Dominican University, Ibadan
COURSE TITLE: ENTREPRENEURSHIP
COURSE CODE: GST 312
Topic:
WRITING A BUSINESS PLAN
By
Saidi Adedeji Adelekan, PhD, FME.
INTRODUCTION
In starting-up a new business, an entrepreneur should first have an idea of what s/he wants to
do. The most important detail will be to develop a business plan, keeping in mind the end goal
to control the arrangements and different improvements that will drive the venture towards a
successful fulfilment or completion.
Such a business plan is invaluable to business associations and should include a key procedure.
To develop a competent business plan, the business environment must be painstakingly and
efficiently assessed with the end goal of distinguishing the risk and opportunity and that
accompanies all business activities.
Creating and composing a business plan takes much time, exertion/energy, money and care;
however, the final outcome can determine the achievement or failure of a proposed business
venture.
WHAT IS A BUSINESS PLAN?
A business plan is an archive or document composed by an entrepreneur or an
imminent owner that contains intelligent elements, including: the idea of the business,
customers, its management, product or service, production and marketing methods,
competition and other important features of the proposed business venture (Burch,
1986).
A business plan is a formal document containing a statement of purpose, a market
examination, portrayal of a firm’s products and services, monetary projections, and
description of the administration methodologies that need to be employed in order to
accomplish the objective.
Megginson et al., (2006) characterised a business plan as a formal arrangement plan
prepared to serve as an apparatus for pulling in alternate parts of the business
development bundle, including money and individuals.
Additionally, a business plan is a document that summarises the business
strategy to be employed and how that strategy is to be implemented.
A well-developed and well-presented business plan can provide entrepreneurs
with a much greater chance of success and reduce their chance of failure.
A business plan is the written document that details the proposed venture. It
must describe current status, expected needs, and projected results of the
proposed new business venture.
Every aspect of the venture needs to be covered: the manufacturing
management, critical risks, project, financing, marketing research and
development and milestones or a timetable.
DIFFERENCE BETWEEN FEASIBILITY STUDY AND BUSINESS PLAN
1. A feasibility study is carried out with the aim of finding out the
workability and profitability of a business venture. Before anything is
invested in a new business venture, a feasibility study is carried out to
know if the business venture is worth the time, effort and resources.
On the other hand, a business plan is developed only after it has been
established that a business opportunity exist and the venture is about to
commence. This simply means that a business plan is prepared after a
feasibility study has been conducted.
1. A feasibility report is filled with calculations, analysis and estimated
projections of a business opportunity. While a business plan is made
up of mostly tactics and strategies to be implemented in order to start
and grow the business.
2. A feasibility study is all about business idea viability while a
business plan deals with business growth plan and sustainability.
3. A feasibility study report reveals the profit potential of a business
idea or opportunity to the entrepreneur, while a business plan helps
the entrepreneur raise the needed startup capital from investors.
THE IMPORTANCE OF A BUSINESS PLAN
The following features of a business plan are of particular importance to an entrepreneur:
i. It can point out the present and likely limits of the business concern, within which
each authoritative individual is to be engaged;
ii. It engages financial specialists and moneylenders who are keen on meeting the
prospect of the business;
iii. It produces excitement in different partners;
iv. It can reflect either a good or bad impression of the association’s administrative
ability;
v. Without a business plan, the strategy and policy of a small business concern can be
random.
THE ‘DO’S AND DON’TS’ IN PREPARING A BUSINESS PLAN
According Timmons (1994) the following ‘do’s’ must be taken into consideration when writing
a good business plan:
i. Do spend money and time on setting up a professional business plan;
ii. Do propose various sources of finance for the operation i.e., spell out how the firm can
continue regardless of the possibility that the underlying money supply fails to work out;
iii. Do make a complete, meaningful and coherent business plan, ensuring that it is clear and to
the point;
iv. Do elucidate the venture’s risks and the strategies that can be put in place to overcome them;
v. Do concentrate on practical market and sales projections as a premise for the monetary
spreadsheets.
On the other hand, Timmons (1991) and Osuagwu (2006) stipulated the following
‘don’ts’ that must be avoided when writing a good business plan:
i. Don’t make superfluous goal-oriented and doubtful objective targets;
ii. Don’t assume that the readers understand specialised business language and terms;
iii. Don’t include monotonous, long sentences and overlay specialised data;
iv. Don’t include profoundly classified data;
v. Don’t disregard talking about the hazards/risks related to the business, as it might
influence the business plan’s believability;
vi. Don’t underrate competitor abilities and reactions;
vii.Don’t steer away proposed individuals from the ventures management team as
unknown portrayals will appear to be suspicious.
HOW TO PREPARE A BUSINESS PLAN
There are different designs accessible in setting up a business plan.
A business plan could take extended periods of time to get ready,
depending on the experience and learning of the entrepreneur and
in addition the reason it is proposed to serve.
It ought to be sufficiently thorough to give any potential investor a
total picture and comprehension of the new enterprise and should
enable the business-person to elucidate her or his reasoning about
the business.
Notwithstanding, the structure and types of any comprehensive
business plan, it has a tendency to contain some broad
components.
Hisrich, Peters and Shepherd (2005) postulates the following ten-point outline for a
comprehensive business plan:
i. Introductory page;
ii. Executive summary;
iii. Industry analysis;
iv. Description of the venture;
v. Production plan;
vi. Marketing plan;
vii.Organisational plan;
viii.Assessment of risk;
ix. Financial plan;
x. Appendix.
INTRODUCTORY PAGE
This is the title page of the business plan. It provides a brief summary of
the business plan’s contents.
In particular, the introductory page will contain the following elements:
i. The name and address of the business;
ii. The names and addresses of the entrepreneurs/principals;
iii.A paragraph describing the company and the nature of the business;
iv. The amount of financing required;
v. Statements of confidentiality of the report.
EXECUTIVE SUMMARY
This area of outline is part of the business plan and is produced after the
aggregate plan is composed.
Ordinarily, it is three to four pages long and is intended to inform and
engage premium potential speculators.
This is an exceptionally important area of the business plan and should
not to be altered in any way by the entrepreneur since the financial
specialist utilises the summary in order to decide whether the entire
business plan merits perusing.
Subsequently, it should feature in a brief and persuading way the key
foci of the business plan.
INDUSTRY ANALYSIS
It is crucial to put the new enterprise in an appropriate setting by leading a domain
investigation to recognise segment drifts and promotion changes taking place on a
national and global level that may affect the new venture.
The following list represents the types of the environmental factors that need to be
included:
i. Economy;
ii. Analysis of competitors;
iii. Industry demand;
iv. Culture;
v. Technology;
vi. Legal apprehensions.
DESCRIPTION OF THE VENTURE
This section is essential in composing a viable business plan. This section enables the
financial specialist to discover the size and extent of the proposed business. It should
begin with a statement of purpose or organisational mission statement of the new
pursuit.
This statement should describe the central idea of the business and what the
entrepreneur would like to accomplish. The statement of purpose or business definition
will manage the firm through to long-term decision-making.
After the statement of purpose should include various imperative factors that provide a
reasonable portrayal and comprehension of the business venture. Key components are
the items and services, personnel and office equipment, location and size of the
business, background of the entrepreneurs as well as the historical backdrop of the
venture.
PRODUCTION PLAN
If the enterprise is a manufacturing operation, a production plan is of
vital importance. The business plan ought to describe the total
manufacturing procedure and quantities to be produced.
The plan ought also to designate the type of subcontractors, including
area of expertise, explanations behind the determination, costs, and any
agreements that have yet to be concluded.
In the event that the product assembly is to be done entirely by the
entrepreneur, the physical arrangement format, plant, machinery and
hardware expected to be utilised in the manufacturing operation, the raw
materials, the suppliers’ names, addresses and terms, the cost of
manufacturing, and future capital plant needs need to be itemised.
In terms of the manufacturing operation, these items will be imperative
to any potential speculator in evaluating the monetary requirements.
MARKETING PLAN
The marketing plan is significant to the business plan in that it
portrays how the item and services will be valued and priced,
distributed and promoted.
Promotion or marketing research, criteria and marketing
methodologies, as well as forecasting sales need to be fully
represented in this section.
Forecasts for particular items or services are also presented,
keeping in mind the end goal being to extend benefit to the
intended venture.
ORGANISATIONAL PLAN
This is the section of the business plan that describes the type of
business association, namely, sole proprietorship, corporation or
partnership.
If the venture is a partnership, the terms of the partnership need to be
delineated.
If the venture is a corporation, it is imperative to detail the offer of stock
approved, offer alternatives, as well as the names and addresses and
CVs of the executives and officers of the organisation.
It is also useful to produce an association chart displaying the line of
authority and duties of each of the members of the organisation.
ASSESSMENT OF RISK
Each new enterprise will certainly be confronted with potential threats,
given the specific business and focused condition. It is critical therefore
that entrepreneurs make an appraisal of risk in the following way.
The entrepreneur should first disclose the potential dangers to the new
enterprise. Discussion should be held as to what would happen to the
business venture if these threats became reality.
Finally, the business plan ought to elect the technique that will be utilised
to anticipate, limit, or react to the risks should they take place.
A significant risk for a new venture could come about because of a
number of reasons, including: the response of competitors, shortcomings
or weaknesses in marketing, failings within the production or
management group, and lastly, new technologies that may render the
new product out of date.
FINANCIAL PLAN
As with the production, marketing and organisational plans, this is an essential
piece of the business plan.
It decides the potential financial burden required for the venture and
demonstrates whether the business plan is financially viable. Accordingly, the
following items should be discussed in the financial plan:
i. Pro-forma income statement;
ii. Pro-forma balance sheet;
iii. Cash flow projections;
iv. Break-even analysis;
v. Sources and application of funds.
APPENDIX
The appendix of the business plan for the most part contains materials
that reinforce or further inform relevant content elsewhere in the report.
Reference to any of the archives in the appendix ought to be made in the
plan itself. The following represent important sample documents and
data that are ordinarily contained within appendices:
i. Letters from customers, distributors, or subcontractors;
ii. Market research data;
iii.Leases or contracts;
iv. Price lists from the suppliers.
Thank you
