Introduction

Business planning is a process involving the creation of the mission and objectives of the
company, as well as identify strategies that will be used to achieve those objectives and
mission. The business planning process can cover many aspects or be targeted to specific
functions within the overall corporate structure. Business planning involves using the
resources of the company, as well as consultant services to help design and implement the
plan.

There are several stages in the development of a business, and the business planning
process is the main task. The start of a new company involves the implementation of a
business plan that defines the company's goals, the activity it will develop, the main internal
structure and the external environment (availability of resources, clients, suppliers,
regulatory framework, tax and social security requirements).

Each business plan requires research, a careful assessment of all known factors and the
potential of the various opportunities that exist in the company. Depending on the
specificity of the business and the size of the company, different types of reports may be
needed for this process, some of them relatively simple, and others extremely detailed and
complex. However, the main task of business planning is to give clarity to external creditors
(banks, shareholders, others) and help the entrepreneur in his judgment when starting
either a new business or introducing new products or acquiring competitors.

Topic Structure:

1. Structure of the business plan

2. Organization of the business planning process

3. Elements of the business plan

4. Basic mistakes made in the development of a business plan

5. Protection of the business plan

Methods of education and teaching

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Training Methods: Case Studies; teamwork; training in a flexible, informal
environment; team training; online education. Teaching methods: lectures; practical
tasks; discussion.

Topic content:

1. Structure of the business plan

In recent years, crucial in modern enterprises, are business plans that are:

• enterprise business program;

• a benchmark for future development when creating a new venture;

• justification to a financial institution to provide financial resources to the

enterprise obtaining credit);

• justification of the appropriateness of an investment decision;

• the basis for the assessment of an enterprise in terms of sale or its merger with
another enterprise;

• acceptance of new partners;

Developing a business plan is an extremely complex task, because its accurate preparation
gives a clear idea of where to direct each company's efforts in order to achieve the
maximum efficiency of its operation. The business plan is crucial for the business, it is a
program for developing the financial management of the company. It includes the
development of company’s goals and objectives in the short and long term, assessment of
the current state of the economy, strengths and weaknesses of the industry, market analysis
and information for customers. It provides an assessment of the resources needed to reach
the objectives set in the conditions of competition. Describing all the key aspects of the
enterprise's future, analyzing the problems it may face, and defining the ways to solve these
problems, the business plan answers the question: Is it worth to spend any money on this
project? Will this project generate sufficient income to cover all expenses?

First, on a certain stage of economic development and the market situation, market relations
and entrepreneurship, the lack of a plan for the business is perceived as something
absurdity and may cause doubts among partners, creditors and customers. The existence of
a business plan is a mandatory requirement on the market.

A well-written business plan is the best “business card” for a businessman. It

helps to structure the company’s business process and saves time. In addition, a thoroughly

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composed business a plan can be quickly converted into a financing request, on the
condition that it contains all information needed.

Secondly, finding money to develop work (partnership, investing, borrowing credit) is

impossible without the information contained in the business plan. A business plan allows
you to demonstrate the benefits of the proposed project and to attract potential
contractors, potential financial partners. It can convince investors that the enterprise has
found attractive opportunities for production development, allowing for effective
implementation of the target. A business plan shows that the enterprise has an effective,
realistic and consistent program for achieving the objectives and tasks of the project.

Thirdly, the presence of a business plan creates a sense of validity, solidity of the company
and its owner.

The business plan is a perspective document and is recommended to be compiled for a

period of 3-5 years ahead. For the first and second year the main indicators are
recommended to be given in quarterly analyzes (and if possible, even in monthly analyzes),
and only, starting from the third year, can be limited by annual indicators.

2. Organization of the business planning process

The business plan is the final product of the entire planning process. In order to finalize it, it is
necessary to go through certain successive stages that make up the planning process.

The vision of the entrepreneur is his idea of the realization and development of his ideas in
the future.

The marketing, production, and management plan are the ways in which the business will
achieve its goals. The process ends with the development of a financial plan, in which,
expected results are reflected through specific quantitative measures.

Writing and presenting the business plan is the stage at which the outcome of all the work
done in the planning process takes the form of a document serving as a major tool in further
business management. However, the ready business plan should not be considered as static
and completed one. As the planning process is continuous, the business plan also needs to
be updated in line with the changes in the external and internal business environment.

Every start-up entrepreneur needs to make clear to himself what marketing activity is
particularly important because it is an important element of the corporate planning
process. This process implies knowledge of the current state of activity and development

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trends and also to use methodologies to model the transition from a current position to an
estimated forecast.

Every manager, regardless of his or her functional interests, must be a symbol of mechanics
and sense of implementation of financial plans at least as far as his business is
concerned. Planning should be done so that the company is able to meet the planned needs.

The planning process requires adequate assessment of the formed or continued

entrepreneurial activities. The planning process involves looking at the enterprise from
different positions, evaluating different aspects of its activity (sales, staffing, organization,
stimulation). Many of the company's strengths and weaknesses must be considered in the
planning process.

Moreover, working on the plan gives business a purposefulness. Targeted and responsible
work over the business plan helps to find a control and management tool that allows a
planned movement of the company to the targeted goals and objectives.

Finally, the process of preparation of a business plan is a powerful tool for self-learning, and
then for the realization of its actions - a basis for comparison with the actual achievements.

3. Elements of business plan

The uniqueness of each business would alter the final form, highlighting the significant
features and specific elements of the particular project.

The common structure and content of a business plan is as follows:

BUSINESS PLAN

I. ANOTATION

II. ANALYSIS OF BUSINESS

A. CHARACTERISTICS OF THE INDUSTRY (SECTOR)

B. SWOT ANALYSIS

C. PRODUCTS AND SERVICES

D. MARKET POSITIONS

III. MISSION AND STRATEGY

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A. MISSION

B. STRATEGY

IV. MARKETING PLAN

A. MARKET CHARACTERISTICS

B. TRENDS IN THE MARKET DEVELOPMENT

C. COMPETITORS

D. SALES AND MARKET SHARE

E. PRICE POLICY

F. DISTRIBUTION

G. PROMOTION AND ADVERTISING

H. EXTERNAL IMPACTS

I. MARKETING BUDGET

V. PRODUCTION PLAN

A. TECHNOLOGICAL PROCESS

B. MAIN PRODUCTION EQUIPMENT

C. TECHNICAL INFRASTRUCTURE CONDITION

D. STAFF IN THE PRODUCTION

E. PRODUCTION BUDGET

VI. INVESTMENT PLAN

VII. ORGANISATION AND MANAGEMENT

A. ORGANIZATIONAL AND PRODUCTION STRUCTURE

B. ORGANIZATION OF WORK

C. MOTIVATION AND STIMULATION

D. EXPENDITURE BUDGET

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VIII. FINANCIAL PLAN

A. EXPLANATORY NOTE

B. MONETARY BUDGET

ANOTATION

▪ name, address and other company basic data;

▪ a brief description of the company's business;

▪ a brief description of the market on which the company operates;

▪ a brief description of the strategy (actions, intentions, behavior) for successful business of
the company;

▪ owners, key personalities in the company's activities, incl. professional experience and
qualifications;

▪ a brief description of the financial needs with indication of the purposes for which the
funds and sources of funds will be used (own and attracted).

The volume of this section is no more than 2 pages. Usually it is being prepared at the end,
after the remaining sections of the business plan have been developed. It is the most read
section of the plan, regardless of whether it is intended for shareholders, managers or
external organizations. The first (often and the only one) impression of the content and
quality of a business plan is drawn precisely from this section. For this reason, it is important
to have a coherent representation with right professional terms and categories.

ANALYSIS OF BUSINESS

General Factors, affecting the company's activities:

▪ normative basis - assessment of the factors affecting major aspects of the company's
activities;

▪ social, demographic and other general factors affecting the company's activities;

▪ presence of foreign companies on the Bulgarian market;

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▪ expected amendments to legislation, requirements to the organization of production
activities, protection of the environment, conditions, security of labor and others after the
accession of Bulgaria to the EU.

Impacts of the sector (s) in which the company operates

A. Industry specific demand:

▪ characteristics of end-users;

▪ growth of demand - historical evaluation and expected trends.

Most often, the growth of demand is measured by sales volume and / or sales revenue. The
analysis is concentrated mainly on determination of demand trends, demand matching
(revenue from sales in industry) with the trends in the change in revenue in the real
economy and gross domestic product.

B. Sectoral specificity of supply:

▪ degree of concentration of forces (high level of concentration -when most of the forces in
the industry are concentrated in one or more companies);

▪ penetration of other companies in the industry, building new companies (assessment of

the opportunities for easy access - from capital, technological, market or other viewpoint) to
business in the industry);

▪ main products production capacity in the sector - historical development and expected
trends.

C. Sectoral (branch) profitability

Determination and analysis of the trends in the industry over the last 3-5 years by the
following indicators:

▪ profitability of sales (net profit / sales income);

▪ Return on equity (net profit / equity);

▪ profitability of assets (net profit / total assets).

SWOT analysis

Strengths - existing positive factors in the company that favors the realization of the
company's mission (conquered markets positions, high qualification of staff, registered

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patents and other objects of intellectual property that ensure uniqueness and high quality of
production, etc.).

Weaknesses - existing negative internal factors, influencing the realization of the company's
mission (low sales level, shortage of financial resources for investment, low qualification of
operational management, inadequate qualification of part of the staff, lack of system for

staff motivation, etc.).

Opportunities - positive external factors that favor the realization of the mission and the
specific objectives of the company (emerging trends for market expansion, opportunities for
quick and easy access to financial resources, favorable opportunities for cooperation with
science research organizations, etc.).

Threats - negative external factors for realization of the company’s mission and ongoing
activity (economic recession, high price of attracted external financial resources, unfavorable
regulations, product and service constraints, presence of unfair competition, easy access of
other companies to business, etc.).

Products and services

▪ description of the company's products and services –the benefits of the use of products
and services for users are highlighted, as well as the parameters and qualities that
distinguish the products and services than those of other companies;

▪ description of the production process, the raw materials used and materials;

▪ a description of the patents, know-how and other intellectual property and the benefits
they create.

Market positions

Description of the company's acquired market positions - market share - current state and
historical development, trends in volume changes, revenues and structure of sales, main
users, attitude of users, assessment of service, etc.

MISSION AND STRATEGY

A. Mission (see Separately presented material "Company Mission")

▪ reflects the meaning of the company's existence;

▪ expresses the company's value system.

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B. Strategy - Expresses the ambition (goals) and the way of achieving a certain level of
competitiveness, considering current and expected levels of capabilities of the
company. Competitiveness is accepted as the most important (in many cases the only
one) factor not only for survival (presence on the market) but also for company
development (expansion of the market presence).

There are two extreme strategies to achieve a certain level of competitiveness:

▪ the first strategy is based on low expenses. The production of products and services with
lower costs than those of competitors, gives an opportunity to generate profitability above
the average in the industry (the sector). Companies that follow such a strategy strive to carry
out strict control of costs. They invest in products and technologies that imply low
production costs, aspire to minimize overall production and management costs (Overhead
costs), avoid or minimize risky investments and costs of researching and developing products
and services, avoid marginal users' service, the organizational structure and control systems
are cost focused.

▪ the second strategy is based on 'differentiation'. Companies whose strategy is based on the
differentiation strive to be unique in meeting certain needs (high quality product or service
or individual parameters of the product), which are highly valued by consumers. Such
strategy requires investment in research and development, continuously upgrading of
qualifications (especially engineering), expanding marketing activity and shaping adequate
image of the company, application of incentive systems for innovative thinking of the staff.

Real business strategies applied by companies are in space between the two extreme
strategies, i. the most common strategy is a compromise between costs and quality
("Improving product quality at certain costs "," reducing costs while maintaining a certain
quality of service product "). The relationship between quality and cost is expressed in exact
product parameters and level of expenses in relation with the existing and future capabilities
of the company. The assessment of the capabilities is related to the answers of the following
questions:

▪ What are the main success factors and risks associated with the selected strategy?

▪ Does the company have the opportunity and resources to use the factors and overcome
the risks?

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▪ Can the company restructure its activities (research, design, production, marketing, etc.) in
accordance with the requirements for implementing the strategy?

▪ are there expectations for significant changes in the sector (amendments in technology,
increasing competition from foreign companies, changes in regulatory regulation, changes in
the consumer search) that may reduce the company’s competitive abilities?

MARKETING PLAN (MARKETING PLAN)

A. Market characterization

Identification of the base production market:

▪ where are the potential users of the company's products?

▪ what are the characteristics of potential users?

▪ What makes consumers buy the company's products? What are the users looking for in the
product - price, quality, functionality, reliability?

B. Trends in market development

Overall market assessment:

▪ volume of potential (possible) sales on the market;

▪ seasonality in consumption;

▪ frequency of consumption (duration of use) of the product;

▪ expected annual growth in sales;

▪ identification of factors and estimation of their expected impact on

sales growth (trends in economy and sector revenue, state regulation, saturation of the
market).

C. Competitors

▪ description of competitors;

▪ why and in which cases consumers prefer to buy competitors’ products;

▪ comparative analysis of the company's products and products of its competitors - prices,
design, service, guarantees, method of payment and other parameters that are significant
from the user's point of view.

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D. Sales and market share

▪ description of the conclusions of the previous sections and the assumptions which are used
as a basis for sales planning;

▪ sales plan - developed in detail for the first year of product scheduling, quantity (and
value), months or shorter periods. For the following years, aggregated indicators are used
for the forecast of the business plan (see BPTABLES - SALES);

▪ estimates of the company's market share, sales structure by consumer groups, market
share and trends in its change.

E. Pricing Policy

▪ the price is a compromise between the pursuit of a market, to retain market positions and
achieve higher profits;

▪ the formation of the price of a particular product implies an analysis on

the basis of clear and accurate information on: (i) the cost of production, (ii)

the average rate of return on invested capital in the company (WACC), (iii) the company's
strategy - to produce and sells cheap, expensive or medium-priced products;

▪ value estimation for the user - most users except the price include the cost of the purchase
and service, dependence on the manufacturer (seller) after purchase, convenience, which

the product creates.

F. Distribution

▪ analysis and evaluation (if necessary) of different opportunities (channels)

for distribution and mandatory estimation of the distribution costs of

products.

G. Promotion and advertising

▪ analysis, evaluation and selection of methods and means of promotion and advertising;

▪ an assessment of the promotion and advertising cost

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H. External influences

Description, probability assessment and action suggestion for neutralization (minimize

negative consequences) of external impacts that are supposed to occur in the realization of
the sales plan:

▪ economic factors - recession, unemployment, inflation, interest rate;

▪ political and social factors - changes in state policy and local authorities, amendments to
tax and social legislation, demographic and ecological processes, changes to plans for
regional development, etc.;

▪ technological factors.

I. Marketing Budget (see BPTABLES - MBUD)

The following methods are used to determine costs:

▪ as a percentage of sales revenue;

▪ the total amount of the budget is determined (by analogy with the previous years and an
estimate of the increase (decrease) in the volume of the activity), after which budget is
allocated to tasks and / or products (groups products);

▪ costs are determined in the following order: (i) the goals to be achieved by marketing
activity are determined (for example, increase sales by 3%); (ii) assign tasks (activities) that
need to be implemented for achieving the objectives; (iii) the cost of each task (activity) is
determined.

PRODUCTION PLAN

A. Technological process (short description)

B. Main production equipment (characteristic, incl. performance of existing and necessary

equipment)

C. Description and assessment of the state of the technical infrastructure

D. Production staff:

▪ characteristic - number, position and qualification structure;

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▪ plan for the needs and / or improvement of the qualification, incl. necessary costs;

▪ motivation, payment and stimulation of staff – existing situation and development

guidelines.

E. Production budget (production plan and production costs)

(see BPTABLES - PBUD)

INVESTMENT PLAN

A. A brief justification of the investment decisions and expected results of the investment.

B. Investment Plan - Most often presented in the form of a table which contains:

▪ the direction of the investment costs (purchase (construction) of production building, land
purchase, machinery and equipment, carrying out capital repair, working capital when
expanding activity);

▪ the date (period) during which the investment is expected to be realized (putting the new
machine into action);

▪ value of the investment;

▪ source of funding - own and / or attracted funds.

ORGANISATION AND MANAGEMENT

▪ organizational and production structure;

▪ work planning and reporting - existing situation and guidelines for development;

▪ key management figures - educational, professional and qualification characteristic;

▪ motivation, payment and stimulation of the management staff – current situation and
development guidelines;

▪ a plan for organizational and management costs (see BPTABLES - MANBUD).

FINANCIAL PLAN

▪ explanatory note;

▪ financial budget (see BPTABLES - CASHBUD).

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If there is significant cash deficit after the preparation of the monetary budget (negative
result for several consecutive periods), the following actions are possible:

▪ adjusting future earnings and / or costs and / or investments;

▪ supplementing the shortage with the funds of the owners and / or borrowers funds.

In practice, in most cases, such adjustments are imperative, which transforms the
preparation of the business plan into an iterative process.

4. Basic mistakes made in the development of a business plan

The most common mistakes in the business plan development are:

▪ The plan is too long, too technically oriented or too detailed.

▪ The financial data does not correspond to the rest of the plan.

▪ Printed or logical errors in the documents.

▪ Lack of operational plans.

▪ Lack of structure and organization of the process.

▪ The mission or strategies are aimed at the present, not the future.

▪ Critical success factors have not been identified and reported.

▪ Lack of customer orientation.

▪ Inability to identify and react to competition.

▪ Insufficient funding or wrong choice of sources of funding.

▪ Underestimating the requirements of the customers.

▪ Wrong selection of people to be attracted.

▪ Insufficient tracking of results and comparison with planned achievements

(lack of information and control system).

▪ Insufficient use of charts, graphs and diagrams.

▪ Inadequate use of external consultants.

▪ Overvaluation of project sales and/or underestimation of project expenses for

the activity.

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 ▪ Underestimating the time needed to place new products or services on the
market.

▪ Lack of persistence of the process.

5. Protection of business plan

In practice, the business plan proves to be a necessary but insufficient condition for
attracting external financing. One of the most important factors in the eyes of the potential
investor will be the personal qualities of the owner / manager and the management
team. Potential investors will seek motivation, enthusiasm and confidence, but above all the
managerial capabilities and competence for the practical realization of the business plan.

The first impressions are important, but the demonstration of knowledge in the key areas of
the business plan are far more important. In parallel, there are many ways to enhance the
performance effect. It is always good to play a performance scenario. The owner (manager)
should put the main accents on the market and the expertise of the management
team. Demonstrated style should maximize awareness of the product or service.

In addition to the above-mentioned rules of conduct, which include complete control of

"body language" and careful listening to comments and remarks, it is necessary to
demonstrate a proper analysis of the competitive market forces in the particular sector, the
realism of the profits and the means available, needed to implement the strategies. It is vital
for the owner or manager and his team to show complete competence in terms of business
plan details.

Conclusion

Proper planning requires that the manager clarifies the essence, goals, tasks, methods,
phases, etc. of the planning process. It is of utmost importance for:

▪ defining the guidelines for sustainable and efficient development of the company
activity;

▪ defining the main directions and proportions of the development of the

production, considering the material sources for its provision and the market
demand;

▪ optimal use of company capabilities, including the best use of all kinds of
resources and prevention of wrong actions, ensuring financial sustainability and
higher profitability of capital than competitors, etc.

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Planning is a process that makes it possible to clearly outline the vision of each enterprise, as
well as to identify possible mistakes that may be made and to take the necessary preventive
measures to eliminate them. The business plan is a powerful tool for planning the activity of
any business, describing all the main aspects of the enterprise's future development,
analyzing the problems which it may face, and identifying ways of solving these problems. As
a result, it addresses the question: Is it worth at all to invest in this project and will this
project bring income that will cover all expenses?

Therefore, before starting their business, entrepreneurs must carefully and thoroughly plan
any small but crucial detail of their future business activity in order to achieve the desired
functionality of their business.

Recommended additional literature:

1. Porter Michael E., Competitive Advantage of the Nations, "Classic and Style"
Publishing Ltd., S., 2004.

2. Kotler Philip, Marketing Management, Graphema Publishing House, S., 1996.

3. Barrow Paul, Best Business Plans, Preparation and Presentation, "Classic and
Style" Publishing House Ltd., S., 2002.

4. J. Pearce II, R. Robinson, Strategic Management, IRWIN, Homewood, 1988.

5. B. Richardson, Business Planning, Pitman Publishing, 1990 .

6. T. Zimmerer, N. Scarborough, Effective Small Business Management,

7 th Edition, Prentice Hall, 2003.

7. Kaplan, R., Norton, D., Balanced System of Performance Indicators, "Classic

and Style" Publishing House, S., 2005.

8. J. Curdi, Business Strategies. Effective Decision Making, Classic Publishing, S.,

2005.

9. A. Thompson, Jr. Strickland III, Strategic Management, Concepts and Cases,

McGraw-Hill / Irwin, 2001.

10. Vladimirova, Strategic Management and Strategic Planning, University

Publishing House "Stopanstvo", S., 2005.

11. Naydenov N., Forecasting and Planning, University Publishing House

"Stopanstvo", S., 2002.

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Keywords

Mission

Internal environment

External environment

Competitive strategy

Cost leadership

Differentiation - distinctive features

Focusing on a market or market niche

Goals

Strategic choices

Control system

Self-Test Questions:

1. What are the stages of the development of a company plan?

2. Is it possible to develop a business plan in a different sequence?

3. What is the relationship between the strategic planning model and the
consistency in the development of a business plan?

4. The statement "We make a profit," can it be included in the company mission?

5. How would you describe a company's internal environment and what are its
elements?

6. Why is it necessary to make detailed and in-depth company analyzes?

7. Specify the approaches used for analysis and assesments?

8. Explain the essence of the functional approach. What are the signs of
the desintegration of the company's activity?

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9. What are the core business processes for which real estimates need to be made as
a result of in-house analysis?

10. What is competition and why should it be explored?

Discussion questions:

1. Why is it necessary to use the system “chain of activities „in the company
analysis? What kind of information we get through its application?

2. What problems would the company management face if each functional unit
analyzed and evaluated only its activity? Specify two problems.

3. How can you identify your company's direct competitors?

4. What kind of competitive strategies do you know?

5. What are the chances of success of a startup company that follows the principle
"what others do – we will do the same"?

6. Please comment on the findings below as a result of a survey of the behavior of

different companies?

Many companies do not invest enough to research their competitors. Some believe they
know everything about their competitors just because they compete with them. Others
think they could never have sufficient information about their competitors, so there's no
need to worry.

7. Is a business plan necessary and why?

8. What benefits do you expect in the process of developing your company business plan?

9. Do you believe that by developing a business plan the investor may find that the time is
not appropriate for achieving his plans and intentions?

10. Does only an operating company need to develop a business plan?

Summary:

Companies often have difficulty determining what to include in their business plan. Using
templates is not the best idea. Most often, business plans include sections where business
objectives are developed, product specifics or services are revealed. Market assessment is
given.

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