Business Plan Document
IMPORTANT
What is given in this is just a guideline and may be modified suitably according to the context
of the business.
The intent in preparing this note was to cover all possible issues a business plan document
should contain in as much detail as possible. However, for this note to be useful, it had to be
as short as can be meaningfully digested without having the need to go through a fat book on
business management. With the above contradictory objectives, this note makes an attempt to
deal with generic issues in writing a business plan, albeit in differing degree of detail, that
need to be covered in a business plan. A lot more can be said about each of the topics. This
note does not claim to cover all the issues in great detail and in great theoretical rigor for
which several management books are available. The treatment given to some of the topics
may be cursory and may not at all be sufficient.
Some of what is written in this note may not appear to be directly relevant. At a very high
level of abstraction, most of it should be applicable. The entrepreneur would have to think
through it to before finally leaving it as not applicable to his/her business.
For some entrepreneurs who have some kind of formal training in management, lot of what is
written in this note may seem obvious. However, the note is also meant for the consumption
of some of the budding entrepreneurs who do not have such formal training.
It may not be possible to obtain the information required to produce the business plan
document below without external help or without spending inordinate amount of time by the
entrepreneurs (which they can ill afford given the multiplicity of the tasks that they need to
manage in parallel). However, the purpose of the note is make the entrepreneur aware about
the issues that need to be understood (and covered in a business plan) and that the
entrepreneur would need be better off if he has considered these issues while he interacts with
the possible financers or makes his business strategy.
Most of what is prescribed in this note has been done by most of the entrepreneurs who have
submitted the business plans atleast to some degree of detail. However, it has been included in
this note to enable the entrepreneur to make the business plan in a bit a more systematic
manner. It is also understood that the given the time and other constraints during the
Enterprise KGP event, it may not have been possible for the entrepreneurs to cover every
aspect of the business in the business plan they had submitted to the panelists.
Ideally all the aspects of the business that are covered below should be included in a business
plan. However, in the context of the entrepreneurs approaching VCs, the entrepreneurs may
get some advice and inputs from the VCs in some of the general or specific aspects of
business (and accordingly the entrepreneur may not fret over them, if they are not able fill
those details in the business plan). For example, elaborate financial or demand modeling may
be desirable but not strictly necessary if the idea is good enough to catch VC’s attention.
Evolving a business plan is a detailed iterative process which is an ongoing activity even once
when the business is established. The manner in which a business plan is presented as given
below may suggest that it is a linear process but it is not. At every stage one has to revisit the
plan made earlier and revalidate the information, analysis and the assumptions made.
The views expressed in this note are personal to the author and do not represent Deloitte’s
viewpoint on the same.
PREPARING FOR QUESTIONS THAT MAY ARISE
Evolving a business plan involves asking yourself hard questions about the question. Some of
the general questions are given below. While being convinced yourself would be the first step,
preparing for these questions would help you to convince others. And expect counterarguments.
 Who is your customer?
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Why will he use your offering or any similar offering?
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How is your offering different from other offerings?
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When will he use your offering? How many such occasions arise when he
thinks your product/offering is useful?
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What alternatives will he consider?
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How does he decide to purchase your or any other offering? What
information does he seek? Who influences the decision? How much does he
think before purchasing? Is it a low involvement purchase or high
involvement purchase? What does he lose if he does not find the product to
be upto his satisfaction?
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How will you spread awareness about your product?
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Where will he access your services?
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Can he afford your service? Alternatively, can he pay a little more?
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Is your offering convenient enough? Are you offering him a small discount in
monetary terms when he has to spend lot more time to use/purchase your
product? Is it more convenient to forego the benefit the offering offers rather
than spend enormous amount of time to avail it (assuming it is cheaper)? Or
on the other hand, is it worth the extra premium your consumer pays you
rather than avail the alternative solution which is cheaper but has more
hassle?
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If the business is online business, does your consumer have access to internet
when he wishes to avail of the service? Or is it that most often when he will
decide to use the product/service, he is hanging out with his friends when a
telephone call is more convenient? Or most often he decides to avail that
service when at home where he does not have access to internet or even if he
has, booting the computer/laptop connecting to internet etc. is more hassle
than simply calling the service provider?
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What value does your service bring to him?
 How much volume do you expect? At those volumes do you expect to break even?
 Is the information, on which the business plan is made, right and from reliable
sources?
 Are the conclusions right? What are the assumptions? How do we know that the
assumptions are right? What validation has been done?
 Can the business be easily copied? How will one prevent some bigger player with
better brand recall and more financial muscle not to copy the business model
(assuming it is profitable)
 Why will the business model work? Has anyone tried and failed before? If it has not
worked earlier when someone else tried, why will it will work now?
 Is it one of those great ideas which as a consumer you will definitely take it if is
offered free but don’t see the need to pay for it?
 If it is in a business which is essentially an intermediary between the customer and
some other business, think of what the business partner will say - “My customer will
come to me anyway. Why should I pay you to ‘route’ my own customers to me!”
There should be strong case for the business partner to use your “intermediation”
services.
 Does the offering complicate the way a customer solves his problem? Instead of
availing your offering, if the customer can as well pay a few rupees more or go for a
less optimal solution than go for the ‘optimal’ or ‘only little more optimal’ solution
that you offer, why would he come to you?
SOME GENERAL POINTS ABOUT DOCUMENT WRITING
Writing about something also clarifies the thought process. So a well written business plan
would also clarify the business plan. It offers you opportunity to ask yourself several
questions to revalidate the information.
Structure the document so that all the relevant aspects of the business plan are covered and
each of them get appropriate coverage (not necessarily long or short but as per the importance
of the topic). Avoid duplication of the content.
One must be clear about what is an information, what is an analysis/inference and what is an
assumption. Though this looks obvious, in reality one often finds, in a not so well written
document, (even those written by premier B-School MBA passouts) information is presented
as analysis and assumptions are presented as information. Sources of information have to be
provided and as long as they are from reliable sources, they lend lot more credibility to your
business plan.
BUSINESS PLAN DOCUMENT STRUCTURE
Executive Summary of the Business Plan
Chapter 1 Need for the offering and overall concept
The need for the offering and the details of the offering should be explained before going on
to discuss about the other elements of the business plan. The ‘big’ idea should emerge from
this chapter.
Chapter 2 Market Analysis
This chapter should discuss
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Overall Market size and growth
Relevant Demographic data with sources/Relevant Demographic Trends
Competitive scenario
Segmentation Analysis of the market
Profile of Target customers
Positioning of your product/offering vs. competition - Key differentiators
Industry Trends/ Future Outlook
Policy environment if applicable
Other similar business models
Notes
The overall market could be defined broadly in the sense this may form the universal set (your
offering/other offerings in the market being the subsets of this universal set) This could also
be offerings which are not a direct competition to the proposed offering.
Demographic trends/data could reveal insights into trends in the consuming population in the
market. Hence these are indicators to broader consumption trends in the overall market.
However it is important to use only relevant demographic trends. The relevancy may be with
respect to the geography e.g. If your offering is limited to Metros or top tier cities, the trends
should be related to these cities only to the extent possible, unless of course, the trends are
universal and can be easily extended to your target segment. These trends would subsequently
form inputs to your demand estimation exercise.
Competitive scenario could profile the existing offerings/business models in the market. The
definition of competition should be broad enough to include those products/services which,
with some modifications or extension of the functionality of its own product/service can
easily substitute the proposed product/offering. The offerings could be in the same market,
same segment within the market or in some other segment of the market. The profiles should
ideally contain all relevant information about the competition such is publicly available or
that can be reasonably inferred from the information available. Some analysis (say SWOT
analysis) about the competition based on the information available is useful here. Profiling the
competitors can help understand the current positioning of the existing players and the
existing segmentation in the market. The information presented in this section should be
enough to evaluate the threat to the proposed business from the existing players.
Segmentation of the market and Targeting the right segment and Positioning your offering
(STP, in marketing jargon) is one of the most important activities in evolving a market
strategy. This exercise leads to answers to several fundamental questions about a business. A
market can be segmented across several parameters or dimensions. Some of the parameters
used frequently to segment a consumer (B2C) market often are gender, socio economic class,
age, occupation, attitude towards life, and several other parameters. Similarly in a B2B
market, there are several segments e.g. organized, small, medium, large etc. Segmenting the
market is the first step to evolving a marketing strategy in a given market. In a market where
there are existing players, analyzing their offering and positioning would also throw some
light on the existing segmentation in the market. This is not to mean that one has to follow the
existing segmentation in the market. Many successful products/offerings both by new
entrepreneurs as well by existing players have redefined the segmentation in the market.
Once the market is segmented, and the existing players profiled and their positioning in the
respective segments identified, an analysis of the players and the segments can be done to
assess the relative attractiveness of the segments. This would involve, identifying which
segments are crowded, have competition with deeper pockets, segments with entrenched
competition (better brand name), high and low growth segments, underserved segments,
profitable segments, segments with high and low barriers etc. Once the Segmentation
Analysis is done, defining your strategy for the chosen segment becomes relatively easier.
This is not to suggest that the segmentation exercise should be done before you dream about
the ‘big idea’. But it is extremely important to know which segment will find your offering
attractive enough to pay for it.
It is important to profile the target customers. This is one of the most important phases of
evolving a market strategy. Profiling should be done to as much detail as possible. Profiling
should contain all the details which will help you to put the customer in one segment or in a
different segment. If this is carefully done, you may realize that your customers come from
two or more distinctly different segments. In such a case you may have to have a different
strategy for each segment. Profiling the customers also helps understanding the whole
purchase process right from the felt need, to awareness about offerings in the market, to
purchase decision, payment, repeat purchase, after sales support, if applicable. In a B2B
market the whole process would be different than from a B2C business. For example in a B2B
business, one has to understand who in the organization will be initiating the purchase order,
who will approve and who will place the order and who will pay. What are the priorities of
these people who will be involved? If the problem you are solving is not high amongst his
priorities, the attention he pays you will be to that extent diluted and the effort will have to be
that much more. All these aspects have to be factored into the strategy at some point in some
manner.
Uniquely positioning your product/service differently is the next step in evolving the market
strategy. Typically for VC fundable projects, uniqueness in the positioning is highly desirable,
though lack of unique positioning does not mean that is not a profitable business idea. (This
perhaps only mean that it wont satisfy VC’s (normally higher) return expectations.) The
Segmentation Targeting and Positioning exercise allows you to identify who is your customer
and more importantly who is not – thus allowing you to find out what he wants and fine tune
your offering. In other words, it allows you to firm up the Unique Selling Proposition (USP)
of your offering. Offerings without a USP generally tend to be low margin/slow
growth/commoditized businesses unless backed by other organizational strengths which for
an upcoming entrepreneur is difficult to achieve. Or alternatively in a commoditized business,
players try to differentiate through better service, better quality, relationships, better design
and so on.
Industry trends and future outlook could be in terms of shifts in consumption trends,
demographic trends, technology trends and any other trends. These trends are very critical to
be analyzed to ensure that you have the right offering and the right strategy. These trends are
also useful inputs the demand estimation.
It is necessary to study the legal framework that could be applicable for the business. Atleast
identify the laws that could be applicable and if necessary fine tune your strategy based on
any legal restrictions. For some businesses, (say for example energy saving devices) studying
the regulatory framework is necessary so that the entrepreneur can suitably avail of the
incentives offered by the government.
The offerings present in some other market (say internationally) which are in no way a
competition to your service but could be used to learn about the business model due to
similarity can be profiled. The information presented in this section should lead to learnings
from their business models.
Chapter 3 Market Research
An entrepreneur generally begins with an idea with a hunch that it will succeed in the market
place – the way he has conceived. It may be a good idea and a workable proposition but not
necessarily in the manner the entrepreneur has conceived. Hence it is important that the
business plan is backed by adequate market research. Market research is a vast subject by
itself but the fundamental principles are
 Construction of the hypothesis
 Adequate sample size
 Proper design of the survey instrument and choice of the method
 Questions that give unambiguous answers
 Use of statistical tools
 Skilled interviewers
 Questions that support or refute the hypothesis
 No bias in the sample
An entrepreneur may not have the time or the resources to conduct a rigorous market research
exercise but whatever research has been done, it may be useful to document. More
importantly, it is necessary that research is done. If the entrepreneur is doing this himself, it is
important that he meets as many unknown people/parties as possible. People who know you
may be inclined to give you a biased feedback. Or worse, they may be from the same socioeconomic segment of the population that you are from – and this segment may not be what
your offering is targeted at. In such case such research has limited utility.
In this section it is also useful to document of customer feedbacks obtained through websites,
direct mails, appreciation letters etc.
In this section, it is also important to document the feedback of your important business
partners e.g. if you are engaging a large number of small retailers, you have to document their
feedback. This feedback should not only include their view of how the product/offering will
fare in the market but also about their terms of business i.e. in terms of margins, responsibility
and liability, investments to be made by them, their concerns if any, as applicable.
Chapter 4 Demand Estimation Model
This chapter should deal with:
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Key Parameters
Key Assumptions
Research methodology used to validate the concept/assess demand
Feedback on the product/service offering
Notes
Demand estimation essentially involves capturing the market segments in terms of size,
growth, in terms of value and in physical numbers/units sold etc. It must be noted that that
demand estimation would be only for the relevant market. For example, if your offering is
only being launched in the metros, it should capture only metro demand. It involves using
some input parameters about the market and some reasonable assumptions to convert the
input parameters to arrive at the potential demand.
For existing offerings in the market, if the data is available, this is relatively easier. However,
for new offerings/concepts, demand estimation is more difficult and surrogate demand
parameters have to be relied upon. Demand estimation using surrogates could mean making
the assumption say y% of the consumers of product X will purchase my product. So defining
the X becomes more crucial – both from the point of view of getting demand data for X as
well as from the point of the assumption that y% of the consumers of X will purchase your
product. Some market research can also be directed at finding the percentage conversion y%
through actual research.
Alternatively, demand estimation could involve making an assumption that y% of type of
population (say IT employees) between say of age between 22 and 40 would use your product
twice a day. Here it is important to be clear about what an ‘IT employee’ means and whether
their population is the right parameter. Does it also include Call center workers? Does it also
include IT enabled engineering services people? Does it also include HR/Admin staff of IT
companies? Should it also include employees with families, if yes what is the family size? Is
the term ‘IT employee’ is loosely being used for young people with higher disposable
income? If yes, then in that case should it also include employees in other industries say
financial services? Should it be limited to employees or it could include other walks of life?
Say housewives or small time businessmen or students? All these answers are also will lead to
clarity about the offering as well as clarity about the segment. In the above example, it might
be difficult to get the IT employees in a city like Bangalore. Even if this is available, it would
be difficult to get data about the population within that age. And it would be even more
difficult to validate the fact that an average customer who is in this segment will use it twice a
day. So one has to make assumptions based on several factors and data obtained from
different sources and doing some primary research.
It is true that demand estimation is based on several assumptions and validating them beyond
a point appears difficult, given the limited resources at disposal. However, it is important that
you must be clear of the assumptions made. And as long as the assumptions are reasonable, it
is good enough. At the end of the day a demand estimate is just that – an estimate. One can
argue this way or that way but as long as it is reasonable it is fine.
Chapter 5 Market Strategy
This chapter should include the 4 P’s of marketing strategy
 Product
 Price
 Place
 Promotion
Once the Segmentation, Targeting and Positioning is completed and the offering, the four Ps
of marketing strategy viz., Product, Price, Place, Promotion need to be fine-tuned. Without
clarity on the segments to be targeted and positioning of your offering, finalizing the
marketing strategy could be counterproductive or plainly ineffective. The subsequent
marketing strategy can be evolved on this basis.
The product can be fine-tuned based on the market feedback and the dynamics of the chosen
segment. It is necessary that the offering contains all (or most) the attributes/features that are
necessary to operate in the segment. The offering attributes/features often determine the cost
of the offering and hence the price. Hence it is also necessary, that the offering does not
contain attributes which that targeted particular segment of customer may not pay for and
which may make the offering costlier.
Pricing a product should take into account several factors. Some of the factors are price of the
other competing offerings in the market, economic benefit delivered, saving to the customer,
cost of offering, willingness to pay. While pricing a product one must have an idea of the
fixed and the variable costs. One must also have an idea of the sensitivity of the demand for
the product/offering with respect to price. This has to be backed by adequate research as this
will also feed into breakeven analysis. Needless to say, the pricing has to suit the target
consumer and his spending habits.
Place refers to the distribution channel through which your offerings will reach the customer.
Depending upon the nature of the product and your strategy, it could be online, it could have a
brick and mortar interface, or it could be telephonic. If you are planning to use franchisee
formats or any other formats where business partners will be play an important role, your
marketing strategy should recognize the value they bring to your business, identify the risks
they take vs. the risks taken by you and how you will reward them. You should have a plan on
how you will convince them to stock your products and to promote your products to end
consumers. If any investment is required at a distributors/ place, you should plan the
investment required and your business plan should provide a clear answer to what is the
investment required, who makes the investment, and what are the returns on that marginal
investment. How the risks and rewards are shared between you and the business partner needs
to be clearly delineated. Investment need not be limited to capital investment it could also be
in terms of training of resources to explain your offering to the customer. Here also, as
mentioned earlier it is just not adequate to conceptualize the whole thing. It is important that it
should be validated through market research.
Promotion Strategy should clearly address how the awareness will be created and the
financial implications/assumptions made. For a promotional campaign to be cost - effective, it
has to be provide as much awareness within the target population while minimizing the spend
overflow to non target segments. The link between the target segment, promotional spend
and your revenues should be understood. Initial promotional offers should be given
Chapter 6 Operations Strategy
The operations strategy could widely vary depending upon the business. It could include any
or all the following, as relevant:
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Manufacturing/service setup and network as applicable
Choice/Suitability of location
Facility and technology requirements including key equipment
Technology Choices and comparison
Quality aspects
Outsourcing of manufacturing/services
Utilities, power, water, sanitation, effluent, if relevant
Environmental aspects, if relevant
Raw Material Availability, if relevant
Capital requirements (project costs)
Anything that has an explicit or implicit cost implication has to be discussed. Similarly
anything that relates to physical infrastructure that is needed to execute the whole idea of the
business plan needs to be discussed in detail in the operation strategy. Importantly, any
outsourcing arrangements/contracts you propose to enter into have to be discussed in detail.
The key inputs to the business, such as raw materials, need to be discussed in detail if
applicable.
How you propose to keep tab on the quality of the product/service is a crucial aspect you need
to discuss. If there are several outsource partners, the overall experience of the customer will
be greatly influenced by the quality of output of your outsourcing partners. Hence it is crucial
to have a clear strategy on this. If too many aspects of your business are outsourced, one must
be clear about the value one is adding in between and whether this is a sustainable position.
Assuming that the business offers good margins, it is possible that the outsourcing partners
eat into your customer base by offering the same service – in which case your position is not
sustainable.
Chapter 7 Human Resource Strategy
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Founding Team
Board of Directors/ Advisors
Management Team (if applicable)
Organization Structure, Staffing, skill sets, compensation, and other Human
Resource aspects if applicable to the scale of business
Notes
This chapter should contain brief writeups/CVs of the founding team/advisory team and key
management personnel, if applicable. This section should strive to give confidence to the
investor that the team is right. Even if the idea is right, VCs would also love to see if the team
can actually deliver- they wont put their money on a team who they think may not deliver.
Advisors should be those who are ready to formally spend time on the business and are
involved.
Any relevant details of organization structure, staffing compensation etc. that is applicable
and clear at the stage of business as going to the financer, can be provided in the chapter. The
manpower required to be hired, if necessary, has to be identified.
Chapter 8 Financial Analysis
 Break even analysis
 Projected Balance Sheet, Profit and Loss and Cash flow Statement for the
next five years
 IRR, RoE, ROCE, NPV, payback period and other return benchmarks
 Proposed capital structure if applicable
 Phasing of investment, if applicable
 Sensitivity analysis
 Burn Rate
Notes
The financial model, like the demand model, will also be subject to various assumptions
about various one-time and recurring costs. It may not be possible to get quotations for all the
project costs and reasonable approximations would suffice. However, needless to say, more
accurate estimates are more desirable. However it is more important to capture all the cost
elements even if some accuracy is compromised. Though the financer will anyway thoroughly
scrutinize your assumptions in case he is convinced about the idea, reasonably accurate
projections will help you to plan better.
Break even analysis will give insights to whether the volumes are adequate to cover the fixed
costs and whether the pricing of the products is appropriate enough to cover the overall costs
and make a reasonable profit.
A well built financial model will be truly reflective of the business. The financial model could
be used to analyze the sensitivity of various demand, price and cost assumptions and assess
the (quantitative) key success and risk factors for the business. In order to analyze the
sensitivity of the project return parameters to various business parameters, the financial model
should parameterize the various aspects of the business and feed it into the financial model in
the form of a quantifiable input parameter.
A critical aspect of the financial planning, which is an integral part of the overall business
plan, will be to see if the investment into the business can be phased over installments. This
reduces the risks for the investor. The form of the investment should also be looked into i.e.
debt vs. equity vs. quasi equity. However for startups, which anyway do not have the assets to
serve as collateral for debt, this may not be a great issue. However, valuation of the equity and
the percent the entrepreneur is willing to share for a given quantum of funds is an issue one
has to give adequate thought to.
Chapter 9 Present Status and Way Forward
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Present status
Way forward and Time frame for key milestones
Risk factors and mitigating strategies identified by the entrepreneur
Critical success factors identified by the entrepreneur
Any other issue like legal form of the entity, clearances etc.
Expectations from Financiers
Notes
The present status should discuss in detail on what stage each of the elements of the overall
strategy that have been described earlier are. This could include the cash invested in the
business, sources of cash, time invested in the business, the market acceptance, business
volume, state of the product development, market research findings etc.
The timelines for the key milestones need to be identified by the entrepreneur and have to be
realistic enough and should gel with the market realities and the overall strategy, keeping in
view the constraints faced by the entrepreneur. To the extent possible, an attempt should be
made to link the level of funding necessary in order to reach a specific milestone. The
milestones should also define the volume of business that should get achieved for a particular
investment. It would also be useful to have some plan on when you will say ‘quits’ and stop
further investment in the business should the critical milestones not be reached.
This concluding chapter would also talk about the risk factors and success factors as the
entrepreneur sees them. The risk and success factors as identified by the entrepreneur, of
course, will be suitably supplemented by the VC’s experience and insights but an attempt has
to be made by the entrepreneur. The risk mitigating measures could include developing
standard terms and conditions for product use. It would be advisable to take professional help
for technology related risks particularly if your offering contains payment gateways etc. Risks
and threats arising out of business partners, if applicable, need to be assessed. A concluding
section on expectations from VCs would be useful.