BUSINESS PLAN REPORT

Content and Structure (Refer materials shared in dropbox for reference of relevant
section)
Prepared by: Sohan Babu Khatri, CEO, Three H Management

1. Preliminary Pages: Cover Page (not missing the month and year of preparation of the plan),
Statement of Purpose (why and for whom this business plan is made ?) , Acknowledgements,
Table of Contents, List of Tables, List of Figures, Abbreviations Used etc. (any declarations,
approval sheets required by college/university are also included here)

You can also include

Methodologies used for making business plan (you explain and include the methods,
researches, data etc used/ expored in this section)

Remember: You should give references, citations and bibliography of all the literatures
you’ve reviewed and used while making this business plan report. This can be given while
giving relevant data in the main body (within bracket) or can be given at the end of the report
after annex.

2. Business Highlights / Salient Features of the Business

• This is a Snapshot Summary page of the Business

• It consists of the key facts and figures about the Business (not total description)
• Should not be more than 3 pages
• Can be given in bullet points.
• Purpose: For the readers/audience of the B Plan to have rough estimation of Business
Size, Scope and Viability

Present the key facts and figures, objectively about the followings: (don’t exceed 2-3
lines on any column……)

A. Name of the Business

B. Nature of the Business
C. Legal status of the Business (Reg No, PAN, VAT etc as applicable)
D. Date and Place of Registration
E. Address of Office/ Operation / Branches / Subsidiaries
F. Contact (Person, Tel No, Fax, Email etc)
G. Major Product/Services
H. Target Customers (few lines about the customers)
I. Major Market (Geographic)

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 J. Capacity Utilization and Years (Growth and Various Capacity Utilization at various
years)
K. Working Schedule – Annual working days
L. Human Resource (Number)
M. Energy Consumed (in KWh in production business)
N. Number of shareholders
O. Total Investment
• Investment in Fixed Assets
• Investment in Working/Operating Assets
P. Capital Structure (Debt: Equity)
• D:E Ratio
• Total Equity
• Total Debt (information about Debt and Cost of Debt / Interest Rate)
Q. Bank and Loan Structure
• Short Term
• Long Term
R. Milestones of achievements (time plans of key milestones to be achieved)
S. Key Performance Indicators
• Years of Loss / from when Profit would be made
• Net Income/Profit Margin
• Total Assets Turnover
• Fixed Assets Turnover
• Return on Assets
• Return on Invested Capital
• Return on Equity
• Breakeven Point (Sales / Number of Units)
• Payback Period
• Net Present Value
• Internal Rate of Return

3. Executive Summary (can also be escaped with if you’ve given necessary details in
highlights)
• Should not exceed more than 3 pages
• The purpose is to descriptively and briefly explain everything about business
and its planned performance so as to convince the audience for the purpose
intended.
• This section should cover all the important aspects of business plan structure
but should be written at last.
• Avoid using jargons here and the write up should be very professional with
smooth flow of the contents.

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4. Background (more important for already established business)
• For Already Established Business
o Key highlights of history, achievements, figures, financials, audit
reports, market performance, present market state, problems faced in
the past etc.
o Key data and statements should be kept in Appendix.
• For New Business
o How the idea germinated, how team formed, how opportunity
knocked, what is the background information about the consumer
problem, any research/ study done etc.
▪ All these can also be included in Introduction (the following
section), if there’s not much to say.

5. Introduction
• First Give some introductory lines explaining the business type, model and
structure, strategy and growth plan
• Purpose: is to introduce the business in detail among the readers and
commence the plan.

A. Vision
B. Mission
C. Values
D. Goals/Objectives
• Short Term
• Medium Term
• Long Term
E. Building Blocks of Business Model
• Value Proposition
• Value Proposition Canvas for 2-3 major customer segments can be
presented if multiple customer segments is targeted – otherwise just
one.
• Target Customer Segment
• Customer Persona can be explained for 2-3 major customer segments
if multiple customer segments is targeted – otherwise just one.
• Key Activities
• Key Resources
• Key Partners
• Customer Relationship
• Channel

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 • Cost Structure
• Revenue Structure

6. Products/Service Description

A. Product Description and History

B. Product Attributes and Benefits to the Consumer (focus on Value to Customers)
C. Research and Development efforts and background
D. Product Life Cycle and Product Category/Line Breadth and Depth
E. Costing and Pricing basis
F. Production Process in brief
G. Quality Assurance and Control
H. Sourcing of raw materials and supplies
I. Intellectual Property Rights (if any)

7. Industry and Market Analysis

A. Industry Structure and Market Characteristics
B. Environmental Analysis
• PESTLE Factors and their descriptions
C. Five Forces of Market and its state in this industry
• Threat of New Entrants
• Threat of Substitutes
• Bargaining power of buyers
• Bargaining power of suppliers
• Rivalry within Industry
D. Market and Competitor Analysis
• SW analysis of your business vs. 3-4 major competitors in the market
E. Consumer and Demand Analysis
• Consumer Segmentation – what are the general variables for analyzing
consumers in the industry
• Projection of Demand of the Industry

8. Business Strategy

A. SWOT Analysis
B. Analysis of Value Chain (Optional)
C. Business Strategy
a. Strategy Diamond (Refer – HBR Article – Are you sure you have strategy)

9. Marketing Plan
A. Marketing Objectives and Goals (Short, Medium and Long Term)

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 B. Consumer Analysis (Target Consumers, Their Descriptions, Behaviour, Psyche,
Persona etc)
C. Marketing and Growth Strategy
• Positioning Strategy
• Positioning Statement
• Brand Mantra
• POP and POD
• What is the competitive advantage
• How will you survive, compete and grow in the market sustainably
D. Marketing Mix (write in more detail about Pricing Strategy, Promotion Strategy,
Distribution Strategy)
• Product
• Price
• Promotion
• Place/Distribution
• Process
• Physical Evidence
• People
E. Sales Strategies, Management and Techniques

10. Production/Operation Plan

A. Location, Premises
B. Infrastructure Build up and Facilities / Layout
C. Aggregate planning (in detail for 1 to 2 years) – production volume, seasonality etc
per month or per quarter for 1-2 years.
D. Process/ Capacity Planning.
E. Time Plan / Work Schedules
F. Production/Operation Process in Detail
• Plants/Machineries
• Technology
• Skills required
• Operations flowchart / Service Blueprints
G. Supply Chain Management aspects eg. Order Processing and Inventory Control
H. Quality Control / Assurance
I. Research and Development

11. Organization/ Management and Human Resource Plan

• Stakeholder Analysis and their interests
• Organizational Structure
• Departmentalization and their core functions

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 • MIS and Reporting/Communication Structure
• Board
• Top Management
• Job Description of Key Positions and Employees
• Human Resource Management Aspects
• HR Planning – Recruitment, Selection procedures etc
• HR Administration – Rules/Regulations, Facilities, Procedures etc
• HR Development – Training/Development, Motivation, Retention etc.

12. Financial Plan

A. Financial Objectives
i. Write financial objectives for short term (1 year), medium term (2-3 years)
and long term (5 years and beyond)
ii. What you write here is what you aim to achieve financially in short, medium
and long term.
• For eg.
o Growing sales to these many units in 1 st year and achieving
sales growth by this much % in coming 3 years and after that
this much %
o Dividend distribution of this much % from this particular year
o Achieving ROI of this much % on this year and achieving
growth in ROI of this much % from this particular year
o Penetration pricing for first 2 years and then increase in price
by this much % for this many years etc
B. Assumptions made for financial estimations
i. All the assumptions you make regarding growth %, inflation, depreciation
method, loan interest rates, loan terms, salary increment etc should be kept
here. This forms basic information for readers before they enter into the
financial plan.
ii. Its better to keep assumptions under each estimation tables also (can be
repetition of same assumptions you keep in this section)
C. Start Up Expenses and Investment / Capital Estimation (Capital Structure)
D. Sales/Revenue Projection
E. Income Statement
F. Dividend Distribution / Retention Plan
G. Cash Flow Statement
H. Balance Sheet
I. Investment Appraisal
i. NPV
ii. IRR
iii. Payback Period

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 J. Key Financial Indicators
i. Quick Ratio
ii. Gross Profit Margin
iii. Operating Profit Margin
iv. Net Profit Margin
v. Fixed Assets Turnover Ratio
vi. Total Assets Turnover Ratio
vii. Return on Fixed Assets
viii. Return on Total Assets
ix. Return on Equity
x. Return on Investment (Return on Capital Employed)
xi. Debt Service Coverage Ratio / Times Earned Interest (TIE) Ratio
xii. Break Even Sales (in Rs and Units)
K. Sensitivity Analysis on Key Financial Indicators by varying key assumptions and
numbers (for eg. Sales decrease/increase, cost decrease/increase etc by certain %age)

Steps:

I. Estimate all the cash inflows and outflows in preliminary Master Cash Budget for
year 0 to 5 (Year 0 being the startup point) – format given in class
II. While doing this estimation, keep only equity amount of what you can put plus your
shareholders/partners and don’t keep any debt. (Or you may not keep any portion of
capital in the Cash Inflow – This will help you estimate the total investment required
in the business)
III. See what kind of ending cash balance would you get and then look at the maximum
deficit you would face during planning period (5 years) [Don’t forget to include
Minimum Cash Balance needed for business and contingencies in Cash Outflow]
IV. Decide on the total investment needed, capital size and capital structure now (Equity
vs. Debt) by considering factors like availability, interest rate, your disposition and
attitude about debt, advantages and disadvantages of taking debt etc)
V. Keep on creating various estimation tables as required to fill up data in preliminary
cash flow statement and while creating other financial statements like income
statement and balance sheet. Such estimation tables can be for followings: [These
tables can be kept in appendix]
i. Startup expenses and investment estimation table
ii. Price estimation table
iii. Sales/Revenue Projection Table
iv. COGS estimation table (Direct Material, Direct Labor, Direct
Overheads)
v. Salary Estimation Table
vi. Marketing expenses Estimation Table

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 vii.Loan Amortization Schedule
viii.Assets Depreciation Schedule
ix.Dividend Distribution / Retention Plan Table
x.Working Capital Estimation Table
• Keep only cash in Year 0
• Estimate net working capital constituents as follows in relation
to sales % or working capital days
o Cash
o Accounts Receivable
o Inventory
o Accounts Payable
o Notes Payable
o Short term debt etc.
• This estimation can be done at last also, while you estimate
CFS and BS.
VI. Now finalize and create three important financial statements: (they should be part of
your main body)
xi. Income Statement
xii. Cash Flow statement (CFS)
• Form this in another format where you classify each cash
inflows and outflows into
o Cash Flow from Operations
o Cash flow from Investment
o Cash flow from Financing
xiii. Balance Sheet (BS)
VII. These three statements would have very close links with one another and hence form
them in parallel.
VIII. Break down each cost (not investment though) of each year into variable cost and
fixed cost. You can find out total fixed cost and contribution margin to find out BEP
Sales.
IX. Now estimate economic cash flow for each year. Investment on year 0 and other cash
flows from year 1-5. Economic cash flow = EBIT + Depreciation – Tax. Then find out
NPV of 5 years, IRR of five years and Payback period.
xiv. Consider discount rate as WACC
xv. Keep cost of equity 4-6% more than loan interest rate prevailing in the
market – and also consider the riskiness in the business model. More
risky the business, more than loan rate and more the cost of equity.
X. Then find out Key Financial Indicators for all years as given above

Notes:

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 1. Financial estimation is an iterative process of planning – you might need to
adjust things back and forth to arrive at conclusion. But, never manipulate data
beyond practical possibility. Never make assumptions which are unrealistic.
2. Charge Preliminary expenses of start up on the first year income statement. That
way, you’ll be forming financial statements on cash basis than accrual basis,
which is always better. That way, you might have loss in first or till 2 nd year – so
be it.
3. Estimate working capital requirement while estimating cash flow statement and
balance sheet in parallel. You can either start by entering them into BS and then
filling up the linked column of CFS or do opposite.
4. Remember – Ending Cash balance in CFS should be cash/bank balance of BS.
5. Take Cash and/or Working Capital (Current Assets) in BS as balancing item.
Check whether these balancing items are realistic or not.
6. Its better you get BEP around 3-5 years
7. Give each particulars/headings in estimation tables in as detail form as possible –
for eg. Don’t write COGS figure only, break them into your direct materials,
direct labors and direct overhead (and you should specify what your materials,
labor and overheads are)
8. If it’s not beyond justification, I suggest you keep some bank loan in capital
structure so that you learn how loan amortization and its treatment is done in
financial statements.

Finally:

Financial Estimation is not so technical and complicated as most of you think. It can be
done easily if you understand your business model properly. Try finding out logic for
each steps and numbers and best part of it is, it’s just estimation – can’t go beyond
rationale, but some manipulation of numbers can be done within limits. You don’t need to
be expert in finance and accounts to achieve it. Be comprehensive, Keep it simple.

13. Risk and Contingency Plan

A. Key Risks in the Business and Risk Management Plan
B. Contingency Plan and Exit Plan

14. Appendix
• Followings can be parts of annex
o Product Prototypes / Pictures
o Quotations taken from suppliers
o Market / Consumer Survey/ Research Outputs in detail
o Questionnaire used if any for Consumer Survey
o Detail Master plan of the infrastructure build up and premises
o Specifications of the supplies/ materials/ parts/ components etc

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 o Estimation tables and feeder tables used to make financial statements (final
statements – B/S, I/S and CFS)
o Detail Job Description of Key Employees
o Legal Papers, Agreement Formats, IPR Certificates etc.
o Other Supporting Documents, Graphics etc.

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