Enterprise Business Plan Lecture 2 – Business Planning

Learning Outcomes:
- Explain the purpose of a business plan
- Describe the essential components of a business plan
- Explain how the components of a business case contributes to as business plan
- List the advantages and disadvantages of a business plan.

1. Purpose of a Business Plan

a. Starting up a new business
Most successful businesses have business plans. Though some entrepreneurs say its all
in their head, it is not sufficient enough. As such, there is a need to have a written
business plan. This plan can be quick or elaborate. It is also essential to review the plan
to identify your business’ strength and weaknesses. It also helps uncover flaws which
you can correct.

A business plan is systematic and helps you to decide on whether to proceed with a plan
or pull back. Never start a business with built-in problems that may reduce success rate.

b. Expanding an existing business

A business plan is also helpful when you are expanding or reviewing your existing
business. For example, when you have an ide to develop a new product, technology,
service or skill, a business plan allows you to improve your odds of success and even
keeps you on track. Before starting a new service, you should look at existing assets
and resources, and determine how to keep costs low while expanding. This way,
your capital is used more efficiently.

c. Seeking financial loans

Most businesses need funding or additional funding to sooth out cash flow issues.
When seeking financial loans, a business plan is extremely important as it shows the
bank what, how and where the funds will be used for.

A poorly written business plan also undermines the ability for the entrepreneur and
the management team, and banks are unlikely to extend loans to them.

“When you fail to plan, you plan to fail”. The lack of a business plan causes higher
incidences of business failures as it forms a blueprint for your business. Many
evidences to claim that businesses fail if they are without business plans. Businesses
that did not have a business plan had a higher statistics of failing.
2. Updating your business plan
a. Update Frequency
Your business plan update frequency may range from annually, quarterly or even
monthly if the industry you are in is a fast-changing one.

When updating, you must make sure that competition does not catch up. The
updated plan must also be dynamic so as to anticipate risks in the environment. If
the industry is a fast changing one, it will require you to review your plan quarterly
or even monthly.

b. If there has been a significant market change

Updating your business plan is crucial whenever there is a significant change or shift
in the market and/or the environment.

These change includes but are not limited to:

 Political
 Socio-cultural
 Economic shifts

c. When financing is needed.

When a business regularly updates their business plan, the numbers, leverage
partnerships will be clearly spelled out.

With these information, proposals to bankers to be convinced to finance your

business will be more convincing.

d. When your old plan is no longer in touch with reality.

Business plans should change when it does not cater to the current events. For
example, a gaming software created to target teenagers and young adults may
section off your product’s reach in view of the Covid-19 situation. This situation may
have caused your target audience to grow to include adults and seniors due to the
need to stay at home and restrictions on travelling.

Marketing and promotional efforts may change immediately to include traditional

channels such as TVs and radio in order to reach the new target groups.

3. Components in a Business Plan

a. Executive Summary
b. Company Overview
 c. Products and Services
d. Market Analysis
e. Competitive Marketing Strategies
f. Financial Plans
i. Reviewing financial requirements / forecasting results
g. Business Operations Plan
h. Optional: Appendix(es)
i. In a business plan, there are many appendixes. This is not a component,
but it is essential.
ii. These can include contracts with suppliers, price lists, research data and
relevant information.

a. Executive Summary
This summarises the key points of the business plan for its readers, saving time and
preparing them for the upcoming event.

b. Company Overview
It explains the fundamentals of your business and provides a clear synopsis of your
business.

c. Products & Services

This component explains the product and or service in detail. This includes payment
nodes, customer payment terms and delivery.

It should also explain the innovation, uniqueness or differentiation of the business or

product or service (if any)

d. Market Analysis
Assess the environmental factors and trends that impacts the organisation’s
performance which can include:
 Industry description and outlook
 Target market
 Market need, growth and trends
 Competitors
 Regulations
e. Marketing Strategy
Here, you should aim to explain the 4Ps of marketing (Product, Price, Place, Promotion).
There are another set of 4Ps – people, process, physical evidence and productivity (last
2 are not required for EBP)
- People
To some businesses, people are core to their businesses. With highly satisfied and
motivated employees, it provides for high level of service and interactions to their
customers. Particularly, people thinks that that this P is important to service industries
like hospitality and F&B. However, it is important to all industries.

In the realm of marketing, giving customers nothing but the best experience in using
their products and dealing with theirs staff is the key to gaining more new customers
and retaining more of their existing customers.

Patronage and loyalty are end results of great customer experience brought about by
the entire marketing mix.

- Process
Process is also important to service industries. The system and processes of the
organisation affect the execution of the service.

Process can include the business’ sales funnel, pay system, distribution system and
other systematic procedures and steps to ensure a working business that is running
effectively.

As customers become much more demanding, the process of sourcing, enquiry,

purchasing and ultimately delivery process becomes core to the business’ choice of
merchants.

f. Financial Plan
This component explains all the monetary elements of your business. These elements
includes:
 Startup expenses and capital
 Projected cash flow statement
 Projected income statements
 Projected balance sheets
 Financial ratios such as break-even analysis

g. Business Operations Plan

The daily operation of the different business function on a daily basis includes but are
not limited to the equipment used, staff, inventory and process. Operations can also
refer to the product / service, workflow, supply chain and quality controls of the
business.

4. Components of a Business Case

The business case and plan are completely different. A business plan is a strategic
document for the entire business and for the entire organisation. Whereas a business
caser is for a single strategy or project.

A business case says ‘here is what needs to be done’ and backs up with evidence.
Examples:
 Deciding to expand into China is a job for a business plan
 Standardising field staff on iPad apps or changing the hosted software
form one vendor to another is a job for business case.
Components
o Executive Summary
o Project Definition
o Finance
o Project Organisation

a. Executive Summary
This is the bird’s eye view of the proposal and it is best to write it last when you have
all the facts and figures at your disposal.

The summary should tell the person or people reading it everything they need to
know without going into detail.

b. Project Definition
A project definition should provide background of the proposal. It should contain
elaboration on the issue and what action you are proposing to act on it. The
definition should also contain the benefits your proposal should bring, risks and
potential limitations that may arise from your proposal.

c. Finance
As for finance, it should clearly state how much will this business case cost. This
allows for proper decisions to be made to obtain the business’ sustainability and
weigh out other opportunity costs.

d. Project Organisation
In this component, it should state who the roles are filled by, what will be done, how
the success and progress rate will be monitored.

This section will include SMART objectives.

5. Advantages of a Business Plan
a. Systematic Approach
A business plan identifies and caters for mistakes to occur. It also improves the
concepts of your business as well as solve issues and problems as early as
possible.
b. Test for Confidence
A business plan allows you to seek advice from people conveniently. This is
useful for first timers.

c. Use it to plan for finances

A business plan helps to find out how much money, when and how long is it
needed for the business.

A well written plan will get finances at a cheaper cost or a lower interest rate.

d. Kickstarting the Planning Process

Writing down a business plan forces and coerces you to start the planning
process. The systematic approach ensures that all is thought through.

6. Conclusion
There are several scenarios why a business plan is the best start to a new idea. All the 7
components of a business plan is necessary and essential. No components should be
missed out for the plan to be concrete. The difference between a business case and a
business plan differs from the context of the project. Lastly, having a business plan is
essential in today’s rapid pace of startup.