BUSINESS PLANNING

Business Plan

Q What is a Business Plan?

- A written document that describes the goals and objectives of the business clearly outlining
how and when they will be achieved;
- A structured guideline to achieve a business goal;
- A road-map to owning and operating a business enterprise;
- A proposal that is presented to potential financiers of a business and which describes the
latter in detail;
- A detailed action-program outlining every conceivable aspect of the proposed business
venture.

IMPORTANCE OF A BUSINESS PLAN

Introduction:

Q Why do we need a Business Plan?

A Business Plan is useful in the following ways:

(i) It is a financial tool: - provides vital business information on the viability of the proposed
business to a prospective financier as a basis for deciding whether or not to advance the
entrepreneur a loan.

(ii) It is a blue-print: - it is a guide for a starting, operating and expanding a business.

(iii) A Business Plan reduces fire-fighting: - a Business Plan will help anticipate problems and
decisions on how they can be avoided determined. The business owner is saved the
problem of solving every other problem as it occurs.

(iv) A Business Plan forces owners to justify their plans of action: - i.e decisions will be
made on the basis of proven validity and logical reasoning or explanation, rather than
on how things ‘sound’ or ‘feel’.

(v) A Business Plan tests ideas on paper: - e.g, it will be possible to prove the profitability of a
business or otherwise rather than waiting to start the business and see it fail.

(vi) A Business Plan indicates the owners ability and commitment: - any potential financier
to the business will judge the owners ability to start and operate the business successfully
from the quality of the Business Plan presented (testimony).

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COMPONENTS OF A BUSINESS PLAN

These include:

(i) Cover Page: - It generally contains all the key details that help to provide identity to the
document.

(ii) Executive Summary: - It is a brief or over-view of the business venture. It summarizes the
Business Description, Marketing, Organizational, Production/Operational and Financial
Plans of the proposed business. It is usually written last in preparation of the Business Plan.

(iii) The Business Description: - It covers the following in detail:-

- Background of the business owner;

- Nature of the business;
- The industry;
- Business goals/objectives;
- Justification of business opportunity;
- Entry and growth strategy.

NB: Business Description is the first item to be written in preparation of a Business Plan.

(iv) The Marketing Plan: - It describes how the business intends to sell its product(s) and offer
its service(s). It identifies the following:

- Potential customers;
- Competition;
- Market size/share;
- Pricing strategy and policies;
- Sales tactics;
- Advertising and promotion strategy;
- Distribution strategy;
- Customer services.

(v) Organization and Management Plan: - It covers the following:

- Organization structure;
- Key management personnel;
- Other personnel (support staff);
- Recruitment, training and promotion;
- Remuneration and incentives;
- Legal requirements;
- Support services.

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(vi) Production/Operation Plan: - It covers the following areas:

- it describes how the products of the business will be manufactured and services delivered;

- it shows a breakdown of the equipment, materials and other costs which will be incurred
during the production process;

- in case of a service, the plan indicates the requirements for providing that service.

(vii) The Financial Plan:- it determines the financial requirements of the business. It also
provides proposals for sources and uses of funds.

(viii) Appendices:- it highlights any supportive material used to reinforce the main text under
discussion within the main chapters of the Business Plan.

QUALITIES OF A GOOD BUSINESS PLAN

A good Business Plan aims at catching the readers interest and winning his/her approval. In order
for the above to hold true, the following qualities must be inculcated in your plan:

- Simplicity and clarity

- Brevity
- Logic (logical)
- Truth
- Be backed with figures whenever possible.

(a) Simplicity and clarity: - It calls for being able to achieve the following:

- keeping your language simple;

- avoid trying to put too many ideas into one sentence;

- let one sentence flow on logically from the last;

- avoid ambiguous words;

- tabulate wherever possible.

(b) Brevity:- Prune and shorten, keeping only the essentials of what your reader ought to be
told. In other words, be brief and to the point.

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(c) Logic:- Present your facts and ideas in a logical sequence. Avoid a series of unconnected
paragraphs. Your chapters, headings and sub-headings should follow each other
systematically.

(d) Truth: - the Business Plan is a blue-print that will guide the owner in starting and operating
his/her business. Consequently, facts and figures must be realistic enough to convince the
reader of the viability of the business venture.

(e) Use of figures: - Bankers/financiers to the business will always think in terms of figures.
Therefore, quantify your ideas wherever possible.

NB: Dynamism of a Business Plan. A good Business Plan is dynamic. The business environment
is always changing necessitating the business owner to constantly review his Business Plan in the
face of new developments that may affect h is earlier plans. Review and adjust accordingly.

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