CHAPTER FOUR

THE BUSINESS PLAN

1. Why Write a Business Plan

2. Elements of the Business Plan

3. The Marketing Plan

4. The Organizational Plan

5. The Financial Plan

 Discussion points

• What is planning and how business can be planned?

•What is business plan?

•Who should plan for the business?

•How BP benefits an entrepreneurs?

• What determine success and failure of business

plan?

•For how long does it work?

 A Business Plan is:

• a document that thoroughly explains a

business idea and

•how it will be carried out

o Story of what the business is & will be

o Marketing plan

o All costs & a description of financing

o Estimation of earnings
 Business Plan - Cont’d …
• A business plan is a living document that maps out the

details of your business.

• A business plan is a written summary of your proposed

business.

• It includes information about the plans, operations and

financial details, its market opportunities and strategies, as

well as the entrepreneur’s personal background.

• A business plan is a document used to summarise an

entrepreneur’s business aspirations, secure legal authority

and mobilise resources to launch the business.
 Business Plan - Cont’d …
• The business plan is essentially a selling

document used to convince key individuals,

– both inside and outside the firm, that the

venture has real potential

• Equally important, it is an opportunity to convince

yourself, the entrepreneur

 Business Plan - Cont’d …

• A business plan is a comprehensive set of

guidelines for a new venture.
• Planning enables the business person to have a
better sense of
– the market,

– product/service to be marketed,

– the management team, and

– the financial needs of the venture as well.

 Business Plan - Cont’d …

• It enables to cope with the changes in

the business environment

– by making ready alternative courses of action.

• It describes all relevant external and internal

elements involved in starting a new venture.

 Business Plan - Cont’d …

• It is often an integration of functional plans

such as

– marketing,

– finance,

– Manufacturing, and

– human resources.
Business Plan - Cont’d …

• It answers the questions:

– Where am I now?

– Where am I going?

– How will I get there?

 When to Conduct A Business
Plan?
1.Starting a new venture (organization, product or
service)

2.Expanding a current organization, product or

service

3.Buying a current organization, product or service

4.Working to improve the management of a

current organization, product or service
 Business Plan - Cont’d …
The Business Plan covers:
• What your business will sell,

• How it will be structured,

• What the market looks like,

• How you plan to sell your product or service,

• What funding you'll need,

• What your financial projections are, and

• Which permits (license), leases, and other

documentation will be required.
 Process of Business Planning
The business planning process is designed to answer two
questions:

– Where are we now?

– Where do we want to go?

• The result of this process is a business plan that serves

as a guide for management to run the company.

• A business plan allows companies to allocate

resources to accomplish goals.

• Therefore, it is vital to describe the most critical

 Cont’d ..
The primary objective of preparing a business plan

– Is to determine the financing requirements of your business

– To apply for external funding.

• In general, a business plan is a written document prepared

by the entrepreneur that describes all the relevant external

and internal elements involved in starting a new venture.

• It addresses both short- and long-term decision making.

• The business plan is like a road map for the business’

development.
 Why a Business Plan?
• Getting an integrated view of your business
• Mutual understanding within the management
team

• Determining financial needs and applying for funds

• Approval from board of directors/shareholders

• Recruiting competent human resources

• Deriving objectives for employees

• Informing employees

• Informing Lenders

• Informing Partners
 Objectives of the Business Plan

• For the entrepreneur starting a new venture, a

business plan has three basic objectives:

1. To identify the nature and the context of the

business opportunity-
• that is, why does such an opportunity exist?

2. To present the approach the entrepreneur plans

to use to exploit the opportunity

3. To recognize factors that will determine

whether the venture will be successful
Pitfalls to Avoid in Planning

Pitfall 1: No Realistic Goals

– Indicators: lack of attainable goals, time

frame, priorities and action steps

– Remedy: set up a time table with

specific steps to be accomplished

during a specific period.

 Pitfalls to Avoid in Planning

Pitfall 2: Failure to Anticipate

Roadblocks
• Indicators: no recognition of future problems,

no admission of possible weaknesses of the

plan, no contingency plans

• Remedy: list the expected obstacles

and solutions
 Pitfalls to Avoid in Planning

Pitfall 3: No Commitment or
Dedication
• Indicators: excessive procrastination, missed
appointments, no desire to invest personal
money
• Remedy: act quickly and follow professional
appointments, show financial commitment.
 Pitfalls to Avoid in Planning

Pitfall 4: Lack of Demonstrated

Experience (Business or Technical)
• Indicators: no experience in business, no
experience in specific area of the venture,
not understanding the industry.
• Remedy: give evidence of personal
experience and background, build
effective team.
Pitfalls to Avoid in Planning

Pitfall 5: No Market Segment

• Indicators: uncertainty regarding who will
buy, no proof of unsatisfied need
• Remedy: have a specific target market
justify why and how your product will
satisfy the need.
 A Business Plan Must Pass Three Tests

1.The Reality Test – proving that :

– A market really does exist for your
product or service.
– You can actually build or provide it for
the cost estimates in the plan.
 A Business Plan Must Pass
Three Tests

2. The Competitive Test – evaluates:

– A company’s position relative to its competitors.

– Management’s ability to create a company that

will gain an edge over its rivals.
3. The Value Test – proving that:

– A venture offers investors or lenders an attractive

rate of return or a high probability of repayment.
A Business Plan Must Pass
Three Tests
 Who Should Prepare the
Business Plan?

• The business plan should be prepared

by the entrepreneur.
• Lawyers, accountants, marketing
consultants, and engineers are useful
in the preparation of the plan.
 Who Should Prepare?
1. Management – planning, organizing, supervising, directing,
and controlling.

2. Marketing – identifying customers, distribution channels,

supply chain

3. Financial – managing financial resources, accounting,

budgeting

4. Legal – organization form, risk management, privacy and

security

5.Administrative – people relations, advisory board relations

6. Higher-order – learning, problem-solving

 Checklist for Business Plan?

• The product
• Why would customers buy the
product/service?
• Are the product specifications clear and
acceptable?
 Checklist for Business Plan?
• The market
• Geographical description of the business location

• Is there local demand for the product and if not,

how can it be created?
• Who are the big competitors, how can you
counteract them and their influence?
• Does your product need publicity and if so, what
expenses would that incur?
• What is the trend in the selling price? Is there any
seasonality?
 Checklist for Business Plan? (Cont’d …)

• Technical factors
– Have you selected all the necessary
equipment? What are your reasons for this
selection?
– If you buy machinery, check if you have a
guarantee and if after sales service is
included.
– Do you know where to source the equipment
from? Who is the supplier?
–
 Checklist for Business Plan?
(Cont’d …)
• Infrastructure
– Is the working/selling space adequate for
your business operation to function?
– Are ownership/tenancy documents for the
land/shop/workshop in order?
– If water is required for your business to
operate, is it available close by?
– Do you have/need a supply of electricity?
– Is transport of raw materials or finished
goods a critical factor and if so, how do you
plan to handle it while minimising costs?
– Do you need to register your business?
What are the legal requirements?
 Checklist for Business Plan?
(Cont’d …)
• Financial analysis
• Have you done financial calculations of needed costs,
resources, income etc?
• Have all the costs of production been included in
your calculations?
• Does the business generate enough cash from the
beginning so as to meet immediate liabilities (e.g.
rent, loan repayment).
• Check your cash flow projections. Are they realistic?

• Check all estimates of capital required as well as

running costs.
 Elements of a Business Plan

• Introductory page (General description of the

business and personal background)
• Executive Summary
• Problem to Solve & Solution
• Mission, Vision & Strategic Objectives
• Market Analysis
 Elements of a Business Plan

• Competitor Analysis
• Marketing Plan
• Business Structure
• Financial Plan
• Next Steps (Monitoring & Evaluation)
 Contents of a Business Plan

• General description of business

• Name of business, business location and
address
• Nature of business activity

• Type of business organisation (partnership,

cooperative, new, old,)
• Any further explanation summarising why the
business will be successful
 Contents of a Business Plan

• Personal background
• Name of business owner(s), promoter(s)
• Educational, professional background
• Relevant experience in business-related
activities
 Contents of a Business Plan

• Executive Summary
• This is prepared after the total plan is
written.
• It should be three to four pages in length and
should highlight the key points in the
business plan.
• The summary should highlight in a concise
manner the key Points in the business plan.
 Contents of a Business Plan

• Issues that should be addressed in the

Executive Summary include:
• Brief description of the business concept

• Any data that support the opportunity for the

venture.
• Statement on how this opportunity will be
pursued.
• Highlight some key financial results that can
be achieved
 Contents of a Business Plan
• Market plan
• Business market area and targeted customers/ customer
groups
• Why you will be able to compete with existing products/ services
and how do you compare competitors (price, quality, appearance,
performance,)
• Past, current, future (projected) market demand for your
product/service
• Suppliers and supply terms and conditions
• Unit pricing and list of all items/services being offered
• How you will be selling your produce (direct, dealers)
• Tip: Include the market research survey report as an
annex
 Contents of a Business Plan

• Business management plan

• Who will be the actors in this business
• Specify their roles and the division of
labour (if applicable)
• How will the business work be organised
(e.g. working shifts, working times,
working conditions)
 Contents of a Business Plan

• Financial plan Investments required

• Fixed assets/starting equipment (e.g. land,

tools, machinery)
• Preliminary expenses
– Pre-operative expenses (e.g. legal fees, licensing
fees, bank charges,)
– Start-up expenses (e.g. water, electricity
connection, cleaning of buildings, etc.)

• Working capital (raw materials, rent, water,

transport)
 Contents of a Business Plan (Cont’d …)

• Sources of raising funds

• Total requirements
– Own contributions/investments
– Family/friends contributions or Already
secured loans, credits etc
– Total funds available
 Contents of a Business Plan (Cont’d …)

• Major assumptions
• Give the assumptions you’ve made that
underpin or support your plan e.g. assumptions
that particular resources will be available
• Business profile
• Summary that shows all major aspects on one
page

• Monitoring and Evaluation Systems

 Using and Implementing Business Plan

• The core of your business plan is your vision for the

future.

• From this vision, you will be able to set objectives for

various parts of the business and these objectives

will need to be well communicated to all involved

to ensure a coherent approach to the tasks in hand.

• Your business objectives are statements about what

you want individual parts of the business to achieve.

 Business Plan Implementation

• A vital stage in business planning is Business plan

implementation.
• Here is where the business plan implementation puts
theory into practice.
• If theory and practice do not come together, the plan
will remain on the drawing board.
• The business plan must be implemented with due
regard to deadlines set.
• The responsibility of each individual involved in the
 Business Plan Implementation Steps

• Establishing the business objectives

• Defining and assigning the tasks needed to
attain the objectives set
• Setting out a timescale
• Monitoring activities and progress
 Updating the Business
Plan
Financial Changes

Additional Changes in
the
Financing Reasons to Market
Update
the Plan
Launch of a New New Management
Product or Service Team

Reflect the New

Reality