessary for
the financing source to make a decisions even
without talking to the entrepreneur.

18. 5.5 Some Rules to Observe
• Blechman and Levinson recommend the following rules
or guide that can be used in writing the business plan.
1. Make it neat.
- Appearance is important and it can reflect the personality
to the maker. Make it simple and avail of latest
technology available in the market.

19. 5.5 Some Rules to Observed
Blechman and Levinson recommended the following the
following rules or guide that can be used in writing business
plan:
a. Make it neat – appearance is important and it can reflect the
personality of the maker.
b. Make it grammatically correct – be sure to have a final
version of the write up corrected or edited by professional
or qualified editors.
c. Make it honest – do not exaggerate to lie, tell exactly as it
is, financial sources are looking for integrity and honesty.
d. Write in layman’s language – communicate in simple
language and not in technical jargon, unless it is called for.
e. Don’t overemphasize your product or business – it requires
a lot of resources that is dependent from one another.

20. 5.6 The Financer View Point
Due to misguided View Point, some business proposal were not entertained
or unfunded.
 A prospective entrepreneur seeking external funding must forever
remember that people or Financiers who make decision making about lending
or investing think differently than the proponents.
 A common reason any business proposal or business plan fails to
communicate is that it is written from the entrepreneurs point of view, which
is not the lender’s or investors point of view.

21. 5.7 Business plan format
A typical format for a business plan is shown on Table 5.1
In the case of a franchising scheme, the franchisor usually provides the guideline of
format in preparing the business plan. Table 5.2
See photocopy

22. 5.8 The Financial plan
For purposes of making the business plan as a marketing tool and convincing prospective
Financiers, the financing plan is the most important aspect of the business plan.
a. Total amount of funding needed
b. amount to be financed and equity component
c. purpose of financing
d. specific use of funds
e. Description of collateral
f. historical financial record of the business
g. financial projection and assumptions
h. schedule of major assets and liabilities
i. management/ ownership structure
j. financial status of owners/ stockholders
k. bank references
l. personal reference of company officers
m. other supporting documents

23. 5.9 The principle of due diligence
Due diligence is the homework investors of financiers complete before a final
investment decision is reached.
 process typically includes background checks on the management
team, industry studies, analysis of competition, identification of major risk
and other reasons, often intangible, why the investment should or should not
be made.

24. 5.10 The feasibility study or project study
The feasibility study or project study is by itself a form of business plan.
 feasibility study is generally focused on the technical aspect without due
regards to
the idea of the true feasibility as a marketing tool.

25. 5.11 Format and contents of the feasibility study
A feasibility study (F/S) or sometimes referred to as project Study
( PS ) is essentially
A thorough and systematic analysis of all the factor that affects
the viability and/ or success of a proposed undertaking or
project.

26. 5.11.1 Project Summary
This portion contains following information:
a. name of the project
b. objectives of the project
c. location of the project
d. brief description of the project
e. production capacity or project size scale
f. project indicators

27. Project indicators
i. technical feasibility
ii. market feasibility
iii. financial feasibility
iv. environmental soundness
v. social acceptability

28. Project indicators
• 5.11.2 technical study – address the engineering, technological
Or technical aspects of a proposed project.
• 5.11.3 market study – discusses the demand and supply
situation
For the environment or industry that the business project is part of.
• 5.11.4 financial aspect- addresses money matters for the
project, the financial aspect itself with how much project needs.

29. 5.12 Must for business plans and feasibility study
1. It must be arranged appropriately .
2. It must be of right of length and have the right
appearance.
3. It must give a sense of what the founders and
the company expect to accomplish in the
immediate period ( 3-7 years).
4. It must explain in quantitative and qualitative
terms the benefit to the user.
5. The company product or service and the
business as a whole.
6. It must present hard evidence of the
marketability of the product or service.
7. It must be justify the means chosen to sell the

30. 5.12 Must for business plans and feasibility study
8. It must be explain and justify the level of product
development that has been achieved and describe
inappropriate detail the manufacturing processes and
associated costs.
9. it must portray management as a team of experienced
people with the complementary business skills.
10. It must contain believable and verifiable market as
well as financial projection, with the key data
explained and documented under assumptions.
11. It must be easily and concisely explainable in a well-
orchestrated oral presentation.

31. 5.13 Who should prepare the plan or Project Study?
- It must be prepared by the entrepreneur himself being the proponent of the
Business project.

32. 5.14 The Role of Consultants
A well written business plan is needed particularly in fund sourcing and loan purposes. Not
all perspective entrepreneurs have the penchant and qualifications as well as experiences to
Be able to prepare a well written Excellency conceptualized business plan.