Business planning
‘The secret of business is knowing something that nobody else knows.’ Aristotle
Definition of a 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 clearly shows what the business is, where it is going and how the entrepreneur
proposes to get there. It is a document that describes the goals and objectives of the business and
clearly how and when they will be achieved. It is a structured guideline to achieve a business
goal. It is a roadmap to owning and operating a business. It’s a proposal that describes a business
opportunity for financing agencies or interests.
When is a business plan written?
i. After deciding to go into business
ii. Before starting the business
iii. When updating is required especially when the owner wants to expand the business
Benefits of a business plan
i. It’s a financial tool that provides information if one wants to obtain a loan
ii. It enables potential entrepreneurs to assess the viability of the business opportunities on
paper
iii. It forces entrepreneurs to establish written goals and objectives for the proposed business.
iv. It establishes the financial need of a business and suggest possible sources of financing
v. A business plan tests idea on paper
vi. It indicates the owners’ ability and commitment
vii. A business plan is a blueprint or guidelines
viii. It communicates clearly to the interested parties
ix. It is a marketing tool in the business
Qualities of a good business plan
i. Simplicity and clarity – in order to be attracting and motivating to the reader, the business
plan should be
● Be simple
● Sentences should flow logically
● Each sentence should have one idea
ii. Brevity – one should be brief and straight to the point
iii. Logic – ideas should follow one another in a logical sequence. Paragraphs should be
connected
iv. Truth – one needs to be frank and not overstating the facts
v. Use of figures – word should be backed by figures especially in a financial plan.
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:
Preliminary pages
The preliminary pages of the business plan that come before chapter 1 include:
1. Cover Page – The first thing the reader of the document sees. The information that should
appear on the cover page is as follows: title of the document, name and address of the
business, business logo, name and registration number of the candidate, name of the
examining body and the diploma for which the business plan is being written. See Sample
Attached.
2. Declaration Statement – where you declare that the document you are presenting for
examination is original and not copied. You also sign against your declaration and provide
for your project supervisor to sign in witnessing the same.
3. Acknowledgement – used to thank all those who assisted you in compiling your business
plan
4. Dedication – used to dedicate your document to anyone special to you.
5. Table of Contents – where all the main chapter titles and sub-titles within them are listed
and the pages on which they appear in your document shown.
6. Executive Summary – written to summarize each chapter of your business plan,
highlighting the main features and items. The Executive Summary should be written in such
a way that someone who does not have enough time to read the whole document, especially
the investors and financiers, can read it and understand what is contained in the whole
document, by seeing the main items
MAIN CHAPTERS
1. 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. This explains more than just what you
are selling but it explains the why is a short statement.
▪ Location.
▪ Form of ownership.
▪ Major activity of the business.
▪ Major customers.
▪ Justification statements/viability
▪ The goals and objectives of the business. Goals and objectives give you
direction. The goals should be SMART; specific, measurable, achievable,
realistic and time-bound.
2. 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. This step is to outline
your ideal customer as well as the actual and the potential size of your market. It
also helps with identifying other companies that currently sell in the market that
you’re looking to enter. You are able to know what are their weaknesses so you
can maximize on them, know their strengths so you can know how to approach
them, know the existing opportunities in the market and also the existing threats
in the industry you are looking to join.
⮚ 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.
3. 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.
- 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.
4. 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. This also involves selecting
a team that will enable you realize the goals you have for your business. Also mention
you still need to hire to grow your company and the cost of hiring experts.
5. 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.
Ideally provide at least three years’ worth of reporting. Make sure your figures are
accurate and don’t provide any loss or profit projections before carefully going over your
past statements for justification. Costs, profit margins and sale prices are closely linked
and many business owners set sale prices without accounting for all costs.
Its important to outline how much money your small business needs so you can make
accurate funding requests. Try to be as realistic as possible.
