BUSINESS PLANNING

Chapter 4

1. Basic recommendations
Taking into account that a business plan is used for representation of the firm outside, it is necessary that it combined impartiality of judgment on the firm prospects, optimal information content – a description should be rather clear in order it would be possible to obtain a sufficiently complete idea on the current state of affairs, on their prospects, but at the same time it is necessary for study. At the same time business planning is a peculiar advertising facility, that is why it must impress the feeling of optimism and enthusiasm.

A tone of narrative should be business-like, if it is too mawkish, a plan will not be perceived seriously. Yet a business plan will be read by living persons. They will respond to positive and fascinating narrative, but they will turn away from it, if it is vague, dull, ill-conceived or poorly built.

It is not a simple deal to combine all these properties in a concrete document, that is why it is possible to attract to preparation of the business plan besides representatives of all services of the organization, different outside consultants. These may include audit firms, firms conducting marketing surveys or firms specialized in preparation and execution of business plans. The only mandatory condition at compilation of such document is participation of the first leader of the enterprise. As such, all remaining participants of this process just assist him in collection of information, execution and calculations.

2. Contents of a business plan.
Let us consider an approximate content of a business plan. Of course, for each enterprise a business plan has its own structure, which takes into account particular peculiarities of business, but it is possible to separate approximate sections.

Section 1. Table of Contents of Business Plan.
Table of contents in the business plan has the same meaning as in a usual book. It is not necessary to have too detailed table of contents and to write down numbers of pages, i.e. at revision new pages or whole sections may be added.

Approximate Table of Contents of the Business Plan

1. Table of contents
2. Executive summary
3. General description of a company
4. Products and services
5. Marketing-plan
6. Management and organization
7. Production plan
8. Capital and legal form of a company
9. Financial plan

Section 2. Summary is an ultimately abbreviated form of the plan – it is a sort of “notice on intentions”. The executive summary is prepared after the business plan has been already thought over and written. For convenience of reading the summary is often put at the beginning of the business plan.

Section 3. General Description of the Company
It is necessary to reflect in the description basic types of activity and nature of the company. It should be pointed out what stage of development was achieved by the company. Basic goals of the company work should be described in the same section.

Section 4. Products and services.
Products and services of the company are described in a simple and clear form in this section. It should specifically point out the uniqueness of the good (service), its exclusive properties. It is useful to present a list of experts and consumers familiar with goods or services who are ready to give a favorable opinion on them. 

Section 5. Marketing-plan.
A goal of this section is to clarify how the supposed business intends to respond to the existing situation and to impact on it. An entrepreneur should prepare such Marketing Plan which is able to awake a thought. He should not only to present a conception, but also to “sell” business as an attractive possibility for investments as a credit risk with alluring prospects or an offer of profitable sale of a product or a service.

Part 6. Management and organization.
Irrespective of the fact how alluring is the business conception, unless just the very people required are attracted to it, it will not be a success. It is related to both a leader of an enterprise and a seller. At the same time the enterprise will not work unless the effective organization of labor will be secured. That is why it is very important based on the work goals to define properly a structure of the enterprise and, according with required functions, to select people whose psychological peculiarities and qualification would match to a maximum extent with their positions.

Section 7. Production plan
Usually replies to the following questions are given in this part of the plan:

1. What will be a general approach to production?
2. What sources of raw materials are supposed to be used?
3. What processes will be applied at production?
4. What are the requirements in respect of labor resources?
5. How will suppliers and sellers be used?

In some cases the production itself may appear one of the most attractive aspects of the business. Then this circumstance may serve as a ground in favor of its more detailed description.

Here are concrete clauses which are often contained in this section:
- Development of product (service) – it is possible to give a brief information on such developments which the company is engaged with;
- Production – usually it implies a description of buildings, equipment, requirements in raw materials and labor resources, a technological process;
- Operation and services;
- Measures on legal protection (patents, licenses, trade brands and copyrights).

Section 8. Capital and legal form of the company
It is indicated what legal form has the company and how it will be provided with capital.
1. Organizational-legal form of the enterprise. It is necessary to designate in what form the enterprise was registered, whether it is an independent company, a subsidiary, etc.
2. Capital requirements. Possible ways of the project financing are reviewed in this clause. If a borrowed capital is required, then forms of the creditor’s share in its profit acceptable for the company are considered. These may be, for example, a loan, bonds, shares.

Section 9. Financial plan.
Materials of previous sections presented in terms of cost are summarized in this section. Moreover, the following clauses are usually compiled:
- prediction of sales (realization) volume;
- balance of monetary incomes and expenses;
- table of incomes and expenses;
- master balance sheet of the firm’s assets and liabilities;
- break-even chart.

Prediction of sales volumes is designed to give a general characteristic of the market share, which is supposed to win.

Money income and expenditure balance gives assessment of the money sum which is necessary to invest into the project implementation (in breakdown by time – from the implementation commencement)..
Basic meaning of monetary incomes and expenses is a check of synchrony of receipt and spending money.

Consolidated balance of assets and liabilities is made at the beginning and at the end of the first year of the project implementation and serves for evaluation of the investments amount in the assets of different types, as well as for determination at the expense of what liabilities an entrepreneur intends to finance creation and acquisition of these assets.

Break-even chart reflects the influence on the profit of production volumes, sale price and prime-cost of products.
By means of this chart it is possible to define a break-even point, i.e. a volume of sale at which earnings from sale (less deductions of taxes) is equal to the prime cost of the products. The further growth of sale volumes is called for provision of profit.
Preparation of a business plan as well as a planning process represents a continuous process, as conclusions arising out of these considerations must be constantly revised.

Actually a process of the business plan preparation never stops. Though a company usually prepares a new business plan in some period of time, its preparation is going on permanently and clarifications are introduced as often as possible.

Yours faithfully.