How do I make a business plan? (Supplement)

How do I make a business plan? Part 1
How do I make a business plan?Part 2
How do I make a business plan? (Supplement)

Your business plan is not complete with the organizational plan and financial plan. (Supplement)

Q: Our company is offering us a one-time loan which I plan to invest in a carinderia. I have talked to my high school friend who is a good cook to help me out in establishing this business. I only have PhP 150,000 to start with. My family is committed to support me with manpower since most of my relatives are currently unemployed.

Currently I have been browsing the internet for materials that could help me build the business plan, cash flow, and feasibility. What other things should I need to consider?

-- Teddy U. Tabanao Jr.
Organization Plan

The first thing to do is to define your VMGO: vision, mission, goals, and objective. The VMGO is a statement of what you want your carinderia to achieve in the long term and short term. It is an expression of what you want your carinderia to be known for and your purpose for setting up the carinderia.

You specify what you want to achieve within a short period of time, say 1 or 2 years, in your goals. While you lay down the specific activities you will do to support your goals. The VMGO provides the direction for your business.

Define the legal form for your business. Is it going to be a single proprietorship, a partnership, a cooperative, or a corporation? Whatever form you decide upon, ask yourself whether this is the best legal form for your carinderia; be clear about your reasons.

In addition to the licenses, permits and registration expenses, you need to set aside some money for other pre-operating expenses. You can get the amount back since pre-operating expenses are amortized during the course of the business. Fill in the pre-operating expenses table below.

(Click the tables to see a larger version)

The success of any business depends to a large extent on the people you hire. Think also of the management aspects of your business: marketing, production, finance, and administration. Assess your capability to manage the carinderia by yourself. This requires a full-time job. If you cannot afford to leave your present job yet, then you need to hire someone to manage the business.

Identify the kind of people you need for the business. By doing a task analysis, you can determine the number of people you will need, the skills you require and the amount you will spend for their salaries.

Once you have identified the positions, write down the job description that go with each position and the qualifications that the position requires. Now you can compute for your administrative expenses.

It is proper to allot rent expense even if you own the space that you will use for the business. You base the rent expense on the amount you think that space would command if you rent it out.

Utilities consist of your water, electricity, and telephone and other communication expenses. Professional fees refer to the payments you give to consultants. Usually, businesses, big and small, get a financial consultant on a retainer basis. The primary task of this person is to prepare financial statements.

The Financial Plan

It is now time to check the viability of your business idea. If you are ready, proceed with the following set of tables. You are going to compute for your total project cost and come up with your income statement, balance sheet and cash flow statement.

Find out how much money you will need to implement the activities you have planned. Break down the cost of each item into two to reflect how much of the cost will be funded by the loan from your office (debt) and how much of its cost will you pay from your own pocket (equity). The ideal debt:equity limit set by banks is 40:60 per cent.

If you borrow money, you will need to pay interest. Now, project your income statement for the next 3 years.

How sure are you that you have cash when you need it? Prepare your cash flow statement so that you will know when you are going to need additional cash.

Now, try making your balance sheet

Now that you have all the figures, it is time for you to decide. Do you think your carinderia is viable? Should you proceed with your plan or would you rather think things over?

You have come to the end of your business plan. Keep in mind that your projections are only as good as your assumptions are. Therefore, always try to make close-to-accurate assumptions.

“SmallBiz Clinic” is a joint project of EYP and the UP Institute for Small-Scale Industries (UP ISSI) that aims to provide free online consultancy and information services to small and medium-scale enterprises. A team of expert consultants from UP ISSI answers questions sent in by SME readers and advises them on general actions to take to better manage their businesses.

The UP ISSI is a training and research organization created in 1966 to help promote the development of small enterprises in the country. It has trained generations of successful Filipino entrepreneurs via comprehensive development programs in management, marketing, and finance, as well as other innovative development strategies such as the training of small business consultants.

UP ISSI brings to the “SmallBiz Clinic” over 35 years of frontline expertise in the day-to-day challenges and issues of running a Philippine-based enterprise.

Source: Philstar.com