TOPIC: BUSINESS PLANNING

SUBTOPIC: BUSINESS PLAN

Objectives
By the end of this subtopic should be able to:
 Define business plan and business planning.
 List components of a business plan.
 Explain components of a business plan.

Business plan
 It is a written document which gives description of company goals,
strategies and financial plan and how to achieve them.
 A business plan establishes a guide to achieve goals and objectives of a
business.
 A business plan can be by a new or existing business.
 A business plan is not only prepared for seeking potential investors but it
is an important document for giving description of goals and how to work
towards achieving them.
 It is essential for highlighting the present and future position of a
business.
Components of a business plan

1. Executive summary

 It describes briefly the business opportunity that is to be exploited.

 It summarizes other sections of the plan.
 It include organisational background, management overview, marketing
strategies, financial highlights and contents page.
 Though an executive summary is the first part to appear, it should be the
last item to be written.

2. Organisational background
 This where the line of business is described.
 A description of when the business was established, its vision and mission
statement are stated.
 If the business sell products, this is where it describes the manufacturing
process, availability of materials and other operational details.
 If the business provide services, it describes the offerings and their value
to customers.
 The following are included;
 Name of the business
 Its address
 Legal structure
 Intellectual property
 Aims and objectives

3. Products
 A description of goods and services that are offered to potential
customers.
 The business describes the uniqueness of their goods or services from
their competitors.

4. Market analysis
 It is an assessment of the market, to see where the business fits in the
market and how competitive is the business.
 Market analysis data is obtained through marketing research.
 It include:
 The industry the business intends to operate.
 It shows sales forecast.
 Target market and customer buying behaviour.
 Competitor analysis.
 Pricing strategies.
 Promotional strategies.
 Barriers to entry and regulations.

5. Strategy and implementation

 This section is about explaining how the business choose different
strategies to achieve set goals.
 It highlight major points which include:
 SWOT Analysis - by identifying the internal and external factors that
are favourable and unfavourable to business objectives.

 Macro environment – these are external and uncontrollable factors

that influence a business activities. These factors include political,
legal, economic, social, technological, demographics.
  Competitive edge – what a business can offer which is more
competitive to what competitors offer. Do the business offer better
quality, lower prices, better service, better style etc.

 Value proposition- is the business aspect that differentiates it from its

competitors.

 Sales strategy – how to win potential customers when in store, visited

the website or contact an organisation.

 Marketing strategy which include

a) Product differentiation –product, price, promotion and place.
b) Pricing strategies.

6. Management
 Description of the business management team and outline the
qualifications and experience of key team members.
 Explaining how their expertise will help the business to meet its goals.

7. Financial plan
 It is a key component of the business plan.
 It shows how the business is financed (savings of owners and borrowing).
 The projections should be realistic based on information about the
business revenue growth and profitability model.
 The financial plan consist of income statement, balance sheet and cash
flow statements.

Income statement
 Its purpose is to disclose the annual revenues and expenses of a business
for a given period.
 For an existing business, the statement should cover one or two years.

Cash flow statement

 It is a financial statement that shows about when and how funds will be
circulating in and out of the business.
 It enables manages to make decisions on what, how and when to afford
the necessities for business operations on a monthly basis.
 It highlights if there is need for borrowing.

Balance sheet/ statement of financial position

 It is a statement of assets, liabilities and business equity of business at
any given date.
 The information is useful as it allows creditors to see the creditworthiness
of the business.

Break-even analysis
 It is used to determine if the business will be able to cover all the costs
(without making a loss or profit).