Chapter – 5 10 marks

What Is a Business Plan?

Business Plan – A business plan is a written narrative, typically
25 to 35 pages long, that describes what a new business plans
to accomplish.

Outline of Business Plan

Section 1: Executive Summary

The executive summary is a short overview of the entire

business plan

– It provides a busy reader with everything that needs to be

known about the new venture’s distinctive nature.

– An executive summary shouldn’t exceed two single-space

pages.
Section 2: Company Description

The main body of the business plan beings with a general

description of the company.

– Items to include in this section:

• Company description.
• Company history.
• Mission statement.
• Products and services.
• Current status.
• Legal status and ownership.
• Key partnerships (if any).
Section 3: Industry Analysis

This section should be by describing the industry the business

will enter in terms of its size, growth rate, and sales projections.

– Items to include in this section:

• Industry size, growth rate, and sales projections
• Industry structure.
• Nature of participants.
• Key success factors.
• Industry trends.
• Long-term prospects.
Section 4: Market Analysis

The market analysis breaks the industry into segments and

zeros in on the specific segment (or target market) to which
the firm will try to appeal.

– Items to include in this section:

• Market segmentation and target market selection.
• Buyer behavior.
• Competitor analysis.
Section 5: Marketing Plan

– The marketing plan focuses on how the business will market

and sell its product or service.
– Items to include in this section:

• Overall marketing strategy.

• Product, price, promotions, and distribution.

Section 6: Management Team and Company Structure

– The management team of a new venture typically consists of

the founder or founders and a handful of key management
personnel.
– Items to include in this section:

• Management team
• Board of directors
• Board of advisers.
• Company structure.
Section 7: Operations Plan
Outlines how your business will be run and how your product or
service will be produced.

– A useful way to illustrate how your business will be run is to

describe it in terms of “back stage” (unseen to the customer)
and “front stage” (seen by the customer) activities.
– Items to include in this section:

• General approach to operations.

• Business location.
• Facilities and equipment.
Section 8: Product (or Service) Design and
– If you’re developing a completely new product or service, you
need to include a section that focuses on the status of your
development efforts.

– Items to include in this section:

• Development status and tasks.

• Challenges and risks.
• Intellectual property
Development Plan
• Product (or Service) Design and Development Plan
– If you’re developing a completely new product or service, you
need to include a section that focuses on the status of your
development efforts.
– Items to include in this section:

• Development status and tasks.

• Challenges and risks.

• Intellectual property

Section 9: Financial Projections

The final section of a business plan presents a firm’s pro forma
(or projected) financial projections.
– Items to include in this section:

1. Sources and uses of funds statement.

2. Assumptions sheet.
3. Pro forma income statements.
4. Pro forma balance sheets.
 5. Pro forma cash flows.
6. Ratio analysis
Presenting the Business Plan to Investors
The Oral Presentation
– The first rule in making an oral presentation is to follow
directions. If you’re told you have 15 minutes, don’t talk for
more than the allotted time.

– The presentation should be smooth and well-rehearsed.

– The slides should be sharp and not cluttered.

• Questions and Feedback to Expect from Investors

– The smart entrepreneur has a good idea of the questions

that will be asked, and will be prepared for those queries.

Chapter -2 10

What is a Business Model?

– A model is a plan or diagram that’s used to make or describe
something.
Business Model

– A firm’s business model is its plan or diagram for how it

competes, uses its resources, structures its relationships,
interfaces with customers, and creates value to sustain itself on
the basis of the profits it generates.
– The term “business model” is used to include all the activities
that define how a firm competes in the marketplace.
How Business Models Emerge

• The Value Chain (continued)

– Entrepreneurs look at the value chain of a product or a service

to pinpoint where the value chain can be made more effective
or to spot where additional “value” can be added.
– This type of analysis may focus on:
• A single primary activity such as marketing and sales.
• The interface between one stage of the value chain and
another, such as the interface between operations and outgoing
logistics.
• One of the support activities, such as human resource
management.

The value chain model is a business concept that describes the series of
steps a company takes to create and deliver a product or service to the
market. It breaks down the process into primary and support activities:

1. Primary Activities:
o Inbound Logistics: Receiving and storing raw materials.
o Operations: Turning raw materials into the final product.
o Outbound Logistics: Distributing the product to customers.
o Marketing and Sales: Promoting and selling the product.
o Service: Providing after-sales support.
2. Support Activities:
o Firm Infrastructure: Company management and planning.
o Human Resource Management: Hiring and training
employees.
o Technology Development: Research and development,
innovation.
o Procurement: Purchasing raw materials and resources.

The goal is to add value at each step so the final product is worth more
than the sum of its parts.
Components of a Business Model

Four Components of a Business Model

• Core Strategy = The first component of a business model is
the core strategy, which describes how a firm competes relative
to its competitors.

• Primary Elements of Core Strategy

– Mission statement.
– Product/market scope.
– Basis for differentiation.

Strategic Resources = A firm is not able to implement a strategy

without resources,
so, the resources a firm has affects its business Model
substantially.

– The two most important strategic resources are:

• A firm’s core competencies.
• Strategic assets.
Partnership Network =A firm’s partnership network is the third
component of a business model. New ventures, in particular,
typically do not have the resources to perform key roles.

A firm’s partnership network includes:

• Suppliers.
• Other key relationships.

Customer Interface
The way a firm interacts with its customer hinges on how it
Chooses to compete.

The three elements of a company’s customer interface are:

• Target customer.
• Fulfillment and support.
• Pricing model.
Chapter -7
Preparing the Proper Ethical and Legal Foundation

• Establishing a Strong Ethical Culture: Creating a work

environment where ethical behavior is encouraged and expected.

• Choosing an Attorney for a Firm: Selecting a lawyer to

help with legal matters and protect the business.

• Drafting a Founders’ Agreement: Creating a document that

outlines the roles, responsibilities, and shares of each founder.

• Avoiding Legal Disputes: Taking steps to prevent conflicts

and lawsuits through clear agreements and practices.

• Obtaining Business Licenses and Permits: Getting the

necessary government approvals to legally operate a business.

• Choosing a Form of Business Ownership: Deciding on the

legal structure of the business, like sole proprietorship or
corporation.
Sole Proprietorship

The simplest form of business entity is the sole proprietorship.

– A sole proprietorship is a form of business organization

involving one person, and the person and the business are
essentially the same.

– A sole proprietorship is not a separate legal entity. The sole

proprietor is responsible for all the liabilities of the business,
and this is a significant drawback.

Advantages and Disadvantages of a Sole Proprietorship

1. Creating one is easy and inexpensive.
2. The owner maintains complete control of the business and
retains all of the profits.
3. Business losses can be deducted against the sole
4. proprietor’s other sources of income.
5. It is not subject to double taxation (explained later).
6. The business is easy to dissolve.

Disadvantages of a Sole Proprietorship

 1. Liability on the owners’ part is unlimited.
2. The business relies on the skills and abilities of a single
owner to be successful. Of course, the owner can hire
employees who have additional skills and abilities.
3. Raising capital can be difficult.
4. The business ends at the owner’s death or loss of interest
in the business.
5. The liquidity of the owner’s investment is low.

Partnerships
If two or more people start a business, they must organize as a
partnership, corporation, or limited liability company.
– Partnerships are organized as either general or limited liability
partnerships.
Advantages of a General Partnership

1) Creating one is relatively easy and inexpensive compared

to a
2) Corporation or limited liability company.
3) The skills and abilities of more than one individual are
available to the firm.
4) Having more than one owner may make it easier to raise
5) funds.
6) Business losses can be deducted against the partners’
other
 7) sources of income.
8) It is not subject to double taxation (explained later).

Disadvantages of a Partnership

1) Liability on the part of each general partner is unlimited.

2) The business relies on the skills and abilities of a fixed

number of

3) partners. Of course, the owners can hire employees who

have additional skills and abilities.

4) Raising capital can be difficult.

5) Because decision making among the partners is shared

disagreements can occur.

6) The business ends with the death or withdrawal of one

partner

7) unless otherwise stated in the partnership agreement.

8) The liquidity of each partner’s investment is low.

Chapter – 8
Process of Industrial Sickness

• Normal Units: Businesses operating smoothly and

profitably.

• Tending Toward Sickness: Businesses starting to

show signs of financial trouble.

• Incipient Sickness: Early stages of significant

financial and operational problems.

• Sickness: Businesses facing severe financial distress

and operational breakdowns.

Consequences of Industrial Sickness

1. Huge financial losses to the bank and financial

2. institutions
3. Loss to employment opportunities
4. Emergence of industrial unrest
5. Adverse effect on prospective investors and
6. entrepreneurs
7. Wastages of scares resources
8. Loss of revenue to the government