Business Planning

Posted by Kirhat | Friday, January 18, 2013 | | 0 comments »

Photo courtesy of theplerolsen

Determining Your Product/Service Line

In planning for a successful business venture, the entrepreneur needs to focus on what specific type of product or service their establishment want to sell. Some of the factors given for consideration will help you come up with a great idea for a product – what specific field are you interested in? Can you apply your skills or background work experience to this field?

According to the Department of Trade and Industry (DTI), below are the different types of product/service lines:

  1. Product Industries - You may choose to manufacture your own product, either for the mass market or for specialized or individual demands. Canned goods, wooden or plastic toys, and ready-to-wear garments are examples of goods produced for the mass market, while precision instruments for industrial use of made-to-order furniture are examples of specialized products.
  2. Process Industries - You may decide to perform only one or two operations in the total manufacturing process. If so, you are not, strictly speaking, a “manufacturer” but rather a “process” enterprise. The activities you perform can be initial operations on raw materials (milling, corrugating, sawing, or cutting), final operations (fishing, assembly, packing, or binding), or skilled or precision operations (embroidery, testing, woodcarving).
  3. Subcontracting Industries - If you choose to be a subcontractor, you will undertake subcontracting work for other industries, usually bigger ones. Bigger industries sometimes subcontract the manufacture of components, supplies, or other specialized operations to smaller shops because the quality required is not viable for their high-capacity operations. Many big companies also find subcontracting a more low-cost and faster way of manufacturing products. Also, you are assured of a market for your products. You can also avail of technical and financial assistance from the big companies. One drawback of subcontracting, though, is that you rely on only one firm or two for your survival.
  4. Service Industries - You could choose to sell services. Service enterprises include repair and maintenance shops, printing and machine shops, and food catering establishments. Beauty parlors, dress and tailoring shops, recreation establishments (bowling alleys and billiard halls), and entertainment enterprises (theaters, discos, and pub houses) are also considered service businesses.

    Although falling under the broad classification of a service enterprise, you may consider the trading business a fifth option. The most common type of trading enterprise is retailing.
Writing a Business Plan

After you have made the preliminary decisions, you can proceed to formulate a business plan. There is no such thing as an all-purpose business plan. You should write your business plan according to the unique factors and conditions of your enterprise. However, you will find it useful to write and use a business plan along the broad guidelines suggested below:

  1. State Your Objectives. This section comes first in a business plan. You tell your reader who you are, what your business goals are, and when you expect these goals to be accomplished. If you are submitting your plan to a bank, you may indicate how much you want to borrow and what you plan to do with the funds.
  2. Describe the Business. This section gives background information on your business and how it is currently doing:

    For a new business. Instead of a brief history, explain what the business will be, how the idea for your business was conceived, and how the business is expected to develop.

    For an existing business. Provide the following information: business name, date and place of registration, when actual operations began, a brief history of your business, and names of owners, partners, or major investors.
  3. Describe Your Products or Services. Give a detailed description of your products or services so the reader gets a clear idea of what you are selling. Also give any applications or uses of your products that may not be apparent.

    In this portion of your plan, you should also note the competitive advantages your product has over other similar products, as well as identify the products you will be competing with. You should be able to state your product’s advantages and disadvantages.
  4. Identify Your Potential Market - Determine who are your present or projected customers and how many. Be as specific as possible. Are you selling to bookstores? A grocery store? A small ladies’ boutique? If you are selling to the general public, you may need to group potential customers according to age, gender, income, education, and other demographic factors. You then ask yourself how you can make use of the information. If, for example, you know that your potential customers will likely be children between three to ten, what does this tell you about your location? Your advertising? Your prices?
  5. Identify Your Competitors - Rather than pose as threats to you, your competition should drive you to do your best. Learn as much as you can about them. Include the following information in your plan:

    • Description of competitors – Identify businesses likely to become your competitors. Name them.
    • Size of Competitors – Determine your competitors’ assets and sales volume.Profitability of Competitors – Which of your competitors are making money? Which are losing, and by how much?
    • Operating Methods – Determine the operating methods of each of your major competitors in terms of pricing strategy; quality of products and services; servicing, warranties, and packaging; methods of selling and distribution channels; credit terms; location; advertising and promotion; reputation; and inventory levels. Discuss only the items relevant to your business.
  6. Consider Your Pricing Policy - In pricing your goods and services, all relevant factors should be considered, like cost of production and distribution as well as the degree of acceptance by the market. Another factor to consider is the pricing structure of your competitors. Of course, the aim of your pricing policy should be to set the price at a level that maximizes profit in the long run.
  7. Determine Your Marketing Methods - Having a good product at a reasonable price is not enough. Your business plan must answer the following questions:

    • How will you promote or advertise your business?
    • How will you sell your product? Will you employ salespeople?
    • What channels of distribution will you use to reach your customers?
    • What do your customers think of your product? How can you improve your image as an enterprise?
  8. Determine Your Key Personnel - Identify the key people in your business, including you as the owner and manager. If your business is a corporation, list the names and addresses of all directors. If your business is a partnership, list the names and addresses of all the partners.
  9. Identify Your Material Requirements and Sources of Supply - List down what materials you will need and where you will get them. Include only direct materials; office supplies and other indirect materials should not be included in the list.

    You should prepare a table for the materials. For each of them, state how many suppliers there are, who your main supplier is, and why. Your readers will see that you have carefully thought out who your best supplier will be.
  10. Determine the Process and Equipment You Will Use to Manufacture Your Product - Give a detailed explanation of your production process. For each step, explain the work done, as well as the equipment and materials used. If you are presenting a complex process, include a diagram showing your work-flow. Assign positions for the jobs that need to be done and estimate how many people you need to employ for each position. Set salary rates, too.
  11. Prepare a Sales Forecast - Include a sales forecast that covers at least two years of operation. For the first year, present your sales on a monthly basis. Present the forecast of the succeeding years on a yearly basis, and explain how you arrived at the figures and at the assumptions on which they are based.
  12. Prepare a Budget - In manufacturing, production costs of materials, labor, service, manufacturing overhead, and other components should be budgeted. A service business should budget operational costs. Sales costs should include selling and distribution, storage, discounts, advertising, and promotion. General and administrative expenses include salaries, as well as legal and accounting costs. Projections should be prepared every month during the first year of operation and every quarter for the second and third years.
  13. Set Your Plan to Work - You are ready to set your plan to work. It is time to raise funds, obtain a license, purchase facilities and supplies, hire and train people, and start operating. Remember that if you are to succeed, you must be prepared to work long hours and must be totally committed to your business.


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