MODULE 2

TOPIC: BUSINESS PLAN

To persuade investors and lenders to support
your business, you need a professional,
well-written business plan that paints a clear
picture of your proposed business.

BUSINESS PLAN
 BUSINESS PLAN

A business plan is key result of the entrepreneurial planning process.

This is a written document that outlines what the entrepreneur
intends to do in the venture and the key steps and requirements to
achieve the venture’s mission and vision.
According to Coulter (2003), the business plan ‘becomes a
blueprint and road map for operating the ongoing business.’
 BUSINESS PLAN DEFINITION # 2 AND 3
A business plan is a written summary of an Entrepreneur’s proposed
business venture ,its operational and financial details , its marketing
opportunities and strategy and its managers , skills and abilities .
Scarborough (2011).

A Business plan is a written explanation of how a business expects to

attains its stated goals . It is made up of various prescribed sections and is
prepared after the business model. Once the business has worked out is
Business model, it is in a good position to complete a business plan.
******
WHY IS THE BUSINESS PLAN SEEN AS A ROAD MAP ?

1. It outlines all the steps needed to guide the business implementation

2. It identifies technical resources needed for operations of the business .
3. It identifies the human resources ( the people needed to operationalized the
business
4. It Outlines the financing / money that is necessary for a person to successfully
start , manage and grow the business.
5. Provide information for internal (employees , shareholders) and external (
potential investors ) shareholders .
6. Help to determine the viability of the venture .
HOW DO YOU KNOW YOU HAVE A GOOD
BUSINESS PLAN

❑ Your Business plan is stems from thorough research

❑ Your Business plan is written by or done in consultation with an
expert
❑ Your Business plan is understandable
❑ Your Business plan is continually updated
❑ Your business plan is influenced by and step from the perspective of
the Entrepreneur
 CHARACTERISTICS OF A SUCCESSFUL BUSINESS
PLAN

Successful business plans possesses ten characteristics. The business plan should
provide clear and realistic financial projections, detailed market research and
competitor research, descriptions of key decision makers, thorough summary,
proof of vision, possess clear writing and good formatting.

It should be brief and concise and show an understanding of the ‘bottom

line’.The business plan should reflect the entrepreneur.
 PURPOSE OF A BUSINESS PLAN
1. Clarification of vision and mission. –The business plan communicates to an audience what the
venture seeks to achieve ..etc...
2. Define planning and evaluation guidelines for venture management: Guides
entrepreneur beyond the start up of the venture. It engages the venture in planning and
evaluation at different stages of the venture life cycle and help in goals clarification and attainment
3. Key tool for accessing funding for venture; The business plan will require entrepreneur to
engage in projected income statements , cash flow analysis , break even analysis and balance
sheet.
4. Tool for guiding venture growth: Provide some guidelines for taking advantage of
opportunities in the environment.
5. Gives prospective lenders and investors a clear idea of the company's plan and
whether the venture is feasible enough to warrant their investments or financial
support.
 BENEFIT OF THE BUSINESS PLAN

1. It can be used as a guide to start a business (1). The business plan is a roadmap, which
guides the implementation of the business (1). It helps entrepreneurs to avoid pitfalls
(1) that they might face during the process.

2. It can be used to secure funding (1) – it can be taken to a credit union, bank or private
investor to get funding. The information provided will allow the investor to
determine whether the business is feasible (1) and can repay the funding if offered (1).

3. • It provides an exit strategy for the business (1) – exit strategies are important as
they explain what are the long-term plans of the business (1). This does not mean that the
enterprise will leave the market. However, the business can be expanded, ownership change,
incorporated in another business or simply sold (1).
 BENEFIT OF BUSINESS PLAN

5 .It provides an estimate of finances (1) e.g. of start-up costs, a crucial component in the business plan
is the financials. The business plan give detail projections on the profit, sales, breakeven, balance sheets etc.
(1) The financial estimates can determine if the venture is properly funded (1).

6. It helps in determining the viability of the venture (1). The business plan provides information on
four key components of the business, financials, human resources, marketing and operations (1). With this
kind of information, the viability of the entity can be assessed before significant investments are made (1).

7. It provides entrepreneur with a better understanding of its competitors.

8. It provides clarity for workers and motivates them
ELEMENTS OF A BUSINESS
PLAN
 KEY SECTIONS OF A BUSINESS PLAN:
(MEMFOB) (BOFEMM)

1. Executive Summary 7.Competitors Analysis

2. Business Description 8. Bibliography and Appendices
3. Management Description
4. Marketing Analysis
5. Operations plan
6. Financials plan
 1.THE EXECUTIVE SUMMARY
This is the first element that the audience is introduced to. It
points out key information about the venture. The summary should
be ‘concise’ yet’ comprehensive’. It gives an overview of all the
other elements . In many cases , it is only if the users interest is
piqued , that they will proceeds to the other sections .
It is advised that the entrepreneur pays key attention to its
preparation . He/she may just lose the buy in of a prospective
creditor or investor if /he or she does not.
 1.THE EXECUTIVE SUMMARY
’ According to (Coulter 2003). It contains brief statements on:
▪ Vision and mission
▪ Primary goals and objectives
▪ Venture history
▪Possible timeline
▪Key Persons( Management team )
▪ Product (good/service) description
▪ Market (description of target market)
▪Competitors
▪ Competitive Advantage
(explanation)
▪ Proposed Strategies
▪ Summary of Financial Information
(Financing expected and intended
purpose)
✔ Sales and profit projections,
✔ rate of return on investments and
✔ dates for repayments of loans
 2. BUSINESS DESCRIPTION

The business description section provides introductory details such as :

Name, type and location of business
Legal structure ( Partnership, Sole Proprietorship etc.)
Goals and objectives of the business
Brief history of the business
Vision and Mission Statement
Current Stage of development of the business
2. (B) BUSINESS DESCRIPTION

The Business Description will also briefly express the business concept. The business concept will explain the
value(product and services) that the business is offering and to whom. It will communicate the problem that exists
and how it (the need will be satisfied by the product or service.

The Value proposition should clearly articulate the benefits that will be derived by the customers through the
use of the product or service. It must be so designed that the uniqueness of the product/ service is highlighted,
and the business is presented in a more favorable light that that of the competitors are in .

N.B: Here are a few statements that may be found in a business “value propositions”.
• Environmentally friendly
• Lower cost
• Easy to use
 3.MANAGEMENT: “WITHOUT THE RIGHT TEAM TO
EXECUTE THE BUSINESS PLAN, THE PLAN WILL
DEFINITELY FAIL”

▪Making a great plan is one thing but if the business does not have the persons with the expertise to manage the business so as to
make everything “ happen” then one can expect the plan to fail. There must be a team that is well-equipped in every way so as to
bring the plan to realization.

▪This section describes the management team in terms of profiles and qualifications.
▪1. who are the owners ? The names of the owners and the percentage that they will have in the business …It must also be
stated whether they will be active participants or not.

▪2. Who else makes up the management team? Outline current responsibilities or those that will be assumed by each members
of the team .

▪Highlights relevant experience(proven track record)and qualification of each members..

▪You may include a resume for each of the key management personnel in the Appendix of the business plan and make
reference to them. Make sure users sees the profit potentials

▪N.B:Some plans have additional section that shows organizational structure

 4.MARKETING ANALYSIS: (THIS SECTION IS THE
MOST COLORFUL SECTION)
The Marketing section speaks to the four PS of Marketing, Price , Place , Product and Promotion.
Entrepreneur should provide research and analysis to show target market that is identify customers;
analyze market size and market share and trends; engage in competitor analysis and establish how the
venture is different from the competitors.
❖ How is revenue the potential determined ?
❖ What/who is my competition ?
❖ How am I better or different ?
❖ Show the pricing strategy and advertising plans with the necessary cost estimates. What will my
customer pay ? Location ?
❖ Produce a marketing plan to show marketing strategy for distribution, price, promotion etc.
 5. OPERATIONS
( HOW BUSINESS SOURCES , MANUFACTURER AND PREPARE
ITS PRODUCT FOR SALES)

This section speaks to the aspect of Production. It looks at the resources that are required to enable the
production of the good or service.

Focus on the production process , resources needed

Location of manufacturing plant , size

Focus on hazardous materials that will be stored and how to dispose them.

Explain the quality control methods used.

Types of machinery and equipment that the business is outfitted with an assessment of their quality

Give research and testing details of products.

Inventory control system

 6. FINANCIALS

• The financials section of the business plan is crucial. It is a projection of

the financial status of the business for a specific period .The
entrepreneur must prove that the business is potentially profitable for all
stakeholders.
• If it is not , then he/she needs to rethink things . Many entrepreneur
do not have a great knowledge of finance and Accounting and so they
fail to treat this section with care and attention that is needed.
• Investors and creditors take great interest in this section .
6. FINANCIAL DATA AND PROJECTIONS:

Financial plans should show projections for at least three years and be as realistic as possible.
This includes:
▪ Projected income statement/ Statement of comprehensive income
▪ Pro-forma cash flow analysis
▪ Pro forma balance sheets
▪ Break-even analysis
▪ Cost controls-Cost control is the process of identifying, eliminating or reducing unnecessary business
expenses in order to increase profits.
▪Loan and investment proposal – state amount requested and purpose , how the money will be repaid .
▪After which the exit strategy of the firm will be stated
THE BUSINESS MODEL VS BUSINESS PLAN

• Business Plan contain all the elements that will

communicate the feasibility of a prospective business to
the various stakeholders

• However , business model shows the elements that make

an existing value create value for stakeholders .