ST.

ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

MODULE DESCRIPTOR
This unit explains the Business Plan. It includes Purposes of a Business Plan,
Parts of the Business Plan, Analysis of the Competition, Operations and Management
and Supporting Document.

NOMINAL DURATION
October 11-12 (3 hours)

LEARNING OUTCOMES
At the end of this module, you MUST be able to:
1. explain the importance of making the business plan;
2. identify the parts of Business plan; and
3. describe the different parts of Business Plan.

LEARNING EXPERIENCES

Learning Activities Special Instructions

1. Read Information Sheet about The In the learning outcome, you must
Business Plan. explain the importance of making the
2. Answer Self- Check and compare your business plan, identify the parts of
answers with the Answer Keys. business plan and describe the different
3. Perform Task Sheet by following the parts of business plan.
given instruction.
4. Perform Job Sheet by following the To be able to do this, you should
given instruction. understand the following:
1. Purposes of a Business Plan;
2. Parts of the Business Plan;
3. Analysis of the Competition; and
4. Operations and Management and
Supporting Document.

Go through the information sheets and

answer the self- check to ensure that
knowledge context of concept of the
Business Plan is acquired.
5. Evaluate your own output using the After doing all these activities, you are
performance criteria. ready to proceed to the next module.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

INFORMATION SHEETS 8.1-1

The number of problems that may be felt when the small business is already in operation
may just overwhelm the entrepreneur. If he is good enough, he will be able to handle
them successfully if they happen one at a time. However, it will be difficult for him if
problems occur simultaneously. The benefits afforded by business planning may help
achieve his objectives. When problems occur some of them require immediate solution,
leaving no sufficient time for the entrepreneur to think clearly. Effective business planning
is used to eliminate this difficulty. Planning may be viewed as a systematic approach to
achieve certain objectives. It is an attempt to eliminate mistakes inherent to on the spot
decisions. Planning provides the decision maker with ample time to consider relevant
variables before a decision is reached. Planning is useful not only to big business. Small
business may also reap the benefits of planning if it is undertaken even on a small-scale
basis.

What is a Business Plan

The business plan is a document that helps the small business owner determine
what resources are needed to achieve the objectives of the firm, and provides a standard
against which to evaluate result. The business plan is a sort of a business blueprint and
it keeps the entrepreneur on the right track. It gives a sense of purpose to the business.
It also provides guidance, influence, and leadership, as well as communicating ideas
about goals and the means of achieving them to partners, associates, employees and
others.

Purposes of Business Plan

A business plan is written for two main purposes. They are the following:
1. to serve as management’s guide during the lifetime of the business; and
2. to fulfill the requirement for securing lenders and investors.

The Plan as a Guide

In the course of writing the business plan, the small business operator (SBO) is
afforded sufficient time to consider all factors relevant to operating the business. Through
analysis of the environment and derivation of what can be expected to happen, decisions
about various aspects of business operations can be considered in advance. The
business plan serves a useful tool for comparing what was planned against what was
achieved. Discrepancies will provide the bases for implementing changes.

A tool for Securing Funds

When the SBO need initial or additional funding for his business venture, the
business plan is a handy means for convincing lenders and investors. In many cases the
business plan indicates that the proponent SBO is fully aware of what he is getting into.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

Lenders will be more comfortable to see various documents that indicate the borrower
can repay the loan. Such documentation takes the form of financial projections which re
usually included in the business plan. The business plan will serve as a means of
providing some assurance that the investor will place his funds in a worthwhile
investment.

Revising the Plan

A business plan is prepared in consideration of the current and expected
development or changes in the environment may not happen fully or even partially. In that
case, the business plan or portion of it may no longer be relevant. When that happens, a
revision of the business plan is in order. The implication is that even with a business plan,
the SBO must strive to be well informed about what is happening to his business and to
the industry where his business belongs.

Parts of the Business Plan

The contents of the business plan will depend upon the purpose. Usually however,
they contain the following:
1. title page and contents;
2. executive summary;
3. description of the business;
4. description of the product or service;
5. market strategies;
6. analysis of the competition;
7. operations and management;
8. financial data; and
9. supporting documents.

Title Page and Contents

The business plan must be easily identifiable through a cover page with a listing
of the following:
1. the name of the business;
2. the name/s of the proponents (in this case, the SBO);
3. address;
4. telephone number;
5. e-mail and website address
6. the date; and
7. the name of the person who prepared the business plan.
The next page should provide a table of contents so the readers can easily find the
information they need.

Executive Summary
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

The executive Summary is a portion of the business plan that summarizes the plan
and states the objectives of the business. If the SBO is intending to borrow money or is
seeking capital from investors, the following must be indicated:
1. the capital needs of the business;
2. how the money will be used;
3. what benefits will be derived by the business from the loan or investment; and
4. in case of loan, how it will be repaid with interest, and in the case of outside investment,
how profits will be generated
The executive summary is prepared after the business plan is written.

Description of the Business

This particular portion of the business plan is very useful to the SBO, as well as
prospective investors and lenders.
This is divided into two parts:
1. a short explanation of the industry; and
2. a description of the business.
In describing the industry, it is important to present the current situation and the
outlook for the future. Information must be provided regarding the various markets within
the industry, as well as new products or developments that could affect the business. The
sources of information must be indicated.
Statements about the following will be useful in describing the business.
1. the industry sector where the business falls into (retail, manufacturing,
education, entertainment and others);
2. whether the business is new or established;
3. the ownership status of the business (sole proprietorship, partnership, or
corporation);
4. information on who the customers are;
5. information on the size of the market;
6. information on how the product or service is distributed.

Description of the Product or Services

The product or service must be described clearly in the plan. To achieve this, the
following must be presented:
1. The important features of the products or service, such as maintenance, free
features of the product, or the home delivery service for the products ordered through the
phone.
2. A detailed description of how the product is used.
3. What makes the product or service different from others available in the market.
Examples are the availability of the product or service 24 hours a day, or the water- based
feature of the product insect repellant.
The objective of the product or service description is to show that the firm has a
competitive advantage over others. If the business plan is able to show the edge, lenders
and investors may just respond favorably. It is very important to explain that the business
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

will be profitable. Factors that will make the business successful must be described. Some
of these positive factors that are worth describing are:
1. superior organization of the business;
2. latest equipment that are currently used by the company;
3. superior location of the company;
4. fair price of the product or service;
5. superior customer service offered by the company.

Market Strategies
Market Strategies refer to what the SBO plans to do to achieve the market objective
of the firm. These strategies are formulated after undertaking market research.
Market Strategies consist of the following:
1. definition of the market;
2. determination of the market share;
3. positioning strategy;
4. pricing strategy;
5. distribution strategy;
6. reader, specially lenders and investors, if the projected market share of the firm
is promotion strategy;

Definition of the Market. The object of the market definition is to determine which part
of the total potential market will be served by the firm. Hence, the market must be defined
in terms of size, demographics, structure, growth prospects, trends, and sale potential.
To determine the total potential market, the total aggregate sales of the competitor must
be presented.

Determination of the Market Share. The business man will be more useful to the
presented.
To determine the firm’s market share, the following steps may be used:
1. determine the number of prospects in the target market;
2. determine the number of times the product or service is purchased by the target market;
3. figure out the potential annual purchase; and
4. determine the percentage of the potential annual purchase that the firm can attain.

Positioning Strategy. Positioning refers to how the firm differentiates is product or

service from those of the competitors and serving a niche.
Positioning strategy is one where the firm identifies a target market segment and develops
a strategy mix to address and desires of that segment. The objective of the positioning is
to stablish the firm’s product or service identify in the mind of buyer.
Before adapting a position strategy, the following question must first be considered;
1. What does the costumer really want to buy from the firm? Apart from product quality,
the answer could vary from fast and efficient service to clean and friendly environment,
to good reputation, and the like.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

2. How is the product or service different from the competitors? A product or a service
may different from the competition in terms of quality, maintenance requirements, number
of user, ease of operation, among others.
3. What make the product or service unique? The firm’s product or service may be unique
in many ways. It may only be the one that is delivered free to the costumer’s house, or it
may be the only product that provides a trade-in-option to the costumers.

Pricing Strategy. How the firm prices its product or service is a very important component
of the business plan. It the firm was to achieves its objectives, the right price of its product
or service must be maintained. In determining the right price, the following factors must
be considered;
1. costumer’s perception of value in the firm’s kind of business;
2. costs involved such us, overhead, storage, financing, production, and distribution; and
3. profit objects of the firm.
The firm’s price may be established through any of the following method:
1. Cost plus pricing- covers all costs, variable and fixed, plus an extra increment
to deliver profits.
2. demand plus pricing- is a method of pricing where the firm set prices based on buyer
desires. The range acceptable to the target market is determined.
3. competitive pricing- call for price- setting on the basis of prices charged by competitors.
4. Mark- up pricing- is a form of cost oriented pricing in which the firm sets prices by
adding per unit merchandize costs, operating expenses and desired profits.
Each of the various methods of pricing has corresponding strength and
weaknesses. In a given situation, one pricing method could be the most effective.

Distribution Strategy. Distribution refers to the process of moving goods and services
from the firm to the buyers. The distribution channel that will be adapted must provide a
strategic advantage of the firm.
Common distribution channels are the following:
1. Direct Sales- is the most effective channel if the plant is to move goods directly
to the ultimate users.
2. Original equipment manufacturer sales- involve selling a manufactured product
to another manufacturer who, in turn, incorporates the same to his product and which is
later sold as a finished product to the end user. An example is the sound system
incorporated to cars.
3. Manufacturer’s representatives- are wholesalers employed by one or several
producers and paid on commission during to quantity sold.
4. Wholesalers- are channel members that sell to retailers or other agents for
further distribution through the channel until they reach the final users.
5. Brokers- are distributors who buy directly from distributors or wholesalers and
sell to retailers and end users.
6. Retailers- sell directly to the consumers.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

7. Direct mails- are printed material used in targeted campaign to consumers.

These are sent directly to the consumers. These includes catalogs, letters, e-mail and
other direct appeals.

Promotion Strategy. How the company’s product or services will be promoted is an

important component of a marketing strategy. The promotion strategy must include the
following:
1. Advertising Aspects:
a. advertising budget;
b. positioning message; and
c. first year’s media schedule.
2. packaging- describes how the company’s products will be packaged.
3. Public relations- will be a detailed presentation of the publicity strategy of the firm. This
will include a list of media that will be tapped to convey the firm’s message to target
market. The schedule of special events like product launching will also be included.
4. Sales promotions- are means used to support the sales message like special sales,
coupons, contests, premiums awards, trade-in, among others.
5. Personal sales- present the sales strategy including:
a. pricing procedures;
b. rules on returns and adjustments;
c. methods of sales presentations;
d. policies on customer services;
e. policies on customer services;
f. compensation of salesmen; and
g. responsibilities of the salesmen.

Analysis of the Competition

The small business operator (or the entrepreneur) will find it necessary to make an
analysis of the competitors.
In competitive analysis, the following must be determined:
1. strength and weaknesses of the firm’s competitors;
2. strategies that will give the firm a competitive advantage;
3. barriers that can be developed to prevent competitors or would be competitors
from exploiting the firm’s market;
4. any opportunity that can be exploited.
The competitors of any business may either or both direct or indirect. A direct competitor
offers a similar product.
The marketing strategies of the firm’s competitors must also be analyzed. Such action will
provide clues as to which part of the target market the firm must serve. The aim of
competitor analysis is to determine how the firm stands against competition. After
determining its position, the firm must take stock of its strength and weaknesses and craft
an appropriate strategy to achieve its business objectives.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

Operations and Management

How the firm will be operated on a continuing basis is an important component of
the business plan. As such, the plan must contain the following.
1. organizational structure;
2. operating expenses;
3. capital requirements;
4. cost of goods sold.

Organizational Structure
A well- defined and realistic organizational structure is an important element of the
business plan. Investors and lending institution will be interested to look at this particular
aspect. Generally, they will be concerned how the firm is organized along the following
concerns:
1. marketing (including sales, customer relations and services);
2. production (including quality assurance)
3. research and development;
4. management; and
5. human resources.
Operating Expenses
Projections of operating expenses are important aspects in the preparation of a
business plan. This is prerequisites in projecting financial statements. Lenders and
investors are especially interested in scrutinizing such statements.
In determining operating expenses, labor and overhead must be considered. The
organizational structure is useful in providing information in the determination of labor
expenses. Overhead, which may be fixed or variable, includes the following:
1. rent;
2. advertising and sales promotion;
3. supplies;
4. utilities
5. packaging and shipping
6. maintenance and repair;
7. equipment leases;
8. payroll;
9. payroll taxes and benefits;
10. bad debts;
11. professional services;
12. insurance;
13. loan payments;
14. depreciation;
15. travel.

Capital Requirements
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

Capital equipment are necessary items in operating businesses. The business

plan will not be complete unless a listing of capital equipment needed to purchased is
drawn up. Equipment needs vary from business to business. Manufacturing firms will
need more elaborate types of equipment. Service businesses usually require less
equipment. A firm engaged in transporting elementary and high school students, for
example, will need buses or jeepneys only.

Cost of Goods Sold

Business which carry like those engaged in manufacturing and trading must
provide a list showing costs of goods. The cost of goods of trading firms consists of
products purchased for resale, while the cost of goods of manufacturing firms refer to total
expenses incurred in manufacturing the products that are intended to be sold.
These expenses are the following:
1. material;
2. labor; and
3. overhead
In both types of business, all merchandise sold are indicated as costs of goods, and those
that are not sold are categorized as inventory.

Financial Data
Financiers are most interested in the financial aspects of the business plan. To
satisfy this requirement, the following statements must be presented in the business plan:
1. income statement;
2. balance sheet; and
3. cash flow statement.

Income Statement
The income statement shows the income, expenses and profits of a firm over a
period of time. It is also alternatively called “statements of earnings”. It may cover a certain
year, quarter, or a month. It provides basic data to help the prospective financier analyze
the reasons for the projected profits.

Balance Sheet
The balance sheet is a type of financial statement that shows the financial
condition of the business as of a given date. The information provided by the statement
is useful not only to entrepreneur but also to prospective creditors. A scrutiny of the
balance sheet will give the owner some clues if modifications are needed in some of the
items listed.
A summary of financial information about the business is contained in the balance
sheet and are broken down into three areas, namely:
1. assets;
2. liabilities; and
3. owner’s equity.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

The assets
The assets portion of the balance sheet lists the assets of the firm in order of
liquidity, i.e., from the most liquid. As such this portion is subdivided into the following:
1. Current assets
a. cash- which includes cash in checking, and short- term investment accounts;
b. Accounts receivable- refer to income derived from credit accounts; and
c. Inventory- refers to the inventory of materials used to manufacture a product not yet
sold.
2. Fixed assets- these are durable assets and will last more than one year. These consist
of the following:
a. Capital and plant- refers to the book value of all capital requirement and others such
as land and building; if owned by the firm, less depreciation; and
b. Investments- are investment accounts owned by the company that cannot be converted
to cash in less than a year.

The Liabilities
The liabilities portion of the balance sheet is classified as current or long-term.
Current liabilities are due in one year or less and they include the following:
1. Accounts payable- refer to all the expenses incurred by the business that are
purchased on an open account from suppliers and are due for payment.
2. Accrued liabilities- refer to operational expenses that are not yet paid. Examples
are overhead and salaries.
3. Taxes that are due and payable.
The long term liabilities are due in more than one year. They include the following:
1. Bonds payable- are bonds due and payable over one year;
2. Mortgage payable- refers to loans used for the purchase of real estate and is
repaid for a period of over one year; and
3. Notes payable- are loans represented by a written document in which is payable
for a period of over one year.

Cash Flow Statement

The cash flow statement is also a very useful for business planners. It projects
what the business plan means in terms of pesos. It is used for operational planning and
estimates the amount of cash inflows and outflows of the business during a specific period
of time. A proper balance between the cash inflows and outflows will result to profits.
The following items are listed in a cash flow statement:
1. Cash- is the cash on hand of the firm.
2. Cash sales- are income for sales paid by cash.
3. Receivables- are income collected from credit sales.
4. Other incomes- are income derived from investments, interests on money
loaned to borrowers, and on cash derived from sales of assets.
 ST. ANTHONY COLLEGE
Module for Entrepreneurial
CALAPAN CITY, INC. Mind

5. Total income- is the sum of each cash sales, receivable, and other income.
6. Material or Merchandise- refers to:
a. raw material used in the manufacture of the product; or
b. the cash outlay for merchandise inventory of trading firms; or
c. the supplies used in the performance of service.
7. Direct labor- refers to labor required to manufacture a product or perform a
service.
8. Overhead- refers to all fixed and variable expenses required in the day to day
operations of the business.
9. Marketing expenses- refer to all salaries, commissions, and other direct costs
associated with the marketing and sales departments.
10. R and D expenses are labor expenses required to support the research and
development efforts of the firm.
11. G and A expenses- refer to those required to support the general and
administrative functions of the firm.
12. Taxes- refers to all taxes, except payroll withholding taxes, paid to the
government, national and local.
13. Capital- represents the fund requirements to obtain any equipment needed to
generate income.
14. Loan payments- refer to total payment made to reduce or eliminate any long
term debts.
15. Total expenses- refer to the sum of materials, direct labor, overhead, marketing
expenses, R and D, G and A, taxes, capital, and loan payments.
16. Cash flow- refers to the difference between total income and total expenses.
17. Cumulative cash flow- refers to the difference between current cash flow and
the cash flow from the previous period.
The cash flow must be carefully analyzed and a short summary must be
presented in the business plan.

Supporting Documents
The business plan would be more meaningful if supporting documents are
included. The documents usually consist of the following:
1. the owner’s resume;
2. contracts with suppliers;
3. contracts with customers or clients;
4. letters of reference;
5. letters of intent
6. a copy of the firm’s lease;
7. a copy of copyright or patent acquired, if applicable; and
8. tax returns for the past three years.