Introduction/Definition of Concepts
A business is an activity or entity, normally engaged in the provision of products and or services, for commercial gain, extending to non-Commercial organizations that may or may not be profit oriented. This is irrespective of the size and autonomy. With this definition, non-governmental organizations, private, public service sector like schools and hospitals are regarded as ‘businesses’. Meanwhile, a plan is a statement of calculated intention to organize effort and resource to achieve an outcome. This may or may not be in written form, but essentially comprising explanations, justifications and relevant numerical and financial statistical data.
Business can be classified into the following groups but not limited to: a small company; a large company; a corner shop; a local business; a regional business; a multi-million naira business, multi-national corporation; a charity organization, a Federal, State or Local Government Ministry, Agency or Department, an hospital, a joint-venture; a project within a business or department; a business unit, division, or department within another bigger organization or company, a profit centre or cost centre within an organization or venture, an individual or joint ventures, etc
Business plan therefore could be referred to as the activities and aims of any entity, individual, group or organization with the purpose of converting efforts to results. It is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
Business plans may also target changes in perception and branding by the customer, client, taxpayer or larger community. When the existing business is to assume a major change or when planning a new venture, a 3 to 5 year business plan is required, since investors will look for their returns within that time frame. Invariably, the business plan simply serves as the detailed map of the venture that will guarantee a steady start up, a steady but gradual growth and vitality of the business.
The process of determining all the goals, strategies and projected actions that you intend taking to promote and ensure the survival and progress of your business within a given time frame is referred to as business planning process. This characteristically has two key aspects, one focused on making profits and the other focused on dealing with risks that might negatively impact the business. Business plan serves as a blueprint to guide the organization’s policies and strategies which are continually modified as conditions change and new opportunities or threats appear. If this is prepared for external audience like lenders and prospective investors; it has to include details of the past, the present, and a forecasted performance of the business. Typically, this also contains pro-forma balance sheet, income and cash flow statements to show how the required fund shall positively affect the financial position of the business.
Business Planning Process:
When writing a business plan from the scratch, from a template or from the guide of an experienced business plan consultant, there are five required steps to create a new business plan. It is a detailed process here referred to as business planning process. These steps are:
Research: Business planning process starts with a detailed research into the industry, its customers, competitors, and costs of the business. This research comes in various forms like information from articles, collected data or direct interviews with prospective clients, experienced consultants or entrepreneurs. The result of the research should be meticulously organized and properly documented with its source.
Strategize: The second step is to strategize based on the information gathered from the research. A good major source of strategizing is to watch the current practices in that business environment to have a foundation to build the necessary competitive distinctiveness. One needs to ponder over the strategy meticulously to consider the appropriate location, startup finances, equipment, operations, marketing and legal formalities.
Calculate: From the decided strategy activities, comes the third step to calculate. It is essential to calculate and have a rough draft of the financial implications in terms of the expected expenditure and revenues to ascertain a possible profitability at the end of the day. There is the need to bring up all assumptions for startup expenses up to maturity at calculations for running early operations. Most startup businesses pack up before gestation stage due to financial assumptions.
Draft: The fourth step of a business planning process is to begin to draft and flesh up the background work made in the decided strategy and the financial calculations for the actual business plan detailed content. One may require the services of a business plan writer or consultant, if there is any challenge in respect of this.
Revisitation and Proof-reading to finalize: The fifth step is to revisit the entire business plan details and reconsider any ambiguity or inappropriate wordings and ideas featuring in the plan. There may be the need to give it further fresh looks after setting it aside for some time. Soliciting for the assistance of an experienced proof-reader may be necessary to prevent grammatical, spelling and formatting errors to finalize the plan.
Typical Structure for a Business Plan for a Start Up Venture
From the foregoing, one will agree that business plans are decision-making tools.There is no fixed content for a business plan. Rather the content and format of thebusiness plan is determined by the goals and audience of that enterprise. Some entrepreneurs simply see a business plan representing all aspects of business planning process that include only the vision and strategy with sub-plans to cover marketing, finance, operations, human resources as well as a legal plan when required. To some others, it has to be more detailed than that. It has to typically include an introduction/overview, a short description of the business idea and opportunity, what makes it different, who will be involved in the business, how you will provide your product or service, your marketing and sales strategy and financial situations and forecasts for the expected profitability. Consequently, it is essential to know that the structure of business plans varies. However, this discussion uses a typical structure for a business plan for a startup venture.
This is the general overview of the entire business. It is a summary of the business idea, the mission statement, a sketchy report of where your business fits in the market place and why it will succeed. Questions that have to be answered here include:
What is the business? A brief description of the business idea and why it should be a success, History of the enterprise and its ownership, Information about the entrepreneur’s qualifications, experience and financial status and location.
What is the market? A description of the product and what it does, an explanation of ways in which the product is distinctive and unique, Analysis of the competition, How the product will be developed and what new products are being considered as replacements, Intangible assets & protection (e.g. copyright, trade marks)
What is the potential for the business? Size and expected growth of the market, Analysis of market by segments, Identification of target segments, Competitors – who they are, ownership, size, market share, likely response to the challenge, Customers (existing & potential) – who they are, how they buy, why they buy, Distribution channels
What are the forecast profit figures? A statement of what the business should achieve over a given time target (three or five year period)
What are the Funding requirements?
What are the prospects for investors and lender?
Please note that all these need not be in detail as they are only the overview of the whole plan.
This is a detailed description of the business, with an in-depth explanation of the product or service being planned for the marketa nd its benefits to those who will buy or use it.
Business Environment Analysis: This should explain the detailed strategy and tactics to be employed for bringing the product or service to the market. Strategy is the broad approach to the achievement of objectives while tactics refer to the details of the strategy. This includes the business name, the image and how they will be protected.
• Determines how to get to the market?
• Summarizes how to fulfill the entrepreneur’s objectives.
• The detail will be contained in programmes and budgets.
• the pricing structure to be established.
• the estimated sales projections.
This should thoroughly describe the customers, your competitors, the need for your product or service, and the health and vitality of the market place. This cannot be guess work. It must be based on a careful and reliable research. Other key questions it must answer are:
• What is the size and growth rate of the market?
• How is the market segmented?
• What is special about the product or service?
• What are the competitive advantages?
• What is the marketing strategy?
The marketing has to be adequately planned for and must include the:
• Market research
• Segmentation and targeting
• Detailed outline of the product or service
• Unique selling points
• Chosen pricing strategy
• Promotional plans
• Distribution strategy
• Customer service strategy
Operations plan include the production process which must be explicitly explained. The process of bringing your product or service to the market, office space, production schedules, inventories, suppliers, supplies, official licenses, and insurance, meeting and existing business regulations must all be thoroughly discussed. The following may also be included depending on the type of business.
• Physical location
• Scale & location of operations
• Capacity – potential and effective
• ICT strategy
• Engineering and design support
• Materials required
• Inventory levels and stock control plans
• Purchasing arrangements
• Sources of supply of key resources
• Quality control plans
• Staffing requirements
Management and Organization:
This explains the organizational structure of the enterprise whether it will be sole proprietorship, partnership, Limited Liability Corporation, or other status and those to be involved. Other are
• Details of senior management
• Corporate governance
• Staffing requirements
• Key personnel
• Recruitment and selection
• Rewards (financial & non-financial)
• Labour relations
• Employment and related costs
This offers the idea about the finances to be involved. The available amount, the required amount and how and where you will secure the difference. It should also be able to give the investment appraisal – payback and discounted cash flow as well as break even analysis. Other expectations from the plan are:
• Details of capital required and uses
• The plan must include details of the external finance required. This will be
equal to the finance required, less the finance raised internally from
existing owners and from operations
• The plan will outline how it is proposed to raise the finance
• Sources of finance: Short, medium and long term; Debt v equity
• Evaluation criteria for performance review
• Ratio analysis: net profit margin, Gross profit margin, return on capital employed, liquidity and solvency analysis
Effective business planning has to begin with an honest and realistic appraisal of the
current position of the business.
Reasons for a Business Plan:
Planning about your business is a necessary process to undertake before, during and after start up. The business venture could be a fresh proposed start-up, a new one developing within an existing corporation, a new joint-venture, or any new organizational or business project for as long as it is purposely to convert action into results. As the backbone of any enterprise, it is very essential for an entrepreneur to ask him or herself why he needs a business plan. An axiom says if you fail to plan, then you have planned to fail. A business plan serves as:
Road Map/Guide For The Business: It is not everyone that starts a business with a plan but it is better to have one to guide one. It guides the entrepreneur through the various phases of his business. Note that it is not a static document that you write once and put away. It should be simply taken as a guide or checklist of questions that constantly need to be attended to at every stage of gestation, growth, maturity and decline of the business.
Assurance of potentiality: The headings in a business plan will reassure all that the venture will work. The plan helps to clarify the entrepreneurs thinking and demonstrates his commitment to carry on as planned. It also identifies where he/she intends to get to and how to get there. This will also convince them that the tools, talent and team to make your plan work are already available.
Defines a Business: It helps to identify the business, its objectives/goals and programmes that must be achieved.
Serves as Résumé for the Business: This happens when there is the need for communications to attract more investments, loans and profit potentials of the business.
Regular Business Review and Course Corrections: The business planis your regular reference to ensure you stay focused on its objectives. It will need to be constantly reviewed as the business develops. It provides the chance to focus one’s mind on how one intends to run the business and to identify early on any areas or issues that might have been forgotten or neglected.
Review Current Progress Against The Initial Forecast: The progress of the business shall easily be feasible against the earlier forecasts. This makes any review or necessary adjustments to get it back on track possible. Having a clearly presented business plan document will also make it easier for any specialist support needed.
Support For A Loan Application Or Raise Equity Funding: When ever a business is seeking fund from a bankers, venture capitalist or investor, a comprehensive business plan that is clear, focused, realistic and contains sound business reasoning shall be a necessary requirement to show that it is worthy of financial support. Banks are more favourably disposed to applications with a business plan whenever it is approached for capital to expand.
Defines Agreements Between Partners: It helps to define agreements, shares, etc between partners, shareholders and other stakeholders in the business.
Proper Allocation of Resources: It helps to allocate resources properly, handle unforeseen complications and thereby assist in making adequate business decisions.
Sets a Value on a Business For Sale or Other Legal Purposes: Whenever the business is placed on sale, it helps to set a value for it. This is also required at most times for legal purposes.
CONTENT CURRENT STATUS DEVELOPMENT PLAN
1. Executive Summary
2. Business Description
3. Business EnvironmentAnalysis
4. Market Analysis
5. Marketing Plan
6 Operations Plan
7. Management &Organization
8. Financial Plan
Typical Structure for a Business Plan. Parents and some of the students are involved in one business venture or the other. These ventures need to be developed. Use the worksheet below, to provide information that could be in a business plan that will improve the business.
Name of the Business venture____________________________________________
Group work assignment, individual assignments/ test questions
1.) What is a business plan and why would an entrepreneur need a business plan?
2.) Itemize and discuss briefly the process of business planning.
3.) Can you recognize some business ventures being run within the University campus? List ten of them.