THE

BUSINESS PLAN

THE BUSINESS PLAN
SESSION OBJECTIVES

At the end of the session, students
should be able to:
understand the importance of a
business plan, and
prepare a business plan

What Is a Business Plan?
A business plan is a written document which
described the proposed business or project to
be undertaken in a comprehensive manner.

It is also known as a working paper,
business proposal, project paper
or prospectus.

Reasons For Preparing a Business
Plan:


Opportunity for entrepreneur to assess the
business venture objectively, critically and
practically.
To study and evaluate the feasibility of the
business.
To convince venture capitalists, investors and
bankers in order to raise capital and obtain
support for the venture.
As a guideline for day-to-day management of
the business.
To be able to distribute business resources
more effectively.
Audiences of the BP
1. Entrepreneurs
2. Investors
3. Bankers
4. Financial Assistance Providers
5. Suppliers
6. Customers
7. Employees

Business Plan Format


1. Cover Letter
2. Title Page
* Title of the business plan
* Name and address of the business
* Name of writers
* Date
3. Table of Contents
4. Executive Summary
5. Main Body of the Business Plan
6. Appendices

Main Body of the Business
Plan



1. Introduction
2. Purpose
3. Background of the Business
4. Background of Partners/Shareholder
5. The Organization/ Admin Plan
6. The Marketing Plan
7. The Production/Operation Plan
8. The Financial Plan
9. Justification


Section 1: Introduction
a. Name of the business
b. Type of business
c. Industry overview
d. Location of the business
e. Date of commencement
f. Factors influencing choice of
business
g. Business potential
Section 2: Business Plan Purpose
2. Purpose
Each business plan is prepared for a specific purpose.
The entrepreneur should clearly and specifically state the
purpose for preparing the particular business plan.

Examples:
a. This business plan is prepared by Syarikat Fair One
Sdn. Bhd. to obtain a term loan for the amount of
RM50,000 from SME Bank.

b. This business plan is prepared by Syarikat Fair One
Sdn. Bhd. as a guideline in managing the business.

Section 3: Background of the
Business
a. Name of the business
b. Business address
c. Correspondence address
d. Telephone number
e. Form of business
f. Main activity
g. Date of commencement of business
h. Date of business registration
i. Business registration number
j. Name of bank
k. Bank account number
l. Equity contribution



Section 4: Background of
Partners/ Shareholders
a. Name in full
b. Identity card number
c. Permanent address
d. Correspondence address
e. Telephone number
f. Date of birth
g. Age
h. Marital status
i. Academic qualification
j. Courses attended
k. Skills
l. Experiences
m. Current job/position
n. Other/Previous business experiences
Section 5: The Organization/
Admin Plan
a. Introduction to the organisation
b. Organizational chart
c. Table of job designation and number
of workers
d. J ob Description
e. Remuneration table
f. List of office furniture, fixtures and
fittings
g. The administrative budget


Section 6: The Marketing Plan
a. Introduction to the product/services
b. Target market
c. Market size
d. Competition
e. Market share
f. Sales forecast
g. Marketing strategies
h. The marketing budget

Section 7: The
Production/Operation Plan
a. Process Flow Chart
b. Unit output/Hours of operation
c. Material requirement
d. List of direct workers
* designation
* remuneration
e. List of machines and equipment
f. Plant/office layout
g. Location
h. Operation overhead
h. The production budget


Section 8: The Financial Plan
a. Project Implementation Cost
b. Sources of Financing
c. Table of Depreciation
d. Loan Amortization Schedule
e. Hire Purchase Repayment Scheme
f. Cash Flow Proforma
g. Profit and Loss Proforma
h. Balance Sheet Proforma


Section 9: Justification
Concludes and justify why the project
is worthy of finance
Administration
Plan
Introduction to the Organisation
Introduce the business by stating the business:
Mission- is a statement of the purpose or reasons for its
existence
Objectives- more specific, stated in a shorter term and
have a definite time frame
Business address
Location of the business
a. Physical location of project and proximity to roads,
highways etc (Provide road map for exact location)
b. Building (type, structure, size and value)
c. Infrastructure (water, electricity, telephone)

Organisational Chart
It is a schematic representation of the
organizational structure
It shows:
The hierarchy
Span of control
Intra-relationship
Division of jobs and responsibilities
Organisation Chart
Manager
Administrative
Officer
Marketing
Officer
Operations
Officer
Finance Officer
List of Administration Personnel
Position No. of Personnel
Manager 1
Administrative Officer 1
Marketing Officer 1
Operations Officer 1
Finance Officer 1
Schedule of Tasks and
Responsibilities
Position Tasks and Responsibilities
Manager To plan, implement and control the
overall management of the business
To plan and monitor the strategic
progress of the business.
To be accountable for the overall
performance of the business
Administrative officer
Schedule of Remuneration for
Administrative Staff
Position No. Monthly
Salary
(RM)
EPF
Contribution
(12%)
(RM)
SOCSO
(2%)
(RM)
Amount
(RM)
Manager 1 2500 300 42.85 2842.85
Administrative
Officer
1 1200 144 20.15 1364.15
Marketing
Officer
1 1200 144 20.15 1364.15
List of Office Equipment
Item Quantity Price/Unit
(RM)
Total Cost
(RM)
Office
Furniture
2 sets 2000 4000
Personal
Computer
2 sets 3000 6000
Air-Cond 1 set 2500 2500
Administration Budget
Fixed assets Cost
Investment made to purchase of assets that will be used
in the organisation for more than 1 year.

Monthly Expenses
Payments that have to be made every month as part of
maintaining the business existence.

Other Expenses
Expenses that do not fall into the above categories.
Expenses incurred once a year or on a periodic basis.
Administration Budget
Fixed Assets
Expenses
(RM)
Monthly
Expenses
(RM)
Other Expenses
(RM)
Building xxxxx
Furniture & Fittings xxxxx
Renovation xxxxx
Rental* xxx
Utilities : water,
electricity, telephone
xxx
Salary xxx
EPF & SOCSO xxx
Rental Deposit xxx
Utilities Deposit xxx
Stationery xxx
Business Registration xxx
Please prepare the following:
Introduction to organisation
Organisation Chart
List of Personnel
Schedule of task and responsibilities
Schedule of remuneration

Marketing Plan
Product or service description
Describe clearly the product or service
offered. Relate the proposed product/
service to target customer needs and
wants.
Target market
State the customer's profile in the target
market area. Identify different market
segments that exist in the same market
area.

Target market is defined as the groups of
customers that have needs and wants
that can be satisfied by the business
through the supply of goods or services
Market size
State the market size in units of product or
unit of sales (in ringgit) or both.
Market size refers to the total potential
purchase of the target market
Competition
List at least three main competitors that
exist in the same market area. State their
strengths and weaknesses.
Competitors refer to other businesses that
offer similar, substitute or alternative
products/ services to the same target
market.
Competition
Example:
Competitors Strength Weakness
Co. A
Market share
Compute the market share as a
percentage of the market size. Product or
service information, customer needs and
wants as well as market competition must
be taken into consideration.
Market share refers to the estimated
potential sales of the business after taking
into consideration the market size and
competitors influences.
Example:
Market Share Before Entry of Ramlan Ent.
Competitors Market share Sales per year
Gard Sales & Service 40% RM 90,000
Highlight 30% RM 67,500
Tan Chong 30% RM 67,500
Total 100% RM225,000
Sales Forecast
Definition: expected purchases
from the identified target market.
It is quoted in units or in Ringgit for
a period of a year or a month

Sales Forecast
Month Units Sales (RM)
January 0 0
February 100 1,000
March 350 3,500
April 400 4,000
May 400 4,000
June 350 3,500
July 400 4,000
August 600 6,000
September 600 6,000
October 600 6,000
November 750 7,500
December 750 7,500
Total 5,300 53,000
Marketing strategy
Discuss the strategies concerning the
following marketing mix:
Product or Service
Price
Place or Distribution
Promotion
List of marketing personnel
Schedule of tasks and responsibilities
Schedule of remuneration

*Use the same format as in admin plan
Marketing Budget
Fixed Assets
Expenses
(RM)
Monthly
Expenses
(RM)
Other
Expenses
(RM)
Van xxx
Pamphlets and
brochures
xxx
Commission xxx
Salary, EPF &
SOCSO
xxx
Petrol xxx
Road tax and
insurance
xxx
Please prepare the following:
Product or service description
Target market
Market size
Competition
Market share
Sales Forecast
Marketing strategy
Operational Plan
Operations process
State the key steps or phases in the
operations process towards producing the
product or providing the service.

Chief mechanic gets information from client on the problems with the vehicles
Discuss repair work with client
Preliminary inspection of the vehicle by mechanics
Get agreement from client on repair work to be done
Chief mechanics fill Job Order form
Pass the Job Order form to mechanic on duty
Process Flowchart
It is schematic representation of the
production/operation process from the
start until the product or service is sold or
delivered
It must show:
The sequence (step by step)
Description of each process/activity
Conventional Symbols
.
Symbol Activity Description
Operation

Materials are being processed or
information being processed or the
process of planning and
calculating
Transporting

Movement of materials from one
place to another.
Inspection

Inspection on the quantity or
quality of the product.
Delay

Process is delayed or materials
waiting for further process.
Storage Materials are stored in the storage
area or warehouse.
Example
Capacity Planning/Production
Schedule
Operations output
Unit of product per day, or
Hours of service
Materials requirement
List down the raw materials or inventories
required in the operations process.

Item Quantity
Required
Price per unit Total Purchase
Flour 100kg RM2/kg RM240
Butter 25kg RM10/kg RM250
List of operations personnel
Schedule of tasks and responsibilities
Schedule of remuneration

*Use the same format as in admin plan
Machine and equipment
All machines and equipment must be listed
together with the estimated price, number
of units and suppliers name.
Type Price Per
Unit
(RM)
Quantity Total Cost
(RM)
Machine X 12,000 1 12,000
Stove On loan/
rented
Operations space layout plan
Draw a floor plan of the operations space
layout with the key items (e.g. store room,
exit doors and electrical points) that have
to be taken into consideration.
Location
Specify the location where the business
operations section is sited. State whether
the building is rented; built by the business
owners or purchased as a ready built
premise. If the premise is rented, state the
rental deposit and any renovation cost
incurred.
Operations Budget
List all the operations expenses involved
under the following categories:
Capital Expenditure/Fixed Asset
Working Capital/Monthly Expenses
Other Expenses
Please prepare the following:
Operations process
Process Flowchart
Capacity Planning/Production
Schedule
Materials requirement
Machine and equipment
Financial Plan
The Importance of A Financial Plan
To determine the amount of money to be
invested the project cost.
To identify and propose the relevant
sources of fund.
To ensure that the initial capital is sufficient.
To appraise the viability before actual
investment is committed.
As a guideline for implementation.
Sources of Financial Information
Financial information is gathered through
budgets.
Operational budget
Administrative budget
Marketing budget
Production budget
Financial budget
Project implementation cost
Sources of fund
Projected cash flow statements
Projected profit & loss statements
Projected balance sheet statements
Steps in Preparing a Financial
Plan
Step 1:
Prepare the project implementation cost schedule.
Step 2:
Prepare the sources of fund to finance the project
cost.
Step 3:
Prepare the projected cash-flow statements.
Step 4:
Prepare projected trading, profit & loss statements
(for 3 years).

Project Implementation Cost
Project implementation cost refers to the total
costs (short & long-term costs) needed to
implement the proposed business/project.

Long-term costs refer to capital expenditure
required to buy fixed assets (ex. land, building,
machinery, equipment, furniture and vehicle).

Short-term costs refer to expenditure to finance
day-to-day operation of the business (ex. raw
materials/inventory, wages & salaries, utilities
and other overheads.
Elements in Project Cost
Schedule
Capital Expenditure
Land
Building
Renovation
Machinery & Equipment
Furniture & Fixtures
Vehicle
Working Capital ( _xx month)
Administrative
Marketing
Operation
Elements in Project Cost
Schedule
Pre-operational costs
Business registration & licenses
Legal fees
Road tax & insurance
Stamp duties etc.
Deposits
Rental
Utilities
Provision for contingencies
(2 to 5 percent)

Example: Project Implementation
Cost Schedule
RM RM

Capital Expenditure
Building 45,000
Machinery & Equipment 23,000
Furniture & Fixtures 7,000
Van 25,000
Renovation 4,000
104,000
Working Capital (1 month)
Administrative 8,000
Marketing 1,500
Operation 8,000
17,500
Pre-operational costs 2,700
Deposits 800
Allowance for contingencies (10%) 12,500

Total cost 137,500
Exercise: Project Implementation
Cost Schedule for Gegak Gempita
RM RM
Capital Expenditure
Equipment 100
100
Working Capital (1 day)
Administrative 10
Marketing 5
Operation 160
175
Preoperational Cost 160
Deposits Rental 10 170

Grand Total 445

Allowance for contingencies (5%) 22.25
Total cost 467.25
Sources of Fund
Sources of fund refer to the source where
fund to finance the project cost is secured.
It can be internally or externally generated.
Sources of Fund
Equity Contribution
the total amount of funds contributed by the owner or the
partners in the business
inclusive of cash and personal asset contributions by the
owner(s).
Term Loan
long and short terms funds obtained from financial providers
Hire-Purchase Scheme
to a form of financing often used in the purchase of fixed
asset such as vehicle, machinery, and furniture and fittings
Others
finance may include government grants, personal borrowings
from individuals and companies.
Example: Sources of Finance
Source RM

Equity Contribution
Cash 27,500
Asset 45,000

Term Loan 45,000

Hire-purchase Finance 20,000

Total 137,500
Cash-flow Projected Statements
It is projected statements of cash inflows
and outflows throughout the planned
period.
It shows the following:
Cash inflows
Cash outflows
Deficit or surplus
Cash position (beginning & ending balances)
Elements in Cash-flow
Statement
Cash Inflows
Equity cash only
Term-loan
Cash sales
Collection of receivables
Sales of asset
Elements in Cash-flow
Statement
Cash Outflows
Operational expenditure
Marketing expenditure
Administrative expenditure
Loan repayment
Hire-purchase repayment
Purchase of fixed assets
Pre-operational expenses
Miscellaneous expenses
Elements in Cash-flow
Statement
Cash Surplus or Deficit
Inflows > Outflows = Surplus
Inflows < Outflows = Deficit
Cash Position
Beginning cash + Surplus/
(- Deficit) = Ending cash
Note: The ending cash balance for a
particular month becomes the beginning
balance for the next consecutive month
Example: Profit & Loss Account
Sales 240,000

Less: Expenses
Administrative 96,000
Marketing 18,000
Operational 96,000
Financial:
Interest on term loan 4,500
Interest on hire-purchase 1,600
Depreciation charges 11,800
Pre-operational expenditure 2,700
Total Expenditure 230,600
Net Profit 9,400

Balance Sheet Pro-forma
Statements
It is a projected statement which shows
the financial position of the company at
a specific point in time in terms of assets
owned and how those assets are
financed.
Projected statements are prepared for
the period of three (3) years.
Elements in a Balance Sheet
Fixed Assets
List all fixed assets at its book value (Cost
Accumulated depreciation)
Current Assets
List all current assets (e.g. cash, stocks, account
receivables, deposits etc.)
Equity
Equity contribution (cash + assets) plus net profit
(accumulated)
Long-term Liabilities
Term-loan (year end balance)
Hire-purchase (year end balance)
Example: Balance Sheet for
Manufacturing & Trading Companies
Fixed Assets
Machinery & Equipment 18,400
Furniture and Fixtures 5,600
Renovation 3,200
Van 20,000 47,200
Current Assets
Cash 40,900
Closing stock for raw materials 3,000
Closing stock for finished goods 3,000
Deposits 800 47,700
Total Assets 94,900
Equity
Capital 27,500
Net profit 15,400 42,900
Long-term Liabilities
Term-loan 36,000
Hire-purchase 16,000 52,000
Total Equity & Liabilities 94,900

Example: Balance Sheet for
Service Companies
Fixed Assets
Machinery & Equipment 18,400
Furniture and Fixtures 5,600
Renovation 3,200
Van 20,000 47,200
Current Assets
Cash 40,900
Deposits 800 41,700
Total Assets 88,900

Equity
Capital 27,500
Net profit 9,400 36,900
Long-term Liabilities
Term-loan 36,000
Hire-purchase 16,000 52,000
Total Equity & Liabilities 88,900