Business Planning Process/Preparation of Business Plan
A business plan is a blueprint of step by step process that would be followed to convert the business idea into a successful business venture. The business planning process is explained as below:
Business Planning Process/Preparation of Business Plan:
1. Idea Generation: This is the first step in the business planning process. This step differentiates an entrepreneur from the usual business. An entrepreneur may come up with a new business idea or may bring in value addition to existing products in the market. Sources of the new idea for entrepreneurs are:
(b) Existing companies
(c) Distribution channels.
(e) Research and Development
2. Environmental scanning : Once the entrepreneur is through the idea generation stage, next entrepreneur is required to conduct environmental scanning which includes analyzing the internal and external environment that affects business idea.
Internal Environmental Factors: These are also known as controllable factors. These factors provides the basic purpose of an enterprise’s existence and operations. It includes the value system, mission and vision of an organization. The availability of machines, human resources, raw material, etc. are already studied in detail.
External Environmental Factors : These are also known as uncontrollable factors. These are further classified into two segments:
Micro external environmental factors : These includes the following factors which affect on enterprise such as:
(i) Suppliers (ii) Customers (iii) Competitors (v) Employees (vi) Shareholders
(b) Macro external environmental factors: These include the following:
(i) Political environment (ii) Legal environment (iii) Economic Environs
(v) Technological environment (vi) Cultural environment (vii) Ethical environs
3. Feasibility analysis : It refers to conducting detailed analysis in relation to every aspect relevant to business and determining credibility of business. It includes analysis/appraisal of the following:
(a) Market analysis : It is conducted to estimate the demand and market share for proposed product and service in future. Demand and market analysis is based on factors like consumption pattern, availability of substitute goods and services, etc.
(b) Technical and operational analysis : This is to assess operational ability of proposed business enterprise. Technical and operational analysis collects data on following parameters:
(i) Material parameters
(ii) Material requirement planning
(iii) Plant location
(iv) Plant capacity
(v) Machinery and Equipment
(c) Financial analysis : It includes the cost of project and cost of production which includes the recurring and non-recurring expenses.
(d) Economic analysis: It essentially involves the compilation of demands for domestic and export markets, most appropriate installed capacity requirements, etc.
(e) Management analysis: The new entrepreneur manager entering the small scale sector should devote his full attention to the new venture.
4. Selection of idea: The next step is to select an idea on the basis of above study. The following factors should be considered for selecting the suitable. Project to produce certain product or provide any service:
(i) If it is an innovative idea?
(ii) Whether competition in the area is less?
(iii) Whether raw material is easily available? (iv) Whether infrastructure facilities are available?
(v) Whether Government policy encourages production of the product ?
5. Project report preparation: The entrepreneur has to put his ideas and other information after deciding upon the product and the organization. Project report is a written document that describes step by step strategies involved in starting and running business. The content of project report are discussed in ‘project report preparation ‘chapter’.
6. Evaluation, control and review: As company operates in dynamic environment, company has to monitor and review strategies and policies to stay in line with competition existing in market.
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