Chapter Three

Business Plan
3.1 The concept of Business plan
What is BP?
Business Plan is a necesity...
A business plan is a written description of the
business idea and how it will be carried out,
including all major business activities.
A business plan is a written document that
describes all the steps necessary in opening
and operating a successful business.
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Cont’d…
A business plan is a written document prepared by the
entrepreneur that describes all the relevant internal
and external elements and strategies for starting a new
venture.
It is a integration of functional plans such as marketing,
finance, manufacturing, sales and human resources.
Business plan is a concise and comprehensive
summary of the business.
Business plan is the image of your business, your
goals and how they can be achieved. The structure
of a business plan will vary depending on the
nature of the business.
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Cont’d…
The business plan of the company explaining the situation,
plan the future action plan, how much it will cost and who will be
the associated revenues.

 A business plan is a written narrative, typically 25 to 40 pages

long, that describes what a new business plans to accomplish.

A business plan contains a description of your company

(products/services), target market, marketing plan and sales
strategy, a review of financial documents and the management
team.
It is a working tool used to start and run a business that requires
material resources, human and financial.
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Shortly,
Business Plan is:
• management instrument
• presentation and sales document
• development and planning document
• recruitment plan.

A good business plan should:

• describe the business concepts
• describe how the company will function
• describe what activities will take place and what
results
• describe what the goals are and how they will be
achieved.
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3.2 Feasibility study
A feasibility study is valuable for:
• Starting a new business
• Expansion of an existing business
• Adding an enterprise to an existing business
• Purchasing an existing business
• Determining cash flow and profits,
• Identifying risks,
• Knowing the sustainability of business

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Cont’d…

Before committing time and energy to preparing a

business plan, the entrepreneur should do a quick
feasibility study of the business concept to see
whether there a any possible barriers to success.

Feasibility study conducted before decision to

proceed (go/no go).

Feasibility study provides investigative function.

Business plan provides planning function.

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Thus, feasibility study includes: (MEET PF)
1) Ecological analysis:
• Identification and exploration of business
scenarios.
• Relationship to the surrounding geographical
area/its impact on the environment.

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 Cont’d…
2) Market Feasibility
• Industry description.
• Industry competitiveness.
• Market potential
• Access to market outlets.
• Sales projection

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Cont’d…
3) Technical Feasibility
• Determine facility needs.
• Suitability of production technology.
• Availability and suitable of site.
• Raw materials.
• Other inputs.

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Cont’d…
4) Financial Feasibility
• Estimate the total capital requirements.
• Estimate equity and credit needs.
• Budget expected costs and returns.
5) Economic Feasibility
The cost –benefit analysis of the society and the
contribution of the business to the country.
• Benefits/costs to the society/country
6) Political-legal Feasibility
• Policy frameworks/rules/regulations
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3.3 Importance of Business plan
The business plan is valuable to the entrepreneur, potential
investors, or even new personnel, who are trying to familiarize
themselves with the venture, it goals, and objectives.
– It helps determine the viability of the venture in a designated
market
– It provides guidance to the entrepreneur in organizing his or
her planning activities
– It serves as an important tool in helping to obtain financing.

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Thus, a business plan is important to:

• Get a fund/support – a detailed and realistic plan has a better

chance of getting funding.
• Create alliance/Partners: big companies are interested in the
survival skills of small firms. A good business plan provides an
important partner that the company has a thorough
knowledge and strength to survive and grow over the long
term.
• To attract employees/motivate management team: If the
company wants to attract a manager with extraordinary
qualities, a business plan will make the company more
attractive and seemed organized, active, geared towards its
targets.
• To win large contract
• Provide information for customers/create awareness

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Preparing a business plan requires its own steps.
These are:
Gather and review information
Develop the strategic alternatives
Write the plan
Ask experts to review the plan

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3.4 Elements of Business plan
1. Cover page
- includes the name of the company, its address, its phone number,
the date, and contact information for the entrepreneur.
2.Table of contents-contents written with page number
3. Introductory Page
– Nature of business-general overview
– Purposes and vision statements-Long- and short-term goals
– Name and address of business
– Name(s) and address of principal(s)
– Statement of financing needed
– Statement of confidentially of report

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Cont’d…
4. Executive Summary – Three to four pages summarizing
the complete business plan
– What is the business concept or model?
– How is this business concept or model unique?
– Who are the individuals starting this business?
– How will they make money and how much?

5. Environmental and Industry Analysis

Future outlook and trends
Environmental analysis
Demand analysis/Industry and market forecasts
Product forecasts
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Cont’d…
6. Description of Venture
Description of product(s)/service(s)
Size of business
Materials and employees required including
cost/salary
Background of entrepreneurs
7.Production/operational Plan
–Manufacturing process (amount subcontracted)
–Technology utilization and Physical plant
–Machinery and equipment
–Names of suppliers of raw
materials/machines/equipments
–Service provision process/operational process

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Cont’d…
8. Marketing Plan
– Customers/market segment
– Pricing
– Distribution
– Promotion
– product
– Competitor’s analysis
9. Organizational Plan
– Form of ownership
– Identification of partners or principal shareholders
– Authority of principals
– Management-team background
– Roles and responsibilities of members of organization
– Structure of the business

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Cont’d…
10. Financial Plan
– Pro forma income statement
– Cash flow projections
– Pro forma balance sheet
– Break-even analysis
– Total amount of money: Sources and applications
of funds
11. Assessment of Risk
– Potential threats/risks/Evaluate weakness of
business and the solutions
– Contingency Plans

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Cont’d…
12. Appendix (contains backup material)-
supportive documents such as
– Letters
– Market research data
– Sample product design

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Measuring the progress of the plan

Entrepreneur should check the profit and loss

statement, cash flow projections, and information on
inventory, production, quality, sales, collection of
accounts receivable, and disbursements for the
previous month. (PIS Q)
– Inventory control
– Production control
– Quality control
– Sales control

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Updating the plan
The most effective business plan can become out-of-
date if condition change.
If the change are likely to affect the business plan, the
entrepreneur should determine what revisions are
needed.
In this manner, the entrepreneur can maintain
reasonable targets and goals and keep the new
venture on a course that will increase probability of
success.

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Why a business plan fail?
Goals set by the entrepreneur are unreasonable.
Goals are not measurable
The entrepreneur has not made a total commitment to
the business or to the family.
The entrepreneur has no experience in the planned
business.
The entrepreneur has no sense of potential threats or
weaknesses to the business. (What does it mean ?)
No customer need was established for the proposed
product or service.

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