CHAPTER THREE
BUSINESS MODEL AND PLAN DEVELOPMENT
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3.1 BUSINESS MODEL CANVAS TO DEVELOP BUSINESS
MODEL
• Business Model is the conceptual
structure supporting the viability of
a business, including its purpose, its
goals and its ongoing plans for
achieving them.
• Business Model Canvas is a flexible,
design-driven template for both
startups and established businesses.
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Business model canvas components:
• It has four main
pieces.
In the middle is
the key piece:
What are you
doing and why
does it matter to
people? This is
called the Value
Proposition.
 On the right are
sections that deal with
your customers:
 who they are, what
relationship you have
with them and how
will you reach them.
(Customer
relationships,
Customer segments,
Channels)
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Business Model cont’d…………….
 On the left are sections
that deal with creating
your idea:
What key partners
do you need, what
activities and
resources do you
require to produce
your big idea? (Key
partners, Key
activities, Key
resources)
 On the bottom are
the big financial
questions:
How much will
your idea cost to
produce and how
will you make
money from it?
(Cost structures,
Revenue
streams)
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3.2 THE CONCEPT OF BUSINESS PLAN
• A business plan
can be defined as
a written
document
prepared by the
entrepreneur that
describes all
relevant external
and internal
elements involved
in starting a new
venture.
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• It is often an
integration of
functional plans such
as marketing, finance,
manufacturing/opera
tions, and human
resources.
• If the plan is
prepared for a start
up, it helps the
entrepreneur avoid
costly mistakes.
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GUIDELINES IN PREPARING A BUSINESS PLAN
 Keep the plan
respectably short
 Organize and
package the plan
appropriately
 Orient the plan
towards the future
 Avoid exaggeration
 Highlight critical
risks
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 Give an evidence of
an effective
entrepreneurial team
 Do not over diversify
 Identify the target
market
 Keep the plan written
in the third person
 Capture the reader’s
interest
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Format and Design of Business Plan
1.
2.
3.
4.
5.
6.
7.
8.
9.
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Introductory Page
Executive Summary
Environmental and Industry Analysis
Business description
Marketing plan
Production Plan or Operational Plan
Organizational plan
Assessment of Risk
Financial plan
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Cont’d…………………..
1. Introductory
page:
This is the title
or cover page
that provides a
brief summary of
the business
plan’s contents.
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• 2. Executive
summary:
This section of the
business plan is
prepared after the total
plan is written.
About 2-3 pages in
length, the executive
summary should
stimulate the interest
of the potential
investor.
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Cont’d…………………..
3. Environmental and
industry analysis:
It is important to put the
new venture in proper
context by first conducting
environmental analysis to
identify trends and
changes occurring on a
national and international
level that may impact the
new venture.
• Examples of these
environmental
factors include:
 Economy
 Culture
 Technology
 Legal concerns
 Industry demand
 Competition
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Cont’d…………………..
4. Description of the
venture:
 In this section, the
entrepreneur must
ascertain the size
and scope of the
business.
 It should begin
with the mission
statement.
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• Other issues that must be
discussed in this section
include:
• The product or service
• The location and size of
the business.
• The personnel and office
equipment that will be
needed.
• The back ground of the
entrepreneur(s) and the
history of the venture. 11
Cont’d…………………..
5. Marketing Plan:
 this section of the
business plan
describes how
the product(s) or
service(s) will be
distributed,
priced, and
promoted.
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The marketing section
includes:
 A more detailed description
of the products and services
 An analysis of the
competition
 An examination of the
pricing structure
 An explanation of the
competitive advantage
 A profile of the target market
 A promotional plan
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Cont’d…………………..
6. Production Plan or
Operational Plan
 If the new venture is
a manufacturing
operation, a
production plan is
necessary.
 This plan should
describe the
complete
manufacturing
process.
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 If the venture is not a
manufacturing
operation but retail
store, service, or
some other type of
non-manufacturing
business, this section
would be titled
operational plan
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Cont’d…………………..
7. Organizational
plan
The organization
plan is part of the
plan that
describes the
venture’s form of
ownership-that is,
proprietorship,
partnership, or
corporation.
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If the venture is a
partnership, the
terms of the
partnership should
be included.
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Cont’d…………………..
• Potential risks to
8. Assessment of
the new venture
Risk
• Every new venture • What might
happen if these
will be faced with
risks become
some potential
reality
hazards, given the
particular industry • strategy that will
and competitive
be employed to
environment.
prevent, minimize,
or respond to the
risks
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Cont’d…………………..
• Three financial areas are
discussed in this section of
the plan:
 The start-up costs
 How the business will be
financed
 Projected Financial
Statement
i. Projected Balance
Sheet Statement
ii. Projected Income
statement
iii. Projected Cash
Flow Statement
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9. Financial Plan
 The financial plan
determines the
potential Investment
commitment
needed for the new
venture and indicates
whether or not the
business is financially
feasible.
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