Lesson 5: THE BUSINESS PLAN

Objectives

After studying this lesson, you should be able to:

 Explain what business plan is;

 Describe the characteristics and reasons for writing a business plan;
 Understand the parts of business plan;
 Identify the parts necessary in the presentation of business plan.

The Business Plan

What is business plan?

A business plan is a realistic written description of the business’ future that helps
entrepreneur determines the resources needed to achieve the objectives of the firm. This
formal document guides the owner what to do and how to execute the plan.
To an entrepreneur, business plan serves as a blueprint to guide him/her during
the lifetime of the business and to accomplish the requirements for the lenders and
investors. It describes the relevant external and internal elements in starting a business.
It also demonstrates the ability of the firm to sell its product/service to earn satisfactory
profit and attract potential investors for the business.

Reasons for Writing a Business Plan

Steven Robbins, a Venture Coach, wrote in his article Why You Must Have A
Business Plan the purpose of writing a business plan. He said, “It’s a tool for
understanding how your business is put together. You can use it to monitor progress,
hold yourself accountable and control the business fate.”

There are two primary reasons for preparing a business plan.

1. A business plan serves as an overall guide for the business. It guides the
entrepreneur in implementing the plan and serves as a reference of the policies. It
guides the entrepreneur in implementing the plan and serves as a reference of the
policies, operational, technical and financial matters in the actual process of the firm.
2. A business plan serves as a handy means to convince lenders and investors. A well-
written business plan gives lenders and investors an indication of the potential of the
firm and as assurance the business is a worthwhile investment. It will give an
entrepreneur a possibility for a bank loan or financing support in the form of financial
projections.
Characteristics of a Business Plan
Developing a business plan does not necessarily mean putting too much time or
details on the paper. There are some investors who are not interested to read 100-page
plan most especially if the first few pages do not show any value at all.
Author Gilles and Mondejar in their book Guide to Entrepreneurship, they relate
reading a business plan to a book. When a reader gets interested on one section of the
book, he would continue reading it. A business plan must be interesting, factual and
professional to impress an investor and make him read your plan.
Tim Berry, an entrepreneur and business planner, wrote in his article “A Simple
Business Plan”, the most basic characteristics of a business plan. He said “An easy to
read quickly format is more important than ever. If you want people to read the business
plan you develop and most people do… then my advice to you is keep it simple.” He
reminded not to confuse the business plan with a doctoral thesis.

List below are the characteristics of a winning business plan:

1. Short and Simple

KISS your business plan – meaning keep it short and simple when preparing
your plan. Do not confuse your readers with excessive words just to impress them.
Putting too many details, just to make your business plan impressive, can actually
hinder the real motive of the document. Do not “overkill” your business plan just to
convince someone to invest in your business.
2. Interesting
Write business plan that would give impact to the readers. The aim of the
entrepreneur should be able to capture attention of the leaders and investors by laying
out the relevance of the business plan.
3. Easy to understand
Another characteristic of a sound business plan is easy to understand. It should
provide clear and concise information on all the aspects of the proposed venture.
Aside from keeping it simple, an entrepreneur can present information graphically to
help in explaining the contents of the business plan. However, multi-color graphs are
not advisable to use to prevent confusing investors understanding the message of
your document.
4. Error-free
It important that the content of the business plan have no typing errors.
Remember that an error-free document adds god impression both to the entrepreneur
and the business plan.
Outline of the Business Plan
Business plan may vary on the nature of the business. The following elements are
essential components ofa business plan.
Cover Page
Table of Contents
I. Executive Summary
II. Company Summary
III. Product and Service Analysis
IV. Market Analysis
V. Strategic Plan
VI. Financial analysis
VII. Operations and Management Profile
Appendix

Cover Page
The cover page includes information about the company. It includes:
a. Name of the business
b. Logo of the business
c. Names of the proponents
d. Address
e. Telephone number
f. Email and Website address
g. Date
h. Name of the person who prepared the plan

Table of Contents
The table of contents should list the sections and page numbers of the business
plan and the appendices.

Executive Summary
The executive summary is the brief overview of the entire business plan. It covers
the highlights of the business plan. Although it appears in the beginning of the business
pan, it is prepared after business plan is prepared. Remember that executive summary
is not an introduction or preface to the business plan. It is a summary of the plan itself
and the most important section in the business plan.
The executive summary should include:
a. Purpose
b. Overview
c. Features
 d. Financial Requirements
e. Growth

Company Description
The company description gives the reader information about the company and
where it is going. It should also include brief statement about people who runs the
business.
The company summary includes:
a. Name of the business and owner’s name
b. Background
c. History
d. Goals and Objectives

Product and Service Analysis

The product and service analysis describe the products or the services the
entrepreneur intends to offer to the customer. It should be able to describe the
uniqueness the product/service and how it will be positioned in the marketplace.
In this section, the investors would want to know how your product/services differs
from the competitors, its added value to the customers, how it will be used and its
competitiveness in the years to come.

Market Analysis
The market analysis should be able to show entrepreneur have segmented the
market. It presents the highlights of the industry, the list of competitors, the possible
costumers and the existing market.
It is important to include in this section the behavior of the consumers in the firm.

Strategic Plan
The strategic plan describes your plan of action. In this section, it should be able
to identify the details of marketing programs, pricing, distribution, sales, promotion and
advertising, and estimated sales or forecast of the firm.

Financial Analysis
The financial analysis section explains where the capital will come from and how
it will be returned to the investors. It is the financial explanation of the other sections. In
this section, it discusses the projections, breakeven analysis and the amount you will
spend before the venture becomes profitable.
Financial analysis includes the balance sheet, income statement, cash flow
schedule and break-even analysis.
Appendix
The Appendix section shows the supporting documents to make business plan
meaningful. It consists of of the owner’s resume, contacts with the suppliers and clients,
letter of intent, copy of copyright or patent (if applicable).

Name: ____________________________________ Score:____________

Grade & Section:___________________________ Date: _____________

Quiz 5

A. Identification. Identify the terms being described in the following. Write your answers
on the space provided.

_______________ 1. It serves as a blueprint to guide an entrepreneur in his business.

_______________ 2. It is a brief overview of the entire business plan.
_______________ 3. It gives reader information about company and where it is going.
_______________ 4. It describes the products or the services the entrepreneur intends
to offer.
_______________ 5. It presents the highlights of the industry, the list of competitors and
the possible customers.
_______________ 6. It describes the plan of action of the entrepreneur.
_______________ 7. It explains where the capital will come from and how it will be
returned to the investors.
_______________ 8. It gives background of the company’s management team.
_______________ 9. It shows supporting documents to make business plan meaningful.
_______________ 10. It serves as the overall guide for he business.
B. Essay. Answer the question in three (3) or more sentences. (5 pts.)
Why is it important to prepare a Business Plan?
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Case 5: Sammy’s Motor Repair Shop: In the Beginning

At age 26, Samuel Bugarin established his motor shop along the highway one
kilometer away from the commercial district of his town. He holds degree in Mechanical
Engineering and just after graduation, he started working as an apprentice in his uncle’s
motor shop. He prodded his uncle to expand his business but his advice was not heeded.

He thinks that the motor repair business is growing steadily. He noticed that the
new car models are operated with electronic systems installed in them. Sammy believes
that repair and maintenance of the new car models cannot be served adequately by repair
shops existing in the area.

Sammy immersed himself into learning the care and maintenance of electronic
installations in cars. He also acquired the skills necessary for maintaining efficient
performance of cars. When he thought he already possessed the required training, he
decided to become a motor repair shop entrepreneur.

Sammy gathered relevant information he thought oud be necessary in the

preparation of a business plan. He considered hiring at least five experienced mechanics.
He started constructing the building where his office and service facilities will be housed.
He made sure that customers can contact him through the telephone he installed in his
office. In addition, he maintains a handyphone so he can serve those whose car get
stalled somewhere.

Sammy stuck to his business plan and the business was very encouraging during
the first three years. On the fourth year of his operation, a new motor repair shop opened
just across the highway from the shop. It was inevitable that some of his customers would
move over to his new competitor. Sammy did not anticipate the threat now confronting
his business. He was already entertaining the idea of putting up another shop at the other
end of the commercial district. But now, it seems that this dream of opening another shop
is slowly drifting away. With the entry of the competitor, he is beginning to lose faith in
the usefulness of a business plan. He is apprehensive and he wants quick advice.
Guide Questions

1. If you were a friend of Sammy, what would you tell him?

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2. Is Sammy’s situation hopeless?

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3. What did Sammy miss regarding his business plan?

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