TOPIC:
BUSINESS PLAN
Business Plan
2
Business Plan
Abstract
These E-Notes contain the overview on how the student needs to prepare a
complete business plan. The students will be exposes to the general information on what are
the definition, purposes, and importance of a business plan. The students also will be
exposes on the contents of a business plan such as on how to prepare administration plan,
marketing plan, operational plan, & financial plan. General information such as owners’
background, background of proposed project, executive summary & etc will be expose to the
students as well. At the end of this e-notes, the students will be given few suggested
references on completed business plan.
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Business Plan
Table of Content
Content
Page
Introduction
5
Why do we need the business plan
6
What is a business plan
6
Who need the business plan
7
Developing a business plan
9
The importance of a business plan
10
Standard format of a business plan
10
Executive summary
12
Table of contents of a standard business plan
13
Introduction
14
Purposes of preparing a business plan
14
Company background
15
Owners background
15
Background of proposed project
16
Table of contents of a standard business plan
17
Administration plan
20
Marketing plan
23
Financial plan
23
Conclusion
29
Appendices
29
Exercises/Activities
30
Summary
31
Glossary
32
Suggested References
33
References
34
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Business Plan
INTRODUCTION
A business plan is a formal statement of a set of business goals, the reasons 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.
A good business plan must be able to communicate the business ideas & goals. A
good business plan must be able to help the business to expand in the future.
In its simplest form, a business plan is a guide a roadmap for your business that
outlines goals and details how you plan to achieve those goals in a certain period of time.
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Business Plan
WHY DO WE NEED A BUSINESS PLAN?
You have probably discovered a new idea in business & you’re maybe can’t wait to start a
business. There’s so much to learn and gather that is can become quite interesting. But,
have you assessed whether you are an entrepreneur at heart and ready for any challenges?
Do you know what kind of business you’re interested in? The next step will test you.
A business plan is a necessary tool for all businesses. Imagine that you’re trying to build a
home without a blueprints or a movie without a script, don’t start a business without any
blueprint. Take all the information gathered and put all those ideas onto paper. Never keep
the ideas in your brain.
NO PLAN, NO MONEY
Without a business plan, banks or investors will not
entertain the thought of financing your business. It is
your only foot in the door, so make sure it shines.
WHAT IS A BUSINESS PLAN?
A business plan is a written document that describes a business:
•
Objectives
•
Strategies
•
Market and;
•
Financial forecasts.
It has many functions, from securing external funding to measuring success within your
business.
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Business Plan
WHO NEED THE BUSINESS PLAN?
There are few parties who need the business for few reasons. Business plan is very
important as it give important info for the parties.
a) Entrepreneur
•
Able to analyze the strengths and weaknesses of the company as well as threats
& opportunities that would be faced in future
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Business Plan
•
Act as a guide of the business from setting business objective to establish daily
priorities
b) Shareholders
•
They need business plan to critically view the draft plan
•
They review the business plan to make decision whether to become the
shareholder of the company or not
c) Bankers/Creditors/Financial institutions
•
Business plan is needed when applying for a business loan
•
Most bankers need the business plan to review whether the entrepreneur
qualified for the loan or not
d) Investors
•
The business plan should explains the reason why the investors should invest in
the business and how the capital provided will be used by the entrepreneur
•
When a business plan is prepared accordingly to information given, the investors
will gain confidence in the company
e) Management/Employees
•
Is needed to communicate with the management team
•
The management will come up with strategies and objectives for the business
f) Clients/Customer
•
To convince the organization’s clients of the business ability and capability to
fulfill the job contract
•
Customers will also be interested in the business plan to look for information
about the company which influence their decision to purchase the company
producrs or services
g) Supplier
•
Convince the supplier of the viability of the venture
•
The business credit given today can be transformed into a long term business
arrangement benefit both supplier and business
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Business Plan
DEVELOPING A BUSINESS PLAN
Steps to be followed while preparing a
Business Plan:
•
Write out what you want to do or what
type of business it is to be.
•
Write out your purpose in starting this
business.
•
Write out your vision for the business:
 Short Term (0-3yrs)
 Medium Term (3-5yrs)
 Long Term (more than 5yrs).
•
Write down a list of what resources you
know you need to start your business: e.g. an office, a bank loan etc.
•
Clearly state any uncertainties you may have, for example, you may be uncertain
about the type of business structure to create - a company or a close corporation etc.
•
Identify your market.
•
Identify your competitors.
•
Attach a cost to each item in (4) and develop your fixed and your start-up costs.
•
Work out how many months your business may have to survive before its income
equals the expenditure
•
Give careful thought about how you will make your business known - how you will
market your products or services - and calculate the costs associated with this
marketing.
Know Your Goals and Objectives
By knowing why you are preparing this plan, you
can save time and effort by focusing on the
important areas.
Business plans often contain filler information that
is not pertinent. If you need to borrow funds, ask
the lending institution exactly what is required.
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Business Plan
THE IMPORTANCE OF BUSINESS PLAN
Business Plan set few important aspects. The importance of business plan set as follows:
•
Creates the opportunities for
success
•
Set the business mission
•
Determines the right way of
managing the business
•
Increases the stakeholders
confidence
•
Determines barriers to the venture
•
Determines the company’s performance
STANDARD FORMAT FOR A BUSINESS PLAN
When you’re planning to write a business plan, you should know what are the contents of a
standard business plan which usually contains all these in information.
•
Cover Letter
•
Cover Page/Title Page
•
Executive Summary/Abstract
•
Table of Contents
•
Introduction
•
Purpose
•
Company Background
•
Owners Background
•
Location of Business
•
Organization/Administration Plan
•
Marketing Plan
•
Operational Plan
•
Financial Plan
•
Conclusion/Summary and Recommendation
•
Appendices
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Business Plan
COVER LETTER
This is your chance to make a good first impression. The
cover letter will be the first thing the bank sees as they
consider whether or not to invest in your business. Make a
good impression.
•
Keep the cover letter short-1 or 2 pages
•
Address it to a specific person, if possible
•
Use the proper format
•
Be clear about why your practice would be a good
investment for the bank
COVER PAGE
Cover Page create the first impression and
favorable image that reflects the nature of the
business. Cover page contains:
•
Title of business plan
•
Logo
•
Name & address of business
•
Name of writer/s
•
Submission date
•
Company mission
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Business Plan
EXECUTIVE SUMMARY
The executive summary is what most readers will go to first. If it is not good, it may be the
last thing they read about your company. Lenders in particular read executive summary
before looking at the rest of a plan to determine whether or not they want to learn more
about a business. Other readers will also go first to your executive summary to get a
snapshot of your business and to gauge your professionalism and the viability of your
business.
While your executive summary is the first part of your plan, write it last. As you create the
other sections of your plan, designate sentences or sections for inclusion in your summary.
Your executive summary should be one page only and include these:
•
Business concept
•
Financial features
•
Financial requirements
•
Current state of your business
•
When it was formed
•
Principal owners and key personnel, and major achievements
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Business Plan
TABLE OF CONTENTS FOR A STANDARD BUSINESS PLAN
Table below shows a standard format of a business plan. You can organize your content of
your business according to the example shown below:
No
Item
1.
Introduction
2.
Purposes of preparing business plan
3.
Company background
4.
Owners background
5.
Background of proposed project
6.
Organization plan
7.
Marketing plan
8.
Operational plan
9.
Financial plan
10.
Conclusion
11.
Appendices
Page
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Business Plan
INTRODUCTION
This part introduced the proposed business venture which contains these information:
•
Name of the company
•
Nature of business
•
Industry profile
•
Business location
•
Date of business commencement
•
Justification of planned project
•
Factors in selecting proposed business
•
Future prospect of selected business
When explaining this part, explain it simple & clear. Make sure that the bankers understand
what you’re trying to explain.
PURPOSES OF PREPARING BUSINESS PLAN
The entrepreneur should clearly state the purpose of preparing the particular business plan.
Normally, entrepreneur will state these reasons in their business plan.
•
To apply financing facilities
•
To act as the guideline in managing the business
•
To allocate the business resources effectively
•
To analyze and evaluate the project viability and growth potential
The main purpose of preparing business plan not necessary to apply financing facilities from
financing institution. Business plan can also be your business mapping for the certain period
of time.
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Business Plan
COMPANY BACKGROUND
The entrepreneur should give details on company background. Make it in point form. Details
in company background are as follows:
•
Name of the business
•
Address of business
•
Telephone/fax no/e-mail
•
Form of business
•
Main activity
•
Date of commencement
•
Date of registration & registration no
•
Initial capital
•
Name of bank & account no
OWNERS BACKGROUND
This part focuses on two aspects, which are (1) the personal details of owners or partners &
(2) the partnership agreement. Details in owners background are as follows:
•
Name of the owner/partners
•
Identity card number
•
Permanent address
•
Correspondent address (includes website/email address)
•
Telephone number
•
Date of birth
•
Age
•
Marital status
•
Academic qualification
•
Course attended
•
Skills
•
Present occupation
•
Experience
1
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Business Plan
•
Name of the business
•
Form of business
•
Location of Business
•
Equity Contribution
•
Financial Matters
•
Management & Position
•
Death & Dissolvement
•
Labour rights
•
Other matters
•
Signature of shareholders
2
BACKGROUND OF PROPOSED PROJECT
This part will focus on the details of chosen location. Explain this section in short paragraph.
•
Physical location
•
Price of premise
•
Distance from the source of raw materials
•
Availability of manpower
•
Transportation facilities
•
Distance from customers
•
Basic amenities (Electric, water, & telephone facilities)
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Business Plan
ADMINISTRATION PLAN
This part explains how the business will be
manage in order the objective of the business
can be achieve. It is a plan that describe the
contribution of management team and staff to
the bottom line, setup plans, and strategies of business. Basically, these info are included in
the plan:
 Mission, vision, & objectives
 Organizational chart/structure
 Manpower planning
 Schedule of tasks & responsibilities
 Remuneration plan
 List of office equipment & supplies
 Administrative budget
MISSION, VISION, & OBJECTIVES
MISSION
 A mission statement defines the long-term goals
 business's mission statement is more permanent than an objective in a business
plan. It must be applied consistently over time. The mission statement serves as a
reminder -- to you, your employees, and your customers -- of the main purpose of
your business
VISION
 Vision statement is about what the business's future will look like if the mission is
achieved. Some say a vision statement imagines what success looks like
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Business Plan
OBJECTIVES
 Spell out your goals; specify results and activities that can be easily tracked
 Objectives don't have to be financial. You can set objectives for performance,
customer satisfaction, and other key elements of success, as long as you define how
they will be measured
ORGANIZATIONAL CHART/STRUCTURE
A diagram that shows the structure of an organization and the relationships and relative
ranks of its parts and positions/jobs. The term is also used for similar diagrams, for example
ones showing the different elements of a field of knowledge or a group of languages.
Example of organizational chart
MANPOWER PLANNING
State the manpower will be used in business. Explain the number of manpower needed in
your business. State the position together with total number of staff needed
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Business Plan
SCHEDULE OF TASKS & RESPONSIBILITIES
State the responsibilities for each position in your organization. Example, for the account
clerk position, state the responsibilities for the position
REMUNERATION PLAN
State the remuneration for all the position in your organization. State the salary, number of
worker, & deduction (EPF & SOCSO)
LIST OF OFFICE EQUIPMENT & SUPPLIES
You need to list the office equipment needed in your administration plan. For example: you
might need a photostat machine, state the quantity for the photostat machine, price, & total
price
ADMINISTRATIVE BUDGET
List the administrative budget. For example, fixed asset, stationeries, or any other expenses
that related to administrative need to be taken into account. Never forget to list all the
expenses as it will affect the financial part.
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Business Plan
MARKETING PLAN
The activities that are carried out systematically in an
organized manner. It is a way to attract customers to buy
the company product/services. It is a critical activity since
it provides the opportunity for the business to develop and
grow through the exchange between business entity & the
customer.
 Description of products or services
 Target market & market segmentation
 Market size
 SWOT analysis
 Market share
 Sales forecast
 Marketing strategy
DESCRIPTION OF PRODUCTS OR SERVICES
•
Describe the proposed product or services offered by you
•
Explain the product features, benefits, and overview of processes or technology to
create the product or services
•
Describe the product differentiation compared to the competitors product
TARGET MARKET & MARKET SEGMENTATION
•
A target market is a group of customers towards which a business has decided to
aim its marketing efforts and ultimately its product or service.
•
Market segmentation is the process of dividing a market into categories of consumer
types of variables
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Business Plan
 Geographic variables – country or region
 Demographic variables – age, occupation, gender, education level, social
class of income, family, race
MARKET SIZE
•
The number of individuals in a certain market who are potential buyers and/or sellers
of a product or service.
•
Entrepreneur is interested in knowing the market size before launching a new
product or service in an area.
•
Normally quoted in unit of goods or sales (RM)
SWOT ANALYSIS
•
S.W.O.T. is an acronym that stands for Strengths, Weaknesses, Opportunities,
and Threats.
•
A SWOT analysis is an organized list of your business’s strengths, weaknesses,
opportunities, and threats.
•
List the SWOT factors for your business.
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Business Plan
MARKET SHARE
•
Refer to the portion of how much of the market that the business can capture or
control after you recognize the market size and the competitor’s position
SALES FORECAST
•
Sales forecasts are estimates of your sales for the forecast period.
•
Ask yourself how much can you realistically sell next year, and how much will you
charge for your goods or services?
•
If you are starting a new business and don't have a business history, base your sales
estimates on market research, industry information, business strategies and
objectives.
•
Your future sales will be based on sales forecast. but remember, sales forecast is an
estimation only
MARKETING STRATEGY
•
An organization's strategy that combines all of its marketing goals into one
comprehensive plan.
•
A good marketing strategy should be drawn from market research and focus on the
right product mix in order to achieve the maximum profit potential and sustain the
business.
•
The marketing strategy is the foundation of a marketing plan.
•
Marketing strategies consist of four key variables or also known as 4Ps of marketing
mix: Product, Price, Place, & Promotion.
•
State the marketing strategy that will be used in your business whether you want to
use the product strategy, price strategy, place strategy, or promotion strategy
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Business Plan
OPERATIONAL PLAN
A description of a business physical location,
facilities & equipment, inventory requirements,
& suppliers.
It also includes operational details such as
description of the manufacturing process. It is
a systematic direction and control of the
processes
that
transform
resources
into
finished goods and services that create value
and benefit to customer
OPERATIONAL PROCESS
•
Depicted in the form of flow chart
•
State the key steps in the operation process for your product or even services
•
Present the operations process flow in a chart
PROCESS FLOW CHART
•
State the key steps in the operational process in producing the products or services
of the business
•
Among the activities in the process flow chart are operation, transportation,
inspection, delay, & storage
PRODUCTION SCHEDULE
•
The amount of product that a company can produce
•
The production schedule specifies the operation output in units of product or hours of
operation
MATERIAL REQUIREMENT
•
List the raw materials or inventory needed in the operational process
•
include the quantity required, price, and suppliers
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Business Plan
•
The list also comprises the mode of payment which will be used to purchase the raw
material and the ending stock that can be estimated as a portion of the monthly or
yearly purchase
MACHINE AND EQUIPMENT
• List all the machines & equipment used in production
• List together with the estimated price, number of units, & suppliers name
LOCATION OF OPERATION
•
Specify the site of your business operation
•
Location should be near to raw materials and market, easy to get the staff, near to
basic amenities, & transportation.
OPERATION LAYOUT PLAN
•
Draw the floor plan of the operational space
•
Can be in the form of process layout, product layout or marketing layout
•
Operational layout plan should show the logical arrangement of the physical facilities
of the business
OPERATION COST & COST PER UNIT
•
Calculate the total operational cost
•
Divide by the number or unit or output produced
•
Operational cost is a sum of total costs of direct and indirect material, direct & indirect
labour, & overhead
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Business Plan
OPERATIONAL BUDGET
•
The operational budgets consists of all operational expenses
•
Consists of all operational expenses under the following categories
 Capital expenditure/Fixed asset expenses (Long term fixed asset for
production. Eg: Machinery)
 Working capital/ Monthly expenses (Payment that has to be made every
month. Eg: direct material course, direct labour cost, & overhead)
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Business Plan
FINANCIAL PLAN
A description of how the business will be finance and how it will maintain a sound financial
position. It gives overall picture of the total cost that is needed to run the entire business
venture. The financial plan is prepared after all budgets pertaining to marketing, operation,
and administration are completed. The crucial aspects of financial plan are the total project
cost, sources of financing and preparation of pro forma statement.
PROJECT IMPLEMENTATION SCHEDULE
•
The initial amount of investment that needed to start a new business
•
Summarizes the cost of buying fixed assets , working capital requirements, as well as
expenditures
•
Covers short term expenditure and short term expenditure
 Capital expenditure -
Land, building, machinery, transportation, furniture,
fixtures & fitting
 Working capital – Part of operating capital. Cover expenses in administrative,
marketing, & operational
 Other expenses – Other costs appear for implementing the proposed venture
(Eg: business registration fee, road tax, stamp duties, training fees, &
business licence)
 Contingency allowance – Additional funds set aside for items that maybe
needed during the implantation of the project. Allocate at least 5% for the
contingency allowances
SOURCES OF FINANCE SCHEDULE
•
Refer to sources of fund obtained to finance your proposed project
•
Can be categorized into internal sources & external sources
 Internal sources - personal fund, family & friends, retirement account
 External sources – Bank & other financial institutions, government loan, stock
market
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Business Plan
HIRE PURCHASE
•
Form of financing used in the purchase of fixed asset
•
Example: To finance transportation vehicles, business premises, machinery &
equipment
•
Listed in Hire Purchase Act
•
The total repayment will depend on the amount of loan, interest rate, & loan duration
LOAN AMORTIZATION (REPAYMENT)
•
A loan with a fixed rate basis is amortized when both principal and interest are paid
by a sequence of equal payments made over equal time intervals
•
Annual principal payment is derived by dividing the loan amount with the period of
financing
•
Example: Assuming that the period of term loan is five years and the total amount is
RM50,000.00. The annual payment of principal for term loan is RM10,000.00
(RM50,000/5 years)
FIXED ASSET DEPRECIATION
•
A reduction in the value of fixed assets to reflect deterioration in the asset over time
•
It is a non-cash expenses. It depreciation lower the company earning and increasing
free cash flow
•
Specific accounting rules are used to measure the depreciation
•
Except land, this schedule are used to measure the depreciation of fixed asset
•
items needed to be depreciated are the cost, method used, economic life in years,
annual depreciation, accumulated depreciation, and book value
PRO FORMA FORECASTED CASH FLOW STATEMENT
•
Projected statement of a company cash inflow and outflow throughout the planned
period
•
Predict the rate at which money will flow in and out in the business
•
Measure the business’s liability & its ability to pay its bills & other financial obligation
•
Begins with the existing cash balance for the business
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Business Plan
 Cash inflow – owners capital in cash, loan, cash sales, collection of account
receivables, sales of assets & etc
 Cash outflow – administrative expenditure, account payable, inventory
 Cash deficit – difference between cash inflows and cash outflows
 Cash position – the beginning and ending cash balances for a particular
period. The final component in the pro forma cash flow statements is the
cash position
PROFORMA FORECASTED INCOME STATEMENT
•
Shows the financial performance expected profit & loss of the business
•
Usually show in three consecutive years
•
Compare expenses against revenues for a certain period of time to indicate profit &
losses
•
Prepare for the first, second, and third of the business for the manufacturing, trading,
and service-based business
PRO FORMA BALANCE SHEET
•
Prepare to show how the business asset is acquired and the sources used to finance
these asset
•
Is a financial statement that disclosed business assets, liabilities, & owner’s equity
•
Bank require the account prepares for the first, second , & third year of the business
•
The owner of the business should recognize which item to be categorized as fixed
assets, current assets, current liabilities, & long term liabilities
 Fixed asset – Equipment, machinery, furniture, fixtures & fittings, vehicles,
building, plants, & etc
 Current asset – Cash, account receivables, inventories, & stock
 Current liabilities – Account payable, Accrued payments
 Long term liabilities – long term loans, bond issues
 Owner’s equity – Investment made by the owner through original capital
contribution in term of cash or asset plus the accumulated amount of net profit
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Business Plan
CONCLUSION
•
Concludes & justified the purposes of preparing the business plan
•
It also highlight the viability & potential of the proposed project
APPENDICES
•
All relevant document that support the business plan
 Supported document from financial institutions
 Copies of courses certificates attended
 Offer letter for tender
 Permit
 Licence
 Promotional brochures or advertisement
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Business Plan
EXERCISES/ACTIVITIES
You are required to prepare a complete business plan. You are required to discuss,
choosing, and evaluate the business idea. After you completed the process, prepare a
business plan
The initial capital for your business is NOT MORE THAN RM150,000.00. Decide how
you’re to use the capital into your business.
Your business plan contents are as follow:
1.0
Executive Summary
2.0
Purpose
3.0
Business Background
4.0
Owners Background
5.0
Organization Plan
6.0
Marketing Plan
7.0
Operation Plan
8.0
Financial Plan
9.0
Conclusion
11.0
Appendices
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Business Plan
SUMMARY
A business plan is a guide to a roadmap for the business that outlines goals and details on
how an entrepreneur plan to achieve goals in a certain period of time. Business plan
contains all financial information in the administrative, operational, & marketing plans that
combined together into an account that will determine the cost of business.
A business plan guided an entrepreneur on how to utilize the capital effectively. Too
many people think that business plans is something that an entrepreneur has do to apply
loan or find investor. They are vital for those purposes, but there’s a lot more to it. An
entrepreneur should be smart on planning a good business plan and allocate the cost wisely.
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Business Plan
GLOSSARY
Business plan – Rancangan perniagaan
Blueprint – Rangka tindakan
Cash deficit – Defisit tunai
Cash inflow – Aliran tunai masuk
Cash outflow – Aliran tunai keluar
Current asset – Aset semasa
Current liabilities – Liabiliti semasa
Dissolvement - Pembubaran
Executive summary – Ringkasan eksekutif
Equity contribution – Sumbangan ekuiti (modal)
Fixed asset – Aset tetap
Hire Purchase Act – Akta Sewa Beli
Market segmentation – Segmentasi pasaran
Owners’ equity – Ekuiti pemilik
SWOT Analysis – Analisis SWOT
Working capital – Modal kerja
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Business Plan
SUGGESTED REFERENCES FOR STUDENTS
Sarimah Hanim Aman Shah & Abdul Rahid Mohd Ali (2010), Entrepreneurship(2nd ed), Shah
Alam: Oxford Fajar Sdn. Bhd.
Irise Laundry
http://eprints.uitm.edu.my/4694/1/ETR_Irise_Laundry.pdf
20 Rancangan Perniagaan yang Berjaya.
http://jutawan-kini.blogspot.com/2011/10/20-kertas-kerja-rancangan-perniagaan.html
How to write a business plan.
http://malaysia.smetoolkit.org/malaysia/en/content/en/793/Creating-an-Effective-BusinessPlan
How to write a business plan for SMEs
http://www.hsbc.com.my/1/PA_ES_Content_Mgmt/content/website/pdf/commercial/sme_biz
_plan.pdf
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Business Plan
BIBLIOGRAPHY/REFERENCES
What Is A Business Plan. Retrieved July 31, 2014 from
http://www.smallbizpro.com/Chapter7Businessplans.pdf
What Is A Business Plan? Retrieved July 31, 2014 from http://www.dineshbakshi.com/igcsebusiness-studies/business-activity/revision-notes/1546-writing-a-business-plan
Creating An Effective Business Plan. Retrieved August 1, 2014 from
http://malaysia.smetoolkit.org/malaysia/en/content/en/793/Creating-an-Effective-BusinessPlan
Plan Your Plan Retrieved August 1, 2014 from http://www.entrepreneur.com/article/38292
Business Plan Basics: Vision Statements, Mission Statements, and Objectives. Retrieved
August 18, 2014 from https://smallbusiness.yahoo.com/advisor/business-plan-basics-visionstatements-080000612.html
Sarimah Hanim Aman Shah & Abdul Rahid Mohd Ali (2010), Entrepreneurship(2nd ed), Shah
Alam: Oxford Fajar Sdn. Bhd.
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