CHAPTER SEVEN

BUSINESS PLAN

.0 Introduction

4.1 Subcomponents of Business Plan

8.0 Title Page

This is the first page of the business plan. This should state:

 Company name, address, phone, fax, web address

 Company logo

 Names, titles, addresses and phone numbers of owners and key executives.

 Date on which this plan was issued.

 Name of person preparing the plan, if other than owners and key executives.

9.0 Tables of Contents

This provides a list of contents and page numbers to guide the reader

10.0 Executive Summary

This provides a clear and concise overall picture of the proposed venture. It is made for those busy
executives who do not have lots of time to go through the whole document. It should provide a sense
of excitement to the potential readers. It is one of the three pages overview of the total business plan.

It is written after other sections have been completed, it highlights their significant points and ideally
creates enough excitement to motivate the reader to continue reading.

11.0Vision and Mission Statement

The vision is a concise written description of a firm’s philosophy. This should convey how all areas of
the business will work together to achieve the organization’s goals.

This should distinguish the firm from others. It should remain simple, believable and achievable.

12.0Company Overview

Explain the type of company e.g. manufacturing, refilling, farming etc.

 Provides background information of the company if it already exist

 Describes the proposed form of organization e.g. proprietorship, corporation, partnership etc.

This section should be organized as follows:

  Company name and location

 Company objectives

 Nature and primary product or service

 Current status (startup, buyout or expansion)

 History (if available)

 Legal form of organization

13.0 Product and Services Plan

 Discusses product and services to be offered to customers

 Their unique features (photographs can be made)

 Innovative features should be identified and patent protection explained

14.0 Marketing Plan

 Shows who the firm’s customer will be

 The type of competition it will face

 An outline of the marketing strategy

 Speculation of the company’s competitive edge

 Methods of identifying and attracting customers

 Selling approach – types of sales and distribution channels of sales promotions and advertising

 Credit and pricing policies

15.0 Management Plan

 Identifies the five key – active investors, management team and directors citing experience and
competences they possess

 Plans for recruiting and training employees

16.0Operation Plan

 Explaining the type of manufacturing or operating system to be used

 Describe the facilities

 Labor

 Raw materials and product processing requirements

  Quality control methods, procedures inventory control operations, sources of supply and
purchasing procedures

17.0 Financial Plan

This section provides an account of the new firm’s financial needs and sources of financing and a
protection of its revenues costs and profit

 Historical financial statements for the last 3 – 5 years

 Proforma financial statements (Balance sheets, Income statements)

 Breakdown analysis of profits and

 Planned sources of financing

18.0 Appendix of Supporting Documents

These are supplementary attachments to enhance the reader’s understanding of the plan. Example
CVs of Management, Photographs of products, facilities, buildings, professional references.

CHAPTER SEVEN: PROGRESSIVE QUESTIONS

QUESTION 1

What is a business plan? [5 Marks]

QUESTION 2

Why is a business plan important? [5 Marks]

QUESTION 3

What is the role of vision and mission statements? [5 Marks]

QUESTION 4

Why is it necessary to have an Executive Summary in a business plan? [5 Marks]

 CHAPTER EIGHT

THE MARKETING PLAN – DEVELOPING THE MARKETING PLAN

1. Introduction

1. What Is Small Business Marketing?

Small business marketing consists of those business attributes that relate directly to:

 Identify a target market

 Determining target market potential and preparing, communicating and delivering a bundle of
satisfaction to the target market.

2. Marketing Philosophies

 Production – oriented – emphasizes the product as the most important part of the business. The firm
concentrates on producing the product in the most effective manner even if this means slighting
promotion distribution and other marketing activities.

 Sales-oriented-express the firm’s believe that everything including production efficiencies and
customer preferences in favor of making sales.

 Customer-oriented-express the firm’s believe that everything including production and sales depends
on customer needs. Customer satisfaction is not a means of achieving a certain goal – it is the goal.

Factors that affect marketing philosophies are:

 State of competition – if there is no or little or no competition a company emphasizes production

efficiencies

 When demand exceeds supply (short term measure which might lead to disaster)

 Small business managers may have a range of interests and abilities that are good at production skills
but weak at marketing. They emphasize production efficiencies.

 Engrossed in the present climate that is pushing sales to customers may lead to customer
dissatisfaction – high pressure selling used with little regard to customer needs.

3. The Formal Marketing Plan

After the market analysis is completed, the entrepreneur is ready to write the formal marketing plan. A
marketing plan should include sections on market analysis, the competition and marketing strategy.

4. Marketing Analysis

 Description of the target market, which is known as customer profile.

 A discussion on the major benefits to customers provided by the new product or service should be
included.
  If an entrepreneur envisions several target markets, each segment must have a corresponding
customer profile.

It is desirable to include most likely pessimistic and optimistic sales forecasting scenarios. Marketing
research information from secondary and primary data may be used to construct the customer profile.

5. Competitor Analysis

 Existing competitors should be studied carefully and their key management personnel profiled

 Competitor’s overall strengths and weaknesses should be part of this section

 Related products currently being marketed or tested should be noted and likelihood that these firms
will enter the entrepreneur’s target market

 Competitors can be monitored by visiting their websites or using search engines.

6. Marketing Mix

The information or marketing strategy forms in the most detailed section of the marketing plan and in many
respects is subject to the closest scrutiny from potential investors. Four areas should be addressed:

 Product decisions to transform product/service idea into a bundle of satisfaction

 Distribution – regarding delivery of product to customers

 Pricing – to set an acceptance exchange value on total product / service

 Promotion – communications necessary to target markets

7. The Product and /or Service Section

Name of product or service and why it was selected should be included. Any legal protection that has been
obtained for the name should be described.

Explain logic behind name selection. Other components such as packaging and customer service plans such
as warranties and repair policies should be presented.

8. The Distribution Section

 Often new ventures will use established intermediaries as their channels of distribution. How
intermediaries will be persuaded to carry the new product should be explained. Any intentions to
license the product should be covered.

 Layout and configuration of retail stores should be explained.

 Discuss relevant laws and regulation governing that activity when product delivery involves exporting

9. Pricing Section
 At the very minimum, the price of a product or service must cover the cost of bringing it to customers.
Pricing plan must include a schedule of both production and marketing costs. Breakeven computations
should be included for alternative prices. The closest competitor may be analyzed on what he is charging.

10. The promotional Section

The promotional plan should describe the entrepreneur’s approach to creating customer awareness to the
product or service and motivating customers to buy. Promotional options are personal selling and
advertising. It should state number of sales people to be employed and how they will be compensated and
the proposed system of training. If advertising is to be used list specific medias to be used and the
advertising themes. Seek the services of a small advertising agency that is name and credentials.

11.Marketing Research for the New Venture

Marketing research may be defined as the gathering, processing reporting and interpreting of marketing
information. A small business typically conducts less marketing research than a big business because of
expenses involved and the lack of knowledge. Managers should compare the costs benefits of marketing
research. Internet is an excellent resource for marketing research data and most of the information found
there is at reduced costs.

12.Steps in Marketing Research Process

1. Identifying the Informational Needs

This may seem too obvious to mention, the fact is that entrepreneurs sometimes conduct surveys
without pin pointing the specific information that is relevant to their venture. The informational
needs should be well defined to help in the research.

2. Searching for Secondary Data

This is information that has already been compiled. This is less expensive than gathering new or
primary data. Marketing decisions can be made on the basis of secondary data. Secondary data can
be internal or external. Internal data is data that exists within the firm. External data could be
periodicals, trade publications, governmental publications, etc. however, secondary data can be
outdated or the units of measure in the secondary data may not fit the correct problem and its
credibility may be questionable as some secondary data are less trustworthy.

3. Collecting Primary Data

This is new market information that is gathered by the firm conducting the research. The
techniques used may be:

Observation – is the oldest research and can provide useful information for small businesses. It can
be economical and avoid potential business that can result from contact with respondents

Questioning Methods – surveys and experiments are both examples of questioning methods.
Surveys can be conducted by mail, telephone or personal interviews. Telephone surveys and
personal interviews have high responds although personal interviewing is expensive. On line
questioning can also be used.
 A questionnaire is the basic instrument of guiding the researcher and the respondent. A
questionnaire should be carefully developed and pre-tested before use. Considerations should be
made:

 Ask questions that relate to the issues under consideration

 Select the form of question that is most appropriate to the subject and the conditions of the
survey e.g. open-ended

 Carefully consider the order of questions

 Ask the more sensitive questions near end of the questionnaire (e.g. age, income)

 Carefully select the words in each (simple, clear)

 Pretest the questionnaire by administering it to a small sample of respondents representative of

the group to be surveyed

4. Interpreting the Data

After the necessary data have been gathered, they must be transformed into usable information.
Methods of simplification include tables, chart and other graphic methods. Use of descriptive
statistics e.g. mean, mode, median can also help.

13.Understand Potential Target Markets

A small business can be successful only if an adequate market exists for its product or service. A sales forecast
is a typical indicator of market adequacy.

14.Ingredients of a Market

A market is a group of customers or potential customers who have purchasing power and an unsatisfied
need. Three ingredients in a market are:

 Markets must have buying units, customers – these may be individuals or business entities

 Customer must have purchasing power – customers who have unsatisfied needs but lack of money or
credit do not constitute a viable market

 Customer must have unsatisfied needs – they should be motivated to recognize the unsatisfied needs.

15.Market Segmentation and its Variable

Determining market potential – is the process of locating and investigating buying units that have purchasing
power and needs that can be satisfied with the product or service that is being offered.

Market segmentation – this is defined as the division of the market into smaller groups with similar needs,
such that each group is likely to respond favorably to a specific marketing strategy.

16.Segmentation Variables
 These are parameters used to distinguish one form of market behavior from another.

There are two broad sets of segmentation variable that represent major dimensions of the market; these are
Benefits Variables and Demographic Variables.

1. Benefits Variable

These are specific characteristics that distinguish market segments according to the benefits sought
by customers e.g. the toothpaste market has several benefit segments.

2. Demographic Variables

These are specific characteristics that describe customers and their purchasing power. Small
businesses commonly use demographic variables as part of market segmentation. Demographic
variables are age, marital status, occupation, gender, family life cycle, income, education, religion,
race and nationality.

17.Market Segmentation Strategies

There are several types of market segmentation strategies but at this point we would like to discuss the
following types: unsegmented, multi segmentation strategies.

18.Unsegmented Strategies

This is also known as the must marketing strategy. This is a strategy that defines the total market as the
target market. It assumes that all customers desire the same basic benefit from the product or service. With
unsegmented strategy, the firm develops a single marketing mix that is one combination of one product,
price promotion and distribution. The traditional argument for mass marketing is that it will lead to the
lowest costs and prices and creates the largest potential market.

Example

Small business - (Community Writing Company)

Marketing Mix 1

Product: lead pencil

Price: $10.00

Promotion: Television

Distribution: Extensive

Market

Potential users of a writing instrument

19.The Multi Segmentation Strategy

 It is a strategy that recognizes different preferences of individual segments and develops a unique marketing
mix for each segment. The traditional argument for segmentation strategy is that customers have different
tastes and their tasks change overtime. Customers seek change and variety .e.g. Community Writing
Company has recognized three separate market segments i.e. students, professors and executives.

Following multi segmentation strategy approach, the company develops a competitive advantage with three
marketing mixes based on differences in pricing, promotion, distribution or the product itself.

Small Businesses: (Community Writing Company)

Marketing Mix 2 Marketing Mix 1 Marketing Mix 3

Product : felt tip pen Product : felt tip pen Product : felt tip pen

Price : $15 000.00 Price : $10 000.00 Price : $20 000.00

Promotion: Professional magazines Promotion: Campus Newspaper Promotion: Personal Selling

Distribution: Direct From Factory Distribution: Bookstore Distribution: Department Store

Market Segment B Market Segment A Market Segment C

Professors For Students Executives

20.The Single Segmentation Strategy

This is a strategy where a company recognizes the existence of several distinct market segments but focuses
on only the most profitable segment. The singlr segmentation approach is probably the most suitable
strategy for small businesses to use during initial marketing efforts. It allows a small firm to specialize and
make better use of its limited resources once the reputation has been built, the firm will find it easier to
enter new markets.

Small Business: (Community Writing Company)

Product: Felt tip pen

Price: $10 000.00

Promotion: Campus Newspaper

 Distribution: Book Store

Market Segment A
Students

Market Segment B Market Segment C

Professors Executives

The Community Writing Company decides to pursue a single segmentation approach and selects the student
market segment.

21. Estimating Market Potential

The Sales Forecast

This is a prediction of how much a product or service will be purchased within a market during a specified
time period measured in dollars or units. It is a useful tool in production schedules, inventory, policies, and
personnel decisions.

22.Limitations in Forecasting

Entrepreneurial inexperience coupled with a new idea.

Small business manager maybe unfamiliar with methods of quantitative analysis

Entrepreneur lacks familiarity with the forecasting process or personnel with such skills