2. DEVELOPING A BUSINESS PLAN
WHAT IS A BUSINESS PLAN?
A business plan is a comprehensive set of guidelines for a new
venture.
A business plan is also called a feasibility plan that encompasses the
full range of business planning activities, but it seldom requires the
depth of research or detail expected for an establishment enterprise.
A business plan would present your basic business idea and all related
operating, marketing, financial and managerial considerations.
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3. What ever the name, it should lay out your idea, describe where
you are, point out where you want to go, and how you propose to
go there.
The business plan may present a proposal for launching an entirely
new business. More commonly, perhaps; it may present a plan for
a major explanation of a firm that has already started operation
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4. THE PURPOSE OF BUSINESS PLAN
1. It can help the owner/manager crystallize and focus his/her idea.
2. Although planning is a mental process, it must go beyond the realm of
thought. Thinking about a proposed business becomes more rigorous as
rough ideas must be crystallized and quantified on paper.
3. It can help the owner/manager set objectives and give him a yardstick
against which to monitor performance.
4. It can also use as a vehicle to attract any external finance needed by the
business. Eg. To get fund…
standard of comparison: a standard used to judge the quality, value, or success of something.
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5. 5.It can convince investors that the owner/manager has identified
high growth opportunities.
6. It entails taking a long-term view of the business and its
environment.
7. It emphasizes the strengths and recognizes the weaknesses of the
proposed venture.
8. The plan can uncover weakness or alert the entrepreneur to
sources of possible danger
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6. WHEN THE BUSINESS PLANS ARE PRODUCED?
At the start up of a new business:
Business purchase:
On going:
Major decisions:
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7. WHO PRODUCED THE BUSINESS PLAN?
o Managers:, Owners:, Lenders:
WHY THE BUSINESS PLANS ARE PRODUCED?
Assessing the feasibility and viability of the business/project: it is in every ones
interests to make mistakes on paper, hypothetically testing for feasibility,
before trying the real thing.
Setting objectives and budgets: having a clear financial vision with believable
budgets is a basic requirement of everyone involved in a plan.
Calculating how much money is needed: a detailed cash flow with assumptions
is vital ingredient to precisely quantify earlier the likely funds required.
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8. THE FORMAT OF A BUSINESS PLAN
1. Where are we now?
An analysis of the current situations of the market place, the
competitions, the business concept and the people involved. It will
include any historical background relevant to the positions to date.
2. Where do we intend going?
Qualitative expression of the objectives, quantifiable targets will
clarify and measure progress towards the intended goals.
3. How do we get there?
Implementing of accepted aims is what all the parties to a plan are
interested in as a final result.
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9. COMPONENTS OF BUSINESS PLAN (OUT LINE OF A BUSINESS PLAN)
1. Identification of the business
a. Introduction
- relevant history and background
- Proposed date for commencement of trading /beginning of a plan
b. Names
-name of the business and trading name
- name of the managers/owners
c. Legal identity
-company/partnership/sole-trade/cooperative
- details of share or capital structure
d. Location
-address-registered and operational
- brief details of premises.
e. Professional advisors, -Accountants, solicitors, bank
I.Analysis of the current situation (where are we now?)
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10. 2. The key people
a. Existing management- Outline of background experience
, skills and knowledge.
-Names of the management team
b. Future requirement -gaps in skills and experience and how
they will be filled ,- future recruitment intentions
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11. 3.The nature of the business
a. Product(s)or service(s)-Description and applications
-Key suppliers
-Planned developments of product or service
Product Oriented Businesses
Describe each product you sell. The combination of products is your
product mix.
If you cannot list each product, break the business down into logical
categories.
Describe the key product features, and how your products are
different from those of your competition. (Functionality, durability,
ease of use, etc).
Describe product protection such as patents, copyrights and
trademarks
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Service Businesses
Describe each type of service you offer (be
specific).
Describe the service features in terms important
to the customer.
Describe any service protection such as
copyrights or trademarks.
Product Risks
If there are any risks associated with your product
or service such as product liability, professional
liability, or ease of duplication by competition,
state them and describe how you will mitigate
these risks.
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b. Market and customers
–Definition of target market, classification of customers
- Trend in market place
Describe the state of the industry. Is it a new industry, growth
industry, competitive industry, or a stable mature industry?
Document industry trends on a local, national or world scale.
Sales, number of customers, number of units sold, trends in
related industries are all goodindustry indicators.
Describe the key customers for your specific industry.
Provide other national/international economic indicators that
encourage the health of your industry.
Examine risks to the industry caused by legislation,
technological change or any threat to the industry as a whole.
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C. Competitive Analysis
Provide the results of any customer survey work you
have done and the sources of information.
List the direct competitors in your local market. These
are firms who offer exactly what you offer. List the
current number and the number in existence for the past
three-year period.
List the indirect competitors in your local market.
These are firms who offer substitute products.
Analyze any competitors who have gone out of
business in the past and if possible describe why their
business failed.
Explain how your firm will compete with these
competitors to prove how you can survive in their
markets.
Position your product.
16. III. IMPLEMENTATION OF AIM (how do we get there?)
1. Management of resources
a) Operation:-premises, materials, equipment, insurance, management
information system.
Production Plan, Production Flow Chart, Procurement
b) People/Human resource/- employment practices, recruitment, team
management, training etc
2. Marketing plan
a)Competitive edge- unique selling point of business (Critical products
or service characteristics or uniqueness in relation to competitors)
b) Marketing objectives - specific aims for product or service in the
market place
c) Marketing methods- product, pricing, promotion, distributions=4ps16
17. 3. Money: financial analysis
a. Funding requirement- start up capital, working capital,
asset capital, timing of funds required, security offered.
b. Profit and loss:-- 3 years forecast, sales variable costs,
profit, overheads, net profit
c. Cash flow:-- 3 years forecast, receipts, payments, monthly
and cumulative cash flow
d. Balance sheet - use of funds, source funds
Assignment 2: write the difference b/n feasibility study and
business plan (brief with 2pages)
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