OVERVIEW Of

Objectives
• At the end of the session participants will
be able to;
• Understand the meaning and benefits of
business plan
• List components of business plan
 Group exercise
• What is business plan?
• Is it different from strategic plan?
 What is business plan?
• It is a road map
• It is a guiding tool where to be heading
• It is a written description of what the
business is intending to do in the future.
• The business plan addresses the
following key questions
• What ?How? For whom? When? Where?
How much?
Strategic Plan vs. Business
Plan

5
 Planning issues
A business that You need a
Having no plan is like
fails to plan, plan to build a
sailing the seven seas
plans to fail. house…..and
without a compass….
a business.

…good planning
helps to make If you don’t have a …Action without
dreams come true. plan…you will be part planning is fatal.
of someone else’s
plan.

….if you will be content to

begin with doubts, you will
end in certainties..
….it’s the planning.
6
• Strategic plan is a general picture where
our business is going
• Business plan is a specific plan which
shows how our business looks like
• Strategic plan 3-5 years
• Business plan 1-3 years
• Why it is prepared?
 A Business Plan

 Leads to a sound business structure

 Produces a marketing plan

 Clarifies financial needs

 Identifies management pathways

 Serves as a communication tool

 WHY PREPARE A BUSINESS PLAN?

 Clarifies what the business opportunity is

 Explains why opportunity exists

 Explores how you may be able to seize the opportunity

 Can be a valuable guide during start-up

 Is a way of reducing risks

 Can be an effective tool for communicating your

business idea
 Exercise
• Suppose you are a banker and people are
willing to borrow from you.
• What are the areas that you would focus in
the business plan before approving the
loan?
 5 C’S OF CREDIT
• Character
• Capacity
• Capital
• Credit History
• Collateral
 Questions a Business Plan Should
Answer….

 What are the significant risks and problems

involved in starting the enterprise?
 What is the long term profit prospect?
 What are the business's financial and cash flow
requirements?
 What is the product or service?
 What is the best way to produce the product?
 What is it about the entrepreneur's experience or
that of the executive that makes me believe he or
she can make this business a success?
 MAIN POINT I

A business plan gives an entrepreneur or

executives a better understanding of the
risks he/they is/are taking, and therefore
he/they can make better decisions, especially
during the first confusing months after
start-up or expansion.
 Why people do not Prepare Business
Plans…

 An entrepreneur is likely to know what he

wants to do, so written plan is unnecessary

 Things rarely go according to plan, so the

plan is inevitably going to be wrong

 Entrepreneurs have been shown to possess

the competencies of initiative, flexibility, and
grasping new opportunities as they appear.
This goes against adhering to a plan which is
seen as more typical of a bureaucrat than of
an entrepreneur.
• What are the components of a business
plan?
 COMPONENTS OF A BUSINESS
PLAN

1. Marketing plan
2. Production plan
3. Organization and management plan
4. Financial plan
 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
 2. Production plan
2.1 Production Process
2.2 Volume/size of production
2.3 Maintenance and Repairs
2.4 Sources of Equipment
2.5 Planned Capacity
2.6 Future Capacity
2.7 Terms and Conditions of Purchase of
Equipment
2.8 Factory Location and Layout
 Production plan cont’d
2.9 Raw Materials Needed
2.10 Cost of Raw Materials
2.11 Raw Materials Availability
2.12 Labour
2.13 Cost of Labour
2.14 Labour Availability
2.15 Labour Productivity
2.16 Production Cost
3. Organization & Management
3.1 Form of Business
3.2 Organizational 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
 4. Financial management
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 Return on Investment (ROI)
4.8 Financial Analysis
 Break- even Point (BEP)
Calculation
• 1. BEP Sales
To determine BEP Annual Sales, multiply
annual sales found in income statement by
the annual fixed costs.
 2. BEP Production
• To determine BEP Production Volume,
divide BEP Sales by the Unit Selling Price
(USP)
 Another method is:
• Divide Annual Fixed Costs by Unit Selling
Price less Unit Variable Cost, also known
as Contribution Margin, that is, what is left
to cover fixed costs and profit. At BEP, the
contribution margin can only cover fixed
costs, not profit.
 3. BEP Percentage
• To determine BEP Percentage on yearly
sales, multiply the yearly fixed costs by
100, divided by annual sales minus the
variable costs.