BUSINESS PLAN

“The secret of business is knowing something that nobody else knows”. Aristotle

Learning objectives

By the end of the module the reader should be able to:-

i) Examine the critical factors that should be addressed in planning
ii) Outline the importance of a business plan and describe the benefits derived from it
iii) Discuss each compound of a business plan
iv) Highlight points to remember in the presentation of a business plan.

Definition of a Business Plan

 Business plan is a document that describes the goals and objectives of the business
clearly how and when they will be achieved.
 It is a structured guideline to achieve a business goal.
 It’s a roadmap to owning and operating business.
 It’s a proposal that describes a business opportunity for financing agencies or
interests.
 A business plan is a written description of your businesses future, a document
that tells what you plan to do and how you plan to do it. If you jot down a
paragraph on the back of an envelope describing your business strategy, you’ve
written a plan, or at least the germ of a plan.
 Business plan is a strong business tool, especially for the small business owner. It
provides you with every detail about your business and allows you to review the
hard ,clear facts that are needed to make strong and successful business
decisions even if it means starting the business over.

Why write a business plan/purpose of business plans

i) To obtain financing
ii) It guides in operating a business
iii) It guides in managing a business
iv) It communicates clearly to the interested parties
v) It is a marketing tool for the business.

TO MAP THE FUTURE

 A business plan is not just required to secure funding at the startup phase but is a
vital aid to help you manage your business more effectively.
 By committing your thoughts to paper, you can understand your business better
and also chart specific courses of action that need to be taken to improve your
business.
TO SUPPORT GROWTH AND SECURE FUNDING.
 When seeking investment in your business, it is important to clearly describe the
opportunity, as investor will want to know.
 Why they would be better off investing in your business, rather than leaving
money in a bank account or investing in another business?

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  What the unique selling proposition (USP) for the business arising from the
opportunity is.
 Why people will part with their cash to buy from your business?
 A well written business plan can help you convey these points to prospective
investors, helping them feel confident in you and in the thoroughness with which
you have considered future scenarios.

TO DEVELOP AND COMMUNICATE A COURSE OF ACTION.

A business plan helps a business assess future opportunities and commit to a

particular course of action. By committing the plan to paper all other options are
effectively marginalized and the business is aligned to focus on key activities.

TO HELP MANAGE CASH FLOW.

Careful management of cash flow is a fundamental requirement for all businesses.

Cash flow management is key when a business pursues investment opportunities
where there are significant cash out flows, in advance of the cash flows coming
in.
These opportunities need to be assessed against any seasonal variations in the
business and the timing of the flows.

HELPS IN MANAGING THE BUSINESS

When is a business plan written?

i) After deciding to go into business
ii) Before starting the business
iii) When updating is required especially when the owner wants to expand the business.

What are the types of business plan?

i) For retail business
ii) For wholesale business
iii) For services v
iv) For menu business
v) For any other type of business

Who writes the business plan?

i) Each prospective business owner/manager writes a business plan for the business he/she
intends to open.
ii) A support agency may assist in writing certain areas of the business plan for example
Kenya Industrial Estates, Faulu Kenya.
iii) Use of consultant/expert

How is the business plan written?

i) By identifying all the questions that could be collected relating to the business

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 ii) By determining what further information needs to be gathered to answer all the questions
iii) by comparing various alternatives
iv) By making a decision on each question.

Source of information for a business plan

i) From the customers
ii) From the customers
iii) Supplies

Benefits of a Business Plan

i) It’s a financial tool that provides information if one wants to obtain a loan
ii) It enables potential entrepreneurs to assess the viability of their business opportunities
on paper
iii) It forces entrepreneurs to establish written goals and objectives for the proposed
business.
iv) It establishes the financial need of a business and suggests the possible sources of
financing.
v) A business plan tests ideas on paper
vi) It indicates the owner’s ability and commitment
vii) A business plan is a blueprint or guidelines.

Qualities of a Good Business Plan

 Simplicity and clarity – in order to be attracted and motivating to the reader, the
business plan should be:-
i) Be simple
ii) Sentences should flow logically
iii) Each sentence should have one idea
 Brevity – one should be brief and straight to the point
 Logic – ideas should follow one another in a logical sequence. Paragraphs should be
connected.
 Truth – one needs to be frank and not overstating the facts
 Use of figures – words should be backed by figures especially in financial plan.

Cover Page
 Business plan
 Name of the business
 P.O BOX………….
 Telephone/mobile no………
 Recipient……………………..
 Business Owner………………………
 Admission Number………………………
 Presented to …………………………………. (Name of the institution)
 In partial fulfillment of the requirement for award of degree in Business
Administration
 Supervisor …………………………………… (for example Kennedy Otieno)

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  August 2011

i) Declaration
I hereby declare that the business plan is my original work and that it has not been
resented for the award of a degree or diploma to any institution.

Name…………………………………………………………………………………
Admin. No…………………………………………………………………………….
Signature………………………………….. Date…………………………………..

Supervisor Name………………………………………………………………………
Signature………………………………….. Date…………………………………..

ii) Acknowledgement
Acknowledge: Lecturer, institutions and employer for their financial and moral
support.
This part is stated as:
I wish to acknowledge the following people who assisted me in ensuring that the
business project report was successfully done.

iii) Dedication……………………………….

iv) Table of contents

Components of a Business Plan/ Business plan template

1.0 An executive summary
2.0 Business description
3.0 Marketing plan
4.0 Organization and management plan
5.0 Production/operational plan
6.0 Financial plan
7.0 Risk plan (not necessary if included in every chapter)

1.0 Executive Summary

Write this last so that you can summarize the most important points from your business
plan.
Provide a concise but positive description of your organization. Summarize what you
intend to do, how and when you intend to do it and how you think you can overcome
major obstacles (such as competition).
Summarize key business highlights for example you might include a chart showing
projected sales, expenses and net profit for the next three years.
Summary of important points in each chapter and should not be less than 5 – 8 lines for
each component.
It should be one and half to two pages. It should include summary of:-
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 1.1 Business description
1.2 Marketing plan
1.3 Marketing and organizational plan
1.4 Production and operation plan
1.5 Financial plan

2.0 Business Description

2.1 Background of the owner
This is where the details concerning the owner of the business are included e.g. name of
the owner(s), age, marital status, address, occupation, education, professional
qualifications, and business experience. Show there relevance to business.

2.2 Business name

 It means the name of the business
 Need to describe how the name was selected
 One needs to come up with a logo of the business
 Logo identifies the business

2.3 Business location and address

 It means where the business will be located, the place and also the site
 Location is general
 Site is specific
 Include a map of the location
 Physical address of business including, email and website

2.4 Form of ownership

The form of the business may include
 Sole proprietorship
 Partnership
 Private company/public company
 Co-operatives
 Give reasons for choosing that kind of ownership
 Give advantages and disadvantages to show that you understood the business you are
going to start.

2.5 Type of business

 It means whether the business is a start-up or ongoing
 Give some of the activities of the business

2.6 Products and services

 What product(s) are you going to offer?
 Describe clearly and include features of products and services for example indicate
size, color, shape, materials, quality, and packaging of the product.

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  What benefits will customers obtain from using your product/service e.g. consider the
performance, conveniences, economy, comfort, durability, usage, flexibility,
servicing, warranties.

2.7 Justification of opportunity

The reasons for choosing that kind of business e.g. exploit resources, nutritional value of
opportunity, niche market, technology advancement, professional qualifications, unmet
demand, climate favorable, infrastructure and security.

2.8 Industry
Which industry does your proposed business belong to? E.g. matatu belongs to transport
industry, consider the total number of firms in that industry or competitors. What is the
industry trend? Is the industry growing, declining or stable? Explain what’s happening in
that industry. Industry characteristics that is capital requirements and kind of technology
in that industry including capital investment and labor requirements

2.9 Goals of Business/Objectives

2.9.1 Goals
What does the business want to achieve in the long term? For example to become a
quality leader, market leader, penetrate in the other markets.

2.9.2 Objectives
What does the business want to achieve in the short term? For example to maximize
profits, increase sales, minimize costs.

2.10 Entry and Growth strategy

 It means how you will penetrate and gain acceptance in the market.
 Need to consider the competitive advantages among competitors, pricing and
Distribution advertisement or promotional methods.

2.10.1 Entry plan

i) Competitive advantages of the business that is what your business has, compare to
competitors.
ii) Weakness of the competitors
iii) Pricing plan – how you will set our prices for your products
iv) Plans to attract consumers – methods you’re going to use

2.10.2 Growth plan

i) Trends which signal business growth/signs of business growth
ii) Opportunities coming from the trends/prevailing opportunities
iii) Plans to take advantage of the opportunities
Carry out a SWOT analysis or use the 4 P’s of marketing as marketing as strategies for entry
and growth.

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3.0 Marketing Plan
3.1 Customer
 Understanding potential customers or current customers is important for any business
because there’s a need to determine who you customers are; wholesalers, retailers,
user/individuals, households and institutions like schools, hospitals, churches.
 You need to determine location of your customers e.g. how many they’re and their
location in terms of income, age, size, education, occupation etc.
 What will customers be looking for in your product or service? For example:
i) Product consideration/characteristics; price, quality, appearance, colour, shape,
materials, size-weight, volume and efficiency
ii) Business considerations
 Advertisement and promotion
 Variety of goods and services
 Credit facilities
 Capability of employees etc
 Method of selling

Examples of customers that need to be analyzed

3.1.1 Wholesalers
3.1.2 Retailers
3.1.3 Institutions
3.1.4 Individuals/households

3.2 Market share/size

It’s the amount of unit sales e.g. what is your estimated expected total sales in units per
month or even quarterly or even yearly. In estimating the market size, one needs to list
down the business selling similar products in the market for example assuming that we
have the followings firms:

Before you penetrate in the market

A B C Total
Sales 20,000 40,000 40,000 = 100,000
Market share 20% 40% 40% 100%

After penetration

A B C D
Sales 20,000 40,000 40,000 30,000 = 120,000
Market share 16.7% 33% 33% 16.7% 100%

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 Competition
 Need to consider what they’re doing
 Analyze factors that have contributed to their success or failure
 Determine if there are gaps to be filled
 Determine your potential competitors and their size in terms of assets, sales volume
and market share of the major competitors
 Determine the strengths and weaknesses of the competitors
 Plans to capitalize on the weaknesses of the competitors

Assuming that we have three firms A, B, C

Table 6: Competition

A B C Total
Assets 200,000 100,000 200,000
Sales volume 400,000 500,000 300,000= 1,200,000

Market share 400,000 = 33.3% 500,000=42% 300,000=25%

1,200,000 1,200,000 1,200,000

Profit p.a 80,000 100,000 60,000

No. of employees 3 4 2

3.4 Methods of promotion and advertisement

i) Media to use which can be electronic and print media
ii) How will you portray your products? What image do you want to project in the
mind of consumer?
iii) How often will you advertise your products or services?
iv) How much will each advertisement cost?
v) How will you measure the effectiveness of your advertisement?
vi) What promotion campaign will you undertake when introducing the product or
service e.g. free samples or free introductory services?
vii) What promotional methods will you employ on regular basis e.g. trade shows,
sponsorships of competitions and the cost of promotion per events.
viii) How will you measure the effectiveness of your promotional campaigns?

3.5 Pricing strategy

i) The methods of calculating the selling price for your products or services.
ii) Factors which will influence your price setting include:-
 Income of clients targeted
 Prevailing market prices
 Cost of raw materials
 Nature of competition
iii) Actual selling prices of product or services
iv) Credit terms to be offered

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  What kind of credit will you give to loyal customers or the ones you know?
 When are you going to offer credit? Is it at the end of the month?
 When will your customers pay back?

v) Discounts offered
 Cash discount when one pays promptly
 Trade discount when one buys in large quantities
vi) Any after sales services
 Offered after purchase e.g. transport, warranty, installation etc

3.6 Sales tactics

i) Selling tactics you will employ e.g. direct selling to the customers or personal
selling or selling indirectly (through an agent)
ii) If you intend to sell indirectly to the customers, how will you recruit, retain and
remunerate your sales force.
iii) If you intend to sell to the distributions or agents, how will you select and
motivate them? E.g. for middlemen, you can use the one already used by many
competitors, select the ones who have a high reputation. Motivate the middlemen
by giving them high profit margins.
iv) Which geographical areas will your agents cover?

3.7 Distribution strategy

i) How will you get your products to reach your customers? E.g. through sales
representatives, wholesalers or distributors?
ii) What means of transport will you use e.g. road, air, rail etc?
iii) How much will the chosen means of transport cost you per month or for a given
period of time?
iv) What specific distribution problems do you anticipate?
v) How will you solve the problems that you anticipate?

4.0 Organization and Management Plan

4.1 Management team

Need to include the members of the management team for your proposed business e.g.
Human resource manager, managing director, production manager, marketing manager,
finance manager.

4.1.1 Describe each of the managers stated above e.g. Managing Director (MD)
 Duties and responsibilities
 Qualifications of the MD. One must have a master’s degree and C.P.A. (K),
depending on the nature of business.
 Experience: 15 years’ work experience at a managerial level.

4.1.2 Purchasing manager

 Duties and responsibilities
 Qualifications

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  Experience

4.2 Other personnel

These include other employees who are not in management team:-
Table 7: Other personnel
Title No. Qualifications Duties
Accountant 1 B.Com. CPA(K) Budgeting, financial reports
Payment of salaries,
Sales Rep 2 KC.S.E (C)
Dip.in Sales and Marketing Distributing products
Sales promotion

Security Officer 1 K.C.S.E at least

Experienced Premises security

Figure 4: Organization chart

Managing Director

HRM

Finance Manager Marketing Manager Procurement Manager

4.3 Recruitment, training and promotion

4.3.1 Recruitment
Need to describe how managers and other personnel will be recruited:-
For management team one can use:-
 Use poaching
 Advertise
 Recruitment agencies

Other personnel
 Poaching
 Recruitment agencies
 Word of mouth

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4.3.2 Training
 Induction training will be given to the newly employed staff and also for those are
promoted.
 On the job training
 Off the job training that include workshops and seminars for the staff
Explain the purpose of training

4.3.3 Promotion
 Criteria of promoting personnel e.g. promotion on basis of evaluation/merit, after
training and attaining qualifications and experience.

4.4.1 Remuneration and incentives

 Indicate firm policy on remuneration e.g. to offer attractive salaries to employee as to
motivate and retain them

Table 8: Remuneration and Incentives

Title No. Monthly pay Allowances/benefits Total

……….. 1 40,000 20,000 60,000
…….. 1 30,000 15,000 45,000
Marketing manager 1 25,000 25,000 50,000
Security officer 1 5,000 3,000 8,000

4.4.2 Incentives
 Bonus
 Commission
 Lunch
 Tea, overtime allowance

4.5 Licenses, permits and by-laws

4.5.1 Licenses
 Trading licenses are paid for in order to start trading
 Where are you going to get the license and how much will it cost you? City council
License?
 State the purpose of trading licenses

4.5.2 Permits
Depending on the nature of the business e.g. milk business will need a permit from Kenya Dairy
Board. For beer from Kenya Liquor Licensing Board, School from Ministry of Education.

4.5.3 By-Laws

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Business will need to comply with the by-laws issued by: county council, municipal council, city
council.
Give reason why your business needs to comply with the by-laws.

4.6 Support services

The business will require support services to enable it carry out it’s operations-effectively.

These will include:-

4.6.1Banking services
 The bank to open an account and the branch
 Type of account
 Purpose of account

4.6.2 Insurance services

 Firm which insure your business
 Indicate what you want to insure against
 How much is likely to cost you?

4.6.3 Consulting services

 Depending on the nature of business, for a school you need advice from teachers/lecturers
 Indicate who will be your consultant and the kind of advice expected.

4.6.4 Legal services

 Legal services will be required when writing contracts, drafting legal letters, interpreting
labour laws and employment
 Indicate the legal firm and the lawyer(s)
 Indicate the registered office

5.0 Production/Operation Plan

5.1 Production facilities and capacity
 Types of facilities required
 List all equipment, machinery, and show the cost of each
 List any other facility required to set up the business and show the cost
 Explain your plans for repairs and maintenance of the machinery
 Show your factory/office layout
 Levels of production (maximum and minimum)
 Explain expansion and future plans of the office/factory

Table 9: Production, facilities and capacity

Item Quantity Cost Capacity
Office 2 rooms 40,000 5 office personnel
Store 2 rooms 20,000 1 ton of tools/removable equipment
Pick-up 1 200,000 CC 1800
Electricity 3 phase 30,000 1000 kw
Pangas 5 2,000 5 persons

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5.1.1 Firm layout
 Draw a firm’s layout

5.2 Production Strategy

It means the methods used to produce the product
 Describe production development from idea to saleable product or service
 Indicate the cost that you will incur when developing your new product
 What kind of methods(s) will you use?
 What changes do you anticipate in technology and how will you cope with them?
 Describe your material requirements, who will be your main supplier?
 What alternative sources are available?
 Describe the skills required for efficient production both for direct and indirect
workers
 Describe the monthly production cost for the products and services
 What will be the total production in a month?
 Purchasing and stock control methods to use

5.3 Production process

 Show stages in producing the product or services
 Production materials involved in production process
 What external factors are likely to affect the production process
 How will you minimize the effects of external factors
 Indicate factors that affect production process

5.4 Production affecting operation

5.4.1 Health regulations

 The requirements of the public health will be adhered to in handling all the
company’s products
 Regular advice that would be sought from the government departments

5.4.2 Safety
Necessary measures that you would take or be followed to guard against physical injuries
of the workers e.g. use of the mask, boots, jackets, helmet etc.

5.4.3 Environmental regulations

 Environmental concerns are one of the major emerging issues in the running of
any business. Today environment legislation set by the government will be
adhered. Regular audits should be done to check the availability and their
efficiently. Are there measures to conserve the environment? For instance, what
environmental concerns will be handled by planting trees?

6.0 Financial Plan

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 The main reason of preparing a business plan is to receive funds. The financial plan
comprises analyzing financial requirements or business and developing financial plans.
Objectives of financial plan
i) Maintain a healthy liquidity position throughout the trading period
ii) Maintain return-on-owners-equity-for example at 25 percentage
iii) Realize a steady growth on income throughout the period
iv) Maintain and control expenses
v) Maintain an effective accounting system

Financial Assumptions
i) The expenses are expected to rise by for example 5 percentage as business operations
expand.
ii) Creditors are to be increased by a certain percentage per year
iii) Debtors are to increase by a certain percentage per year.
iv) Net profit is expected to increase by a certain percentage per annum
v) Net profit realized would be ploughed back to the business so as to expand the
business

6.1 Pre-operational costs

Pre-operational means the cost incurred before the start of the business

ITEMS COST
Research/travelling XXXX
Designing XXXX
Licenses XXXX
Advertisement XXXX
Recruitment XXXX
Professional fee XXXX
Installation XXXX
Rent deposit XXXX
Utility bills XXXX
Total amount XXXX

6.2 Pro-forma balance sheet

A balance sheet is a financial statement that shows the financial position of the business
for certain period of time (usually one year)
Balance sheet as at 31 December 2011
Assets (fixed)
Building at cost XXXX
Land XXXX
Motor vehicle XXXX
Less depreciation (XXXX)
Furniture & fittings XXXX
Less depreciation (XXXX)
XXXX

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 Current assets
Stock XXXX
Cash at bank XXXX
Cash at hand XXXX
Debtors XXXX
Pre-payments XXXX
XXXX

Less current liabilities

Creditors XXXX
Accruals XXXX
Bank overdraft XXXX
Working capital XXXX
XXXX
Financed by:-
Opening capital XXXX
Add net profit XXXX
Less drawings XXXX
Closing capital XXXX
Loans XXXX

6.3 Working capital

Working Capital is the current assets – current liabilities
i.e WC = CA-CL
Current Assets
Cash at hand XXXX
Cash at bank XXXX
Debtors XXXX
Stock XXXX
XXXX

Less current liabilities

Creditors XXXX
Bank overdraft XXXX
Accruals XXXX
XXXX

Working capital XXXX

XXXX

6.4 Cash flow projection

It is financial statement that shows cash in and cash out of the business.
Transactions that generate cash in a business include; sales, payments from debtors,
discount received, rent received, loan received.

Transactions that may reduce cash in a business include:

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 Purchases, salaries/wages, rent payments, payments to creditors, standing orders,
discount allowed etc.

4.1 Cash flow projections for the year 2012

Receipts Jan. Feb. March………………. Dec.

Loan 50,000 - -
Sales 30,000 70,000 80,000
Debtors 20,000 20,000 35,000
Discount received 5,000 5,000 4,000
105,000 95,000 119,000

Payments
Purchases 30,000 40,000 45,000
Salaries/wages 10,000 10,000 15,000
Creditors 30,000 30,000 35,000
Discount allowed 10,000 10,000 8,000
80,000 90,000 102,000

Cash flow 25,000 5,000 17,000

Balance b/d - 25,000 30,000
Balance c/d 25,000 30,000 47,000

6.5 Pro-forma income statement (trading, profit and loss account)

Item Year 1 Year 2 Year 3

Sales XXXX XXXX XXXX
Cost of sales XXXX XXXX XXXX
Gross profit c/d XXXX XXXX XXXX

Gross profit b/d XXXX XXXX XXXX

Add any income
Expenses
Salaries & wages XXXX XXXX XXXX
Rent XXXX XXXX XXXX
Water XXXX XXXX XXXX
Telephone XXXX XXXX XXXX
Postage XXXX XXXX XXXX
Transport XXXX XXXX XXXX
Total expenses XXXX XXXX XXXX

Net profit before

Tax XXXX XXXX XXXX
Taxation (%) XXXX XXXX XXXX
Net profit after
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 Tax XXXX XXXX XXXX

6.6. Break Even Analysis

Break even analysis is where the total revenue is equal to the total costs. The firm is
earning normal profit or zero profit. If total revenue > total costs, the firm makes
abnormal profits or supernormal profit. If total revenue < total costs the firm will make
losses. Break even analysis is also known as Cost Volume Analysis.

Assumption of break even point analysis

1. Fixed cost will remain constant. It means that the fixed cost does not change as the output
changes.
2. Cost and revenue behave in a linear fashion or linear manner. It means if output increases
then revenues will increase proportionally.
3. That, the only factor affecting cost and revenue is volume (turnover)
4. Technology, production methods and efficiency does not change
5. For graphical methods the analysis relates to one product or to a constant product mix.
6. The closing stock is valued at marginal cost only.

Usefulness of break even analysis

As a management tool, it has the following benefits
i) Helps to find specific level of output
ii) Shows behavior trend of cost and sales
iii) Information can be used to make proper decisions
iv) The analysis shows the safety level of a particular level of activity. Safety level
means the quantity which it is safer to produce.

Limitations to break-even point analysis

i) Only done within specific levels of activity
ii) Fixed costs may change at different levels of activity especially in the long run
iii) Variable costs may not give a linear trend
iv) The relevant time factor can effect break even analysis

Formula of break-even point (B.E.P)

a) B.E.P in units = fixed costs
Contribution/unit

b) B.E.P in value (Shs) = fixed cost x selling price/unit

Contribution/unit

c) Contribution/sales ratio = contribution/unit x 100

Selling price

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 d) Number of units for target profits = fixed costs + target profits
Contribution/unit

e) Sales for target profit = fixed costs + target profits (selling price)
Contribution/unit
A company makes a single product with a price of shs.10 and a marginal cost of Shs. 6 and the
fixed costs of shs.60, 000 p.a. calculate:

a) Number of units to break even

b) Contribution per sales ration
c) What number of units would need to be sold in order to achieve a profit of 20,000 p.a?
d) Which level of sales will achieve a profit of 20,000 p.a

Solution:
a) Number of units to break-even point (B.E.P)
B.E.P in (units) = Fixed cost
Contribution/units

Contribution = selling price – marginal/variables cost

= 10 – 6
= 4

B.E.P in units = 60,000 = 15,000 units

4

b) Break-even point in (Shs) value = Fixed cost x selling price/units

Contribution/unit

= 60,000 x 10 = 150,000 (value)

4
c) Contribution per sales ration = 4 x 10 = 40%
10

d) Target profits = 60,000 + 20,000 = 80,000 = 20,000

4 4

e) Sales for target profit = 60,000 + 20,000 x (10) = 20,000 value

4

6.7 Desired financing

Item Amount
Pre-operational costs XXXX
Working capital XXXX
Fixed assets XXXX
XXXX

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6.8 Capitalization
Item Amount
Owners contribution XXXX
Borrowed funds XXXX
Total investment XXXX
6.9 Profitability rations
i) Gross profit ration = G.P. x 100
Sales

ii) Net profit ration = N.P x 100

Sales

iii) Return on equity = N.P x 100

Owner’s equity
Owners equity = (opening capital + net profit) less withdrawing

iv) Asset turnover = Sales revenue (total sales)

Assets (CA +FA)
v) Quick ratio = Current asset – stock (closing stock)
Current liabilities

v) Liquidity rations = Current assets

Current liabilities

Risk management
Important for the entrepreneur to make an assessment of risk. He/she should indicate the initial
risks of the new business and go on to describe what might happen to the business if a risks
become a reality. The entrepreneur should then discuss the strategy(s) to prevent, minimize or
respond to these risks. Some of the risks could arise from:

i) Economy
ii) Political
iii) Ecological
iv) Social cultural
v) Economical
vi) Legal
vii) Industry
viii) Financial

Appendix
This consists of support documents/back up materials. This is material not included in the text of
document. It could include:-
i) Map
ii) Questionnaire
iii) Certificates of business registration
iv) Bank loan forms

Madam Kyule – jacklinekyule@gmail.com

 v) Curriculum vitae

Sample questions
1. Mr. Onyango has been contracted by Beta Consultants to write a business plan for milk
bar business. Explain the qualities of such a business plan.
2. After operating his business for two years M/S Kamene was advised by a consultants to
write a business plan. Explain the reasons for such advice.
3. A potential investor regards the marketing plan as critical to the success of a business
highlight the critical sections of that component.
4. Explain the sources of information that small scale entrepreneurs may use for writing
their business plans.
5. An entrepreneur is contemplating writing a business plan on mushroom farming.
Justify such an opportunity.
6. Organization and management plan is an important component of a business plan.
Highlight the sections of this component.
7. Marketing research is important to the entrepreneurs before they write a business plan.
Justify the reasons for carrying such a task.
8. Production plan should be included in a formal business plan. Highlight the sections of
this component.
9. Highlight the assumptions that entrepreneurs need to make when computing break even
the financial plan.
10. It makes sense to write a business plan with particular emphasis in mind “in the light of
this statement explain any FOUR types of a business for which a business plan may be
written.
11. Identify and explain four sources of business ideas for writing a business plan.
12. Discuss FIVE elements of the milestone section of a business plan
13. State FOUR reasons why it is important for an entrepreneurs to write a business plan.
14. Describe FIVE sections of the operation component of a business plan
15. Describe any five sections of the marketing section of a business plan
16. Distinguish between a mission and vision statement of a business plan
17. What is the importance of the operation segment of a business plan
18. For all types of business plan a set of financial projections is expected. With reference to
this statement explain five reasons why the financial segment is important.
19. Distinguish between strategic and transactional business risks.
20. Explain the functions performed by a formal business plan
21. Production plan should be included in a formal business plan. Discuss the importance of
such component to an entrepreneur.
22. When writing a business plan, the entrepreneurs most summarize the risks facing the
business in each of the component in a risk plan section. Describe the risks of each of the
component of a business plan.
23. Organization and management plan is an important component of a business plan.
Highlight the sections of such component.
24. Explain the importance of ration analysis in the business plan
25. Why should a business plan have a harvesting section of a business plan
26. Explain the reasons why entrepreneurs are more interested in financial plan component of
Business plan

Madam Kyule – jacklinekyule@gmail.com

 27. Highlight the limitations of using break even analysis

Madam Kyule – jacklinekyule@gmail.com