How to Make a Business Plan: Step by Step detailed guide

The business plan is a formal statement prepared by the entrepreneur, of a set of business goals. It is a plan for reaching those goals framed by the organization or team. Business plans describe all necessary inputs for the enterprise, explain how the resources will be utilized, detail the strategies for the execution of the project, outline the desired goals, and assess market sensitivity and the profitability of the venture.

The business plan is valuable to the entrepreneur, potential investors, venture capitalists, banks,
financial institutions, new personnel’s suppliers, customers, advisors, and others who are trying
to familiarize themselves with the venture, its goals, and objectives.

It’s well said that “writing a good business plan can’t guarantee success, but it can go a long way
toward reducing the odds of failure.”

Formats of Business Plan

The depth and detail of the business plan depend on the size and scope of the proposed new
venture. There is no fixed content for a business plan as it varies according to the entrepreneur’s
goals. Thus, it is common for start-ups to have three or four formats as follows for the same
business plan.

Elevator pitch

It is a three-minute summary of the business plan’s executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.

A pitch deck with oral narrative

A hopeful, entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation, i.e., the executive summary and a few key graphs showing financial trends and key decision-making benchmarks.

A written presentation for external stakeholders

A detailed, well-written, and pleasingly formatted plan targeted at external stakeholders.

An internal operational plan

A detailed plan describing planning details that are needed by management but may not be of interest to external stakeholders.

Components of Business Plan

1. Introductory cover page/general introduction
2. Business venture
3. Production plan
4. Operational plan
5. Organizational plan
6. Human resource plan
7. Marketing plan
8. Financial plan

Let us understand these components or parts of the business plan in detail

Introductory Cover Page/General Introduction

This is the title or cover page that provides a brief summary of the business plan. It includes

• The entrepreneur’s bio-data – Name, address, qualification, experience
• Industry profile – Name, address, contact details, and nature of business
• Structure of Organization – Form of the organization like Sole proprietorship, Partnership, Joint-stock company, HUF, Co-operative society and their registration details
• Product details

Business Venture

This business plan section generally begins with the “mission statement” by the entrepreneur describing the enterprise’s size, scope, and nature. It includes

• Details of the Site – Location, leased or owned land, industrial area of an enterprise, and NOC from Municipal Corporation if required.
• Physical infrastructure –
  • Raw material -Indigenous or imported and source of supply
  • Labour – Type of labour and number of manpower required
  • Utilities – Power, fuel, water, gas, and electricity need to be clearly stated
  • Pollution control – The sewage system, the sewage treatment plant, the water harvesting system, and arrangement for dumping and disposing of the other types of waste or emissions all need to be discussed in the plan.
  • Transport and Communication – Requirements for transportation and communication facilities.
  • Machinery and Equipment – A complete list of machinery items and equipment types required indicating their size, capacity, type, cost, and sources of their supply, should be disclosed.
  • Production Process – The process involved in the production, the installed licensed capacity of the plant, the technology to be used, whether available locally or imported, shifts involved, need to be present in the business plan.

Production Plan

Production is the most important activity of an enterprise because over here, the transformation of raw material into the finished product is taken place with the help of energy, capital, manpower, and machinery.

There are three situations before the entrepreneur they are as follows

• No Manufacturing – If no manufacturing is involved, this section will not be included in the business plan.
• Partial Manufacturing – In this process, the entrepreneur has to clearly mention what he/she intends to do himself/herself and what he/she plans to get done from outside is required. If some or all the manufacturing process is to be subcontracted or outsourced, then the production plan should describe:
  • Name and location of subcontractor(s)
  • Reasons for their selection
  • Cost and time involved
  • Any contracts that have been completed etc.
• Complete Manufacturing – If the manufacturing is to be carried out in whole by the entrepreneur, they will need to describe:
  • The physical plant layout
  • The machinery and equipment required to perform the manufacturing operations
  • Raw materials and suppliers’ names, addresses, terms, and conditions
  • Cost of manufacturing
  • Any future capital equipment required etc.

A production plan helps to plan the work in such a manner that one can clearly form an idea about the Production schedule and/or budget, Machinery, Equipment requirement, Manufacturing method and process involved, Plant layout, Manpower requirement, and Inventory requirement.

Operational Plan

Where the production plan aims to “plan your work,” their operations plan ensures “work
your plan.” It is actually a blueprint prepared right in advance of actual operations –

• Determine the exact route or path a product/ service has to follow right from raw material to its transformation into the finished product.
• Fix the time, day, and date when each operation is to be commenced and completed.
• Issue necessary order instructions, guidelines, and/or information to work.
• A properly planned follow-up procedure is to be prepared as it will be helpful in dispatching errors and defects in the work.
• Compare materials, products,s or performance with established standards.
• How shipping is going to take place is also to be mentioned.

Organizational Plan

The organizational plan is that part of the business plan that describes the proposed
venture’s opted from of ownership like Sole Proprietorship/Partnership/Company/HUF or Co-Operative Society adequately mentioning :

• The terms and conditions associated with the selected form
• Lines of authority and responsibility of members of the new venture
• The names, designation, addresses, and resumes of the members
• Share of members in the organization
• Roles and responsibilities of each member
• Procedure for solving conflicts/disputes amongst members
• Forms of payment for the members of the organization
• Voting rights, managerial and controlling rights of the members.

All this information provides the potential investor with a clear understanding of who controls the organization and how other members will interact in performing their management functions.

Financial Plan

Availability of finance makes the entrepreneur bring together men, materials, machines, and
methods to produce goods/services. The entrepreneur should develop a sound plan discussing financial requirements, sources of raising funds, exact assessment of the revenue, cost, profits, cash flow, etc. Following are the major elements of the Financial Plan :

• Format of Investment Decisions is to be made by mentioning how the enterprise’s funds are invested in different assets so that the enterprise is able to earn the highest possible returns on investment.
• Format of Financing Decisions summarizes all the projected sources of funds available to the venture to raise finance from.
• Format of Income Statement is the projected net profit calculated from projected revenue minus projected costs and expenses. Basically, it summarizes all the profit data during the first year of operations of the new enterprises.
• Format of Cash Flow summarizes the projected cash available with the enterprise as a result of subtracting projected cash disbursements(Cash Outflow) from projected cash accumulations(Cash Inflow).
• The balance sheet Format is a summary of the projected assets, liabilities, and net worth of the entrepreneur is depicted through the proforma balance sheet.
• Break-even Point is that level of volume of production at which a firm neither makes a profit nor a loss. Here, the total revenue is equal to the total cost of a firm at the given level of capacity.
• Economic and social variables are always advisable to mention in the business plan, the socio-economic benefits expected to acquire from the proposed investment like Employment generation, Import substitution, Export promotion, Local resource utilization, Development of the area, etc.

Human Resource Plan (Manpower Planning)

An organization’s performance and resulting productivity are directly proportional to the quantity and quality of its manpower. This planning is a process by which an entrepreneur ensures that he/she has the right number of people, and the right kind of people with appropriate skills, at the right place, and the right time to do work for which they are economically most suitable. Manpower planning thus helps to assess :

• What kind of people are required?
• How many people are required?
• How will they be selected?

Marketing Plan

This section goes beyond the production process by describing the market conditions and strategies related to how Products/services will be distributed, Priced, and Promoted. The marketing plan represents a significant element in the business plan for a new venture as it effectively establishes how the entrepreneur will complete and operate in the marketplace by providing answers to three basic questions:

Where have we been?

This question can be answered through a business situation analysis, identifying the target market, and conducting SWOT Analysis. It includes the history of the market, the Strengths and weaknesses of the venture, and Opportunities and threats in the market.

Where do we want to go?

This question can be well answered by establishing realistic, attainable, and well-defined goals and objectives for the enterprises and by setting standards to measure those goals.

How do we get there?

The answer to this question includes the specific strategies for the market that will be implemented to meet the goals. The marketing strategy and action plan comprise decisions pertaining to the 4 Ps: Product, Price, Promotion, and Place.

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