Download VTU MBA 2nd Sem 17MBA26-Entrepreneurial Development Module 2 Business Planning Process -Important Notes

Download VTU (Visvesvaraya Technological University) MBA 2nd Semester (Second Semester) 17MBA26-Entrepreneurial Development Module 2 Business Planning Process Important Lecture Notes (MBA Study Material Notes)

? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
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P
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E
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OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
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M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
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PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
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PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
? Another DCF method, also called rate of return,
time adjusted rate of return, yield on
investment, marginal efficiency of capital,
marginal productivity of capital, etc.
? Rate of return is internal to the proposal based
on outlay and cash flows unlike NPV-where it
is external based on cost of capital.
? IRR is discount rate which equates aggregate
PV of net cash inflows with aggregate of net
cash outflows. It is the rate at which NPV=0
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
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smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
? Another DCF method, also called rate of return,
time adjusted rate of return, yield on
investment, marginal efficiency of capital,
marginal productivity of capital, etc.
? Rate of return is internal to the proposal based
on outlay and cash flows unlike NPV-where it
is external based on cost of capital.
? IRR is discount rate which equates aggregate
PV of net cash inflows with aggregate of net
cash outflows. It is the rate at which NPV=0
? Recognises time value of money
? Easy to understand
? Indicates profitability.
? Consistent with overall objective of
shareholders? wealth maximisation.
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? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
? Another DCF method, also called rate of return,
time adjusted rate of return, yield on
investment, marginal efficiency of capital,
marginal productivity of capital, etc.
? Rate of return is internal to the proposal based
on outlay and cash flows unlike NPV-where it
is external based on cost of capital.
? IRR is discount rate which equates aggregate
PV of net cash inflows with aggregate of net
cash outflows. It is the rate at which NPV=0
? Recognises time value of money
? Easy to understand
? Indicates profitability.
? Consistent with overall objective of
shareholders? wealth maximisation.
? Tedious calculation
? Multiple rates
? Inconsistent in maximising shareholders?
wealth
? Reinvestment of cash flows
? Ignore rupees of NPV
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
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hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
? Another DCF method, also called rate of return,
time adjusted rate of return, yield on
investment, marginal efficiency of capital,
marginal productivity of capital, etc.
? Rate of return is internal to the proposal based
on outlay and cash flows unlike NPV-where it
is external based on cost of capital.
? IRR is discount rate which equates aggregate
PV of net cash inflows with aggregate of net
cash outflows. It is the rate at which NPV=0
? Recognises time value of money
? Easy to understand
? Indicates profitability.
? Consistent with overall objective of
shareholders? wealth maximisation.
? Tedious calculation
? Multiple rates
? Inconsistent in maximising shareholders?
wealth
? Reinvestment of cash flows
? Ignore rupees of NPV
? Economic feasibility
? Technical feasibility
? Financial feasibility
? Managerial feasibility
FirstRanker.com - FirstRanker's Choice
? Written document prepared by the
entrepreneur that describes all the relevant
external and internal elements involved in
starting a new venture.
? Integration of functional plans like marketing,
finance, manufacturing, HRD, etc
? Addresses short/term decision making
? Integration and coordination of effective
business objectives and strategies.
? Road map that addresses ?where am I now?,
where am I going? And how will I reach there?
? Entrepreneur
? Investor
? Suppliers
? Buyers
? Other stakeholders like employees, consultants,
regulatory bodies
*To give direction to the vision formulated by the entrepreneur
*To objectively evaluate the prospects of business
*To monitor the progress after implementing business plan
*To persuade others to join business
*To seek loans from financial institutions
*To visualize concept in terms of market availability, organizational,
operational, and financial feasibility
*To guide entrepreneur in actual implementation of plan
*To identify actual strength and weakness of plan
? Introduction
? Executive summary
? Market/industry/environmental analysis
? Description of venture
? Production plan
? Operations plan
? Technical plan
? Marketing plan
? Organisational plan
? Human resource plan
? Social plan
? Assessment of risk
? Financial plan
? Schedule/milestones
? Appendix/annexures/biblography
? Keep it short and sweet
? Focus
? People and Roles
? Avoid jargon
? Information based on study
? Realistic and objective
? Proper mission statement
? LT & ST goals Guide
? Analysis of ideas on paper
? Help in convincing others
? Reduction in emotional bias
? Provides SWOT analysis
? Justifies one?s ideas/plans
? Develops consistent strategy
(cont?d)
? Achieve one?s commitment
? Feasibility study
? Action plan
? Selling tool
? Fundraising
? Evaluating progress
? Discouragement
? Cutting corners/short cuts
? Takes Time
? Tunnel vision
? Expense
? Inflexibility
? Obsolete
? Lack of accountability
? Poor implementation guide
? Improperly described plan
? Poorly defined strategies
? Lack of details on job responsibilities and operating
schedules
? Unprofessional goals and objectives
? Incomplete plan
? Not measurable
? Inadequate commitment
? Lack of experience
? No sense of threats and weaknesses
? No proper customer base
? https://www.youtube.com/watch?v=h-
smuQmaR5Q
BUSINESS PLANNING PROCESS
Idea generation
Environmental scanning
Feasibility analysis
Project report preparation
Evaluation, control and review
1. IDEA GENERATION
It is the first step in the business planning
process. This step differentiates
entrepreneur from usual business. An
entrepreneur may come up with new
business idea or may bring in value
addition to existing product in the market.
Sources of new idea for entrepreneurs are :
? Consumers/ customers
? Existing companies
? Research and development
? Employees
? Dealers, retailers
2. Environmental scanning :
Environmental scanning which includes analyzing
external and internal environment that affects
business idea.
1. External environment comprises of
Socio cultural appraisal : culture and tradition
existing in society. It is comprised of values and
beliefs of people which determines the acceptance
of product by customer in the market.
Technological appraisal : it assess various
technological options available to convert an idea
to product. It also provides an brief overview about
technological aspects.

q Economic appraisal : it assess the status of the
society in terms of economic development, per
capita income, national income, consumption
pattern in the business.
q Demographic appraisal : it assess the
population pattern of given geographic area.
Which includes sex, age profile, distribution
etc.
q Government appraisal : it assess the various
legislation, policies, incentives formulated for
particular industry. Flexibility of these rules
determine ease for entrepreneur in terms of
opening venture in particular area.
2. Internal environment :
? Raw material : it refers to in terms of availability of raw
material required for the process of production. If the
material availability is at distance place and is very
expensive then entrepreneur should give second
thought to the same.
? Production/ operation : it assess the availability of
various machineries, equipments, tools and techniques
that would be required for production.
? Finance : it studies total requirement of finance in
terms of start up expenses, fixed expenses, running
expenses etc.
? Market : refers to study on potential customer and
target customers in market.
? Human resource : refers to demand and supply of
required human resource in market and estimation of
expenses to be incurred on human resource.
3. FEASIBILITY ANALYSIS
? Marketing plan : lays down the strategies of marketing
which can lead to success of business plan. Strategies are in
terms of marketing mix which includes (product, price,
place, promotion) which determines the potential demand
of customers for product in the market.
? Production plan/operational plan : production plan is
drafted for manufacturing sector where as operation plan is
designed for business into service sector. It comprises of
strategies on parameters such as location layout, cost,
availability of material, human resource etc.
? Organizational plan : defines type of ownership pattern in
company, sole trading concern, family business, private or
public limited company etc.
? Financial plan : financial plan indicates the requirement of
proposed business enterprise which includes fund flow,
cash flow statement, break even point, projected ratios,
projected balance sheet, profit-loss statement.
4. Project report preparation :
Project report is a written document that
describes step by step strategies involved in
starting and running business.
5. Evaluation , control and review :
As company operates in dynamic environment
company has to monitor and review strategies
and policies to stay in line with competition
existing in market.
MARKETING PLAN
v Marketing plan refers to plan that describes market
condition and strategy related to how products and
services will be distributed, priced and promoted in
market.
v INDUSTRY ANALYSIS : prior to preparation of
market plan entrepreneur are required to conduct
industry analysis section of the business plan.
Industry analysis provides information about
national and local market that affects marketing
operation of company. Industry analysis also
involves collecting information about competitors
which is available in form of secondary data by
newspapers, article, websites, catalogs, promotions,
interview with distributors, customers etc.
STEPS INVOLVED IN MARKETING
RESEARCH
1. Define
purpose and
objective
2. Gathering
data from
secondary
sources
3. Gathering
data from
primary
sources
4. Analyzing
and
interpreting
the result.
STEPS IN MARKETING RESEARCH
1. Defining the purpose or objective : The
entrepreneur should be clear about the nature
of information required by the business,
sources through which required data will be
collected, whether required data will be from
primary or secondary source of information.
2. Gathering data from secondary sources :
Secondary source of information is what
available through magazines, new papers,
libraries etc. It usually refers to data available
about competitors strategy and their position in
the market.
3. Gathering information from primary source :
primary data required for market research is
collected from people directly through methods
such as observation, networking, interviewing,
focus group, exhibition etc.
4. Analyzing and interpreting results : results
should be evaluated and interpreted depending
on the objective of research process.
Summarizing results will provide in
preliminary insights about competitors market
position and their image in competitive
environment.
https://www.facebook.com/ialwaysthinkprettyt
hings
CHARACTERISTICS/ IMPORTANCE OF
MARKETING PLAN
v it should provide strategy for accomplishing the
company mission and goal.
v It must provide for the use of existing resources
and allocation of all equipment , financial
resources, human resources in company.
v It should provide for continuity so that each annual
marketing plan can successfully meet long term
goals and objectives of company.
v It should be simple and specific in nature so as to
provide appropriate roadmap in terms of planning
market strategy for company.
v It should focus on criteria to be evaluated to assess
marketing success of the company.
MARKETING PLAN- STEPS
MONITORING PROGRESS OF MARKETING ACTIONS
IMPLEMENTATION OF MARKET PLAN
BUDGETING MARKET STRATEGY
PRODUCT PRICING DISTRIBUTION PROMOTION
ESTABLISHING GOALS AND OBJECTIVES
DEFINING MARKETING STRATEGY AND ACTION PROGRAM
CONSIDERING STRENGHTS AND WEAKNESS
DEFINING THE TARGET MARKET ( OPPORTUNITIES AND THREATS )
DEFINING THE BUSINESS SITUATION
STEPS IN PREPARING MARKETING PLAN
1. Defining business situation refers to understand
past and present business achievements of new
venture. It give basic insight about scenario
persisting in market, response of customers to new
venture in market, and helps in predicting
customer acceptance of company product in
market.
2. Defining target market : target market refers to
group of potential customers towards which
venture aims its market plan. Knowledge of target
market will provide basis for determining
appropriate market action strategy to meet needs
of customers. Target market also includes market
segmentation which involves process of dividing
market into definable and measurable groups for
purpose of targeting market strategy.
3. Considering strength and weakness : strength
of business refers to core areas which company
is specialized in which may be abundance
experience of company in similar area of
business and weakness may be in terms of
production capability, or layout which permits
limited space for equipment and operation.
4. Establishing goals and objectives : marketing
goals of the company should be clear and
specific in nature as it has to clearly indicate
about nature of product, target customers ,sales
promotion , advertising support etc.
5. Defining marketing strategy and action program : it
refers to specific activities outlined to meet the venture,
business plan objectives and goals.
a. Product and service : indicates description of product
or service to be marketed in the new venture.
b. Pricing : refers to price to be charged for product in
market before which company is required to consider
various aspects such as cost, margin , competition etc.
c. Distribution : refers to means through which product
will be made available to customer in market which
involves decision relating to nature of product,
distribution channel, middlemen etc.
d. Promotion : refers to various channels through which
entrepreneur will advertise company product to
customers in market.
7. Budgeting marketing strategy : After drafting
marketing plan entrepreneur is required to
estimate total expenses to be incurred in
process of implementing market plan. Expense
of marketing plan should be in line with
planned expense of entrepreneur.
8. Implementation of marketing plan : market
plan should be implemented in the company,
should be informed to the workforce involved
in marketing activity, it acts as guiding element
to direct on strategies which will make
marketing process effective.
9. Monitoring progress of marketing actions :
marketing of plan involves tracking specific
results of marketing effort. Sales data of
product, data gathered by market survey are
few methods of monitoring progress of market
plan.
? Executive summary
? Business overview
? Target market
? Goals
? Pricing, positioning and branding
? Market strategies
? Implementation tactics
? Budget
? Evaluation of results
MP leads other plans because:
? Overall direction
? Marketing goals
? Business environment
? Target and tactics
PRODUCTION PLAN
v Production plan is the process of converting the
input into output through a conversion process.
v The inputs are in the form of land, labour, raw
material, machinery, capital and information.
v Transformation takes place through machinery
in manufacturing unit and through employees
skills in service sector.
? Better service to customers
? Fewer rush orders
? Better inventory control
? Effective use of equipment
? Reduced idle time
? Better morale
? Lower capital requirement
Dimension of production plan
Plant
location
Plant
layout
Inventor
y
manage
ment
Monitori
ng stock
turn and
coverage
Quality
manage
ment
system
Total
quality
manage
ment
Budgeti
ng
producti
on plan
DIMENSION TO BE COVERED FOR
PRODUCTION OR OPERATION PLAN
v Plant location : refers to geographic location were
the infrastructure of company will be built and
operations of the company will take place.
Following aspects should be taken care of before
choosing plant location :
a. Vicinity to raw materials
b. Availability of raw materials
c. Availability of labour
d. Proximity to market
e. Climate condition
f. Cost of location
g. Tax, subsidies and loans
v Plant layout : is pattern in which space would be
arranged in order to utilize the machinery,
equipment, and manpower. Effective designing of
plant layout reduces unnecessary movement of
employees and helps in effective utilization of
time and resources in company. Variables to be
considered while planning plan layout :
a. Proper utilisation of space
b. Proper light & ventilation in all areas of the
premises
c. Ensure smooth flow of operation
d. Supervision can be carried out in smooth manner
e. There are provision for emergency exit
f. There is flexibility to introduce changes in future
v Inventory management : inventory management
refers to maintaining inventory in form of raw
materials, packing materials, WIP, adequately in
order to meet business requirements.
v Monitoring stock turn and coverage : monitoring
individual stock items to identify fast and slow
movers depending on the industry.
v Quality management system : quality
management refers to maintaining quality in terms
of product produced in company. As customers
these days are getting conscious about quality day
by day maintaining quality standards in product
will help in building company image and also
build customer loyalty towards
company/products.
v Total quality management : management
focuses on quality improvement through
prevention of problems and errors. It requires
continuous monitoring and control of process,
performance and quality etc.
v Budgeting production plan : depending on the
COGS per quantity, projected cost of
production at any stage can be estimated. The
amount of production and budget depends
upon the capacity of production unit.
? Market forecast
? Inventory control
? Availability of resources
? Standard operating procedures
? Risk factors (Guide)
ORGANIZATIONAL PLAN
v Organizational plan involves deciding the form
of ownership that entrepreneur intends to
form. Nature of planning , organizing, leading
and controlling will be determined by nature of
business or form of ownership.
? Process by which an organisation creates
procedures and actions to achieve stated
objectives
? List of work plan, structures, responsibilities,
relationships, responsibilities, accountability
etc
Focus/important areas:
Forms of ownership
Designing org structure
Job design
Manpower planning (guide)
? Gives Focus to work and resources
? Identifies real needs of clients
? Reveals what should no longer to be delivered
? Legitimises work of organisation
? Provides roadmap to organisation?s growth
(guide)
STEPS IN ORGANIZATIONAL PLAN
v Developing management team : refers to set of employees
employed in the company who are in charge of managing
the activities on the operating part of organization.
v Legal form of organization : refers to composition and legal
existence of business. Business may be proprietorship,
partnership or corporation form of business. Three legal
forms of business are :
a. Corporation is legal entity that is run by stock holders
having limited liability. It is regulated by the statute and is
treated as separate legal entity for liability and tax purpose.
b. Proprietorship : is form of business with single owner who
has unlimited liability, controls all decisions, and receives
profit.
c. Partnership : two or more individuals having unlimited
liability who have pooled resources to own a business.
? Ownership : it refers to pattern of investment and
control of owners in company, which includes
conditions relating to sharing of profit and loss in
business.
? Liability of owners : of business covers two aspect
either members of business will have limited or
unlimited liability depending on legal form of
business agreed by partners.
? Costs of starting business: refers to expenses
incurred in starting the business and proportion of
contribution from every member of business or
sources through which required finance of
business will be raised.
? Continuity of business : refers to question on who
will take over business operations in future and
what will be members role in coming future.
? Transferability of interest : entrepreneur will have
two options in relation to transferability of interest.
Owner may transfer his interest after assessing
credibility of member in business or may sell
interest with his own wish.
? Capital requirement : refers to amount of capital
required to start up business venture, sources
through which required finance for company will
be obtained, what will be contribution of members
or the owner towards business.
? Management control : it refers to control of
business in the hands of an individual person or
several members in business. It also comprises of
power of members in terms of decision making,
guiding business activity in company.
? Distribution of profit and loss : profit of the
firm may be shared as per the terms and
conditions agreed by the members of business,
loss or liability of individual depends on nature
of business agreement of partner with the
business.
v Tax attributes for forms of business : tax
advantage and disadvantage will vary in
accordance with form of business. In
proprietorship and partnership profit and loss
of business is considered same as that of
individual as in corporation as business is
treated as separate entity tax is laid on business
and earning of individual separately.
v Designing the organization : it comprises of formal
and explicit indication to the members of the
organization as to what is expected from them. These
expectation are grouped in following areas :
a. Organization structure refers to task, responsibility and
accountability of every member in the business.
b. Planning, measurement and evaluation of schemes
communicate goals and strategies to attain desired
goals in business.
c. Rewards : forms of rewards and yardstick based on
which employees will be rewarded in company.
d. Selection criteria refers to guidelines for selecting
employees in company.
e. Training : refers to determining skill requirement of
employees in company and accordingly design training
program for employees in company.
v Building the management team : this process
involves to see that strategy of business should
be in line with objective of the company,
management team of the company should be
role model for employees in company and
accordingly plan and guide employees towards
organization goal attainment. Management
team of the company should be flexible to try
new techniques and innovation in the company.
Management team should focus on hiring
efficient employees in company and develop
core values which guide and regulate
employees behavior and attitude in company.
v Role of board of directors : board of directors
in the company are required to review
operating and capital budget, developing long
term strategic plan for growth and expansion,
supporting day to day activities, resolving
conflicts among owners or shareholders, ensure
proper use of assets, developing network
source of information for entrepreneurs.
v Board of advisors and organization : board of
advisors are not permanent employees of the
company. They are set of expertise who guide
business in terms of management and technical
issues in company.
? Objectives
? Design team
? Current processes
? Tasks and functions
? Current structure
? Identify changes in structure
? New org chart
? Implementation plan (guide)
FINANCIAL PLAN
v It studies total requirement of finance in terms
of start up expenses, fixed expenses, running
expenses etc.
v Financial plan indicates the requirement of
proposed business enterprise which includes
fund flow, cash flow statement, break even
point, projected ratio, projected balance sheet.
? Fin plan describes activities, resources,
equipment and materials needed to achieve
objectives and the timeframes involved
? Can be a budget outlining future income,
expenditure and investments for further
expansions
C
O
M
P
O
E
N
E
T
OF
F
I
N
A
N
C
I
A
L
PLA
N
PRO FORMA OF INCOME STATEMENT
PRO FORMA OF CASH FLOW
PRO FORMA BALANCE SHEET
BREAK EVEN ANALYSIS
PRO FORMA OF SOURCES AND
APPLICATION OF FUND
OPERATING AND CAPITAL BUDGET
v Operating and capital budget : An
entrepreneur must develop an operating and
capital budget first. Capital budget refers to
capital expenditure involved in the project and
operations budget refers to operating expenses
like utilities, salary, depreciation, interest,
insurance, advertising etc. Projection is usualy
phased in a monthly basis
v Proforma income statement : refers to
projected gross profit calculated from projected
revenues minus projected costs. costs should
comprise of COGS, and operating expenses as
above. Taxes are deducted from gross profit to
give net profit
v Proforma cash flow : refers to projected cash
available calculated from projected cash inflow
minus projected cash dismemberment. It is result
of difference between actual cash receipts and cash
payments. It is not the same as profits.
Often calculated from profits by adjusting for
depreciation, account receivables, inventory,
prepaid expenses, accounts payabes and other
activities like capex, debt and dividend payments.
v Proforma of balance sheet : summarises the
projected assets, liabilities, and net worth of new
venture. Balance sheet represents the position of
the business at end of year.
v Break even analysis : Entrepreneur in initial
stage is required to know when profit may be
achieved which will help him understand
financial potential of a start up business. BEA is
useful technique to analyze how many units
have to be sold in order to break even. Break
even is volume of sales where venture neither
makes profit nor loss. BE=Overheads/margin
v Proforma for sources and application of funds
: summarizes projected source of fund available
to the venture and how these funds will be
distributed.
? Funding
? Balance risks and costs
? Simplicity
? Long term view
? Flexibility
? Liquidity
? Optimum use of funds
? Financial leverage Guide
? Cash management
? Long range view
? Spoting trends
? Prioritising expenditure
? Measuring progress
Guide
? A project report is a business plan written with
a purpose of procuring funds usually from a
financial institution.
? It could even be for internal project sanctions.
? It has more elobarate financial plan with
detailed feasibility studies to convince project
viability and to get funds
CONTENTS OF PROJECT REPORT
1. Cover page : page of the project report should
contain the title of the project, name, address so that
the readers of the report can easily contact
entrepreneur relating to queries of report.
2. Table of contents : table of content are compiled
after the main body of the project report is finalized.
Topics covered in the project report along with the
page number should be mentioned in the project
report.
3. Executive summary : should be written after the
completion of project report as it gives brief gist of
project. Length of the executive summary should
not exceed more than one-two pages.
4. Company information and industry : Here you
should explain the ownership form of the
company, which should contain the reason for
venturing into the proposed business plan, how do
you plan to satisfy the needs and expectation of the
potential customers and existing competitors in
industry. It should also include SWOT analysis of
company.
5. Technical plan : In this part of the report the key
aspect analysed during the technical feasibility of
the report should be highlighted. The choice of the
product and service to be offered should be
justified. Report should be able to explain how the
product of the company is creative and innovative
from the existing product in the market.
6. Marketing plan : this aspect of the product should
focus on the industry and market feasibility. It
should describe about the pricing policy, findings
of market research, how large is the market for the
product to be offered by the company, details
about marketing strategy adopted by the company
to promote the product, target customers company
is focusing on.
7. Operations plan : it describes about the
manufacturing and service delivery process to be
utilised for production of chosen product and
service. It should explain about the innovation
brought in the process of production which makes
it better when compared to existing competitors. It
should also focus on the location, availability of
resources required for production.
8. Organizational plan : It gives information about the
management team who are part of the company. It
focuses on the management and technical skills
possessed by the employees in company and how it
will prove to be beneficial for the work process to be
carried in the company. It should highlight as though
why even after possessing such efficient skills they
preferred joining your organization.
9. Project timeline : this chapter explain about the
network diagram which explains about the time
duration required for the project. Diagram explains
about the various activities in the project, which are
sequentially organized and the time duration required
for the execution of the project is arrived by estimating
time required for completion of every activity for the
formation and later process of the company.
10. Critical risk and assumption : it explains the
various assumption made during the formation of
the company particularly regarding the financials.
There may be various risks related to the product
and market company is planning to enter. All these
details should be highlighted in this part of the
report. Sensitivity analysis is incorporated to
analyse the impact of these risks and proposed
action is documented.
11. Social plan : it explains how company project will
benefit the society. It should highlight how
company will generate employment opportunities,
lead to skill development of local people, provision
of goods and services to be provided to the local
people, utilization of local resources etc.
12. Exit strategy : this is the negative aspect of the
business but the company should explain how they
would close down the business if the company is
not able to earn the expected profitability, the
investors will be keen to know as though how their
investment can be recovered in such situation.
13. Financial plan : it is an important part of the
report which will contain brief content all the
sections with numbers in monetary terms. It
explain about the financial composition of the
company, various sources through which company
has raised required finance, total expenditure
incurred by the company which will be effectively
explained through the means of break even
analysis, PBP, ARR, NPV, IRR etc and the company
financial reports.
14. Conclusion : this summarizes the key aspect
of the report in concise manner. It should end
the report on a positive note so that the readers
develop positive image about the report.
15. Appendices : it contains conclusion part of the
report and supplement data which is important
part for the report but cannot be included in the
initial topics of the report.
? PMI?s PMBOK defines project as ?A temporary
endevour undertaken to create a unique goods or
service?
? F L Harrison- ?A non-repetitive, one-off
undertaking, normally with discrete time, financial
and technical performance goals?
? British standard- ?A unique set of cordinated
activities with definite starting and finishing points
,undertaken by an individual or organisation to
meet specific objectives within defined schedule
cost and performance parameters.
? Focus
? Life span
? Team spirit
? Life cycle
? Unique activities
? Specific goal
? Sequence of activities
? Specific time
? Interrelated activities
? Transcience creates urgency
? Uniqueness creates risk and uncertainty
? subcontracting
? Entrepreneur?s interest
? Government regulations
? Resource availability
? Market adequacy
? Cost factor
? Risk level
? Choosing an idea
? Observation
? Scanning business environment
? Preparation of project report
? Road map
? Basis for loans
? Reflects economic health
? Others ? record, future reference, registration,
issue of shares
? Process of investigation, review and evaluation
of the project or its alternatives as defined.
? Concerns nature and scale of investment, and
economic evaluation based on cash flow
analysis of all costs and benefits.
? Cyclical process repeated as new ideas come-in,
additional info received, till a feasibility is seen
? Ex-ante assessment to decide on the project.
? To assess project results
? To improve project management and process
planning
? To promote learning
? To establish new knowledge
? To understand different stakeholders?
perspective
? To ensure accountability
? To ensure best use of funds
? To avoid weaknesses and future mistakes
? Assesses economic viability of the project
? Protects from larger capital investments
? Useful and valid for different projects
? Ideas on paper before implementation
? Presents associated risks and returns
? Provides objective evaluation of projects to
lenders
? Understanding demand
? Assessing resources
? Marketing feasibility
? Marking timelines
Evaluation
techniques
Traditional
(ARR, PBP)
Discounted
cashflow
(NPV,IRR,PI)

= Average annual profit after tax * 100
Average investment over project life
= Total profit/no of years *100
Net WC+ Salvage value+ ? (initial
cost-salvage value)


Project Cost (Rs) 56125 56125
Annual profits - 1 3375 11375
Annual profits - 2 5375 9375
Annual profits - 3 7375 7375
Annual profits - 4 9375 5375
Annual profits - 5 11375 3375
Total profits 36875 36875
Project life (yrs) 5 5
Salvage Value (Rs) 3000 3000
Calculate ARR
= Total profit/no of years* 100
Salvage value+ ? (initial cost-salvage
value)
= 36875/5 = 25%
3000+(56125-3000)1/2
Average annual profit after tax
= ---------------------------------- - * 100
Investment * 1/2
Average annual profit after tax
= --------------------------------- - * 100
Investment
Average annual PAT + Depreciation
= --------------------------------- - * 100
Investment /2
? Merits
? Simple to understand and calculate
? Demerits
? Accounting income and not cash income
? Time value of money not taken
? PBP refers to the time it takes to payback the
original cost of the investment
? Represented as no of years
? Usually a cut-off is used to accept/reject a
proposal
? Useful in mutually exclusive decision making
Year Annual cash flow
(Rs.)
Cum. cash
flow (Rs.)
Comments
1 14000 14000 No
2 16000 30000 No
3 18000 48000 No
4 20000 68000 Between 3 & 4
years.
56125-48000=
8125/20000
=0.406
PBP = 3.406
5 20000+5000
(including salvage
value)
93000
? Merits
? Easy to understand and calculate
? Cash flow is considered
? Demerits
? Ignores cash flow after PBP/frontloading
? Ignores time value of money
? Useful for:
? War situations
? Liquidity crunch situations
? Short term focused companies
? We need a system that considers
? Full cash flow
? Time value of money
? Money has utility
? Utility has a cost
? Cost of money is called interest, linked to ?time?
? Future value = Present value + interest
= Present value (1+r)
n
? Present value = Future value/(1+r)
n
? Compounding and discounting techniques
1. What is the FV of Rs 1000 in 3 yrs at 10%
compounding rate?
1000* (1.1)
3
= 1000*1.331= Rs 1331
2. What is the present value of Rs 1610 of year-5 at
10% discounting rate?
1610*(1/1.1)
5
= 1610*0.6211= Rs 1000
? Present value of a cash flow is cumulative of
individual years.
? PV of year1+PV of year2+PV of year3+. . . .. .
+PV of year n
? PV= ? [CF
n
/ (1+r)
n
]


? Net Present Value (NPV)
? NPV indicates the PV of future cash flows ?
Investment
? NPV= ? [CF
n
/ (1+r)
n
] ? C0

? Accept if NPV is +ve, Reject if NPV is -ve
? Takes into account time value of money
? Takes into account lifetime cash flow
? Allows for different discount rates
? Helps evaluate mutually exclusive projects
? Depends on discount rate which itself is not
clear
? Absolute measure and not a percentage of
capital
? Internal rate of return (IRR)
? Discounting rate of a future cashflow at which NPV
becomes zero.
? ?r? such that = ? [CF
n
/ (1+r)
n
] ? C
0
= 0
? Decision based on a cut-off ?r?
? Calculation by trial and error method or using excel
sheet =IRR(A1:A5,guess rate)
? Profitability Index (PI) or Benefit/cost ratio
? PI = PV of inflow/Outflow
? PI = = ? [CF
n
/ (1+r)
n
] /Co
? Similar to NPV but presented as a ratio
? DCF is more popular
? Multiple criteria used for decision making
? IRR is used by 85%, NPV by 65%
? 68% use PBP usually small firms
? PI is used more by public sector units
? A company has the following investment
projects
Project Co C1 C2 C3
A -10000 10000
B -10000 7500 7500
C -10000 2000 4000 12000
D -10000 10000 3000 3000
Calculate payback, ARR, IRR and NPV at 10% discount
rate and rank them
A. 10000/10000 in 1 year
B. 10000/7500 in 1 yr +2500/7500=1/3
total = 1.33 years
C. 10000/6000 in 2 yrs + 4000/12000
=1/3 yrs
total = 2.33 yrs
D. 10000/10000 in 1 year
10000/1
A. ---------- *100 = 200%
10000*1/2
B. 15000/2
--------- * 100 = 150% ARR = Average PAT / ? Investment
10000*1/2
18000/3
C ----------*100 = 120%
10000*1/2
16000/3
D ---------*100 = 107%
10000*1/2

NPV= ?[CFn/(1+r)
n
] ? C0
A. (10000*0.909)-10000 = (910)
B. (7500*0.909)+(7500*0.826)-10000 = 3013
C. (2000*0.909)+(4000*0.826)+(12000*0.751)-10000 =
4134
D. (10000*0.909)+(3000*0.826)+(3000*0.751)-10000 =
3821

? By trial and error method,
A. 0%
B. 32%
C. 27%
D. 37%
ARR
(%)
PBP
(Yrs.)
NPV
(Rs.)
IRR (%)
A 200 1 (910) 0
B 150 1.33 3013 32
C 120 2.33 4134 27
D 107 1 3821 37
Discussion
ARR is misleading
PBP of A and D is same but IRR different
Higher NPV has lower IRR (C and B)
Non-discounting techniques
? Payback period (PBP)
? Return on investment (ROI)
Discounting techniques:
? Net Present Value (NPV)
? Rate of return/Internal rate of return(IRR)
? Profitability Index(PI)
? Number of years required for the project?s
cumulative cash inflows to equal its cash
outflows. It is time required to recover initial
cost of project or time taken to break even.
? Simple in concept and application
? Low calculation cost
? Liquidity indicator
? Suits high risk of obsolescence
? Ignores cash inflows after PBP
? Ignores time value of money
? Ignores salvage value
? It is more a method of capital recovery than
profitability.
? Capital employed and related income is
determined over the entire economic life of the
project and average yield is calculated
1. ROI/ARR = (annual average net
earnings/original investment)*100
2. ROI/ARR = (annual average net
earnings/average investment)*100
-Annual average net earnings is after depreciation
and tax for full economic life
3. (Increase in expected future annual net
earnings/initial increase in required
investment)*100
Average investment =
1. Original investment/2
2. (Original investment-scrap value of asset)/2
3. (original investment+scrap value of asset)/2
4. (Original investment-scrap value of asset/2)+addl
net working capital+scrap value
? Easy to calculate
? Considers entire cashflows
? Based on accounting profit
? Ignores time value of money
? Cost and future inflow cant be accurately
estimated
? Ignores project period (short term higher return
gets preferred)
? Unsuitable for investment in parts (assumes
full investment in the beginning)
? Considers time value of money
? PV for all outflows and inflows for the entire
duration is discounted by cost of capital and
NPV calculated
? NPV = PV of each inflow- initial investment
= CUM (CFt/(1+k)t) - CFo
= CUM (CFt*PVFk,t) - CFo
? Recognises time value of money
? All cash flows considered
? Achievement of Profitability objective
? Value additivity achieved
? Difficult to understand
? Ignores project period and investment size
? Discount rate is tough to decide
? PI = PV of cash inflows/PV of cash outflows
? PI(net) = Net Present Value/Initial cash outlay
? Net PI = PI-1
? Project is accepted if PI>1
? Projects are ranked in order of PI
? Easy to understand
? Time value of money taken
? Uses cash flow method
? Consistent with objective to maximise
shareholders? wealth
? Doesn?t consider project duration
? Cost of capital is estimated
? Requires long term forecasts
? Another DCF method, also called rate of return,
time adjusted rate of return, yield on
investment, marginal efficiency of capital,
marginal productivity of capital, etc.
? Rate of return is internal to the proposal based
on outlay and cash flows unlike NPV-where it
is external based on cost of capital.
? IRR is discount rate which equates aggregate
PV of net cash inflows with aggregate of net
cash outflows. It is the rate at which NPV=0
? Recognises time value of money
? Easy to understand
? Indicates profitability.
? Consistent with overall objective of
shareholders? wealth maximisation.
? Tedious calculation
? Multiple rates
? Inconsistent in maximising shareholders?
wealth
? Reinvestment of cash flows
? Ignore rupees of NPV
? Economic feasibility
? Technical feasibility
? Financial feasibility
? Managerial feasibility
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