Session 1 – Business Plan Format and Process

Objectives of the Topic

By the end of this session, you will be able to:
● Understand the need for and use of business plans
● Understand the process of creating a business plan and create your own
● Use your business plan as a management tool for decision making
● Use your business plan as a communication tool to gain the confidence of both
investors and lenders and secure their buy-in

Business Plans are a great tool to get you started! This module will walk you through
the steps so you can create your own. This is a great opportunity to start your
business off on the right foot!
Introduction
A Business Plan (BP) will help you as a potential entrepreneur to answer various strategic
questions, and to help minimize future risks. The BP should provide evidence that answers
the following questions:

 Is there a market or customer segment for my product or service?

 Can my start-up sell these products or services sustainably?
 Can my business efficiently produce and deliver?
 Will my business be organized and managed?
 Will my business be funded?
 Can my business yield “healthy” funding flows?
A BP consists of different sections that give a detailed analysis of the viability of the business
operating within its context, competitors and economies of scale.
 Key Reading 1: Business Plan

What is a Business Plan?

A BP is a document in which a business opportunity, or a business already under way, is
identified, described, and analyzed. The BP examines its technical feasibility, as well as its
economic and financial viability. The BP helps develop the procedures and strategies
necessary to convert the business opportunity into an actual business.

A BP sums up decisions made while planning your start-up. It helps articulate how to execute
the business idea. It is an indispensable tool to help start up a business, regardless of the
size of the project and/or the amount of business experience you have. It provides answers to
simple questions about a new business or a business already under way.

Purpose of a Business Plan?

The purpose of a BP is to identify, describe and analyze a business opportunity and/or a
business already under way. It serves as a business card for introducing the business to
others, such as banks, investors, institutions, public bodies, or other agents, when it is time to
seek cooperation or financial support of any kind.

Why Prepare a BP?

Preparing a BP helps anticipate risks, and strategies for mitigating them before they become
real problems. It is written to increase your chances of success. It is an essential step in
starting and financing enterprises. In Nigeria, BPs are suited (and required!) for MSMEs
intending to borrow or access funding from banks and other formal sources.

In addition, BPs also:

 Spell out the business goals and objectives, and clearly outline how and when they will
be achieved
 Provide a road map to owning and operating a business
 Communicate the business opportunity to financing agencies or investors and become
the main discussion paper and basis for funding or investment decisions
 Record your intentions and reasons for starting
 Act as yardstick for prospective investors and bankers to monitor progress of the
MSME
 Comply with financial institutions’ requirements for loan or credit applications,
processing and approvals. In Nigeria, CBN, NIRSAL, Bank or Industry, Bank of
Agriculture, Development Bank of Nigeria, and others require a BP before an MSME
can access credit
 Provide the basis for financial estimates and projections

Key Reading 2: Components and development of a Business Plan (BP)

2.1. A BP should have the following components:
 Executive Summary - A snapshot of the proposed startup
 Economic and Marketing Plan - Research on your industry, market and competitors
 Production and Service Delivery Plan - The products or services been offered and the
technology
 Organization and Management Plan - Your business and management structure
 Financial Plan – Profit and loss, cash flow, balance sheet projections, etc.
 Annexes – Documents, certificates, tables, and any other additional information

2.2. Creating BPs

BP development requires gathering information from actual research, interviews with potential
customers, competitors, suppliers of raw materials, suppliers of equipment, possible locations
and so on. Writing a BP is an extremely rewarding learning process that involves:

 Systematic research and the gathering of relevant information

 Insightful discussions and the potential to establish communication with other MSMEs,
potential buyers, competitors, suppliers, partners, coaches and even funders and
financial institutions
 Assembling all the information necessary to make a persuasive argument that the
proposed MSME has been sufficiently researched, and all foreseeable risks have a
mitigation strategy in place
 Calculating figures, prices of products, number of buyers needed yearly, quantity to
produce yearly, salaries or wages to pay for, taxes, etc., even before starting the
enterprise. This is the BP’s most valuable contribution!
 Collating all of this information and presenting it in a straightforward way to make the
case for creating the business
 Summarizing areas of concern, for example is there proof that the customer will really
buy the products? Where is the breakeven point? Can the MSME generate enough
cash, etc. for potential partners and the funder?

Use this list to help you organize your BP.

 Key Reading 3: Link between Business Plan
and
Business Model Canvas (BMC)

The table below shows the links between the BMC blocks and the four sections of the BP:

BP components/sections BMC blocks linked to them

Marketing Plan  Value proposition
 Customer Segments
 Customer Relationships
 Channels
 Revenue Streams
Production and Service Delivery  Key Activities
Plan  Key Resources
 Value Propositions
Organisation & Management Plan  Team partners
 CV
 Competencies
 Teams
Financial Plan  Key Resources
 Cost Structure
 Revenue Streams
 A Short story
Hajiya Zainab is returnee who was living in Saudi Arabia for 8 years. She was deported to
Nigeria due to the fact that she was an illegal immigrant. In 2011, Zainab had travelled to
Saudi Arabia to perform the Hajj pilgrimage but did not come back as she eloped in a script
that was well crafted before embarking on the journey. After living undercover and doing
menial work to earn a living, she was arrested by Saudi immigration officers and deported to
Nigeria. Due to the circumstances of her return, she lost all her property and savings.
While in Saudi Arabia, Zainab trained as a hair hairdresser. That skill became her only asset
on her return and she decided to establish a hair salon. She knew she needed support to help
her realise her ambition. She approached different family members but only got N20,000 in
support from her uncle which is far cry from the N500,000 required to start a small-scale
salon. She realised she needed access to a credit facility and was told to create a BP. She
was eager to start because her friends and family members were keen to patronize her future
business.
She was introduced to Sadiq, a local business coach who has been assisting and guiding
other small business owners and start-ups to prepare BPs. Using notes she had already
written and other ideas from friends, Sadiq, through phone conversations, SMS, WhatsApp
and YouTube applications guided Zainab through the process of preparing a BP. She did not
just write her plan, but also internalized the requirements of her business and associated costs
such as her monthly rental costs, equipment cost, staff salaries, the tools she needed to
purchase and the price, the number of hair stylists she needed, nail attendants, masseurs and
the profit she could make over time.
As she obtained more information and support, Zainab’s confidence increased and her belief
in her future success was boosted. She decided to approach potential partners and investors.
She needed to convince them that she understood the business. With Sadiq’s guidance, she
practiced the art of pitching her idea by rehearsing and doing mock presentations to imaginary
funders and lenders. When feeling more confident, she applied to various investors and was
invited by the Sanaá foundation to pitch her business idea. Before the meeting she received
more coaching and Sadiq asked her to watch BBC’s ‘Dragons Den.’ Zainab gave an excellent
pitch, focusing on her market niche, strategy, sales figures, profit and return on investment.
She received a N2million Naira grant!

Key Reading 4: Best Practices in BP Writing

As Zainab’s story demonstrates, there is no concrete method for writing a BP that leads to a
grant or loan. The format, logic and persuasiveness are what count. There are best practices
you can follow:

 Do it yourself - Get started! Ask for help from the coaches on this programme if you
need it. This learning experience is yours to take
 Writing is thinking - Writing allows you to imagine going through business processes,
such as operations, selling, collecting orders, and other business routines. Identify
future obstacles and fix them before they become real
 Follow the format above to help you get started, but do check if the bankers and
investors you are applying to have a different template you need to use
 Know your audience - Who is reading the plan? If the BP is for potential investors keep
that in mind. They will likely want lots of data, number-crunching, a reasonable growth
strategy and an explanation of what the proposed startup does better than the
competition. Think about it this way - Based solely on the information in the plan, would
you invest in the enterprise?
 Have someone or a certified public accountant check your financial statements, and
check again. These are really fundamental!
 Focus on massive sales efforts - While you have to be truthful, reasonable and credible
with what you put in your plan, you also have an obligation to put your best foot forward
and make a compelling case for your startup
 Write the executive summary last - For some reason, most first-time BP writers begin
with the executive summary. It’s smarter, and ultimately easier, to wait until the other
components are completed and then assemble the summary as a condensed version
of the BP. Make it enticing!
 Figure out if ‘less is more’ OR ‘more is more’ - An understanding of your audience or
end users of the BP should guide the quantity of information in the BP. When you come
across a funder that requires plenty of information you can use the annex of your BP
for additional information, e.g., spreadsheets, graphs, charts, brochures, product
descriptions, pricing sheets, or any other information that helps the reader understand
the startup's capabilities and opportunities.
 Key Reading 5: Other Information
Investors and bankers rely on the BP to make a decision on whether to invest or grant loans.
In loan applications and other funding requests, there are other requirements besides a well-
prepared BP. These can include:

 Opening of a business account at the bank

 Valid Biometric Verification Number (BVN)
 Loan application form
 Presentation of Guarantors
 For loans exceeding N3million, an asset might be required to serve as collateral. The
collateral required differs amongst financial institutions
 Development institutions like the Bank of Industry, Bank of Agriculture and NIRSAL
Microfinance Bank require loan applicants to submit pre-forma invoices from
equipment suppliers, raw materials suppliers, landlords, etc.

Do your homework and make sure you understand what else you need to do prior to submitting
your application. Good preparation is key. Don’t be afraid to ask questions to make sure you
have everything you require and everything has been completed correctly. Check, check and
check again!

Collateral
Collateral is an asset that a lender accepts as loan security. It may take the form of real estate
or other kinds of assets, depending on the purpose of the loan. The collateral acts as a form
of protection for the lender. If the borrower defaults on loan repayments, the lender can seize
the collateral and sell it to recoup some or all its losses.
For Covid-19 support, the CBN has introduced a 50 billion Naira Target Credit Facility (TCF)
where households and MSMEs who have been adversely affected can apply for loans of up
to N2.5million. The facility has a maximum tenure of not more than three years with at least
one-year moratorium. No BP is required. The introduction of the National Collateral Registry
by the CBN allows small businesses and vulnerable groups to register and use movable
assets as collateral. The moratorium period before loan repayment can be up to one year.
Where a woman does not own her own property or assets, she can quote the family assets in
the BP provided she has the express approval of her family, especially her husband

Key Reading 6: What are the benefits to be derived from a Business Plan?
Summary
Without a BP, starters will indulge in ‘trial and error.’ Doing a BP replaces this with a more
systematic approach that includes the collection, organization and written presentation of
relevant information. With it, you can convince investors and bankers to put their funds and
resources into their budding enterprises. The BP is often the only avenue for starters to
convince investors and bankers since it is likely that no past experience or track records yet
exist. The benefits are:

 A written document helps you, the entrepreneur, to understand the business better
 It helps you focus on your enterprise’s objectives and goals
 A business plan is a ticket to sources of finance
 It identifies potentially critical issues and provides a suggested response to any of
these problems that could arise
 It is a communication tool that allows employees, sales staff, suppliers, etc., to get up
to speed with the business