Given below is a sample format of a business plan under which organisations can apply for support and funding from the producer organisations scheme of NABARD.
What is a business plan?
A business plan is essentially a written description of a business’s future. It provides an in depth report on the environment in which the company functions, what the company plans to do in the near future and predictions on its performance. A business plan conveys your business goals, the strategies you’ll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.
Format of good business plan:
1. A good business plan follows generally accepted guidelines for both form and content.
There are three primary parts to a business plan.
a) The first is the business concept, where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.
b) The second is the marketplace product, in which you describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you’ll position yourself to beat it.
c) Finally, the financial section contains your income and cash flow statement, balance sheet and other financial ratios, such as break-even analyses. This part may require help from accountant and a good spreadsheet software program.
2. Breaking these three major sections down even further, a business plan consists of six key components:
I. Executive summary
II. Business description
III. Marketing Plan
IV. Production Plan
V. Operation and Management Plan
VI. Financial Analysis
I Executive Summary:
Within the overall outline of the business plan, the Executive Summary will follow the title page. The Executive Summary should be to the point and in a nutshell convey the value of your proposition.
Key elements that should be included are:
3. Business Concept, the business and market: Describes the business, its product and the market it will serve. It should point out just exactly what will be sold, to whom and why the bushiness will hold a competitive advantage.
4. The management team: A brief summary of the business team composition, special skills required to operate the proposed business successfully should be provided in the executive summary of the business plan. The nature and type of deployment of the key personnel and in case of specialized needs who would support the key business proposition.
5. Business rationale – why the proposal is different: A statement of business rationale establishing how and why the proposal is different than other businesses of the same nature in the prevailing industry. This will prompt the financial institutions and others watching and planning to support the business.
6. The proposal: State clearly the intent of the proposal and what precisely you are planning to do and achieve the intended output.
7. Basis for its success: State your logic as to why you think the proposed business would succeed in the present circumstances and how it will meet the intended outputs. Strength – Opportunity matrix may help summarize the logic.
8. Profitability and financial feature: Highlights the important financial points of the business including sales, profits, cash flows and return on investment.
9. Financial requirements: Clearly state the capital needed to start the business and to expand.
It should detail how the capital will be used, and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.
10. Risk assessment and mitigation strategies: The executive summery may also include a brief sketch of the potential and killer risks assessed while analyzing the business proposition vis- a-vis industry and the potential competitors. How the risks would be mitigated should form the body of the risk mitigation or aversion strategy.
11. Current business position and prospects: Provides an overview of the market in which the startup is to function. In brief, it focuses on the proposed strategy to beat the competition.
12. Future Prediction as to the targeted market share, profitability and return on investment
13. Key conclusions: Based on above the key conclusions may be drawn for a quick snap shot vision of the whole business plan.
II Business Description:
1. The business background: The business description is an extended version of the Executive Summary, where you must convey the crux of your proposition and provide some depth of knowledge regarding the plan.
2. Location and operational area: The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate.
3. Method of operation: When describing your business, the first thing you need to concentrate on is its structure, i.e., wholesale, retail, food service, manufacturing or service oriented. Also state whether the business is new or already established. A very major part of the Business Description is detailed information about the team.
4. Defining the prospective market and the customers: You should also mention, who you will sell to, how the product will be distributed, and the business’s support systems. Support may come in the form of advertising, promotions and customer services.
5. Type of business and services offered: Once you’ve described the business, you need to describe the products or services you intended to market. The product description statement should be computed enough to give the reader a clean idea of your identification. You may want to emphasize any unique features or variations from concept that can typically be found in the industry. Be specific in showing how you will give your business a competitive edge. The revenue model you propose must also be touched upon in the business description.
6. Statement of viability: This section deals with financial analysis of the proposal and depicts the viability of the business which enables the resource institutions, shareholders and others assess and allocate resources.
III Marketing plan:
1. The marketing plan is the result of the meticulous analysis of the market analysis. A market analysis forces the business entity to become familiar with all aspects of the market so that the target market can be defined and the company can position its product and or services in order to garner its share of market.
2. The market analysis also helps to understand market dynamics, enables to work out pricing, packaging, promotion and positioning strategy vis-a-vis its potential competitors. It helps understand ad apprise competitive environment and competitive advantage it could have or generate through strategic business decisions.
3. Begin your market analysis by defining the potential target market, its size, structure, growth prospects, trends and the potential for foreseeable future. The aggregate business volume of the competitors may provide a fairly accurate estimate of the potential market and shall help precisely define the proposed market share.
4. The target market narrows down the total market by concentrating on the segmentation factor that will determine the total addressable market – the total number of users within the sphere of the business’ influence. The segmentation factor can be geographic, customer- attribute or product oriented.
IV Competition Analysis
1. The competition analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strength and the weaknesses of the competitors within the proposed market, the strategies that will provide the proposed business a distinct advantage the barriers that can be developed in order to prevent competition from entering your market, and any weakness that can be exploited within the product development cycle.
2. The first step in a competitor’s analysis is to identify the current and potential competition.
There are essentially two ways you can identify your competitors. The first is to look at the market from the customer’ view point and the group all your competitors by the degree to which they contend for buyers’ perception value in terms of money or satisfaction by its use. The second method is to group competitors according to their various competitive strategies so you understand what motivates them.
3. Once you have grouped your competitors, you can start to analyze their strategies and identify the areas where they’re most vulnerable. The aim is to get a competitive advantage over them. The analysis could be carried out on the parameters like (1) reasons behind their success or failure; (2) prime customer motivator; (3) major component costs and (4) industry mobility barriers.
4. The strategy for negotiating the proposed market share may focus on (1) product (2) distribution (3) pricing (4) promotion and (5) advertisement. Arriving at a projection of the market share for a business plan is very much a subjective estimate. It is based on not only an analysis of the market share but on highly targeted and competitive distribution, pricing and promotional strategy. The market share should have a time horizon. To estimate this, factors like industry growth which will increase the total number of users and conversion of users from the total feasible market needs to be considered.
5. This section of business plan should include strategies for successful positioning of the business in the competitive business environment. The strategic issues like how the competitors are positioning themselves, what specific attribute your product have that competitors’ do not and what customers needs does your product fulfill.
6. The success of the business significantly depends on pricing policy. To keep the pricing policy competitive any of the of the following methods could be used:
a) Cost-plus pricing- it assures that all costs both fixed and recurring or variable are attained with desired percentage of profit;
b) Demand pricing- the pricing based on demand;
c) Competitive pricing – this strategy is implied by the companies that are entering in to the market where there are already established pricing exists and it is difficult to differentiate one product from another;
d) Mark-up pricing – used mainly by retailers, mark-up pricing is calculated by adding your desired profit to the cost of the products. Each method listed above has several strength as well as weakness.
7. Distribution includes the entire process of moving the product from the place of manufacturing to the end users. The type of distribution network chosen will depend upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, and then decide whether to use the same type of the channel or an alternative that may provide you with a strategic advantage. Some of the more common distribution channels include direct sales, retailers, wholesalers, etc.
8. The promotion strategy in its most basic form is the controlled distribution of the communication designed to sell your product or services. In order to accomplish this, the promotion strategy encompasses every marketing tool utilized in the communication efforts. This includes advertising, packaging, public relations, sales promotion, etc.
IV Production plan
1. The purpose of the production plan section is to provide a detailed overview of how the actual production will be carried out in the case of a manufacturing concern, or the service performed in the case of service industry.
2. The production plan is very crucial for a manufacturing concern. In the case of a service company, it may be done away with and the relevant issues would be covered in the operation and management plan. The production plan should include – production process adopted, capacity planning and task scheduling and cost estimation.
V Operation and management plan
1. The operation and management plan is designed to describe just how the business functions on a continuing basis. The operation and management plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operation and management of the business.
2. There are two areas that need to be accounted for when planning the operations of your company. The first area is the organizational structure of the company, and the second is the expense and capital requirement associated with its operation.
3. Organizational structure: The organization structure of the company is an essential element within a business plan. It should include the personnel deployed by the producer organization like Chief Executive Officer, Accountant, Service Providers, the personnel
from the supporting agency for the technical skills like agriculture technologies and marketing. Details of the key personnel should be appended with the business plan to foster confidence in the financial agencies.
4. Depending upon the organization structure, the personnel requirement at various levels of the organization is estimated. In addition to this, the costs of support services required for the functioning of the organization are estimated. These costs are then used to compute the overhead costs which, in turn, are used in the calculations involved for the financial statements.
VI Financial Management plan and analysis
1. The financial analysis is extremely important, in most cases it is the decisive factor. The most significant analysis is the profitability promised by the proposed business; similarly cash flow statement provides insight in to the sustainability of the proposed business. The business plan should contain income statement, balance sheet and the cash flow statement.
2. The financial statement should accompany financial analysis like break even analysis, return on investment, return on assets, return on equity, profit margin analysis, debt equity ratio, etc.
3. Typical Profitability Analysis Ratios to be included
Return on Investment (RoI) = Net Income / Average Total Assets
Average Total Assets = Total asset in the beginning + Total asset at the end /2
Return on Equity = Net Income / Average Stockholder’ Equity
Average Stockholder Equity = total stockholder’ equity in the beginning + End Equity / 2
Profit Margin = Net Income / Sales
Earnings per share = Net Income / Number of common share outstanding
Sample Format for Preparation of DPR and Checklist
The project report is an essential building block for completion of a project. Hence, it must be prepared carefully and with sufficient details to ensure appraisal, approval and finally funding from the financial institution. The project report must be accompanied by executive summary.
POINTS TO BE COVERED IN THE PROJECT REPORT EXECUTIVE SUMMARY
Executive summary is a important and necessary part of a project report. It includes all the details
which will become part of a detailed project report but in summary form. It covers:
Layout of Factory / plant
Plant and Machinery
Raw material requirement, storage and handling
Present and Future demand of end product
Pollution Control equipments
Power and water supply
Capital Costing including one cycle of working capital margins
Other subsidiary requirements and ancillary facilities like marketing, etc.
Capacity building assessment
The part of project constitutes of:
Brief background of company
Background of entrepreneurs
Location details of the project
ENTERPRENEUR/ MANAGEMENT DETAILS
Work experience in detail
Role pay of Management Team
Location & Title of land
Connectivity through road, train, air, etc.
Proximity of raw material sources and other vital facilities
Reason to choose the site.