6. THE BUSINESS PLAN FOR NEW ENTEPRENEURS

6.1 What is Business Plan

A business plan is a detailed, self-explanatory plan of action which sets out every imaginable aspects of the planned establishment of the enterprise.  It contains the following information:

n  What, where, when and how the small business entrepreneur aims to start an enterprise.

n  Why the small business entrepreneur believes his or her idea is viable.

6.2 The Importance of a Business Plan

A business plan is important for the following reasons:

n  It encourages the small business entrepreneur to arrange his or her thoughts logically.

n  It encourages the entrepreneur to think about a future strategy for his or her business enterprise.

n  It encourages the entrepreneur to pay attention to different components of the feasibility of his or her business idea.

n  It provides a framework whereby the small business entrepreneur can explain the future direction of the enterprise to others.

n  It encourages the entrepreneur to face reality and so anticipate problems.

n  It is a plan of action in accordance with which the small business entrepreneur can manage his or her enterprise after it has been established.

n  It is an important aid for negotiating finance or trade credit.

n  It is an important instrument for decision-Making.

n  It is an aid in tendering for contracts.

n  It provides a basis for future planning.

n  It can help to improve an enterprise’s performance.

6.3 The most important components of a business plan

It is not easy to draw up a comprehensive business plan.  As far as possible, a business plan must be based on irrefutable facts; all aspects of a plan should therefore be properly researched.

There is no fixed or prescribed manner of drawing up a business plan.  The type of enterprise being planned does indeed influence the business plan, but it should always be logical, to the point and comprehensive, and it should be set out legibly.  The length of the business plan will depend on how sophisticated the enterprise is.  A business plan can be from five to twenty pages long.

6.4 Summary of Business Plan Format

1.     Front Page

The title page should be concise and professional and it should catch the eye immediately.  It may contain the following information:

n  The name of the enterprise.

n  The name of the owners(s).

n  The enterprise’s address.

n  The address and telephone number of the owner(s).

n  The type of enterprise.

n  The logo or emblem of the enterprise (if available)

n  The date on which the business plan is presented.

2.     Executive Summary

(Details See section 6.5)

3.     Contents

3.1 Personal Data of Entrepreneur

3.2 Marketing Plan

3.3 Production Plan

3.4 Organisation & Management Plan

3.5 Financial Plan

4.     Short Conclusion

6.5 Executive Summary

The Executive Summary, although appearing first in the order of presentation in the Business Plan, is actually the last to be prepared, that is, after the four sections of the business plan (marketing, production, organisation & management, and finance) have been completed.  It should be short (not more than two pages single space) but loaded with vital information about the project and the proponent.

1.     What is the nature of the project?

Briefly describe the project - the product, market, location, legal form, plan of operation and financing plan.

2.     What are the entrepreneur’s competencies and qualifications?

Give a brief introduction of yourself as an entrepreneur, your background, your past track record, business experience and training, especially mention those skills and qualities needed by or related to the project, and how you plan to use this knowledge and skills in the business.

3.     What are the project’s contributions to the local and national economy?

Describe the important socio-economic and developmental contributions of the proposed project to the local and/or national economy.  These contributions should be significant factors and priority concerns of the government, banks and society in general.  These contributions may include employment generation, utilisation of local skills and materials, income generation, import substitution, export earnings, etc.

6.6 Business Plan Format

Executive Summary

1.     Brief Description of the Project

2.     Brief Profile of the Entrepreneur

3.     Project’s Contributions to the Economy

Section 1

Marketing Plan

1.1 Description of the Product

1.2 Comparison of the Product with its Competitors’

1.3 Location

1.4 Market Area

1.5 Main Customers

1.6 Total Demand

1.7 Market Share

1.8 Selling Price

1.9 Sales Forecast

1.10 Promotional Measures

1.11 Marketing Strategy

1.12 Marketing Budget

Section 2

Production Plan

2.1 Production Process

2.2 Fixed Capital

2.3 Life of Fixed Capital

2.4 Maintenance and Repairs

2.5 Sources of Equipment

2.6 Planned Capacity

2.7 Future Capacity

2.8 Terms and Conditions of Purchase of Equipment

2.9 Factory Location and Layout

2.10 Raw Materials Needed

2.11 Cost of Raw Materials

2.12 Raw Materials Availability

2.13 Labour

2.14 Cost of Labour

2.15 Labour Availability

2.16 Labour Productivity

2.17 Factory Overhead Expenses

2.18 Production Cost

Section 3

Organisation and Management Plan

3.1 Form of Business

3.2 Organisational Structure

3.3 Business Experience and Qualifications of the Entrepreneur

3.4 Pre-Operating Activities

3.5 Pre-Operating Expenses

3.6 Office Equipment

3.7 Administrative Expenses

Section 4

Financial Plan

4.1 Project Cost

4.2 Financing Plan and Loan Requirement

4.3 Security for Loan

4.4 Profit and Loss Statement

4.5 Cash Flow Statement

4.6 Balance Sheet

4.7 Loan Repayment Schedule

4.8 Break-even Point (BEP)

4.9 Return on Investment (ROI)

4.10 Financial Analysis