III- Business Plan Preparation

• Sources of Product for Business-Prefeasibility

Study-Criteria for Selection of Product-
Ownership -capital- Budgeting project profile
preparation - matching entrepreneur with the
project-Feasibility report preparation and
evaluation criteria
 Business Plan Preparation
• WHAT IS A BUSINESS PLAN?
• A structured approach to launching a successful
business.
• A business plan is a guide—a roadmap that
provides directions so a business can plan its
future and helps in the smooth functioning of
the business.
• It is a plan which outlines goals and details
about how to achieve those goals.
 Business Plan Preparation
• A business plan is a structured document that
outlines a business’s goals, strategies, financial
projections, and operational plans.
• One of the key components of a business plan is
identifying the source of products or services the
business will offer.
• Identifying and securing reliable sources of
products is crucial for entrepreneurs aiming to start
and grow a successful business. Here are some
potential sources of products that can be
considered:
• BUSINESS PLAN PREPARATION
•
• 1 Sources of Product for Business
• 2 Pre-feasibility Studies
• 3 Criteria for Selection Process
• 4 Ownership Structure
• 5 Capital
• 6 Budgeting Project Profile Preparation
• Matching Entrepreneur with the Project
• 8 Feasibility Report Preparation and Evaluative Criteria
•
 Sources of Products for Business
1. Manufacturers: Companies that produce goods on a large scale,
either locally or overseas, offering a wide variety of products.

2. Wholesale Suppliers : Businesses that purchase goods in bulk from

manufacturers and sell them to retailers at discounted prices, often
specializing in specific industries or product lines.

3.Distributors: These businesses buy goods from manufacturers or

wholesalers and sell them to retailers or directly to consumers, often
providing additional services like storage and transportation.

4.Importers: Companies that source products from overseas for

resale, providing access to unique products not available domestically.
 Sources of Products for Business
5. Retailers: Businesses that sell products directly to consumers,
which can also act as sources for other businesses by purchasing
in bulk.

6.Online Marketplaces: Platforms like Amazon, eBay, and Alibaba

that offer a vast range of products from various sellers, making it
convenient for businesses to find competitive pricing.

7.Private Label Manufacturers: Manufacturers that produce

goods under a brand name owned by another company, allowing
businesses to sell products under their own brand without
investing in manufacturing facilities.
 Sources of Products for Business
• Crowdfunding: Platforms like Kickstarter and Indiegogo can
serve as sources of funding to develop and produce new
products.
• These are just a few of many sources of products available to
business.
• Choosing the right source depends on the type of product
needed, budget, and business goals.
 Important Characteristic to consider
When sourcing products for a business, several important characteristics
should be considered to ensure success:
• Quality: The quality of products is critical. It’s essential to evaluate the
consistency and reliability of the products from each potential source
to meet customer expectations.

• Cost: The cost of products affects pricing strategy, profit margins, and
overall financial performance. Entrepreneurs should consider all
expenses, including manufacturing and transportation, to maintain
competitive pricing and reasonable profit margins.

• Lead Time: This refers to the time it takes for products to be

manufactured and delivered. Evaluating lead times is crucial to meet
customer demands and avoid stockouts.
 Important Characteristic to consider
• Customization: If offering customized products, ensure that the source can
accommodate these needs. Some sources, like manufacturers, may offer
more customization options than others.

• Scalability: Consider whether the source can scale up or down as business

demand changes. It’s important that the source can maintain quality and
consistency during growth.

• Reputation: Researching the reputation of potential sources is essential.

Reliable and trustworthy sources with a track record of delivering quality
products are preferable.

By carefully evaluating these characteristics, entrepreneurs can select the

best sources for their products, enhancing their chances of building a
successful business.
 Pre-feasibility Study
• A prefeasibility study is a crucial step for entrepreneurs
before developing a business plan.
• It helps determine the feasibility and potential profitability
of a business idea by analyzing various factors. Here are the
key steps involved in preparing a prefeasibility study:

• 1. Market Demand
• 2. Cost Analysis
• 3. Regulatory Compliance
• 4. Competition Analysis
• 5. Technical Feasibility
 Pre-feasibility
• Market Analysis: Conduct market research to identify the target
market and potential customers. This includes assessing the demand
for the product or service, market size, demographics, and any trends
or changes in the market.

• Competition Analysis: Analyze the competition to understand the

potential demand for your product or service. Evaluate competitors’
strengths and weaknesses, identify market gaps, and develop a unique
value proposition.

• Technical Analysis: Assess the technical aspects of the business,

including the production process, necessary equipment, and
technology. Evaluate the feasibility and efficiency of the production
process and the availability of required resources.
 Pre-feasibility
• Financial Analysis: Estimate the initial investment needed to start the business,
including equipment, inventory, and other expenses. Prepare projected financial
statements, such as income statements and cash flow statements, to assess
potential profitability.

• Resource Analysis: Consider the human resources and skills required to operate
the business. Identify any gaps in skills and develop a plan for recruitment and
training.

• Risk Analysis: Identify and evaluate potential risks associated with the business,
such as market competition and regulatory challenges. Develop a risk management
plan to mitigate these risks.

In conclusion, conducting a thorough prefeasibility study allows entrepreneurs to

evaluate the viability of their business idea and make informed decisions about the
resources needed to start and run the business. This process significantly increases the
chances of success and helps build a sustainable and profitable venture.
 Criteria for Selection of Product
• 1. Market Demand:
• 2. Profitability
• 3. Raw Material Availability
• 4. Scalability
• 5. Competition
• 6. Unique Selling Proposition (USP)
• 7. Investment & Risk
 Market Demand
• Identify Market Gaps: Ensure that the product
solves a specific problem or satisfies an unmet
need in the market meets customer needs.
Understand who your customers are and
whether the product appeals to them.
Evaluate current market trends to ensure the
product fits with changing preferences or
emerging needs.
 Profitability
• Consider the cost to produce,
marketing ,distribution and compare it with
the potential selling price.
• Ensure the product offers a healthy margin for
profitability.
• Make sure the product has strong sales
potential based on market research.
 Competition
• Competition Analysis: Research your
competitors and determine if there are similar
products already in the market.
• Consider how your product will differentiate
itself.
• Assess whether there are any barriers (like
high startup costs or intellectual property)
that could prevent new entrants or
competitors from copying your product.
 Scalability
• Evaluate whether the product can be scaled
up as demand increases.
• Ensure you can expand production efficiently
without compromising quality.
• Assess the sustainability of sourcing raw
materials or production capabilities for the
long term.
 Unique Selling Proposition (USP)
• Unique Selling Proposition (USP) is a
distinctive feature or benefit that makes your
product or service stand out from
competitors. It highlights why a customer
should choose your offering over others.
When defining your USP,
 Regulatory and Legal Considerations

• Compliance: Make sure the product complies

with any industry regulations, standards, and
safety requirements.
• Intellectual Property: Check for any patents,
trademarks, or copyrights that could affect
your ability to sell the product.
 Customer Feedback
• Consider testing the product with a sample of
your target audience to gather feedback
before mass production.
• Validate the interest in the product through
surveys, focus groups, or social media testing.
 Ownership
• Ownership refers to the structure and legal rights associated with the
business, including how the business is owned, controlled, and operated.
• This aspect is crucial, especially when detailing the sources of the product
or supply chain within the business plan, as it affects how you source,
produce, and distribute products.
• The ownership structure impacts how your business sources its products
and the level of involvement you, or other owners, will have in the process.
• Below are the key considerations for ownership when preparing a business
plan, particularly with respect to the sources of products:

• 1. Sole Proprietorship
• 2. Partnership
• 3. Corporation
• 4. Cooperative
• 5. Franchise
The ownership structure you choose for your business
will influence how you approach sourcing products .

• Sole Proprietorship: If you're the sole owner

of the business, you have complete control
over sourcing decisions.
• The business plan should outline your direct
involvement in sourcing suppliers, managing
production, and distribution.
• However, you'll be personally liable for any
financial obligations or risks.
 Partnership
• In a partnership, ownership is shared between
two or more individuals or entities.
• The business plan should detail how decisions
regarding product sourcing will be made
collaboratively.
• It’s essential to define each partner’s role in
sourcing products and how you’ll manage any
potential disagreements.
 Corporation
• In these structures, management might be
separate from ownership.
• This is a form of ownership in which business
is owned by shareholders who have limited
liability for the companies debts and
obligations.
• The corporation is a separate legal entity from
its owner and ownership can be transferred
through the buying and selling of shares
 Franchise
• In cases where the business is a franchise or
licensee of another company, sourcing may be
dictated by the parent company’s guidelines.
• Your business plan should outline the parent
company’s sourcing practices, including any
restrictions on where or how products can be
sourced.
 Cooperative
• This is a form of ownership in which group of individuals
owns and operates a business for their mutual benefit.
• Members share in profits and have a say in companies
decision making process.
ownership influences how you source products and
manage relationships with suppliers. Whether you're
the sole owner, part of a partnership, or operating as a
corporation, your ownership structure determines the
level of control, decision-making authority, and financial
risk involved in sourcing products.
 Capital
• Capital is one of the most important elements to consider when preparing a
business plan, especially when detailing sources of product for your
business.
• Capital refers to the financial resources required to start, maintain, and
grow your business.
• Capital can come from various resourses, including personel savings, loans
and grants.
•
• Here's how you should approach capital when preparing your business plan,
especially in relation to
• 1. Fixed Capital
• 2. Working Capital
• 3. Equity Capital
• 4. Debt Capital
• Sources: Savings, Loans, Venture Capital, Grants,
 SOURCES
• Personal Savings: The capital you invest from your own
savings to source products, purchase raw materials, or
build inventory.
• Grants and Subsidies
• Grants, especially from government programs or private
foundations, don’t need to be repaid.
• Grants are competitive and often require meeting
specific criteria, which may not always align with your
business goals.
• Crowdfunding allows you to raise capital from the public,
often in exchange for early access to your products.
 Debt Capital
• Refers to the funds that a business borrows,
usually from external sources like banks, financial
institutions, or bondholders, with the obligation to
repay the borrowed amount (principal) along with
interest over a specified period.
• Unlike equity capital, where the business sells
ownership shares in exchange for funds, debt
capital involves borrowing money and committing
to repaying it under agreed-upon terms
 Equity Capital
• Refers to the funds raised by a business through
the sale of shares or ownership interests in the
company.
• Unlike debt capital, which involves borrowing
money and repaying it with interest, equity capital
is essentially an investment in the business in
exchange for ownership stakes or equity.
• Investors who provide equity capital become
partial owners of the business and share in its
profits and losses
 Cash Flow Management

• Cash flow management ensures that you have

enough capital to cover expenses without
running into financial trouble.
• Incoming Cash: Expected revenue from sales
and other sources of income.
• Outgoing Cash: Costs associated with
producing and delivering products, paying
employees, and general operating expense
 Entrepreneurs are expected to hold three types of
capital to acquire success in starting a new venture −
• Social capital − It is a quality acquired from the structure of an
individual’s network relationships. Social capital ensures the
relationships by which an entrepreneur receives opportunities to utilize
human and financial capital.
• Human capital − It indicates attributes possessed by individuals like
personality, education, intelligence, and job experience. Creating value
by the acquisition of human capital, specifically building a management
team tends to be the biggest challenge for seed stage founders and
investors of new ventures. A start-up with an experienced management
team will receive a higher valuation by investors.
• Financial capital − It is any economic resource scaled with respect to
money used by entrepreneurs and businesses to purchase what they
need to make their products, or to facilitate their services to the sector
of the economy upon which their operation is based, like retail,
corporate, investment banking, etc.
Budgeting & Project Profile Preparation
• Budgeting and Project Profile Preparation are key
components of business plan preparation.
• Both serve to clearly define how financial resources will
be allocated, monitored, and managed to ensure a
business or project is on track to meet its objectives.
• 1. Identify Expenses
• 2. Revenue Projections
• 3. Profit & Loss Statement
• 4. Cash Flow Analysis
• Project Profile: Objectives, Market Potential, Financial
Estimates, Risks
 Project overview
• Provide a brief introduction to the project.
This includes its objectives, scope, and
significance within the business plan.
• State the overall goals of the project, such as
increasing revenue, improving operational
efficiency, or expanding market reach.
• Briefly mention the project’s duration and
estimated budget.
 Project cost
• Break down the project budget into the following categories:
• Personnel Costs: Salaries, wages, and contractor fees.
• Material Costs: Raw materials, supplies, and other tangible
resources.
• Equipment Costs: Purchase or rental of equipment and
machinery.
• Operational Costs: Office space, utilities, insurance, and
administrative expenses.
• Contingency Fund: Set aside a percentage of the budget
(typically 5-10%) to cover unforeseen expenses or changes.
• Other Costs: This can include travel, marketing, legal fees, and
any specialized services required.
 Project Schedule
• Creates a detailed project schedule that
outlines the timeline for each phase of the
project,start and end dates ,milestone and
deliveries.
 Project Risk
• Identify Project Risks: List potential risks that
could affect the project’s financials, such as delays,
resource shortages, or regulatory changes.
• Provide a plan to manage these risks, including
how the budget can be adjusted or how additional
resources can be allocated if needed.
• Estimate the financial impact of each identified
risk and how it could affect the overall project cost.
Practices for creating a budget that supports the project:

• 1. For budget, get help from an experienced team

member or mentor. In a collaborative group, get
input from everyone‟s work estimates.
• 2. Learn from other projects. Find a past project
that was similar in type or scope to the current
one, and use it a model. Some teams turn to their
project management tool to mine data and
information on how much time and money went
into certain projects and identify where resources
were added or subtracted .
 Practices for creating a budget that
supports the project:
3. Know your core costs. They include team members,
equipment, software, travel, etc. Next, compare
those core costs to the total budget.
4. Prepare to change budget estimates. Most initial
estimates are just that estimates. With the common
occurrences of scope creep, unexpected surprises
and the nature of doing business, at some point in
the project the budget can easily change. This fact
just underscores the need to manage the project
budget continually.
 Practices for creating a budget that
supports the project:
• 5. Monitor resources. Salaries are a big component of the
budget, so review resource usage weekly to make sure that
everyone is working the highest priorities and putting the
proper amount of hours per week into their tasks.
• 6. Be transparent. Keep your team informed of the evolving
budget forecast. Communicate what's expected of them to
stay within budget.
• 7. Manage scope. To avoid unplanned work that leads to
cost overruns, create change orders for work that goes
beyond initial project requirements, with accurate
projections of additional cost. Seek additional funding for
the project to cover change orders
 Matching Entrepreneurs with Projects
• Matching an Entrepreneur with a project requires careful
consideration of the entrepreneur’s skills, experience and interests ,

• 1. Skills & Expertise

• 2. Financial Capacity
• 3. Risk Tolerance
• 4. Market Trends
• Use SWOT Analysis for decision-making
• An entrepreneur possessing the keen attitude for setting up a small
scale unit and formulate a business plan and take a number of steps to
give shape to his business idea.
• He is to prepare project report and obtain various approvals and
sanctions. The various steps to be taken by entrepreneurs to start a
small business unit.
 Step 1 : Selection of the Product
• An entrepreneur may select a product according to
his own capacity and motivation. As an innovative
entrepreneur he may design a new product or like
an imitative one he may copy an established existing
product in terms of additional uses, comfort or
saving in cost.
• The economic viability of product should cover the
following demand aspects,
 Volume of existing demand in the domestic market
 Volume of aggregate existing demand
 Volume of potential demand

 The degree of import substitution

 Degree of substitution of an existing product

 The volume of demand by big unit for ancillary product

 The information can be obtained from various technical

publication, state development agencies etc.
 Step 2 : Selection of firm of ownership

• The most commonly chosen firms of ownership are

 Sole proprietorship

 Family ownership

 Partnership

 Private limited company

• The first two firms are mostly preferred for having unified control over
the unit. The next two firms highly facilitate the pooling of financial
resources, managerial and technical skills and business experience.
 Step 3 : Selection of Site

• An entrepreneur has options for the selection of site,

• 1. From state development corporation like SIDCO, SIPCOT, MMDA,
TNHB

• 2. From the industrial estate constructed by the state industrial

development agency (SIDA)

• 3. Choose from plot/sheds developed by private developers

• 4. Buy private land and develop the same for industrial use

• 5. The last option is to select a site/shed available in free trade zone

 While selecting, following factors to be
considered,
 Situated in one's native place

 Site with all the incentives provided by the Government

 The place near the market

 The site with suitable labour supply and raw material

 The site with modern infrastructural facilities

 Step 4 : Designing Capital Structures
• The initial capital of a new venture comes from the
following sources,
• Own capital
• Loan from banks and financial institutions
• Bank play an important role in providing working capital
finance.
• However, an analysis of capital structure of small scale units
reveals that the support from the financial institution is not
adequate and that they should gear up their administrative
machinery and produce better performance in order to
fulfill the objectives and targets adequately.
 Step 5 : Acquisitions of Manufacturing
know-how?
• Many institution like government research
laboratories, research and development
divisions of industries and also individual
consultants provide the manufacturing know -
how.
• Sometimes, it is provided by the plant and
machinery suppliers, both domestic as well as
foreign. The scale of operation is linked closely
with technology, financial and market demand
 Step 6 : Preparation of Project Report
• It is necessary to prepare a project report according to the format
of the loan application of the concerned team building institution.
• An entrepreneur may get these reports done by a consultant or
technical consultancy organization.
• The project report being compiled by the entrepreneur should
accomplish the purpose of providing a 'Bird's eye view' of the
entire spectrum of activity.
• The project report may contain the following feasibility
•  Technical feasibility
•  Economic viability
•  Financial implication
•  Managerial competency
 Feasibility Report Preparation
• The feasibility report should include an analysis of the industry to which
the project belongs. It should deal with the past performance of the
industry. The description of the type of industry should also be given (i.e)
the priority of the industry, increase in production, role of the public
sector, allocation of investment funds, choice of technique etc. This should
contain information about the enterprise submitting the feasibility report.

• 1. Executive Summary
• 2. Market Feasibility
• 3. Technical Feasibility
• 4. Financial Feasibility
• 5. Operational Feasibility
• 6. Legal Feasibility
 1. General Information

• The feasibility report should include an analysis of the

industry to which the project belongs.
• It should deal with the past performance of the industry.
• The description of the type of industry should also be
given (i.e) the priority of the industry, increase in
production, role of the public sector, allocation of
investment funds, choice of technique etc.
• This should contain information about the enterprise
submitting the feasibility report.
 Feasibility Report Evaluation Criteria
• 1. Cost vs. Benefit Analysis
• 2. Market Demand
• 3. Break-even Analysis
• 4. Risk Analysis
END