Fundamentals of Entrepreneurship

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CHAPTER

BUSINESS PLAN

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Objectives
The objectives of this chapter are to:
provide and understanding of preparing a systematic, effective
and viable business plan
provide a better understanding of the difficulties and challenges
of preparing a good business plan

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Learning Outcomes

At the end of this chapter, students should be able to:

apply a systematic business planning methodology which can be
applied to many other tasks or undertakings
learn the various scopes and disciplines of business planning
such as marketing operation, finance, organization and human
resources management, many of which involve generic planning
skills that can be applied in their working careers and their life.

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Learning Outcomes (cont.)

use and enhance their communication skills through business

plan presentation
develop their creativity, innovativeness and critical thinking skills
when they work out their business plan.
improve their social skills by working in teams effectively and
harmoniously on the business planning project.
prepare a good business plan that is effective, practical and
viable.

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Business Plan

A business plan is a written document that outlines the

detailed execution plan of the business. It will include
details of the:

organization, administration and human resource plan

marketing plan
production plan
financial plan
The business plan should enable an entrepreneur to determine
whether the project is viable, needs to be modified or whether
the project is not feasible and should be abandoned altogether.

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Key Planning Elements

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Purposes of Preparing a Business

Plan

The business plan is normally written for the following purposes:

it is used as a feasibility study to ascertain the viability of the project
it is a guide for project implementation
it is used as a document to justify and support loan application or to
entice and convince a partner or investor to invest in the business

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Project Preliminary Screening

Before you prepare the business plan of the project, an

entrepreneur should do a preliminary screening on the suitability
of the project. At least he should have a general idea that the
proposed business is fairly satisfactory on the following issues.
The viability, sustainability and growth potential of the business
concept, model and strategy
Overcoming initial start up hurdle or chasm: The provision of
adequate capital, skill manpower and the ability to achieve early
break even sale volume

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Business Plan Format

A basic business plan should include:
executive

summary
table of content
introduction
company background
owner/partner background
location
organization, administration and human resource plan
marketing plan
operation plan
financial plan
conclusion
appendices
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Example of a Simple Business

Plan
Introduction
The following is an example on how to prepare a simple business
plan for a burger kiosk. It shows important planning elements that
must be worked out, i.e.
organization, administration and human resources
market planning
operation planning
financial planning

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Organization, Administration
and Human Resources Plan
for Burger Kiosk
Basic issues that need to be resolved for man power planning are:
Manpower requirement and the organization structure for the
company.
Manpower planning also includes planning for their job
qualifications, job specification, recruitment and their remunerations
budget.

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Organization Chart

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Employees Salary, EPF and SOCSO

contribution

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Administrative Budget

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Marketing Plan for Burger Kiosk

Basic marketing issues that need to be resolved are:
What is your product and its special attraction or quality?
Who is your target market?
What is the market size?
Who are your competitors and what are their competitive
strengths?
What is your market share and your sale forecast?
What are your marketing strategies?
What is your marketing budget and plan?

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Marketing Strategies

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Target Market Profile

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Target Market Profile (cont.)

Based on the issues as outlined in the above table, the
following are issues for the burger kiosk.
What is your product range?

burgers, hot dog, kebab, etc.

Where are you going to do your business?

It should be at strategic location where there is sizable market or
traffic and accessible. The market growth potential is good.

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Target Market Profile (cont.)

Who is your target market?

Lets say the purchases expected from the main group of customers in
the area of operation are as follows:
College students
Factory workers
Local residents
Tourist and others

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Target Market Profile (cont.)

What is the total market size?

The estimation of the total purchase of similar products in the
locality including those purchased from your competitors.
Lets say daily market size is as follows:
College students 100@RM3.00
Local residents 50@RM3.00
Factory workers 30@RM3.00
Tourist
and others 20@RM3.00
Total daily market size

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RM300.00
RM150.00
RM 90.00
RM 60.00
RM600.00

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Target Market Profile (cont.)

Who are your competitors?

Lets say you only have one competitor in the area.
What is your market share and your daily sale forecast?
Lets say, your market share is 50 per cent, thus sale forecast is
RM300.00 per day
What is your promotion strategy?
Roadside banners and signboard only.
What is you selling price?
RM3.00 per burger

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Target Market Profile (cont.)

What is your marketing Budget
Lets say, you are going to promote your burger through pamphlet
and roadside banner:

PamphletPrinting and distribution RM200.00

BannerPrinting and permit RM200.00

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Operation Plan for Burger Kiosk

Basic production plan issues that need to be resolved are:

What products do you want to produce and what are its quality
specifications and characteristics? Does this quality meet the target
customers needs and wants?
What is the cost of production per unit and what is the possible
selling price the market can absorb?

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Operation Plan for Burger Kiosk

(cont.)
How many do you need to produce per day/week / month so that
you can cater for your sale forecast?
Based on quality and quantity required, what is the best
production plan for the job; you will have to decide whether it is
going to be fully mechanized, semi-mechanized or totally
manual?
You will have to outline your material, machines, tools, space and
lay out needs based on the production process flow chart.

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Operation Plan for Burger Kiosk

(cont.)

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Operation Plan for Burger Kiosk

(cont.)

Based on your production schedule, you will have to plan and

calculate the following items:
Product: chicken and beef burgers

Lets say your operation is quite simple. Your material input cost
per burger is only RM1.00 and your selling price per burger is
RM3.00.
Estimated sale per day RM300.00
Cost of raw material for one day RM140, therefore for 5 days (one
week) RM700/week
Sale for five days/week RM300 5 days = RM1,500/week
Salary:
RM20.00 /person for 2 persons
5 working days/ week, RM20 2 persons 5 days = RM200/week

Lets say your asset equipment cost is only RM1,500.00

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Process Flow Chart

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Process Flow Chart (cont.)

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Financial Plan for Burger Kiosk

Basic financial plan includes the following:
project implementation cost
sources of fund for the project
financial schedule for asset depreciation and loan amortization
cash flow projection
income statement projection (profit and loss)
balance sheet projection

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Project Implementation Cost

Example of project implementation cost of burger kiosk:
Project implementation cost is as follows:
Assets (equipment)
RM1,500
Working capital for one week i.e. salary and raw material:
RM100@5 days + RM40@5days=
RM 700
Registration cost
RM 100
Banner and pamphlet (one time)
RM 400
Total project implementation cost
RM2,700

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Sources of Funds

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Project Implementation Cost

Table

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Depreciation Table

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Loan Amortization Table

Example of loan amortization table for the proposed burger kiosk
project: Lets say, the loan amount is RM1,000, duration 4 weeks,
interest at RM10.00 per week.

Period

Principal

Interest Loan balance

1st week
2nd week
3rd week
4th week

250
250
250
250

10
10
10
10

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750
500
250
0
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Social Entrepreneurship Project

As an alternative, students can also do a social entrepreneurship
project for their practicum.
Students can look into the internet to gain some ideas on the
types or themes of the social entrepreneurship project that can
be undertaken.
For instance, some non-governmental organizations (NGOs)
organize efforts to help the urban or rural poor, orphans, single
mums, ex-drug addicts, HIV or cancer patients, etc.
There are NGOs that work on environmental causes, animal
protection or organize to fight child labour, pollution, etc.

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