This document outlines the importance of business planning for entrepreneurs, detailing the essential elements and structure of a business plan. It emphasizes the need for a comprehensive approach that includes market analysis, operational strategies, financial forecasts, and risk management. The module aims to equip learners with the skills to create a well-structured business plan that serves as a roadmap for business success.
This document outlines the importance of business planning for entrepreneurs, detailing the essential elements and structure of a business plan. It emphasizes the need for a comprehensive approach that includes market analysis, operational strategies, financial forecasts, and risk management. The module aims to equip learners with the skills to create a well-structured business plan that serves as a roadmap for business success.
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SEO003 Obafemi Awolowo University, Ile Ife, Nigeria
This document outlines the importance of business planning for entrepreneurs, detailing the essential elements and structure of a business plan. It emphasizes the need for a comprehensive approach that includes market analysis, operational strategies, financial forecasts, and risk management. The module aims to equip learners with the skills to create a well-structured business plan that serves as a roadmap for business success.
This document outlines the importance of business planning for entrepreneurs, detailing the essential elements and structure of a business plan. It emphasizes the need for a comprehensive approach that includes market analysis, operational strategies, financial forecasts, and risk management. The module aims to equip learners with the skills to create a well-structured business plan that serves as a roadmap for business success.
Institute for Entrepreneurship and Development Studies
MODULE 7: PREPARATION AND WRITING OF BUSINESS PLAN
7.0. Introduction Planning is a key aspect of the business development process as it assists the entrepreneur in articulating both his/her long-term and short-term goals for the proposed new business. It is in the business plan that the entrepreneur establishes the probability of the success of a business as well as lists and defines the activities required for the successful operation of the business. Also, in preparing the business plan, the entrepreneur should identify all the resources available to the business and how to combine them to obtain maximum benefits. Therefore, in this module, you will learn the main elements of a business plan and the process of writing one. 7.1. Learning Objectives At the end of this module, you should be able to: 1. List the elements of a typical business plan. 2. Explain each of the elements. 3. Write a simple business plan.
7.2. Business Plan
A business plan is a document that specifies the goal and objectives of a business as well as clearly outlines how and when the goal and objectives will be achieved. It is an important tool for describing the journey of the business from its startup to its growth. The following questions are addressed when writing a business plan: 1. Which market is the business serving? 2. Who are the main customers and/or consumers of the product or service of the business? 3. How will the product or service be offered? 4. How will the resources needed for the business be organised and managed? The main purpose of writing a business plan is to keep the entrepreneur focused on his/her goals and strategies, identify the market and formulate strategies to reach them, establish the various types of resources and skills required and where to source for them, as well as to formulate strategies needed to manage the business to success. A well-conceived business plan must emphasise three main viewpoints, which are: 1. Entrepreneur viewpoint: Information about the promoter(s) of the business in terms of his/her education, knowledge, skill, experience, and so on. 2. Marketplace viewpoint: Information about the in-depth marketing information that describes the benefits to users and the existence of a substantial market. 3. Investor viewpoint: Sound financial projection (forecast) for 3 to 5 years.
1 7.3. Elements of a Business Plan
A detailed business plan usually includes 8 to 10 sections (depending on the industry and idea). This is listed and explained below:
Section I: Executive Summary
This is usually written after the entire business plan has been completed. It must be a clear snapshot of the complete plan and briefly describe the venture, the market opportunities, financial needs and projections, and any special research or technology associated with the venture. Section II: Business Description Section II is the general description of the business where the following are established:
Industry background (current status and future trends).
Goals and potential of the business and milestones (if any). Uniqueness of product or service (potential advantages the new venture possesses over the competition, patents, copyrights, trademarks, or any special technological or market advantages). Section III: Marketing: This is where the promoter (entrepreneur) must convince investors that the market exists, that sales projections can be achieved, and that the competition can be beaten. The main elements are: (a) Research and analysis where: target market (customers) is identified. market size and trends are shown. competition is established. Competitors may be those producing the same or similar product (substitutes) or offering the same or similar service. Market share is estimated. (b) Marketing Plan. This includes market strategy (sales and distribution), pricing method to be adopted and strategies for advertising and promotions. Section IV: Operations: In this section, the entrepreneur should write about the: (a) Location of the venture, whether it has advantages over other businesses. That is, in terms of labour availability, wage rate, proximity to suppliers and customers, transportation cost, and, so on). (b) Specific operational procedures. Information about the operation management that will ensure efficiency and effectiveness. (c) Personnel needs and uses. The various types of personnel (workers) required will be specified.
Section V: Management: Section V is where the management team, that is, key personnel is identified as well as their positions and responsibilities. Also, the type of legal form of business, that is, ownership structure, is stated. The composition of the Board of Directors, Advisors, and Consultants is also explained.
Section VI: Financial: It is in this section that the entrepreneur will perform the financial forecast. That is profit and loss, cash flow, break-even analysis, cost controls, and budgeting.
2 Section VII: Critical Risks: It is important to indicate possible potential problems, in terms of the effect of unfavourable trends in the industry, possible competitors’ strategies, inability to meet sales projections, wrong market projections, and so on. In addition, the alternative courses of action to mitigate these problems will be stated. Section VIII: Harvest Strategy: The main elements of this section are (a) provision for future harvest strategy, (b) liquidity event (initial public offering or sale), (c) continuity of business strategy (management succession and investor exit strategies), and (d) identify successor(s). Section IX: Milestone Schedule: This provides investors with a timetable for the various activities to be accomplished, which should include the timing and deadline of each event as well as the relationship between the events. Examples of such events are: • Product design and development. • Sales projections. • Establishment of a management team. • Production and operations scheduling.
Section X: Appendix or Bibliography: Though not compulsory, but it allows for additional documentation that is not appropriate in the main parts of the plan. These may include: • Diagrams, blueprints, or financial data • Curriculum vitae of the promoters and or main management team. • Any other bibliographical information that supports the other segments of the business plan.
Other Segments of a Business Plan
Growth Plan This describes how the business will expand in the future. Investors and lenders like to see that a business has plans to grow in a planned and controlled way.
Contingency Plan This section looks at the risks to the business, such as changing economic conditions and lower- than-expected sales, hence suggesting ways to minimise the risks.
7.4. Conclusion A business plan, as a road map to the success of any business, is defined and explained in this module. The module also outlines and explains the main elements (contents) of a business plan. The focus of each of the sections in a business is discussed to assist you in the preparation of your business plan document to summarise the operational and financial objectives of the business and how they will be realised.
