1. BAEB501 : ENTREPRENEURSHIP
CHAPTER 5:
Business Plan
© 2010 Cosmopoint

2. Chapter 5: Business Plan
Topic Outlines
5.1. Introduction
5.2 Purposes of preparing a Business Plan
5.3 Business Plan helps
5.4 Who should read your business plan?
5.5 5C’s of Credit – Additional information
5.6 Business Plan Format
5.7 Business Plan
5.8 The Executive Summary
5.9 State your Mission Statement
5.10 Describe your product/service
5.11 Analyze the competition
5.12 Describe your pricing strategies
5.13 Example: Describe any special pricing strategies
5.14 Describe your credit policy
5.15 Describe your competitive advantage
5.16 Describe the market segmentation
5.17 Describe your location
5.18 Common Location Mistakes
5.19 Describe your promotion plan
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3. Chapter 5: Business Plan
Learning Outcomes
 After completing this chapter, student should be able to:
 Explain the business plan
 Understand the elements in business plan
 Develop your own business plan
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4. Chapter 5: Business Plan
5.1 Introduction
What is a business plan?
It is a written document that serves
as a blueprint and guide for a
proposed business project that one
intends to undertake.
A comprehensive document that
helps the entrepreneur analyze the
market and plan the business
strategy
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5. Chapter 5: Business Plan
5.1 Introduction
 What does business plan
contains of?
 The business plan contains of:
 Proposed business venture
 Its operational and financial
details
 Marketing opportunities and
strategies
 Manager skills and abilities
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6. Chapter 5: Business Plan
5.1 Introduction
 Why do we write a business plan?
 Because:
 Prepared by a start-up to
avoid costly mistakes
(e.g. in financial plan, marketing
plan, right?)
 To ensure the future growth is
properly managed
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7. Chapter 5: Business Plan
5.2 Purposes of preparing a Business Plan
 To allow the entrepreneur to view and evaluate the proposed business
venture in an objective, critical and practical manner.
 To analyze and evaluate the viability of a proposed venture.
 To convince relevant parties of the investment potential of the project.
 As a guideline for managing the business.
 To allocate business resources effectively.
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8. Chapter 5: Business Plan
5.3 Business Plan helps
 Owner project where they are, where they want to be, and how they
plan to get there.
 Clarify the goals of your business, the risk you take in starting it, and
the possible rewards.
 Describes the product you wish to sell and how will you sell it.
 Banker an insight into your strategy and market
 Investors to decide if you and your ideas are worth their risk.
 Sales people and suppliers learn about your operations and goals.
 You to analyze and predict competitive and money market situations
that help or hurt your business.
 Your learn to better manage your finances, marketing and
management.
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9. Chapter 5: Business Plan
5.4 Who should read your business plan?
 Bankers – who grant loans for
equipment and expansion.
 Investor – who can supply startup or
growth capital.
 Business Brokers – who buy and sell
businesses.
 Initial Stock Offering Consultants –
who write prospectus to sell stock or
partnership units.
 Suppliers of your inventory and
materials (if they need to know who
they are dealing with).
 Marketing managers – if you need
outside talent to help you develop
marketing and sales plan.
 Entrepreneur – to track whether
he/she in the right path.
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10. Chapter 5: Business Plan
5.4 Who should read your business plan?
 Are you unique?
 You must have a unique
product or process with high
profit potential.
 Desirable to them if you can
offer proprietary technology
such as pattern, production
process, trade secret,
chemical formula
 Management Team’s Tract
Record
 Must be experienced in
different kind of business
 Will business continue if
something happen to you
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11. Chapter 5: Business Plan
5.4 Who should read your business plan?
 A track record of profit for the past 3 years.
 Seldom consider people seeking startup capital unless have a
substantial amount of collateral such as property.
 How the loan is used to improve an already efficient operation. How
you will generate enough cash from your cash flow to repay your
loan.
 Debt-to-Equity ratios of less than 3 to 1. This ratio compares what
you owe to what you own. Anything less is a sign of risk, and
bankers are not in business to take risks.
 Conservative financial projections that show reasonable growth with
reasonable profits over 2 years (which is what venture capitalists
want to see).
 Strong analysis of your market and competition.
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12. Chapter 5: Business Plan
5.5 5C’s of Credit – Additional information
 Capital – to have own money as a sign of
commitment, stable capital base. Willing to
lose, handle.
 Capacity – cash flow to show ability to repay
loan. Money come in.
 Collateral – assets pledged as security for
repayment of loan. Set when default to recover
the loans.
 Character – intangible factors such as honesty,
competence, intelligence, ability, etc.
 Conditions – potential growth in the market,
competition, location, form of ownership, loan
purpose, etc.
© 2010 Cosmopoint Slide 12 of [11] Topics

13. Chapter 5: Business Plan
5.6 Business Plan Format
 Cover Letter
- To write you purpose of writing
business plan, formal format.
 Cover page
 Title of business plan
 Name of business/business address
 Name of writers
 Date of submission
 Table of contents
 List of topics, list of figures (if there’s
any), paging
 Executive Summary
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14. Chapter 5: Business Plan
5.6 Business Plan Format
 Main Body of the Business Plan
 Introduction (briefly tell what is all about)
 Purpose (what you focus at)
 Company Background (all about your company)
 Owner/Partner background (formal biodata of owners)
 Location of the business (map, address, why choose)
 Administrative Plan (organizational chart, description)
 Marketing Plan (4p’s, marketing strategies, planning)
 Operation Plan (how the product/service produced)
 Financial Plan (describe capital, profit, lost, return)
 Conclusion (summary why writing business plan)
© 2010 Cosmopoint Slide 14 of [11] Topics

15. Chapter 5: Business Plan
5.6 Business Plan Format
 Appendices
 Balance sheet/financial statement
 Supplier’s quotation
 Agreement letter
 Letter of references
 Research findings
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16. Chapter 5: Business Plan
5.7 Business Plan
 For more understanding what should be in the business plan,
herewith I attach you the additional information on Business Plan
description. Enjoy reading on next slide! 
© 2010 Cosmopoint Slide 16 of [11] Topics

17. Chapter 5: Business Plan
5.8 The Executive Summary
 It should best be summarized in 1 page (maximum 2 page only). The
less the better.
 A brief description of the proposed business and the product/service
it will provide.
 The most important trends in the industry.
 The type of advertising and promotion that will be implemented.
 Sales and Profits from the past 3 years (if the company is an existing
business).
 Projected Sales and Profits for the next 3 years.
 The education and work experience of the owners and key personnel.
 Any other information that is critical in understanding how your
business operates.
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18. Chapter 5: Business Plan
5.9 State your Mission Statement
 In writing a business plan, please
state your mission. This is
advisable to prepare good business
plan. This can include:
 State the purpose of your
business.
 Identify the products and/or
service to be offered.
 Describe your management
philosophy.
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19. Chapter 5: Business Plan
5.10 Describe your product/service
 To include information concerning
any applicable data such as:
 Size, shape, colors
 Raw materials
 Weight, speed
 Packaging, texture, etc
 To include information concerning
services such as:
 Personalized attention,
custom ordering
 Guaranteed response time,
trial orders
 Money-back guarantee, etc.
© 2010 Cosmopoint Slide 19 of [11] Topics

20. Chapter 5: Business Plan
5.11 Analyze the competition
 Identify 3 of your main competitors
by name.
 State the distance between you and
each of the competitors. (e.g. how
far? How long?)
 Describe their trading areas in
comparison to yours.
 Identify the strengths and
weaknesses of your competitors by
using the following checklist. (Note:
Not all information will be available
on all competitors).
© 2010 Cosmopoint Slide 20 of [11] Topics

21. Chapter 5: Business Plan
5.12 Describe your pricing strategies
 State your pricing objective, the
goal to be achieved through pricing
such as:
 A certain level of profit
 A specific market share
 To reach a certain sales
volume
 Describe the typical markup in this
industry and how your prices
compare.
© 2010 Cosmopoint Slide 21 of [11] Topics

22. Chapter 5: Business Plan
5.12 Describe your pricing strategies
 Identify your pricing policies and general pricing guidelines.
 Examples:
 Will you run seasonal sales?
 Will you try to match the competitors’ prices?
 Will you use coupons?
 Will you give employees discounts on merchandise
purchased?
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23. Chapter 5: Business Plan
5.13 Example: Describe any special pricing strategies
 Introductory prices – Low prices used to gain entry into market
 Price Lining – Grouping inventory into categories and then setting the
same price for all items in each category.
 Odd-ending – Prices set at odd numbers such as RM1.99, RM9.99,
RM29.99, etc
 Loss-Leader – Selling one or a few items below cost in order to attract
customers.
 All-One-Price-Setting every item equal to the same price.
 Bundling – Grouping items together and selling them for less than if
each item were purchased separately.
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24. Chapter 5: Business Plan
5.14 Describe your credit policy
 Describe your credit terms to
customers.
 Compare your credit terms to those
of your competitors
 State whether you will accept checks,
credit cards, etc.
 Segmentation – identify target market
by separating the customer into
groups of similar needs.
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25. Chapter 5: Business Plan
5.15 Describe your competitive advantage
 As much details as possible.
 Might include: - Quality, Price, Selection
(variety of product)
- Location, Service
- Fast turnaround, etc
 Provide an explanation of how you will achieve
your competitive advantage. (Try to combine
several advantages, if possible)
 Example: -How will you have better quality?
-What will make your service better?
-Why is your location better?
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26. Chapter 5: Business Plan
5.16 Describe the market segmentation
1. Geographically – the geographic area you will serve.
2. Demographically – the age, sex, race, income, etc. of your target
market.
3. Benefit – the benefits customers are buying such as status,
security/safety, convenience, romance, sociability, entertainment,
comfort, self indulgence, durability, etc.
4. Usage rate – the % of your customers that account for the largest
portion of sales.
5. Psychographically – the values and lifestyle of your customers such
as outgoing, introverted, scholarly, partygoers, athletic, family
oriented, etc
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27. Chapter 5: Business Plan
5.17 Describe your location
1. Give the business address
3. State whether the property is correctly zoned or if rezoning is
necessary
- Residential, commercial, industrial, agricultural
4. Describe your trading area.
6. Provide the demographic data for your trading area giving age, sex,
race, income, occupation, etc.
8. Give the average traffic count in front of the outlet.
10. Describe anything hindering accessibility such as medians, one-
way streets, congested traffic, difficult entrance, etc.
12. Identify any factors helping accessibility such as multiple
entrances, a location near major highways.
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28. Chapter 5: Business Plan
5.17 Describe your location
8. Identify the businesses adjacent to your site. State whether these
businesses serve the same customers as your business and whether
they have similar operating hours.
9. Research and describe the community’s sign laws. Describe any
restrictions that would affect the sales of the business.
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29. Chapter 5: Business Plan
5.18 Common Location Mistakes
 Location Mistake 1: Choosing a location
because it is close to home
 Location Mistake 2: Choosing a location
because it is the cheapest
 Location Mistake 3: Choosing a location
because it is the only one available
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30. Chapter 5: Business Plan
5.19 Describe your promotion plan
 List the type of promotion you will use
 Sales and direct marketing, advertising
 Publicity and public relations
 Sales promotion
 State your promotional goals. Might include:
 A specific sales volume
 A percent increase in awareness
 To inform customers of a sale
 To eliminate seasonal merchandise, etc.
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31. Chapter 5: Business Plan
5.19 Describe your promotion plan
 Provide information on your inside and or outside sales force, state
whether you hire only experienced salespeople or if you hire
inexperienced personnel and train them
 Describe the compensation packages for the sales force (Salary only,
salary plus commission, etc)
 Describe how customer accounts are divided among the sales force –
geographically, by industry, by company size, etc.
 Describe any direct mail, catalogs, or direct response ads that will be
used.
 State the objectives of the promotions and the total annual cost.
 Identify company activities that can be used for publicity.
 Any plan to write for the local newspaper concerning the grand
opening, expansion plans, new products that are developed, etc. or
interesting enough to be featured on local radio or television stations
© 2010 Cosmopoint Slide 31 of [11] Topics