Unit 3: Preparing a Business Plan

Meaning and significance of a business plan, components of a business

plan, and feasibility study.
A Business plan is a comprehensive
document that outlines the goals,
strategies, financial projections, and
operational details of a business.

It serves as a roadmap for

entrepreneurs and organizations.
Significance of a Business Plan
1. Provides Direction and Strategy:
✔ Vision and Mission: A business
plan outlines the vision and mission
of the company, providing a clear
direction for the future.
✔ Goals and Objectives: It sets
specific, measurable goals and
objectives, helping the business to
stay focused and on track.
2. Attracts Investors and Funding:
✔ Investment Proposals: Investors
and lenders require a business plan
to understand the business concept,
the market opportunity, and the
financial projections.
✔ Credibility: A well-thought-out
business plan enhances the
credibility of the business and
increases the likelihood of securing
funding.
3. Guides Decision-Making:
✔ Operational Blueprint: It serves
as an operational blueprint,
guiding decisions related to
marketing, production, staffing,
and financial management.
✔ Risk Management: Identifies
potential risks and outlines
strategies for mitigating them,
helping to manage uncertainties
and challenges.
4. Facilitates Communication and
Collaboration:
✔ Stakeholder Engagement:
Communicates the business strategy and
vision to employees, partners, and
stakeholders, fostering alignment and
collaboration.
✔ Team Alignment: Ensures that
everyone in the organization understands
their roles and responsibilities and works
towards common goals.
5. Assists in Monitoring Progress:
✔ Performance Tracking: Provides
benchmarks and performance
indicators that can be used to track
progress and measure success over
time.
✔ Adjustments and Updates: Allows
for regular reviews and updates,
ensuring that the business remains
agile and can adapt to changing
market conditions.
6. Market Analysis and Competitive
Positioning:
✔ Market Research: Includes detailed
market analysis, helping the business to
understand its target market, customer
needs, and competitive landscape.
✔ Competitive Advantage: Identifies the
unique selling proposition (USP) and
competitive advantage of the business,
which is crucial for differentiating from
competitors.
7. Resource Allocation:
✔ Financial Planning: Outlines the
financial plan, including budgeting,
forecasting, and resource allocation,
ensuring efficient use of resources.
✔ Resource Management: Helps in
managing resources effectively,
including human, financial, and
physical resources.
8. Foundation for Growth and
Expansion:
✔ Scalability: Provides a framework
for scaling the business, including
plans for growth, expansion, and
entering new markets.
✔ Sustainability: Ensures that
growth is sustainable and aligns
with the long-term vision of the
business.
Contents of Business Plan
Title Page:
✔ Legal information about the business, including the registered business
name, physical address, contact details, and company logo.
Executive Summary:
✔ The most important section, providing a concise overview of the entire
business plan.
✔ Captures the reader’s attention and should not exceed two pages.
Industry Overview:
✔ Details the specific industry the business operates in.
✔ Includes major competitors, industry trends, estimated revenues, and
the company’s position in the market.
Market Analysis and Competition:
✔ Describes the target market for the company’s products or services.
✔ Demonstrates that the company understands the market and its
demand.
✔ May consolidate market analysis and competition analysis or present
them separately.
Sales and Marketing Plan:
✔ Outlines how the company plans to sell its offerings to the target
market.
✔ Highlights the unique selling proposition and sales channels.
Management Plan:
✔ Details the organizational structure, roles, and responsibilities of key
team members.
Operating Plan:
✔ Covers day-to-day operations, production processes, and logistics.
Financial Plan:
✔ Includes financial projections, budgeting, and capital requirements.
✔ Provides insights into revenue, expenses, and profit margins.
 Feasibility Study
A feasibility study is an important step in the project planning process that
assesses the practicality and potential success of a proposed project

Components of a Feasibility Study

1. Executive Summary:
Overview: Summarizes the main points of the feasibility study, including
the purpose, scope, and conclusions.
2. Technical Feasibility:
✔ Technical Requirements: Evaluates the technical resources and
capabilities required to complete the project.
✔ Technological Considerations: Assesses whether the technology
needed is available, and if the organization has the technical expertise to
implement it.
3. Economic Feasibility:
✔ Cost-Benefit Analysis: Compares the expected costs of the project
against the anticipated benefits.
✔ Financial Projections: Includes revenue forecasts, expense estimates,
and potential profitability.
4. Legal and Regulatory Feasibility:
✔ Compliance: Identifies legal requirements, regulatory constraints, and
any potential legal issues that could impact the project.
✔ Permits and Licenses: Assesses the need for permits, licenses, and
other legal documentation.
5. Operational Feasibility:
✔ Operational Requirements: Examines the operational aspects, such
as staffing, workflow, and management.
✔ Implementation Plan: Provides a plan for how the project will be
executed and managed.
6. Market Feasibility:
✔ Market Analysis: Analyzes the target market, customer needs, market
trends, and competition.
✔ Market Demand: Assesses the demand for the product or service and
the potential market share.
7. Financial Feasibility:
✔ Funding Requirements: Identifies the funding needed to start and
sustain the project.
✔ Investment Analysis: Evaluates the return on investment (ROI),
payback period, and break-even analysis.
8. Risk Assessment:
✔ Risk Identification: Identifies potential risks and uncertainties
associated with the project.
✔ Risk Mitigation: Develops strategies to mitigate or manage identified
risks.
Significance of a Feasibility Study
1. Informed Decision-Making:
Project Viability: Helps stakeholders determine whether the project is
viable and worth pursuing.
Resource Allocation: Assists in deciding how to allocate resources
effectively.
2. Identifies Potential Challenges:
Early Detection: Identifies potential problems and challenges early in the
planning process.
Proactive Solutions: Allows for the development of strategies to address
challenges before they become critical issues.
3. Enhances Project Planning:
Detailed Analysis: Provides a detailed analysis of various aspects of the
project, leading to better planning and preparation.
Improved Accuracy: Enhances the accuracy of project estimates and
timelines.
4. Increases Project Success Rate:
Risk Reduction: Reduces the likelihood of project failure by addressing
risks and uncertainties.
Strategic Alignment: Ensures the project aligns with the organization's
strategic goals and objectives.
5. Facilitates Stakeholder Communication:
Clear Communication: Provides a clear and comprehensive report that
can be shared with stakeholders.
Stakeholder Buy-In: Helps to secure buy-in from stakeholders by
demonstrating the project's potential and feasibility.
6. Financial Prudence:
Cost Efficiency: Ensures that the project is financially feasible and that
resources are used efficiently.
Investment Justification: Justifies the investment in the project by
demonstrating expected financial returns.
7. Legal and Regulatory Compliance:
Compliance Assurance: Ensures that the project complies with all
relevant legal and regulatory requirements.
Risk of Non-Compliance: Reduces the risk of legal issues and penalties
associated with non-compliance

Feasibility study is a critical tool for assessing the practicality, risks, and
potential success of a project. It provides a comprehensive analysis that
helps in making informed decisions, identifying potential challenges,
enhancing project planning, and ensuring that resources are used
efficiently
 Steps in Drafting a Business Plan
1. Write an executive summary

This is your elevator pitch. It should include a mission statement, a brief

description of the products or services your business offers and a broad
summary of your financial growth plans.

✔ All major information in a concise manner, not more than 2 or 3 pages

✔ Information is mostly likely to influence positive decision
✔ Attractive and Uniqueness
✔ Do not write for yourself, write for your readers
✔ State what you expect
✔ Does not require a full pro forma
2. Describe your company

✔ Your business’s registered name.

✔ Address of your business location.
✔ Names of key people in the business. Make sure to highlight unique skills
or technical expertise among members of your team.
✔ Define your business structure - such as a sole proprietorship,
partnership or corporation and include the percent ownership of each
owner
3. State your business goals

This section spells out what you’d like to accomplish, both in the near term
and over the coming years.
4. Describe your products and services

✔ In this section, go into detail about the products or services you offer or
plan to offer.
✔ An explanation of how your product or service works.
✔ The pricing model for your product or service.
✔ The typical customers you serve.
✔ Your supply chain and order fulfillment strategy.
✔ You can also discuss current or pending trademarks and patents
associated with your product or service.
5. Do your market research

✔ Lenders and investors will want to know what sets your product apart
from your competition.
✔ In your market analysis section, explain who your competitors are.
✔ Discuss what they do well, and point out what you can do better.
✔ If you’re serving a different or underserved market, explain that.
6. Outline your marketing and sales plan

✔ Here, you can address how you plan to persuade customers to buy your
products or services,
✔ How you will develop customer loyalty that will lead to repeat business?
Details about your sales and distribution strategies
✔ The costs involved in selling each product.
7. Perform a business financial analysis

If you’re a startup, you may not have much information on your business
financials yet. However, if you’re an existing business, you’ll want to
include income or profit-and-loss statements, a balance sheet that lists
your assets and debts, and a cash flow statement that shows how cash
comes into and goes out of the company.
These reports helps you to calculate metrics such as:
Net profit margin: the percentage of revenue you keep as net income.
Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you
collect on receivables per year.
 8. Make financial projections

✔ It outlines how your business will generate enough profit to repay the
loan or how you will earn a decent return for investors.
✔ You’ll provide your business’s monthly or quarterly sales, expenses and
profit estimates
9. Summarize how your company operates

✔ Summarize how your business is structured and outline each team’s

responsibilities. This will help your readers understand who performs
each of the functions you’ve described above
✔ If any of your employees have exceptional skills, you may want to include
their resumes to help explain the competitive advantage they give you.
10. Add any additional information to an appendix

Finally, attach any supporting information or additional materials that you

couldn’t fit in elsewhere.
That might include:
✔ Licenses and permits.
✔ Patents, Equipment leases, Contracts.
✔ Bank statements.
✔ Details of your personal and business credit history, if you’re seeking
financing.