2. Objectives
By the end of this chapter, you are expected to;
Know what a business plan is.
Understand the importance of a business plan to a
business.
Acquire the relevant skills on how to prepare a
good business plan.
Describe the major sections of a business plan and
the type of information they contain
Prepare a business plan
3. Introduction
Business plan: A detailed account of
how the owners of a business plan to
convert ideas and vision into a real,
functioning profit center.
It is a document that outlines all the
steps that the business intends to
follow to achieve the objectives or
goals that have been set
4. Definition
A business plan is a detailed account of
the conversion of the entrepreneur’s
ideas and vision into a real, functioning
business.
It is a document that sets out how the
entrepreneur intends to execute the
ideas he has thought of for his business.
.
5. Definition cont.
It’s a written document that describes
all the steps that the entrepreneur
plans to carry out in opening and
operating a successful business.
A business plan identifies the product
or service the entrepreneur will
produce how he will produce it and who
will buy it
6. Definition cont.
It is also in the business plan that the
entrepreneur identifies who he will be working
with. He needs a team that will assist him win
customers from competitors, increase and maintain
the market share for his product.
A business plan is a document that convincingly
demonstrate that your business idea can sell
enough of its products and services so as to make
satisfactory profit and attractable to potential
financiers.
7. Definition cont.
In other words a business plan is a road map you
can follow to start and manage a Successful
business.
It shows step by step on how to start, fund,
manage, monitor, and evaluate a successful
business.
Once all this has been written, the entrepreneur
will also need to come up with a convincing
financial plan, that is, a budget of how the
business intends to use the funds and most
importantly how the investment will yield returns
8. Importance of a Business Plan
1. It forces would be entrepreneur to
establish written goals and objectives
for their proposed businesses.
2.It enables potential entrepreneur to
assess the viability of their business
opportunity on paper
9. Importance cont.
3. It assist in identifying the potential
customers, marketing opportunities, pricing
strategy, promotional activities, distribution
strategy and a competitive conditions needed
for business success.
4. It identifies the number of employees
needed, the skills they should possess, the
task they will perform and the methods of
remuneration to be adopted.
10. Importance cont.
5. It establishes the financial needs of
a business and suggests the possible
sources of financing
6. It helps to identify critical factors
for successful entry and growth of a
businesses in a given market place.
11. Common Mistakes of Entrepreneurs
when Drafting Business Plans
Ignoring Confidentiality
Poorly drafted Business Plans
Lengthy Business Plan
Unprofessional appearance
Absence of evidence for claims-security/collateral
Use of jargons when describing products. Use Layman
language
Failure to analyse the market thoroughly
Providing either too detailed or incomplete financial
statements
Failure to indicate the qualifications of management team
Hiding weaknesses
12. Why Some
Business Plans Fail
Goals set by the entrepreneur are unreasonable.
Goals are not measurable
The entrepreneur has not made a total commitment to
the business or to the family.
The entrepreneur has no experience in the planned
business.
The entrepreneur has no sense of potential threats or
weaknesses to the business.
No customer need was established for the proposed
product or service.
13. What is a ‘’Good Plan”
1.A good plan should be dynamic
document which should be available for
reference for decision making evaluation
and future plans
2.It should clearly communicate visions
and ideas
3.Should show the evidence of
understanding of target customers
4.Appealing to the potential financier.
14. Components of a business plan
●Cover page
●Executive summary
Chapter 1
Business description
Chapter 2
Marketing plan
Chapter 3
Competitor analysis
Chapter 4
Management plan
Chapter 5
Business operation (production/ service, delivery plan)
Chapter 6
Financial plan
References
Appendices
15. Executive Summary
N/B. This should be done last It includes the;
1.Type of venture
2.Products/ service to be offered
3.How unique
4.If there is a major opportunity for products/ services
5.The business status/ stage 111
6.Legal form of business
7.Location of business
8.Target market
9.% share of market
10.Competitor strength and weakness
11.Strategy of entering the market
12.Managing staff and their qualifications and experiences
13.Time frame for accomplishing your goals.
16. Executive Summary
Potential investors often make an
initial judgement based on the content
of the Executive Summary and their
decision to read the detailed content
of the Business Plan will depend on its
content.
17. Executive Summary Cont.
While the Executive Summary is
shown at the front it should not be
completed until the Business Plan has
been written. It will highlight all
milestones in the company’s
development over the next five years.
18. Executive Summary cont.
At minimum it should summarize the
following
• Purpose of the Plan
• Product or Service and its advantages
• Market opportunity
• Management Team
• Track record, if any
• Financial Projections-sales, net profit before
tax, investment etc Funding Requirements
19. Chapter 1: Business Description
For a new startup business it will include
1.Objectives, vision, mission statement and goals
2.Specific objectives (SMART)
a. Service objective (quality of service)
b. Profit objective ( actual % and amount targeted)
c. Growth objective
d. Social objectives ( corporate responsibility)
3.Type/form of business venture
4. Date of commencement
5. Physical location
6. Advantages of the location
7. Postal address, physical address/ street/buildings/ road
8. Telephone contact/ email/ fax/website
9. Brief history of the business (company)
10.Experiences of the owners
20. Chapter 2: Marketing Plan
1.Description of the target market
( customer segment)
2.Description of products/ services
3.Prices of products/ services
4.Distribution of products /services
5.Promotion of products/ services
21. DESCRIPTION OF
PRODUCTS/SERVICES PURPOSE.
What do you sell? Why should people buy it?
Describe in depth your products or services
(attach any ‘extra’ marketing material, technical
specifications, drawings, photos, etc. in the
Appendix).
What factors will give you competitive
advantages or disadvantages? Examples include
level of quality or unique or proprietary
features. What are the pricing, fee, or leasing
structures of your products or services?
22. Chapter 3: Competitor analysis
1.Internal analysis both strength and
weakness
2.External analysis ( opportunities and
threats)
3. Environmental analysis ( political,
social, economic, regulatory factors
that can impact on your business
23. Chapter 4: Management and
Organization
1.Key management staff
a. Their positions/ designations and responsibilities
b. Qualification and experience
2.Other staff
a. Their positions/ designation and responsibilities
b. Qualification and experience
c. Their number.
3.Human resources practices
a. Staff recruitment
b. Motivation
c. Training and development
d.Reward and recognition
e. Staff appraisal
24. Chapter 5 : Business Operation
1. Product/service development design and facilities.
2. Description of premises
3. Ownership status
4. Renovations/ facelifts/medications
5. Products and services to be offered
6. Machinery, tools, equipment and other facilities required
7. Implementation
a. Procurement
b. Repair and maintenance
c. Repair and maintenance
d.Future expansions
8. Legal requirements: business name, tax compliance, labour laws, by-laws
etc.
9. Monthly overhead expenses
10. Professional and support services
25. Chapter 6: Financial Plan
1. Pre-operational costs ( costs before start-
up)
2. Working capital
3. Projected monthly cash flow statement
4. Projected annual cash flow statement
5. Projected profoma income statement
6. Projected balance sheet
26. Appendix
1. Brochures and advertisement materials
2. Maps and photos of location
3. Copies of lease and contracts
4. Company certificates of registration
5. List of assets available as collateral for a loan
6. Copies of licenses
7. Research and marketing results
8. Any other materials needed to support your
business plan
9. List of equipment owned or to be purchased
27. Review Questions
1) What is a business plan?
2) What is the importance of
preparing business plans?
3) How do Potential Lenders and
Investors Evaluate the Plan?
4) Describe the contents of a good
business plan
28. Final Examination
In groups of not more than (Seven) students you are
required to identify a business idea and develop a
business plan. Your business plan will be evaluated as
your final examination and is required to be submitted
as follows.
1. Hard copy of your business plan
2. Oral presentations through power point presentations
3. All members of your group should actively participate
in developing the business plan and in the oral
presentations
