Professional Documents
Culture Documents
Introduction
A business plan is an important document for an entrepreneur because it acts as a guide and
reference point in regard to overall business management.
This sub-module unit outlines the major components of a business plan and how to write it.
Although numerous organizations are in business of granting or lending money, these agencies
will not release their funds just because you have a viable business idea. They need to be
provided with well written and convincing document presenting your plans. They require
proposals that show what you have in mind is a priority, feasible, cost effective and fit with your
own. It is now time to sit down and put your analysis and propositions on paper.
Specific Objectives
By the end of this sub-module unit the trainee should be able to
a) Define the term business plan
b) Describe components of a business plan
c) Explain the uses of a business plan
d) Prepare a business plan
CONTENT
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(v) Provides a clear analysis of the industry including opportunities and threats.
(vi) It’s the description of the business model and how the entrepreneur plans to make
money and stay in business
(vii) It’s a document that you use to introduce your business to investors, suppliers and
lenders.
(viii) It’s a handbook for the management team, employees and new staff that describes what
the business is all about.
(ix) Provides an analysis of the expected revenues, costs and projected profits.
(x) Encourages potential entrepreneurs to establish written goal and objective for their
proposed business.
(xi) Enables potential entrepreneurs to assess viability of their business support unit.
(xii) Assist in identifying potential customers, market opportunity pricing strategy,
promotional activity, distribution, strategy and competitive conditions of a business.
(xiii) Enables identification of employee’s needs, skills they should possess, task they will
perform and methods of remunerations.
(xiv) Assist financial needs and sources of funds.
(xv) Identify factors for successful entry and growth of business in a given market.
(xvi) Expose the entrepreneur to the whole planning, budgeting and forecasting land
acquisition process necessary for starting or expanding a business.
WHAT IS A GOOD PLAN
Should clearly communicate your ideas and plans.
Must have evidence of focus.
Have specific understanding of target customers.
Must have an appreciation of the investors or lender’s needs.
Must show intimate and thorough understanding of your business.
HOW SHOULD IT APPEAR
It is presented in a format that is logical and well supported.
Presentable and appealing to the eyes of the readers.
Typed carefully and printed without errors.
Used short paragraphs and clear headings and sub-headings.
Well-designed cover page.
Use good grade papers.
DON’TS IN BUSINESS PLANNING
Don’t make your plan very lengthy. Keep it short as possible without compromising the
quality of your venture.
Don’t over diversify your business; focus your attention onto one or two product line
and market.
Don’t describe technical products or manufacturing processes in a technical jargon or
language that only experts can understand.
Don’t estimate your sales on the basis of what you can or would like to produce rather
estimate carefully your potential sales based on realities on the ground.
Don’t make ambitions, vague or unsubstantiated statements etc.
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Market growing rapidly, high economic growth.
NB: For an overall guideline as to format and length, experts suggest a maximum length
of fifty pages, neatly types and a two page executive summary. The details and depth of
your plan depends on the size and scope of the proposed business.
DISADVANTAGES/ PROBLEMS FACED WHEN YOUR BUSINESS DOESN’T HAVE
A BUSINESS PLAN
i. Running out of cash before operations commence because you had not anticipated the
actual total start-up costs.
ii. Missing sales projections because you don’t know who your customers are and what
they want.
iii. Losing customers because your product /service doesn’t measure up to market
expectations
iv. Becoming overwhelmed with too many options because you failed to focus on your
vision and mission.
v. Going bankrupt because you didn’t prepare a good business model / plan of how to
make money.
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B. THE CHAPTERS
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Trading area as whole e.g.
Specific region to be covered by business.
Approximate population.
The business activity of community.
Cultural factors e.g. language of community, diet religion and other practices etc.
Draw sketch of the business location.
1.3 FORM OF OWNERSHIP
Which form of ownership will you choose and give reasons for the form chosen.
Explain reasons for choosing this form.
1.4 TYPE OF BUSINESS
What type of venture are you proposing.
Manufacturing, making, producing, wholesaling, retail or service type etc.
Outline the scope of trade for trading area.
1.5 PRODUCTS/SERVICES
Which product or service will you offer.
List and describe your product or services in details.
Explain other benefits customers will obtain from each product/services e.g. convenience,
economy, comfort, durability, usage flexibility, servicing and warranties of product / services
1.6 JUSTIFICATION OF OPPORTUNITY
Justify why you stand a chance to succeed in the business: -
(i) Discuss the nature of the opportunity or unique aspect of your concept.
(ii) Viability of opportunity e.g.
Demand, availability of raw materials.
Skilled labour availability (managerial/technical)
High return on investments, security etc.
(iii) Contribution the business will make to local community e.g.
Employment creation, use of local resources.
Provision of goods and services.
Promotion of indigenous technology.
Improves living standards of community
1.7 INDUSTRY
Into which industry does your venture fall?
Name the type of industry into which your business is based e.g. agricultural, motor vehicle,
building, general engineering, clothing, electrical and electronics, beer industry, sports and
entertainments, hotels and restaurants, leather works.
Outline the characteristics of the industry.
(a) Capital requirements low or high.
(b) Kind of technology – labour intensive or capital intensive.
(c) Level of technology – modern, outdated/obsolete sophisticated or simple.
(d) Sizes of firms in the industry i.e. small, medium or large, average.
(e) Seasonal factors experience in the industry.
(f) Current trends in the industry i.e. growing, declining, stable etc.
1.8 BUSINESS GOALS AND OBJECTIVES
What are the short term goals (2–5 years)
What are the strategies of achieving the short term and long term goals.
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NB: the goals should be:
S Specific
M Measurable
A Achievable
R Realistic
T Time frame
List them in point from and focus on marketing, management, operational/production and
financial projections.
1.8.1 ENTRY AND GROWTH STRATEGIES
ENTRY AND GROWTH STRATEGIES
1) ENTRY STRATEGIES (START UP STAGE)
What are the key factors for success of your venture at the start-up stage?
Consider the following: -
Competitive advantage, weakness among competitors, pricing policy, distribution channel to
use, adverts, promotion etc.
2) GROWTH STRATEGIES
What are the key factors for the growth of your business i.e. consider the following: -
Diversify products/services, improved quality of product/services.
Business expansion, more skilled and qualified personnel etc.
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CHAPTER TWO
2.0 MARKETING PLAN
This is the strategy created with the purpose of reaching as many customers as possible for a
given area. This will enable you describe your market opportunity and challenges will also
enable you describe the marketing strategies statics and policies required to exploit the
2.1 INTRODUCTION
What are your marketing goals: These are the objectives you intend to achieve in the given
market. State your marketing goals for the first three years. Focus on: -
(a) Number of customers to be served.
(b) Volume of business profits per month.
(c) Gross income and number of contracts.
2.2 CUSTOMERS
A person or organization that buys goods or services from the business.
Who are your target customers e.g.
(a) Wholesalers, retailers, individual customers.
(b) Institutional, future customers.
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Product superiority – Quality, price advantage – fair, number of employees, number of
brands.
Sales
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
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Calendars, magazines, media, other specify, internet.
What message will you pass?
E.g. shop offers lower prices.
Shop offer fast services.
Shop offers variety of products/services etc.
How much will each method cost?
Which is the method appropriate to you?
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ii) Sales team-how they will be required, remunerated, trained and motivated.
iii) Sales policy on: quality products, price discounts, credits i.e. % of deposits asked, fixed or
negotiable prices.
iv) Maintaining and increasing sales: raffles, free samples, advertisements.
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CHAPTER THREE
3.0 ORGANIZATION AND MANAGEMENT PLAN
This phase develops policies for staff development and human resource management.
You will present in details the job analysis and description, employees evaluation,
training and staff compensation plans.
You also indicate, support staff and series as required for your business management
plans.
3.1 Management Team
Who will manage your business – specify whether the owners are also the managers. State
the role of the management team, name of the manager.
Age, educational, technical and professional qualifications, job description.
State duties and responsibilities, salary and benefits, other incentives.
SUMMARY PERSONNEL
No. Personnel Number Qualification Duties and Salaries and
required responsibilities benefits
1 Manager
2 Supervisor
3 Technician
4 Sales person
TOTA XXX XXX
L
State the nature of the legal measures, where to obtain them and the amount charged as legal
fee.
What external support service will you require to successfully run your business? e.g.
banking, insurance, consultancy lawyer, postage; suppliers repair and maintenance,
telephone.
Identify the name and address of the organization or person who will provide these services
and at what cost.
Organization structure.
Explain how your business is organized, draw an organization structure: focus on the
following: -
Departments/sections, decision making process, communication methods, meetings.
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regulations societies
2. Labour laws
3. Insurance
4. Building
regulations
5. Local authority
regulations
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CHAPTER FOUR
4.0 OPERATION / PRODUCTION PLAN
This business planning phase explains the facilities, labour and overheads required to
manufacture your proposed products or render your proposed services.
Explain the process of making your products or describe the key process of offering your
services.
Indicate any regulation, compliances and approval that will, affect your operation or
production.
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State other conditions attached to the use of the premises, right to renovate, duration or
lease.
State the location of your business e,g. village, town street/road, building name, room.
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Comfort – highest level of enjoyment.
Economy – worth the price.
State the activities that will ensure achievement of the stated standards:
Consider quality, proper tools and equipment, security, motivated employee, good working
conditions etc.
Who shall be in charge of quality control, inspection and monitoring?
Tabulate summary of quality control.
Example:
Number of direct workers x cost per hour x number of weeks or months = ……………..
No. of direct workers x per cost per hour x number of weeks or months = ……………...
State education level needed for your employees/workers.
State activities in production process as well as support or indirect labour jobs. Note one
personnel can be assigned multiple jobs.
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Who shall be the custodian of purchase records?
How shall the inspection of goods/services be done and by whom?
What regulation system of supply shall your business adopt e.g. dairy, weekly, monthly,
quarterly etc
State whether there are agreements or conditions laid down on purchase?
Who are your supplies? What benefits will you receive?
(vii) INVENTORY CONTROL
How is your inventory control?
Inventory – a detailed list of goods (stock)
Stock – A store of goods available for sale, distribution or use.
Focus on:-
Stock of raw material if in production.
Stock of goods for sale if on operation.
How much are you going to invest in stock?
How frequent will you be carrying stock taking?
What is your stock cycle’s i.e. minimum value of stock to be maintained at any given
time?
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Draw a layout plan for your production process.
Indicate dimensions of each step.
State equipment available and requirements for each station.
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5.0 CHAPTER FIVE
5.1 FINANCIAL PLAN
This phase deals with financial aspect of your proposed business. To gauge your future
financial potential you will prepare projected cash flow statements pro-forma profit and loss
account (Trading Statements) and pro-forma balance sheets. You will also determine the
break-even levels of sales and calculate the expected profitability ratio of your business.
Finally you will indicate your financial requirements and proposed capitalization.
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(iii) Working capital estimated as amount of money needed to finance business operations
for a duration of (1) (2) (3) (4) (5) (6) etc. months before business start making
adequate profits to sustain itself.
(iv) Miscellaneous expenses estimated at 10, 20, 30% of other expenses.
Months
1 2 3 4 5 6 7 8 9 10 11 12
Cash inflows
Collection debtors
Other specify
Total cash inflow
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Cash out flow
Cash purchases
Creditors payments
Rent
Salaries
Telephone
Electricity
Advertisement
Repair/Maintenance
Traveling / Transport
Others – Specify
Total cash flow
Net cash
Cumulative Cash
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5. Net incomes (profits) = gross profits – expenses (overheads).
Preparation of income statements
List the expected year incomes from sales and other revenue sources.
List the expected yearly expenses.
Prepare the income statements.
Projection is made for the three years of business operations.
Nb: Gross profits = incomes (sales minus major cost of operations).
Summary
Income statement for ………………….business for the year…………………….
CURRENT ASSETS
This includes cash at hand or in the bank and all those assets that can be converted into
cash within one year e.g. debtors, accounts receivables, stocks or material stocked or
finished products etc.
FIXED ASSETS
These include items that the business has acquired and are expected to last for a long time
usually more than one year e.g. land, buildings, equipments, furniture, machines, vehicles
etc.
LIABILITIES
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Anything the business owes others. They are claims against assets of the business. They are
classified as their current or long term.
CURENT LIABILITIES
Are debts that must be paid within one year e.g. creditors, bank overdrafts, salary arrears,
short-term loans etc.
LONG TERM LIABILITIES
Debts payable in more than a year time e.g. a five year term loan.
5.9 BREAK EVEN ANALYSIS
At what point will your business break-even in year one, two and three?
Breakeven point – is the level of operation at which a business neither makes a profit nor
sustains losses. The business has exactly enough income over expenses with nothing left
over for profits. The information assists a business in setting a reasonable price for a
product to determine markup or profit projections.
Calculate break-even points in terms of sales and also in terms of money.
Draw break-even chart to illustrate this (refer to cost accounting and marketing books).
Comments
iii) RETURN ON EQUITY RATIO (R.O.E)
Determine the rate at which the business is receiving returns on owner’s equity to the
business. It is computed by diving net profits after taxation to owner equity i.e.
R.O.E = Net profits after tax x 100
Owner’s Equity
SUMMARY: RETURN ON EQUITY
ITEM YEAR 1 YEAR 2 YEAR 3
23
NET CASH
Comments ……………………………
5.11 DESIRED FINANCING
How much money do you need to initiate your venture?
NO. ITEMS AMOUNT REMARKS
1 Owners equity Cash
2 Loan – KIE Machine (specify)
3 Loan KCB Cash
Others Specify Specify
Total xxx
Total amount of loan to pay (principal loan and interests) Ksh 190,200/=
NOTES
1. Equity must be more than 20% and more than 60% of the total.
2. Equity or loan can be in cash, materials tools or machines and equipments.
3. Security refers to some property pledged by the borrower to a lender to be used in the
event of default e.g. land building, vehicle, chattel mortgages guarantors etc.
4. Guarantee and undertaking to pay another person’s debts in s=case of default.
5. Grand period – the duration allowed by the lender to make use of money before you
start paying back.
6. Loan payment schedule shows amount paid per year that encloses principle plus
interest. It m may be broken to nominally quarterly or semi annually.
APPENDICES
REFERENCES
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Writing a business plan
BUSINESS PLAN
COVER PAGE
Name of business:
............................................................................................................................................................
Address and telephone:
............................................................................................................................................................
Name of owner:
............................................................................................................................................................
............................................................................................................................................................
Date:
............................................................................................................................................................
Signature:
............................................................................................................................................................
EXECUTIVE SUMMARY
Summarised statement on:
a. Business description
b. Opportunity and entity
c. Target market
d. Management team
e. Financial plan
f. Critical risks and problems and solutions
BUSINESS DESCRIPTION
i) Owner Details
Name:.................................................................................................................................................
Age:....................................................................................................................................................
Address:.............................................................................................................................................
Occupation:........................................................................................................................................
............................................................................................................................................................
Education/Professional
Qualifications: ...................................................................................................................................
.........................
Business
Experience: .......................................................................................................................................
.....................
ii) The Business Venture
Name of business:
............................................................................................................................................................
Location of business:
............................................................................................................................................................
Legal form of business:
............................................................................................................................................................
Major activity of business:
............................................................................................................................................................
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Principal customers
............................................................................................................................................................
............................................................................................................................................................
Location of customers:
............................................................................................................................................................
............................................................................................................................................................
Amount to be invested by owners
............................................................................................................................................................
............................................................................................................................................................
Amount to be borrowed:
............................................................................................................................................................
............................................................................................................................................................
Total amount needed for the venture:
............................................................................................................................................................
............................................................................................................................................................
iii) The Product/Service.
Name of
product/service: .................................................................................................................................
..........................
Features of
product/service: .................................................................................................................................
..........................
Benefits obtained from
product/service: .................................................................................................................................
..........................
Unique features of
product/service: .................................................................................................................................
...........................
iv) Entry Plan
Competitive advantage of the business:
............................................................................................................................................................
............................................................................................................................................................
Weakness of competition:
............................................................................................................................................................
............................................................................................................................................................
Pricing plan:
............................................................................................................................................................
............................................................................................................................................................
Plans to attract customers:
............................................................................................................................................................
............................................................................................................................................................
v) Growth plan
Trends which signal business growth:
............................................................................................................................................................
............................................................................................................................................................
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Opportunities arising from this trend:
............................................................................................................................................................
............................................................................................................................................................
Plans to take advantage of the opportunities:
............................................................................................................................................................
............................................................................................................................................................
MARKETING PLAN
i) Potential Customers
Type of customers (individuals, institutions):
............................................................................................................................................................
............................................................................................................................................................
Total target market population:
............................................................................................................................................................
............................................................................................................................................................
Number of customers who can buy product/ service:
............................................................................................................................................................
............................................................................................................................................................
ii) Competition.
Names of the key competitors:
............................................................................................................................................................
............................................................................................................................................................
Location in relation to your business:
............................................................................................................................................................
............................................................................................................................................................
Size of the competitors:
............................................................................................................................................................
............................................................................................................................................................
Comparisons between your product(s) or service(s) and those of the competitors:
............................................................................................................................................................
............................................................................................................................................................
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............................................................................................................................................................
............................................................................................................................................................
Credit terms to be offered:
............................................................................................................................................................
............................................................................................................................................................
Discounts to be allowed:
............................................................................................................................................................
............................................................................................................................................................
Any after-sales service(s) and relevant costs:
............................................................................................................................................................
............................................................................................................................................................
iv) Sales Tactics.
Method of direct selling or personal selling:
............................................................................................................................................................
............................................................................................................................................................
Method of indirect selling:
............................................................................................................................................................
............................................................................................................................................................
Method of recruitment and retention of the sale force:
............................................................................................................................................................
............................................................................................................................................................
Utilization of distributors or agents:
............................................................................................................................................................
............................................................................................................................................................
Ways of selecting and motivating distributors or agents:
............................................................................................................................................................
............................................................................................................................................................
Geographical area you intend to serve:
............................................................................................................................................................
............................................................................................................................................................
v) Advertising and promotion.
Media to be
used: ..................................................................................................................................................
............................................................................................................................................................
..........
Product/service image to be portrayed:
............................................................................................................................................................
............................................................................................................................................................
Image to be projected regarding business:
............................................................................................................................................................
............................................................................................................................................................
Frequency of advertisements:
............................................................................................................................................................
............................................................................................................................................................
Cost per advertisement placement:
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............................................................................................................................................................
............................................................................................................................................................
Measuring effectiveness of the advertisements:
............................................................................................................................................................
............................................................................................................................................................
Plans for initial promotional campaign:
............................................................................................................................................................
............................................................................................................................................................
Plans for regular promotional methods:
............................................................................................................................................................
............................................................................................................................................................
Cost of each promotional event:
............................................................................................................................................................
............................................................................................................................................................
Measuring effectiveness of promotional campaigns:
............................................................................................................................................................
............................................................................................................................................................
vi) Distribution
Channels to be utilized:
............................................................................................................................................................
............................................................................................................................................................
Means of transport you will use:
............................................................................................................................................................
............................................................................................................................................................
Transport cost per month:
............................................................................................................................................................
............................................................................................................................................................
Anticipated distribution problems:
............................................................................................................................................................
............................................................................................................................................................
Overcoming distribution problems:
............................................................................................................................................................
............................................................................................................................................................
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ORGANISATION PLAN
i) Structure (draw)
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Postal:
............................................................................................................................................................
Management advice:
............................................................................................................................................................
............................................................................................................................................................
Other:
............................................................................................................................................................
............................................................................................................................................................
PRODUCTION PLAN
ii) Machinery/equipment
No Item Unit Price Total Value Maintenance Costs
Total:
Value Source
Total:
Total:
v) Labour
No Particulars No. of Staff Annual Further Training
Wages/Salaries Required
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Skilled
Semi-skilled
Unskilled
Owner’s Salary
Total:
Total:
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FINANCIAL PLAN
i) Pre- operational Costs
ITEM COST
Transport
Market research
Plan properties
Meeting people
Photocopying
Installations
TOTAL COST
APPENDICES/REFERENCES
Is any reference documents that support your business plan. All supporting documents should be
readable and understandable. Importance:
(i) It demonstrates that you have done a significant amount of thinking, land working in all
areas of venture.
(ii) Exhibit credibility to your plan.
(iii) Allows the read visualize your plan, visions and goals.
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