CHAPTER TWO

BUSINESS PLANING

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 Learning Objectives

at the end you will be able to:

• Identify opportunity in the environment,
• Evaluate the opportunities in the environment,
• Generate business idea,
• Explain the concept of business planning,
• Identify components of business plan,
• Develop business plan,

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 2.1 Opportunity Identification and Evaluation
• There are five main steps namely;
1)Scanning the Environment/ Getting the Idea and
business opportunities.
• Idea is a thought or suggestion about a possible
course of action.
• Opportunity is a favorable time or set of
circumstances for doing something.
• Business opportunity is a gap left in a market by
those who currently serve it,
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2)Opportunity Identification
….continued

• The process of discover and exploit opportunities

that others miss.
• It is the process of seeking out better ways of
competing.
• Make effective use of abstract, implicit and
changing information from the changing external
environments.
3)Opportunity Development
• The process of combining resources to pursue a
market opportunity identified.
• involves systematic research to refine the idea to
the most promising high potential opportunity.
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 ….continued

4)Opportunity Evaluation
• assessing whether the specific product or service has
the returns needed for the resources required. To justify
feasibility.
• product or service, market opportunity, industry
characteristics, costing and pricing, profitability, capital
requirements and issues and risks
5)Assessment of the Entrepreneurial Team
• Entrepreneurial focus
• Salesman personality
• Managerial skill
• Sense of ownership
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 2.2 Business Idea Development
• The process of generating and developing
business idea.
• A business idea: is a short and precise
description of the basic operation of an
intended business. The three business ideas;
1.Old Idea – copies of an existing business idea
2.Old Idea with Modification –to fit a potential
customer’s demand.
3.A New Idea – an invention of idea for the first
time
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 2.3 Business Idea Identification
• Which need will your business fulfill for the
customers?
• what kind of customers will you attract?
• What good or service will your business sell?
• Who will your business sell to?
• How is your business going to sell its goods
or services?
• How much will your business depend upon
and impact the environment?
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 2.4 Methods for Generating Business Ideas

1. Learn from successful business owners

• What kind of idea did these businesses start with?
• Where did the ideas come from?
• How did they develop their ideas into successful
businesses?
• How does the business profit and fit into the local env’t?
• Where did they get the money to start their business?
2. Draw From Experience
• Your own Experience
• Other People’s Experience /consumers/
3. Survey Your Local Business Area
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 ….continued

4. Scanning Your Environment

For example think about:
 Natural resources/e.g. clay,
 Characteristics & skills of people in the local
community,
 Import substitution/produce locally,
 Waste products,
 Publications/internet, web-site, newspapers,
articles /,
 Trade fairs and exhibitions???
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 ….continued
5. Brainstorming
• Opening up your mind and thinking about
many different ideas.
• You start with a word and then write down
everything that comes to mind relating to
that subject.
6. Structured Brainstorming
• Process of thinking the different processes
that are involved in the operation of a
particular business
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 ….continued

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 ….continued

7. Focus Group
• on a structured format
• led by moderators.
• an open and in depth discussion:
• the discussion is either Directive or non-
directive manner.
8. Problem Inventory Analysis
• consumers are provided with a list of
problems
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 ….continued

9. Free Association
• the simplest method
• 1st word or phrase related to the problem is written
down,
• 2nd then another and another, with each new word
attempting to add something new to the ongoing thought
processes,
10. Forced Relationships
• is the process of forcing relationships among some
product combinations.
11. Attribute Listing
• list the attributes of an item or problem and then look at
each
Monday, from
January 2, 2023 a variety of viewpoints. 13
 2.5 Business Idea Screening

1) Macro screening: down ideas to 10.

• own competencies (see strength detector)
• own equity?
• demand of my product/service
2) Micro Screening: down ideas into 3.
• Solvent demand
• Availability of raw materials
• Availability of personal skills
• Availability of financial resources
3) Scoring the Suitability of Business Idea:
• Deciding on starting a business.
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 2.6 Concept of Business Plan
• The first and the most crucial step for starting
a business.
• A road map for starting and running a
business.
• Involves Identification of opportunities,
Scanning the external and internal
• It provides information to all concerned
people like the venture capitalist and other
financial institutions
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 The objectives of a business plan are to:
• Guide plan implementation and give directions to
the vision.
• Evaluate the prospects of business.
• Monitor the progress after implementing the
plan.
• Persuade others to join the business.
• Seek loans from financial institutions.
• Identify the SWOT analysis of the plan
• Identify the resources, document ownership
arrangements, future prospects and projected
growths of the business venture.
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 2.7 Developing a Business Plan
2.7.1 Business Planning Process
1) Preliminary Investigation
• Before preparing the plan entrepreneur
should:
 Review available business plans (if any).
 Draw key business assumptions on which the plans
will be based (e.g. inflation, exchange rates,
market growth, competitive pressures, etc.).
 Scan the external and internal environment to
assess the strengths, weakness, opportunities and
threats.
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 ….continued

2) Opportunity Identification and Idea

Generation
3) Environmental Scanning
• analyze the prospective strengths, weakness,
opportunities and threats of the business
enterprise with the intended set up area.
4) Feasibility Analysis
• A study of finding whether the proposed project
would be feasible or in greater detail.
5) Report Preparation
• The business plan report is prepared.
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 2.7.2 Essential Components of Business Plan

I) Cover Sheet: the cover page involves the

name of the project, address of the
headquarters (if any) and name and address of
the promoters.
II) Executive Summary: the first impression
about the business proposal. Should be in brief
(not more than two or three pages) with
financial figures and salient features of the
project.
• E.g. Generating interest in the minds of the
readers
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 ….continued

III) The Business: business concept, objective, a brief

history, ownership, address of the proposed
headquarters.
IV) Funding Requirement: how these requirements
would be fulfilled.
• Debt equity ratio should be prepared, how much
finance would the company require and how it
would like to fund the project.
V)The Product or Services: includes the key features
of the product, the product details about the patents,
trademarks, copyrights, franchises, and licensing
agreements.
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 ….continued

VI) The Plan: involves functional plans for marketing,

finance, human resources and operations are to be
drawn.
1) Marketing Plan: Marketing mix strategies are to
be drawn & including cost.
2) Operational Plan: includes
(i) Plant location:
(ii) Plan for material requirements, inventory
management and quality control
(iii) layout and input –output process
(iv) Suppliers and seasonality of supplies
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 ….continued
3) Organizational Plan: indicates the pattern of flow of
responsibilities and duties in the organization
• management structure
• It is also budgeted.
4) Financial Plan: usually drawn for 2-5 years for an existing
company.
• For a new organization the following projections are
drawn:
a) Projected Sales
b) Projected Income and Expenditure Statement
c) Projected Break Even Point
d) Projected Profit and Loss Statement

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 ….continued

e) Projected Balance Sheet

f) Projected Cash Flows
g) Projected Funds Flow
h) Projected Ratios
VII) Critical Risks: investors are interested in knowing
the tentative risks to evaluate the
• Viability involved risk of the business
• This can further give confidence to the investors as
they can calculate the risks involved from their
perspectives.
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 ….continued

VIII) Exit Strategy: The exit strategies would

provide details about how the organization
would be dissolved, what would be the share of
each stakeholder in case of winding-up of the
organization.
• It further helps in measuring the risks
involved in investing.
IX) Appendix: The appendix can provide
information about the Curriculum Vitae of the
owners, Ownership Agreement and the like.
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 2.8 Sample Business plan Format
• You can this sample search from
“Google”
• Tips:-
The detail this format depends on the size
of the business
The format varies as per the nature of the
business.

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