Topic 4 Business Plan

TOPIC 9
BUSINESS PLAN
This is an outline of an entrepreneur’s goals and objectives and how they intend to
achieve them. Most entrepreneurs do not realize the importance a business plan to the
growth and development of a business. The business plan describes the future direction
of the business. The entrepreneur must prepare a sound business plan in order to exploit
the opportunity or the idea. (TheBusiness planning process is explained below)
Importance of a business plan

A good business plan is important for the following reasons:
1. Helps in getting funds for the business (a good financial analysis the
business will motivate investors to see that their money is in safe hands
are they know they will get profit from their funding of your business
entity.
2. Helps in spotting potential problems before they occur (A good business
plan helps an entrepreneur to forecast into the future and look at trends
that could occur that may help or affect the business.
3. Helps entrepreneurs to stay on track (a good business plan has future
plans and helps targets made to meet what the business entity attains to
achieve.
4. It helps in managing the business better (With a good business plan,
entrepreneurs may find out that managing business becomes much
easier and better and knows what goes where and who is responsible for
various duties.
5. Staying on the budget is much easier (A good plan allows you to plan how
money will be properly allocated to various aspects of the business
enabling one to find out cheaper alternatives to what to venture in to the
business and helps stay in the budget and avoid unnecessary spending on
the business which saves money that can put back into the business. This
is simply since many businesses fail, not because they are unprofitable,
but because they ultimately become insolvent i.e. unable to pay their
debts as they fall due.
6. Helps to decide whether to start or continue with the business (A good
business plan allows entrepreneurs to know when a business is not doing
well especially when targets in your plan are not met. This does not mean
the idea or business is bad but maybe a different approach is needed for
the business.
7. Helps in developing and communicating a course of action (A business
plan helps an entrepreneur to access future opportunities and commit to
a particular course of action making all other options effectively
marginalized and the company is aligned to focus on key activities.
8. To better understand your competition (Creating the business plan forces
you to analyze the competition. All companies have competition in either
direct or indirect competitors, and it is critical to understand your
company’s competitive advantages.
9. To reduce the risk of pursuing the wrong opportunity (The process of
creating the business plan helps to minimize opportunity costs. Writing
business plan helps assess the attractiveness of this particular
opportunity, versus other opportunities.
10. To attract potential partners (Partners also want to see a business plan
to determine whether it is worth partnering with your business.
Establishing partnerships requires time and capital, and companies will be
more likely to partner with your venture if they can read a detailed
explanation of your company.
11. To position your brand (Creating business plan helps to define your
company’s role in the marketplace. This definition allows you to succinctly
describe the business and position the brand to customers, investors, and
partners.
Contents of a good Business Plan

1. Introduction- Contains the name and address of the business, names of
the directors, nature of the business, funds required, statement of
confidentiality of the report/plan.
2. Industry analysis- Showing the trends in the industry, competitors,
nature of the market and the industry forecasts.
3. Description of Venture- Products, services, size of business, office
equipment and personnel.
4. Production Plan- Manufacturing process, physical plant, machinery and
names of suppliers of raw materials.
5. Marketing plan- Pricing, distribution, product forecasts and controls.
6. Organizational and management plan- e.g Form of ownership, names
of the shareholders, names of the directors, authority of the directors and
roles and responsibilities of members of the organization.
7. Assessment of risks- Where weaknesses of the business are evaluated,
new technologies and contingency plans.
8. Personal Financial position- Personal assets, incomes and savings,
credit status of the entrepreneur.
9. Financial plan for the business- Includes: working capital, income
statements, cash flow projections and the budget for the proposed
activities.
10. Executive summary- This is information in 3-4 pages summarizing
the whole business plan.
Appendix- These are attachments including reports, market research data,
leases or contracts, price lists from suppliers and supporting letters and
business brochures.
Business Plan Format
An exhaustive business plan should include the following sub topics.
1. Executive Summary
a) Company name address and some number
b) Name, address and phone numbers of all very key people.
c) Brief description of the business, its product /service
d) Brief overview if the market for your products and services
e) Brief overview of the strategies that your firm a success
f) Brief description of the managerial and technical experience of
key people
g) Brief statement of the financial request and how the money will
be used.
h) Charts as tables showing highlights of financial forecasts
2. Vision and Mission Statement
a) Entrepreneurs vision for the company
b) What business to venture in
c) Values and principles on which the business stand
d) What makes the business unique
3. Company History (for ongoing businesses)
a) Company funding
b) Financial and operational profile
c) Significant achievement.
4. Business and Industry Profile
a) Industry background and overview
b) Significant trends
c) Growth rate
d) Key success factors in the industry
e) Outlook for the future stages of growth (start-up growth,
maturity)
5. Business Strategy
a) Desired image and position in market
b) SWOT Analysis
• Strengths
• Opportunities
• Threats
• Focus
6. Company products and services
a) Description
• Product /service features
• Customer benefits
• Warranties and guarantees
• Uniqueness
b) Patent and trademark protection
c) Description of production process (where applicable)
• Raw materials
• Costs
• Key suppliers
d) Future product or service offerings 7. Marketing
strategy
i. Target market
a) Complete demographic profile
• Complete demographic profile
• Other significant customer characteristics
b) Customer’ motivation to buy
c) Market size and trends
• How large in the market
• Trend of the market – growing or shrinking
d) Advertising and promotion
• Media used – reader, viewer, listener profiles
• Media costs
• Frequency of usage
• Plans for generating publicity.
e) Pricing
• Cost structure – fixed and variable cost
• Desired image in market
• Comparison against competitors’ prices
f) Distribution strategy
• Channels of distribution used
• Sales techniques and incentives
8. Location and layout
a) Location – Demographic analysis of location versus target
customer profile b) Traffic count
c) Lease/rented
d) Labour needs and supply
e) Wage rates
9. Competitor analysis
a) Existing competitors
b) Potential competitors
c) Impact on your business
10. Description of management team
• Key managers and employees
• Their backgrounds
• Experience, skills and know how expertise
• Resumes of key managers and employees (suitable for an
Appendix).
11. Plan of operation
a) Form of business chosen and reasoning
b) Company structure (organizational chart)
c) Decision making authority
d) Compensation and benefits packages
12. Financial forecasts (suitable for an Appendix)
a) Finance statements
• Income statements
• Balance sheet - Cash flow statement
b) Break-even analysis
c) Ratio Analysis with comparisons to industry standard applicable
to ongoing businesses.
13. Loan or investment proposal
a) Amount requested
b) Purpose and uses of funds
c) Repayment or “Cash out” schedule (exit strategy)
d) Timetable for implementing plan and launching the business
14. Appendices – which may entail supportive document, such as
market research, financial statements organizational charts,
resumes and other items.
NB When developing a business plan, the entrepreneur should not lose focus
on the following:
1. Vision of the business- Where he hopes the business shall be in future.
2. Mission- This should be short and memorable and it indicates the reason
why the said business exists.
3. Core values- These are the principles guiding the employees and the
activities undertaken in order to achieve the vision and mission of a
business entity. Must of the time they include: safety and security,
integrity, professionalism, excellence and customer focus.
4. Business Objectives- The entrepreneurial activity may not achieve its
vision and mission if the objectives it sets are not SMART I.E
- Specific – i.e They must set out exactly what the firm is trying to do
- Measurable-It must be possible to measure whether the objective has
been achieved or not.
- Agreeable- Those implementing the objectives must be in agreement
that that is what they plan to achieve.
- Realistic- The targets set in a given objective must be achievable
given the firm resources.
- Time specific- It is important to specify how long people have to take
to complete the objective.
Focus/coverage of the objectives
Typically, business set objectives that relate to:
- Profit- i.e The revenue they hope to make over a specified period
- Growth- i.e The market share they have achieved during a given period
of time.
- Social considerations- What the organizations hope to have done for
the society in a given period of time.
- Employee welfare- What the organizations hope to have done for the
employees in a given period of time in relation to working conditions and
career development opportunities.

Topic 4 Business Plan

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Topic 4 Business Plan

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TOPIC 9

Importance of a business plan

Contents of a good Business Plan

Focus/coverage of the objectives

Typically, business set objectives that relate to:

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