BUSINESS PLAN

Introduction
Business environment are dynamic and characterized with stiff
competition.
In order to gain and retain sustainable competitive advantage, to
achieve stated objectives and a range efficiencies an entrepreneur
must have a good business plan.
Business Plan
Business plan is the written document describe the objectives of the
proposed business venture and the steps necessary to achieve those
objectives.
It shows where you are, where you are going and how to get there.
It is the presentation of business ideas and it is viability in a written
form.
It is the written document that describe in detail how a new/existing
business is going to achieve its goal
It is a proposal that describes a business opportunity for financing
agencies or any interested groups
Business Plan cont….
It requires dealing with the why, what, who, how, where, when and
how much of your venture
Writing a business forces the entrepreneur to take a deep look at
his/her idea and how he/she will turn it into a business
Importance of Business Plan for an
Entrepreneur
1. It describe the path for an entrepreneur to follow through period of
growth
Since planning is deciding in advance what do and how to do.
2. It enables investors, bankers and other creditors to understand and
appreciate the entrepreneurial potential for successful business.
Plan gives them an indication of the returns they may expect from
their loan.
Idea on company’s strategies and priorities.
Importance of Business Plan for an
Entrepreneur cont……..
3. It act as a sale document to raise fund
You probably need outside financing to start a business and the
business plan is the tool to convince investors to come on board
Concessions from suppliers or customers
Importance of Business Plan for an
Entrepreneur cont……..
4. Increase opportunity for success
A business plan will determine the changes that need to be taken to
ensure success
Such changes that need to be taken into consideration are
organizational structure, introduction of new technology and new
manufacturing techniques
Importance of Business Plan for an
Entrepreneur cont……..
5. Minimize risk of failure, and avoid potential problems
Business plan helps an entrepreneurs to take some precautions
before negative financial consequences from these events become
severe
6. Provide measurable bench Mark for comparing forecast with actual
sales
Set realistic target to be achieved as a performance yardstick
Basics for evaluating and controlling the company’s performance in
the future in terms of profit, cost and quality.
Users of business plan
A business plan is very important to various parties. Among those
include the following
1. The management team
Enable the management team to determine the time, effort and
support need to achieve the company’s goal
Enable them to forecast changes that will happen in the future
Setting a benchmark as a comparison for company’s success
Users of business plan cont…..
2. The shareholders
They must know how the business is to be conducted since their
approval is necessary if changes in the target and strategy are to be
made.
The entrepreneur should inform them about the future market of the
products/services, business operations, financial projections and
future plans; such as expanding the business to international market
Users of business plan cont…..
3. Bankers and creditors
The plan gives them the indication of the returns they may expect
from their loan and enable them to gauge the viability of the venture
and its profitability within a reasonable time frame.
Users of business plan cont…..
4. Customers
Are interested in the business plan to get information regarding the
company which will influence their decisions to use its products or
services.
Issues of interest include quality, price, durability, features, safety and
additional support or after sale service of the company’s product or
service.
Users of business plan cont…..
5. Employees
Business plan provide prospective employees information about the
company’s development and performance before joining the
company.
Basic types of Business Plan
1. Start up business plan
2. Operational business plan
3. Extended business plan
Basic types of Business Plan cont….
1. Start up business plan
Suitable for new enterprises in an early stage of their development
It is prepared before an enterprise is established in order to analyze
the feasibility of an enterprise ideas and it guide the establishment
process.
Basic types of Business Plan cont….
2. Operation business Plan
Serve as a operative tool(business guideline)
Prepared to measure operational progress, identify operational
problems and possible solutions and set new operational objectives.
Basic types of Business Plan cont….
3. Extended business plan
It is prepared when an entrepreneur wants to introduce new product
into the new market
It is prepared only if the product is likely to involve large part of the
enterprise budget
Example business requires the construction of new and innovative
industrial plants, that require request for long term credits to finance
the constructions.
Business plan structure
Before an entrepreneur start to write a business plan, should identify
all the sections that are supposed to be in the plan
The component of the business plan depend much on the purpose of
the business plan and where the document shall be submitted.
Business plan structure
1. Cover page
The front page of the business plan
The real reflection of the entire document
Should be attractive and look professional
The fonts used should be easily readable and color contrast should be
pleasant to the eye
Nice graphic or photograph could make it look even more attractive
Business plan structure cont…….
It must include among others
Name and address of the business company
Name of entrepreneur(s)
Telephone number
Fax number
Email address
Website address
Nature of the business
Business plan structure cont…….
2. Executive Summary
Brief summary of the key points contained in the business plan
Include the most important information in each section of the plan
Written in a such a way it persuade a reader that this business will be
successful
Must captures the reader attention
Summarize who you are, what your company does, where is it going, why
it is going there and how it will get there
It appears first, but it is normally written after the completion of the plan.
Business plan structure cont…….
3. Business description
An introduction to your business, provide an overview of the business
and its objectives
State the mission of the new venture; what kind of service or goods
are going to offer
State the business location and why do you think you will generate
profit
What kind market do you propose to serve
Business plan structure cont…….
What is the size and fraction of that market that you hope to cover?
Why will your company serve the market better than the
competition?
Why will your business be profitable?
Why have you chosen this particular location?
Provide company history and its background and where you want it
to be?
Business plan structure cont…….
If you already selected legal structure i.e. Sole proprietorship,
Partnership or a corporation then describe it and who will be the
principal owner of the business and how will it be managed?
Provide the definition of the business is it a manufacturer, retailer,
wholesaler, service provider or some combinations?
What background experience, skills and strengths do you personally
bring to this new venture? Will it be started from scratch as an
expansion or as an acquisition or franchise?
Business plan structure cont…….
4. Environmental and Industry analysis
Conduct an environmental analysis to assess external uncontrollable
variables that may impact the business plan such as an economic
environment, culture, legal concern, technological and political issues.
Describe your industry; Is it a growing industry, short and long term?
Describe your most important company strengths and competencies,
what factors will make the company succeed.
Business plan structure cont…….
5. Market Analysis
Collect and analyze an appropriate amount of information to
determine whether there is enough of needs/wants for your
products/service to support a viable business idea and allow it to
grow.
Things need to know include; Market size, the growth rate of the
market trend, profitability and main competitors
Business plan structure cont…….
If you are selling to consumers, then ask yourself
Are your customers local, regional, national and or international?
Do your customers young, old, male, female, high income or low
income?
Are there cultural considerations, social connection or other personal
factors that might shape your customers needs, wants and buying
behaviors?
Business plan structure cont…….
If your customers are primarily business then consider the following;
Do business customers in different regions have different needs?
Who in business is involved in purchasing decisions? what is their job
function? who influences their decision? what is their background
and knowledge with respect to your product or service?
What are company buying and policies and procedures, financial
constraints and timing of purchase?
Business plan structure cont…….
6. Competitor Analysis
All business have competitors. Some competitors sell similar
products, while others sell a product that serves the same function.
Define who your competitor are and then profile them; Assess the
competitors on their strengths and weakness compared to your own
Address how your competitor fill customers need/wants and what
you in turn will offer.
Business plan structure cont…….
In reviewing competitors, consider what they have as far as; market
share, relationship wit customers, advertising plan, price, distribution,
product or service features, financial strengths and length of time in
business.
Business plan structure cont…….
7. Marketing plan
Marketing plans, usually address four areas; product offered, price
charged, distribution system and promotional effort (Marketing Mix).
a) Product offered
Describe your product and how it will be used
Explain your products, identify their features and discuss what needs
or problem they address in the market
Business plan structure cont…….
If you will offer a product describe what it is, what it does and its
features and its benefit. Include pictures, drawings, or technical
images if they would help readers get a better understanding of your
product.
Discuss its size, color, cost, design, quality, capabilities, technological
life span and patent protection.
The product you offer will includes aspects beyond the product itself
like packaging, product support, warranties, returns training and
service.
Business plan structure cont…….
If you will offer a service; explain what the service is and what need it
will address to your target market.
Describe how you will perform the service(whether it is on site or via
the internet, telephone or some other method.
What make it different, and what materials or equipment are needed.
Business plan structure cont…….
b) Pricing
Pricing strategies are based on the perceived value of your product and
services, your cost of doing business
As you make pricing decisions, think about your cost to produce your
product or service
Think about what other products similar to your product sell for in the
market.
Think of why the price of your product should be above or below the
market price
Demonstrate that your price will allow you to create a profit
Business plan structure cont…….
c) Describe how your product/service will be distributed and over
what geographical area.
Describe how your product will be sold, whether through retailers,
direct sales and or other methods.
Discuss any relationships you have developed with distributors or any
licensing agreements you have.
Describe how your product will reach customers including specific
channels or geographic areas.
Business plan structure cont…….
d) Promotion
Before potential customers can appreciate your product, they have to
hear about it
To achieve this you must attract attention, inform, persuade and
inspire confidence.
Explain the value of your product or service to your customers that
your product meets their needs than competing or alternative
solutions
Business plan structure cont…….
The range of promotional tools available are very broad and may be
combination of advertising, personal selling efforts and general public
relations activities.
An effective promotional plan must focus on your target segment
Business plan structure cont…….
8. Operational Plan
Operational section of the business plan deals with the internal
organizational structure, operations and the equipment you will need
to operate your venture.
Discuss how the business will be owned and managed, resources and
production methods and the legal issue you will have.
Business plan structure cont…….
a) Ownership and Management
Describe the ownership of your venture and explain how the business
will be managed on day-to-day basis
For stance, If your venture will operate as a partnership then explain
who will be the partners and how management will be made and if it
is Corporation describe the composition and function of your board
of directors, who will be principal owners and how each will be
involved in decision making.
Business plan structure cont…….
Organizational structure is also expected to be seen in this section.
b) Resources and Production Method
If you will need to hire employee apart from your self and other
operators what will be their job descriptions including job
responsibilities and authorities, compensation and qualifications for
relevant positions.
Outline the methods you will use to produce your product or conduct
your service.
How will you source the input you require.
Business plan structure cont…….
A manufacturer will be required to describe how raw materials will be
obtained and transformed into fished product
A service provider will want to describe, where, when and how the
service will be performed
Operational description should also include your policies, procedures
for billing and collections, inventory control, record keeping and how
you will maintain quality
Business plan structure cont…….
d) Legal Issues
In this section it is also important to explain the way you are going to
align with legal requirements depending on the nature of your
business
Example if it is the new company expected to operate in Tanzania
must be registered by Business Registration and Licensing
Agency( BRELA) and you must get Tax Payer Identity Number (TIN)
from Tanzania Revenue Authority (TRA)
Issues of intellectual property such as patent, copy right, trade mark,
business secrets also need to be explained.
Business plan structure cont…….
9. Financial Information
Business plan must include issues such as a statement of financial
position, statement of comprehensive income, cash flow statement
and breakeven period among others.
Describe the current financial status and presents forecasts of future
financial statements.
Business plan structure cont…….
If you are using the business plan to seek financing, cover the type
and amount of financing planned( and its repayment terms as well as
the potential return on investment.
Financial portion must be detailed because it is closely examined by
those interested in investing or lending money, they will want to know
how you will use invested funds to create successful venture
Business plan structure cont…….
There are three key projections for this section; Profit and loss, cash
flow and balance sheet
for the start-up, business figures have to be projected for all of the
above financial statements(called pro forma statements).
The term “pro forma” means provided in advance.
Consult your accountant or financial advisor when making these
projections.
Business plan structure cont…….
The sample provided below are not all inclusive and are presented as
examples to be used as a starting point.
a) Projected profit and loss; The profit and loss statement details the
income and sale of your company over specified period
Sample of pro forma income statement
Business plan structure cont…….
Proforma income statement Year 1 Year 2 Year 3

Sales
Cost of goods sold
Gross profit
Expenses
Payroll
Rent
Utilities
Insurance
Administrative expenses

Advertising
Total expenses
Net profit
Business plan structure cont…….
b) Projected cash flow; the statement of cash flow shows the income
and outgoing cash of the business.
Sample of the pro forma cash flow statement
Business plan structure cont…….
Pro Forma Cash Flow Year 1 Year 2 Year 3
Cash received
Cash from operations
Cash sales
Cash from receivable
Sub total cash from
operations
Additional cash received
Rental income
Sub total cash received
Net cash flow
Cash balance
Business plan structure cont…….
c) Projected balance sheet
The balance sheet provides an instant financial picture of your
business.it has two sections: assets and liabilities
Business plan structure cont…….
10. Assessment of Risk
The entrepreneur should indicate potential risks to the new venture,
impact of the risks, strategy to prevent, minimize or respond to the
risk.
Major risks could from competitors reaction, weakness in marketing
or production/management team or new advances in technology.
Business plan structure cont…….
11 Appendix
It contains any backup material that is not necessary in the text of the
document
It may includes letters from customers, distributors or sub contractors
CV’s of all potential people who are involved in management of the
business and other directors.
Leases, contracts or other types of agreements and price lists from
suppliers and competitors may e attached in this section.
Reasons for Failures of Business Plan
1. Failing to define what your specialty is
An effective way to do this is by clearly defining what makes your
company unique
This requires being clear about what your company offers in terms of
products, services, unique skills sets and experience.
Identifying a niche which you excel can improve your chances of
success
Reasons for Failures of Business Plan cont…
2. Omitting vital information
Writing business plan is as important as the plan it self, failing to
include necessary information; let say in an executive summary or in
business description or improper marketing or industry assessment
may limit an entrepreneur as he or she implement the plan.
Reasons for Failures of Business Plan cont…
3. Insufficient understanding of finances
Understanding of financial statements, lack a thorough grasp of sales
figures; potential investors will hesitate no matter how the business
idea is.
Fund request need to be backed up for investors to understand the
sources of investment return.
Reasons for Failures of Business Plan cont…
4. Failing to maintain a living document
Making the necessary changes keeps the plan alive and help drive
business forward.
5. No customer needs was established for the proposed product or
service
It is obvious if an entrepreneur fail to determine a customer needs
and incorporate them in a business plan it become very hard to
succeed.