START YOUR BUSINESS.

THE BUSINESS IDEA AND BUSINESS PLAN

LEARNING OBJECTIVE: At the end of this session,
participants will be able
to:
Generate a business idea
Identify the characteristics of an entrepreneur
Test themselves as an entrepreneur
Identify the content of the Business Plan
 WHAT IS A BUSINESS IDEA?

A business idea is a short and precise description of an

intended business.
A good business start with a good business idea. Before you
can start a good business you need to have a clear idea of
the sort of business you want to run.
 QUESTIONS THAT MATTERS.

 Which need your business will fulfill for the customers.

 What product or service your business will sell.

 Who your business will sell to.

 How your business is going to sell its product or services.

 WHAT MAKES A GOOD BUSINESS IDEA?

A good business idea is one that is based on:

 A product or services that customer want

 A product or services you can sell at a price customers can

afford and which will yield profit.

 The knowledge and skills you have or can get

 The resources and money you are able to invest.

 YOU AS AN ENTREPRENEUR

A person who has decided to take control of his future and

become self-employed—whether by creating his own
unique business or working as a member of a "team" as in
multi-level marketing.
Do you have what it takes to get through the recession?
It is said that an entrepreneur is simply defined as a person
who owns, operates, and takes the risk of starting a
business venture.
They are often motivated by a spirit of independence which
leads them to believe that their success depends on raw
effort and hard work, not luck.
 CHARACTERISTICS OF AN ENTREPRENEUR

The success of your business depends on your personal

characteristics, situation and skills.
The more entrepreneurial characteristics and skills you
have, the more likely it is that your business will succeed.
The kind of characteristics and skills you need will vary with
the type of business you decide to start.
Your family and financial situations are also important
factors to consider before you start your own business.
If you lack certain skills they can be developed through
training or studies. You can even hire staff with the needed
skills.
 TEST YOURSELF AS AN ENTRPRENEUR

The following test/assessment criteria will help you find out

which skills you need to develop and what training or help
you will need.

Skills
 Technical skills

 Business management skills

 Knowledge of your line of business

Personal characteristics and situation
 Commitment

 Motivation

 Taking risk

 Making decisions

 Family situation

 Financial situation
 STRENGTHEN YOURSELF AS AN ENTREPRENEUR

Identified weaknesses can be worked on and turned into

strength thus:
 Seek help from others

 Observe successful business people

 Attend training

 Read books to sharpen your skills

 GENERATE YOUR OWN BUSINESS IDEAS

Business ideas can be generated through:

 Using experiences

 Visits to your local business area

 Investigating your environment

 Brainstorming
 ANALYSE YOUR BUSINESS IDEAS AND SELECT
THE BEST ONE

 Screen your idea list

 Field research

 SWOT analysis

 Your own business idea

Screen your idea list

Go through your idea list and make notes about each
business idea by answering these questions:
 Which.
 Which need do you want to satisfy for the customers?

 Which needs will your products or services satisfy for the

customers?
What.
 What product or service do your customer want?

 What quality of the product do your customer want?

 What information do you know about the products or

services for this business

 Who.
 Who will be your customers for this particular business?

And will they be enough?

 Who are your competitors?

How.
 How will you be able to supply the goods and services the

customers want?
 How much do you know about the quality of goods and

services the customers want?

 How does running this sort of business suit your personal

characteristics and abilities?

 How do you know there is need for this business in your

area?
 How do you imagine yourself running this business in ten

(10) years time?

 FIELD RESEARCH

 People to talk to

 Key informants

 Conduct interviews and questionaire

 What to ask customers

 What to ask suppliers,wholesalers and competitors

 What to ask the key informants

 DO SWOT ANALYSIS

Strength,Weakness,Opportunity and Threats.

Inside the business

 Strength; are the specific positive aspects which will give

your proposed business an advantage over similar business

ventures and competititors.
 Weakness; are the specific aspects that your business will

not be good at.

 Outside the business
 Opportunity; are on going potential developments around

you that will be good for your business

 Threat; are probable events that may affect your business

negatively.
 YOUR OWN BUSINESS IDEA.

After passing through previous exercises successfully, you

have completed the first step in preparing to start your
business. Now you have a business idea.
The next step in starting your own business is preparing a
Business Plan. This will be extensively discussed as
workshop progreses.
YOUR BUSINESS IDEA
HOW A BUSINESS PLAN CAN HELP IN STARTING
A BUSINESS

Before you start a business, you need to collect certain

information and make plans to be able to see if the new
business will be profitable and if you should take the risk to
start.
The business plan helps you:
 decide if you should start your business or not
 organize your ideas so that you will start and run your
business in the best way
o present your business idea to the lending institution such as

bank to get a loan for your business

 CONTENT OF THE BUSINESS PLAN.

 The business idea

 The marketing plan

 Form of business

 Staff

 Legal responsibility and insurance

 Costing

 Financial planning

 Required start-up capital

 Sources of start-up capital

 SUMMARY.

Having a good business plan is of great importance before

starting a business.

“
Too often we are so preoccupied with the destinati
on, we forget the journey.
”
Chinese Proverb.
THE MARKETING PLAN
LEARNING OBJECTIVE: At the end of this session,
participants will be able
to:
 Identify what marketing entails

 Do market reseach

 Make a marketing plan

 WHAT IS MARKETING?

Everything you do to find out who your customers

are, what they need and want.
It is how to satisfy customers while making
profit by:
 providing the products or services they need

 setting prices that they are willing to pay

 getting your products or services to them

 informing and attracting them to buy your products or

services.
 MARKETING RESEARCH

 Talk to potential customers

 Study your competitors’ businesses

 Ask suppliers and business friends

 Read newspapers, catalogues, trade journals and magazines

 MAKE A MARKETING PLAN.

To do this, follow the four Ps of marketing

 Product- what product or services you are going to sell to

your customers
 Price-which price are you going to charge

 Place-how and where you are going to reach your

customers
 Promotion-how you inform your customers about your

products and services and how you attract your customers

to buy them.
 PRICE

To set prices you have to:

 know your cost

 know how much customers are willing to pay

 know your competitors’ price

Note: the right price is derived after proper

costing is carried out
 PLACE

Business location is chosen for a reason(s). If your business

is not located where your customers are, you need to find
ways to get your products to where it is easy for customers
to buy.
Distribution method is of major concern for
manufacturers (Wholesalers, Retailers, Consumers)
 PROMOTION

Advertising-giving information to your customers to make

them more interested in buying your goods or services.
Sales Promotion-everything you do to make customers
buy,or buy more when they have come to your business
 SUMMARY

If a business wants to achieve something, it is more likely to

do so with a well-constructed and realistic market plan.
STAFFING,LEGAL RESPONSIBILITY
AND INSURANCE.
 LEARNING OBJECTIVES: At the end of this session,
participants will be
able to:
 Determine staff needed to run their business

 Enumerate Legal Responsibilities and insurance necessary

for running business

 STAFF

If you employ staff you need skills in managing them.

You should set objectives for your staff, encourage them,
supervise them and pay them.
You should also follow the laws and regulations of the
labour market.
If you hire family member make sure it is based on
skills and competencies.
 WHAT STAFF DO YOU NEED

Steps to follow:

1. Starting from your business idea, list the tasks that will
have to be performed in the business.

2. Decide which tasks you will not have time or skills to

perform yourself.

3. Determine what skills, experience and other requirements

you need in the staff for these tasks

4. Decide how much employees are needed to perform each

task.
 EXAMPLES OF COMPANY OPERATIONS/TASKS

 Secretarial Services

 General Administration

 Record Keeping

 Buying/Selling

 Stock Control

Employment could be part time or full time.

Some activities could also be outsourced.
LEGAL RESPONSIBILITIES AND
INSURANCE.
 LEGAL RESPONSIBILITIES

When you run a business you have legal responsibilities.

These include:
 paying taxes,

 obeying regulations regarding employees,

 getting licences and permits,

 following lease and other contractual

agreements.
 TAXES.

 Sales tax or value added tax (VAT)

 Employee income tax

These taxes are paid by the customers and employees.

Your business collect them and deliver to the authorities.
Sales tax or VAT is paid when products or
services are bought from other businesses.
Tax is also paid on the business profits.
 EMPLOYEES

Among the areas covered in law and regulations are:

 Minimum wage
 Working hours
 Holidays
 Occupational Safety and Health
 Sick leave
 LICENCES AND PERMIT

Many businesses will need a licence from the authorities to

operate.
Find out if you need a licence and where to get it.
 INSURANCE

There are always risks involved in running a buiness. The

type of risk vary with the type of business you are running.

Risk can be offset through insurance. If you have insurance

for your business it will give you some financial security.

 Not everything can be insured,

 Properties such as machines, stock and vehicles, can be

insured.
 Properties can be insured against damage caused by fire

or accidents

 Yourself or your employees can be insured against

accidents and medical expenses.

 SUMMARY

Employing the right staff, Identifying and fulfilling all legal

responsibilities and insurance are vital keys to running a
successful business.
 COSTING FOR A SERVICE OPERATOR

WHAT IS COSTING?
Why is Costing important?
 Costing helps to set prices
 Costing helps to reduce and control costs
 Costing helps in making better decisions about business
 Costing helps in planning for the future
 TYPES OF COST

 Direct Cost
 Indirect Costs

 Types of Direct Cost

 Direct Material Cost & Direct Labour Cost

 Direct Material Cost: are the cost of buying goods to

resell.

 Indirect Costs: are all other costs that you have to incur

in the process of running your business e.g. rent, electricity,

transport, insurance, licences depreciation, miscellaneous,
salaries, interest on loan, maintenance, telephone etc
STEPS TO CALCULATING TOTAL COST PER ITEM

 Step 1. Calculate Direct Material Costs

 Step 2. Calculate Direct Labour Cost

 Step 3. Calculate Indirect Cost

 Step 4. Add up the cost

 SOURCE AND REQUIRED START-UP CAPITAL

LEARNING OBJECTIVES: By the end of the session,

participants will be able
to:
 Identify types/sources of start-up capital for their business.

 Calculate the amount of money required

to start their business.

 TYPES & SOURCE OF START-UP CAPITAL

After estimating how much start-up capital you need for

your new business,the next question is; where do you get
that capital from?
The most important types of start-up capital are:
 Owner’s equity

 Loans

 Grants
 OWNERS EQUITY

Equity or Owner’s Contribution means the private money

you put into your business. If your business fails you will
lose that money.
Owner’s equity is called risk capital.
If you do not have enough money to invest in the business,
you can consider finding a partner or partners who are
interested in investing in the business.
A partner may not be working in the business, but only
invest his or her money in it.
You should not let the partner own more than half of the
business, because you will then lose right to make the
decisions regarding the business.
 LOANS

To get loan for start-up capital signifies that someone lends

you money. Loan must be paid back (at once or by

instalments) with interest,depending on agreement made

with lending institution.

You may be able to borrow money for:

Land and building, Equipment and working capital.

 MAJOR REQUIREMENTS WHEN APPLYING FOR LOAN

o A well thought through and clear Business plan with a good

business idea that the lending institution believe in.

o The lending institution will need collateral/security for

repayment (in case business fails).

Other different sources to apply for loan to start your

business are:
o Government credit scheme

o Non-government credit scheme, Family or friends.

 GRANTS.

Government and non-governmental organizations

sometimes give grants for potential entrepreneurs to start
small businesses. It is often the same organizations that run
credit schemes which gives grants.

A grant is an allowance that a government or an

organization gives to support small business creation in a
country.
 REQUIRED START-UP CAPITAL

This is the money you need to start your business.

You You need to know how much start-up capital you
require and where you will get it before you go ahead and
starting up your business.
You will need start-up capital for:
 CAPITAL INVESTMENT

 WORKING CAPITAL
 WHAT INVESTMENT DO YOU NEED

A capital investment is when you buy an asset for the

business that has a high value and last for long time.
Every business need to make some investment to operate.
You must estimate how much capital you need for
investment.
Capital investment you need to make can normally be
divided into two categories:
Business premises and Equipment.
 BUSINESS PREMISES

This is a place you work from. It can be a whole building for

your factory or just a small room to work from.
To reduce your investment you can work from home.

When you know what sort of premises you require you

need to decide if you should:

 Construct the premises

 Buy the premises

 Rent the premises

 Run the business from your home

 EQUIPMENT

Equipment is all the machines, tools, workshop fittings,

vehicles, office furniture, etc, that your business needs.

Some businesses will require heavy investment in

equipment (e.g manufacturers and some service operators).

It is important to carefully think of what you need

regardless of the size of the business.

Leasing/renting is sometimes recommended. If you decide to

lease equipment, take the machine out of investment and add

to lease payments to the required working capital (in your

business plan).
 WHAT WORKING CAPITAL DO YOU NEED

Businesses are run for some time before any money comes
from sales. Some service operators have to buy materials
before they can start selling their services.
Retailers and wholesalers must buy stock before they can
start to sell.
Most businesses must spend time and money on
promotion before they can get customers.
Wages, rent etc have to be paid during this time.
 WORKING CAPITAL

This is the money you need to pay for these expenses.

This is included in the amount of start-up capital you need.
In calculation, the amount depends on how long it will take
before money start coming in from sales (3 - 6 months in
many cases) and how much stock you need.
WORKING CAPITAL COVERS:
STOCK OF MATERIALS AND FINISHED

GOODS
PROMOTION

WAGES

RENT

INSURANCE

OTHER COSTS
 CONCLUSION

 Set achieveable objectives

 Participants can now confidently calculate the amount of

money required to start their business

All the best as you work to start your Business venture!
 FINANCIAL PLANNING

 LEARNING OBJECTIVES: By the end of the session,

participants should be able

to:

 Make a Sales and Costs Plan

 Prepare a Cash Flow Plan

 INTRODUCTION

 How do you cope with a new business which has not started

making money?

 What are the two most important things?

 What should you do?

 WHAT IS A SALES & COST PLAN

 What does it show?

 For what period is it usually made?

 How optimistic should you be when forecasting?

Steps to making a Sales and Costs plan
Step 2: Forecast
direct material
costs per item Step 3: Forecast
direct labour
costs per item
Step 1:
Forecast indirect
costs for each
month of the first
year

Step 4: Forecast
sales for each
Step 7: Complete month of the first
your sales and year
costs plan

Step 5: Calculate
Step 6: Calculate
total direct material
total direct labour
costs for each month
costs for each
of the first year
month of the year
 PREPARING A CASH FLOW PLAN:

STEPS TO FOLLOW.
1. Cash at the start of the month:
2. Cash in from sales:

3. Any other cash in:

4. Total cash in:

5. Cash out for direct material costs:

6. Cash out for direct labour costs:

7. Cash out for indirect costs:

8. Cash out for planned investment in equipment:

9. Loan repayment:

10. Any other cash out:

11. Total cash out:

12. Cash at the end of the Month

FORMS OF BUSINESS
LEARNING OBJECTIVE: At the end of this session
participants will be able to:
 Identify diferent forms of business (based on their

advantages and disadvantages)

 select the right form of business that suits their need.
 THE DIFERENT FORMS OF BUSINESS

There are a number of forms of business to choose from.

They all have their advantages and disadvantages.
These include:
Sole proprietorship
Partnership
Limited company
Cooperative society
 SOLE PROPRIETORSHIP

As a sole proprietor, your business will be owned by you

alone and you will have authority to make all decisions

about the business.

Advantages.

 Procedure of starting the business are simple and the cost is

low.

 Business profit is for the sole proprietor.

Disadvantages:

It is a very risky form of business because the owner is

personally responsible for all the expenses and debts of the

business.

Generally, you might need a licence for your business and

register for sales tax or value added tax. If you have

employees, you probably need to register for income tax

purposes too.
 PARTNERSHIP

If two or more people decide to run a business together

they can form a partnership.
Advantages:
 Procedure for starting the business is quite simple and the

cost is low.
 Partners can be an advantage if the business needs skills

and experience which you do not have.

 It is another way of finding enough capital to start the

business.
 Disadvantages:
 All partners share the responsibility for debts of the

business.
 If other partners have no money you might have to pay all

the business debt yourself.

 Decision time may be a delay factor (seeking partners’

consent).
Generally;
You might need a licence for your business and register for
sales tax or value added tax. If you have employees, you
probably need to register for income tax purposes.
The business profits are divided between the partners
according to the partnership agreement and each
partner is individually taxed on his or her share of the
profit. The agreement need to be written to avoid future
misunderstanding.
 PARTNERSHIP AGREEMENT

The Partnership agreement should, for a example cover:

 What line of Business the partners are goin to be in

 How the profit or loss is going to be shared by the partners

 Duties of each partner.

 LIMTED COMPANY

This is owned by one one or more owners called

shareholders. There can be one or more owners who are
all working in the business.There can also be both owners
who are working in the business and investors who are not
active in the business but are still owners.
 STEPS TO FOLLOW IN STARTING A LIMITED
COMPANY

 The name you have chosen for your business must be

approved by the Registrar of Companies or a similar

authority.
 After approval of the name, the Memorandum and Article

of Association for your proposed company must be drawn.

 The Memorandum and Article of Association are filed with

the Registrar of Companies or a similar authority.

 The Registrar of Companies issues a certificate of
 incorporation,which means that your limited company is
now formed.
Advantages.
 Smaller risk to shareholders.As shareholder,you only risk

losing money put into the business as share capital.You are

not personally responsible for the debts of the business.
 Disadvantages.
 It is quite complicated and expensive to form.

 If many shareholders are involved,making decisions can be

complicated.Hence, the shareholders will appoint board of

directors (BOD)who are responsible for the management of
the business. The BOD can in their turn appoint one or
more managers to run the business.
Generally;
The company itself is taxed for the profits.The shareholders
can be paid a salary from the company,which is taxed as
any salary.The shareholders can also be be paid share of the
company’s profit, called a dividend for which they pay tax
according to the tax law in the country.
 COOPERATIVE

This is formed by a number of people who decide to work

together for a common purpose.
The common purpose can be economic gain or providing
certain services for the members of the cooperative.
These services can, for example be marketing services or
supply of raw materials.
All members have one vote each when making decisions,
but often they appoint a management committee to handle
the day-to-day operations of the cooperative.
 Advantages.
 Not as expensive as starting a limited company

 Financial risks are normally not very high for the members

of the cooperative.Their personal liability for cooperative

debts is limited to what they have paid into the cooperative
as capital, much like in a limited company.
Disadvantages.
 It is complicated and decision making could take a long

time.
Generally;
The company itself is taxed for the profits.The profit is then
divided among the members,for which they pay tax
according to the tax law in the country.
 HOW TO SELECT THE RIGHT FORM OF BUSINESS

A critical study of forms of business highlighted the

advantages and disadvantages ascribed. In order to select
the right form of business, you must asses all important
factors as enumerated in table below.
 Sole Proprietor Partnership Limited Company Cooperative
Mi ght have to be Mi ght have to be
Regi s tration Has to be regi s tered Has to be regi s tered
regi s tered regi s tered

Cos t of s tarting
Low cos t Low cos t Hi gh cos t Low cos t
the bus i nes s

Si mpl i ci ty of
s tarting the Si mpl e Si mpl e Compl i cated Compl i cated
bus i nes s

Number of
Onl y one At l eas t two One or more At l eas t fi ve
owners

Fi nanci al
Unl i mi ted pers onal Unl i mi ted pers onal No pers onal l i abi l i ty No pers onal l i abi l i ty
res pons i bi l i ty of
l i abi l i ty by the l i abi l i ty by al l the by the s harehol ders by the members for
the owner for the
owner for al l debts owners for al l debts for the debts the debts
bus i nes s ' debts
Sharehol ders Every member has
Deci s i ons are made
appoi nt board of one vote. A
Deci s i on maki ng Al l deci s i ons made j oi ntl y by al l
di rectors who can management
i n the bus i nes s by the owner owners ,unl es s
appoi nt managers to commi ttee i s often
agreed otherwi s e
run the bus i nes s appoi nted
The owners are
The company pays The cooperative
The owner i s taxed taxed i ndi vi dual l y
Taxation tax for bus i nes s pays tax for
for bus i nes s profi ts for thei r s hare of
profi ts bus i nes s profi ts
bus i nes s profi ts
 CONCLUSION

The advantages and disadvantages of the various forms of

business highlighted above will guide entrepreneurs in
choosing the best form of business that suit their
businesses.