DBA 403: ENTREPRENEURSHIP

Session 5: Business
Planning
 Session Objectives

• At the end of the session, students should be able

to understand:
❖Meaning of Feasibility, Business Plan and
Business Model Canvas
❖ The importance of a Business planning
❖ The different components of a Business Plan
❖ Reasons why a business plan may fail
❖The distinction between the Feasibility, Business
Plan and Business Model Canvas
What is a Feasibility Analysis?
Feasibility Study Process
 A. What is a Business Plan?
• A business plan is a blue print to be followed in the
successful launch or re-launch and successful
operation of a business.
• A business plan is a summary of how a business
owner, manager, or entrepreneur intends to
organize an entrepreneurial endeavor and
implement activities necessary and sufficient for the
venture to succeed.
• It is a written explanation of the company's business
model
• It is an integration of a business’ functional plans
eg Marketing, Finance, Production, HR etc
 What is a Business Plan(ctd)
• It is a document that convincingly demonstrates that
a business can sell enough of its products or services
to make a satisfactory profit and be attractive to
potential stakeholders like bankers,
investors/partners, suppliers etc.
• Business plans are used internally for management
and planning and are also used to convince outsiders
such as banks or venture capitalists to invest money
into a venture.
 Feasibility Plan vs Business Plan
• A Feasibility Plan is more focused towards proving
that the business is viable. It is more of an objective
and quantitative argument about whether or not the
business should be done. It answers the question,
“should we do this business?”
• A Business Plan is the next stage after having made
a decision to do the business. It basically
operationalises the decision to do the business. It is
holistic and provides a more detailed answer to,
“how should we do the business?”
 B. Importance of a Business Plan
• Entrepreneurs prepare business plans out of own
accord or at times at the instigation of some
stakeholders like
financiers/investors/partners/alliances
• Many entrepreneurs resist preparing a business plan
as they consider it a waste of time or they think they
already know what need to be done.
• Business plans are noted for often quickly becoming
out of date.
• Planning should nevertheless be appreciated as a
process that never ends and actually evolves as the
firm grows.
 Importance of Business Planning (ctd)
• Business Planning places a timeframe around
around the idea. Its also a means of assessing the
potential of the business in financing decisions
• If properly prepared, it can act as a sanity check for
business ideas.
• You should identify who reads the plan so as the
scope and content of the plan
• One common belief within business circles is that
the actual plan may have little value, but what is
more important is the process of planning, through
which the manager gains a greater understanding of
the business and of the options available.
 Specific Roles of a Business Plan
Analysis Synthesis Communication
• Articulates • Provides action • Communicates
Vision plans in a Enterprise
• Acts a checklist unified way potential
ensure • Ensures that • Addresses
enterprise is actions are concerns of
heading in right appropriate for stakeholders
direction strategy • It can also be a
• Inculcates • Potential negotiating tool
discipline in clients may for completing
gathering view it as part mergers and
information by of a sales acquisitions
entrepreneur process
Specific Roles of a Business Plan (ctd)
Management
Call to Action Development Tool Road Map

• Gives details • Gives • Goal and

of activities Manager Direction
to be opportunity Giver
undertaken to figure our • Allows and
and expected problems and demonstrates
outcomes solutions positions
• Sets firm’s
priorities for capacity to
achieving obtain large
vision orders
 D: Contents of a Business Plan
• There are no hard and fast rules about what
should be included.
• The contents should be tailored to reflect
the needs of the venture it represents.
• Available templates from websites e.g...
www.sba.com
www.sme-solutions-center.com
http://en.wikipedia.org/wiki/Business_plan
 Contents of a Business Plan (ctd)
• The following are some of the types and scope
of the information and themes that might be
included to ensure exhaustiveness.
◆ Cover page – title, name, address, date, purpose
◆ Executive summary – 1-2 pages overview
◆Brief Firm Profile, Ownership, Mission, Vision,
Values
◆ Industrial Environmental information
◆Future Outlook & Trends, Competitor Analysis, Market
Segmentation, Industry and market forecasts
◆ Description of the Activity
◆Product, Service, Size, firm equipment, personnel,
background of entrepreneur
 Contents of a Business Plan (ctd)
◆ Production & Operations Plan
◆Manufacturing process, machinery and equipment in use,
names and quantities of suppliers of raw materials
◆Description of firm’s plan, technology utilisation, flow of
orders for goods and/or services
◆ Marketing Plan
◆ Pricing, Distribution, Promotion, Controls
◆ Organisation Plan
◆ Ownership, Management team background, Roles
◆ Recognition of Risks and its Assessment
◆ Financial Plan
◆Assumptions, Projected income statement, Cash flow
projections, Break Even Analysis, Source & Application of
funds
 Vision and Mission Statement
• It is important to have a long-term vision of what
you want your business to become.
• Some businesses use their Vision and Mission
Statement to highlight their business strategies and
philosophies or to show the importance that their
business places on developing good relationships
with customers and employees.
• These Statements should then be made to be
consistent with the short term objectives of the firm.
 Vision Statement
A Vision Statement describes in graphic terms where
the goal-setters want to position themselves in the
future. It may describe how they see events
unfolding over 10 or 20 years if everything goes
exactly as hoped. It may include;-
– clarity and lack ofambiguity
– painting a vivid picture
– describing a future
– memorable and engaging expression
– realistic aspirations
– alignment with organizational values andculture
– subjection to customer needs (in the case of a vision statement
for a business organization)
 Mission Statement & Objectives
• A mission statement resembles a vision statement,
but has a more immediate focus.
• It details what one will do today to attain one's
goal, purpose, or mission. Ford's brief but powerful
slogan, eg "Quality is Job 1" could count as a an
example of a Mission Statement.
• Objectives list the short to medium term (1 to 5
year) goals of the business. What do you want the
business to accomplish?
• Your objectives should be S.M.A.R.T. A business
plan loses credibility if the objectives are not
believable to the reader.
 Prior to the Plan…think of…
1. Defining the
business 2. Market analysis
• The industry –– industry • Customers – target
analysis customers, segmentation
• The company –– • Market size and trends –
company nature of market; size,
mission/vision/goals/obje number and buying
ctives etc capacity
• The products or service – • Competition – number,
CVP – value proposition strength, plans by
• Entry strategies – new competitors
product, new market, • Estimated market share
new value e.g. time, and sales
– why you think you will gain share
proximity, quality – Translates to expected sales
 Additional Internal Plans
4. Design and Development
3. Marketing Plan
Plans
• Overall marketing strategy • Development status and
• Focuses on short term tasks – how the product
works or how service is
• Pricing strategy and
used
policies
• Sales tactics – personal • Difficulties and risks
selling; retailers; • Product improvements
distributors etc and new products. If
new, describe tests done
• Service and warranty
and results etc.
policies
• Costs
• Advertising and promotion
• Proprietary issues
• Distribution plan
5. Manufacturing and Operation plan
• Geographic location – discuss advantages and disadvantages
of location
• Facilities and capacity improvements – how to acquire the ;
costs etc; expansion plans
• Strategy and plans – manufacturing process; make or buy;
quality control; inventory management and problems etc;
compliance to environmental regulations, approvals etc.
Critical Risks & Problems: Honestly identify the
risks/problems – adds credibility e.g.
• Political risks, Ecological Risks, Legal & Regulatory Risks,
• Unfavorable industry trends; Economic Trends, Socio-Cultural
Changes
• Costs overshooting estimates; Potential Competitor price cuts;
Sales projections not achieved
• Delays in acquisitions and changes of technology
 Risk Management Process
• Examples of Contemporary
Risk;
✓ Processing Risk
✓ Internal Frauds
✓ Health and Safety Risk
✓ Legal Risk
✓ Reputational Risk
✓ Technological / Systems Risk
✓ External Fraud
✓ Finance Risk
✓ Foreign Currency Risk
✓ Human Resource
Management
✓ Etc etc
Strategies for Risk Management
Strategy Action Example

Diversification Production of different products and

Risk Spreading activities
(Process of Flexibility Allow oneself to be able to do or fail
reducing frequency to do the particular product hence
of losses and temporarily transferring the resources
controlling to other products/activities
magnitude of those
that do occur)
Sharing/ Transfer Insurance or Cost sharing
Predictive vs Choose what is definite; Temporary
Speculative suspension of services

Risk Avoidance Choice of minimal loss Choose what has the smallest impact

Safe Products Choose definite products

Compensation Higher Return Accept risk as is, but demand higher

returns
6. Organisation Plan: Management Team
Organisation Key
Ownership Structure & Management
Operation Personnel &
Roles

Shareholders & Job profile and Management

Experience performance Qualifications &
metrics Experience

Proprietors/Board Remuneration Consultants,

of Directors and incentive Advisors
schemes Available to firm
 7. Financial Plan and Analysis
Analysis Projections
• Gross and operating • Budgeting Process
margins • Pro forma cash flow
• Profit potential and analysis – 12 months, first
durability year
• Pro forma income
• Break even analysis (fixed
statement – 1 year
and variable costs)
• Pro forma balance sheet –
• After analysis, suggest
time 0 and end of year 1,3
remedial action
Proposed Company Financing
• Desired financing (needs)
• Capitalization (sources)
• Uses of funds (uses)
• Use of Accounting Software Packages
 8. Supporting documentation
(Appendices)
• Lists of Assets
• Specifications – technical specializations
• Photos of products
• Suppliers Agreements
• Customer Agreements
• Licenses, permits, patents, lease agreements
• Contracts – consultants, attorneys etc
• References – resumes etc.
E. Writing the Plan – Tips
• There is no right way of writing and there
will always be some mistakes in the first
attempt. However, your sentences should be
simple, logical and flow
• Get other people to critique your ideas and
the flow of your plan
• Do not make unsupported statements. Stick to
verifiable facts. Include as much supporting
material as possible. As much as possible,
words should be backed by figures
• Determine the Priority issues in each are of
the plan (success factors and emphasis on
them)
• Limit the access of your Plan to trusted
people
 F. Customising A Business Plan
• Business plan should sell the business to the various
constituencies important to you
• You should write a plan tailored to the interests/needs
of the expected reader
• Each of the various groups look for different things in
a business plan
• Investors want evidence of market growth and company ability to grow
• Bankers want evidence of adequacy of cash flows to repay the loan and
existence of assets that can be liquidated to recover outstanding loan incase
of cash flow difficulties. Strategic partners are interested in find new
products/lines that can be integrated into their existing offering.
• Large customers want evidence that the company will be around long
enough to continue to offer the products/service.
• Key employees want to see company track record as evidence of security
and opportunity.
How can you cater for all these varied interests in one business
plan?
 G. Presenting a Business Plan
First Impression
Matters. Make Keep it
Short &
your Plan precise Simple
& Stand out

Use Involve other

Clearly Justify
your data Visual members of
your team
Aids

Demonstrate
your product
or Service
H: Reasons why a Plan may fail.
• Goals Set by the Entrepreneur are
unreasonable
• Objectives are not measurable
• Entrepreneur has no commitment to the
business
• Entrepreneur has no experience in the
planned business and has made no
effort in addressing this gap
• Entrepreneur has no sense of potential
threats or weaknesses to the business
• No customer need was established for
the proposed product or service
I: Business Model Canvas
Ultimately, you have a choice…..

or
END.