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14.0 BUSINESS PLAN14.1 Introduction
A business plan is an important document for an entrepreneur because it acts as a guide and reference point in
regard to overall business management.
This sub-module unit outlines the major components of a business plan and how to write it.
14.2 Specific Objectives
By the end of this sub-module unit the trainee should be able to
a) Define the term business plan
b) Describe components of a business plan
c) Explain the uses of a business plan
d) Prepare a business plan
14.3 Content
14.3.1 Definition of business plan
This is a written document justifying the business and gives a step-by-step explanation of how the business will
achieve its goals. It summarises the operational and financial objectives of a business and contains the details,
plans and budgets showing how the objectives will be achieved.
A business plan shows a clear picture of what the business is, where it is going and how the entrepreneur proposes
to get there.
14.3.2 Components of the business plan
A business plan should be comprehensive enough to give any potential user a complete picture and understanding
of the venture and will help the entrepreneur clarify his or her thinking about the business.
Although there is no generally accepted format of a business plan. A typical format would possess the following:
i) Cover page:
It contains the name of the business, its owner(s), nature of the business, and the organization to which
the business plan is to be presented.
ii) Executive summary:
Contains a brief summary of the main contents of the business plan. It is prepared after the entire plan
is written. It summarizes every chapter of the page.
iii) Business description:
Contains a comprehensive description of the business and what it intends to accomplish
Example of information contained includes:-
▪ Name of the business and its contact
▪ Vision and mission of the business.
▪ Location.
▪ Form of ownership.
▪ Major activity of the business.
▪ Major customers.
▪ Justification statements/viability
▪ The goals of the business
iv) Marketing plan:
The marketing plan outlines the specific action the entrepreneur intends to carry out to attract potential
customers. The marketing segment is divided into two major parts:
➢ Research and Analysis: describes the target market i.e. who the customers are, the size and its
trends, the existing and possible competition.
➢ Marketing strategy: This part describes the methods that will be used to market the product,
price the product, make sales, advertise and promote the product and also the distribution
channels that will be used.
iv) Organization/ management plan.
This is the section that describes the key management personnel required, their qualifications, duties,
salaries and incentives. The organization structure is also defined
- It also identifies other employees needed, their duties, pay, training needs.
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, - Other support services required are highlighted in this section e.g. banking services, legal services,
management consultancy Etc.
- Any licenses, permits or regulations affecting the business are discussed here.
v) Operational plan/Production plan.
This section describes the processes, activities, and requirements involved in realizing the operational
goals of the business and required raw materials.
vi) Financial plan
This section outlines the financial needs of the business and sources of raising the finances and also
gives the projections of income and expenditure through such key statements as:
- Cash flow statement
- Income statements (trading, profit and loss account statements) among others.
14.3.3 Uses of a business plan
A business plan is important for a business because it can be used to:
i) Obtain finances
ii) Hire staff
iii) Attract partners -
iv) To expand the business
v) Guide the business in its operations
14.3.4 Preparing a business plan
BUSINESS PLAN
Business Plan for Small and Medium Enterprises
Step 1: Preparation of business plan and estimation of costs
A business plan is the most essential document for starting, building and making businesses successful. It is an
effective tool for raising the necessary capital to start and/or run business enterprises. The business plan
describes what the business will do, how and where it will be started. Many businesses fail due to lack of
planning and preparation.
The preparation of a business plan is important because it provides information about:
• What profit your business can expect to make in the future;
• How much money you can expect to come into and go out of your business;
• Level of profit expected from your business within the period of the life of the business;
• Which part of your business you can improve.
The two most important planning documents for your business are:
• Sales and cost plan;
• Cash flow plan.
When you make business plans:
• Make them simple;
• Choose the most suitable period;
• Make them before you need to use them;
• Look for information.
In working out your own project, you should prepare a sound business plan based on data which you collected
and in which you have the utmost confidence. Make your business plan tailor-made based on your specific
strengths and weaknesses. Decide on how much of your savings should be invested in the project, how much
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,income you should generate from the business, who your clients would be, and which technical process is in line
with your level of skills, resources and market size.
Presented below is a business plan format. The format will help you take practical steps to prepare your busine ss
plan accordingly. You will find help topics and explanations for the majority of the elements of the business plan.
When applying the format, you need to organize and make use of data collected in the information seeking stage.
Business Plan Format
The Cover Sheet
What to Include on a Cover Sheet
The first page of your business plan will be the cover sheet. It serves as the title page and should contain the
following information:
• Company name
• Company address
• Company phone number (including area code)
• Web address, if you have a web site
• Logo, if you have one
• Names, titles, addresses, and phone numbers of the owners or corporate officers
• Month and year in which the plan is issued
The month and year in which the plan was written is important to include as it lets the reader and especially – if
the plan is also intended for providers of finance - the lender know if the business plan is up-to-date.
Please refer to the Business Plan template for the structure of the Cover Sheet.
Table of Contents
BUSINESS PLAN
Cover Sheet
Table of Contents
Executive Summary
1. The Nature of the Business
1.1 Mission Statement
1.2 Objectives
1.3 History of the Company
1.4 Legal Structure
1.5 Ownership and Investors
1.6 Company Location and Facilities
2. The Organisation
2.1 Organisational Structure
2.2 Management
2.3 Key Staff
2.4 Other Employees
2.5 Payment of Employees
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, 3. Products and Services
3.1 Product/Service Descriptions
3.2 Product/Service Uniqueness
3.3 Statutes of the Products
3.4 Proprietary Position
3.5 Production Process and Capacity
3.6 Production Site
3.7 Cost of goods
3.8 Suppliers
3.9 Quality Control
4. Marketing
4.1 The Market
4.1.1 Market Characteristics and Customer Profile
4.1.2 Existing and Potential Customers
4.1.3 Market Segments and Selected Target Markets
4.1.4 Market Size
4.1.5 Competitors
4.1.6 Geographical coverage
4.1.7 Market Share and Estimated Sales
4.2 Marketing Strategy
4.2.1 Product Positioning
4.2.2 Price
4.2.3 Sales and Distribution Channels
4.2.4 Promotion
4.2.5 Marketing Budget
5. Risks
5.1 Strength of the Business
5.2 Weaknesses to Overcome
5.3 Opportunities in Future
5.4 Threats
6. Financial Plan
6.1 Financial History or Start-up Information
6.2 Budget for Private Drawings
6.3 Budget for Start-up Costs / Pre-Operating Expenses
6.4 Budget for Operating Expenses
6.5 Capital Requirements
6.6 Projected income Statement
6.7 Balance Sheet (5-year)
6.8 Assets
6.9 Liabilities
6.10 Shareholders’ Equity
6.11 Projected Cash Flow Statement / Liquidity Planning
6.12 Break-even Analysis
6.13 Funding Request and Security
Executive Summary
Why write an Executive Summary?
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