ABC OF BUSINESS PLAN

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MODULE 4: ABC OF BUSINESS PLAN
By
Festus Eligbo, Edward Mekwuye & Young Okezie
Introduction

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Every business begins with an idea, be it product or service-based. Such idea cannot
be transformed into a live enterprise unless a clear business opportunity has been
identified. Thus a business plan in an entrepreneur response to an identified
business opportunity.Fear is the greatest challenge to drive your business idea.
Preparing your business plan checks such fears.
What is a Business Plan
A business plan is a comprehensive written description and analysis of the business
an enterprise plans to go into. It is the most important document an entrepreneur
should package for a successful venture.
It should detail among others, the nature of the planned business,the enterprise
vision and mission, the market and the target clients, projected financials,
identified risks and mitigants as well as the exit strategy.
Why do we need a Business Plan?
 To get an integrated view of the proposed business
 To have a roadmap for running your new business
 To have the key tool for sourcing business finance
 As an instrument for technical assistance/grants
 To understand the financial aspects of your business including
cashflows, profitability and break-even requirements.
 To analyse and mitigate inherent risks in the proposed business.
 Helps you communicate in a compelling manner, your passion, dream
for the planned business.

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Steps in developing a Business Plan.
Assessing the
Situation
Developing your vision
and mission
statements
Market Survey of
Information/ Data
gathering
Working out the
Plans
Developing the
Plan
Preparing the
Executive
Summary

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Assessing the Situation
The departure point in business plan preparation to carry out an assessment of the
operating environment in which the proposed enterprise is to be run.Youneed to
know the state of the operating environment, the state of the industry you are
entering into, the level of competition, the opportunities, possible threats, state of
the infrastructure and the macro-economic indices – inflation, interest rate etc.
Developingyour Vision and Mission Statements
Your Visionis your big picture of where the planned business will be in the near
future. Your mission indicates what the business is out to achieve, it articulates
what benefits your business will bring to your publics.
Market Survey and Information/Data Gathering
The existence of market for the planned product or service is critical to the success
of the enterprise. The market survey/ information gathering helps you to show the
existence of potential customers/clients for the planned product/service.
Working out the Plans
A Business Plan is made up several sub-plans. These sub-plans must be worked-out
and be made integral part of theBusiness Plan. These plans include – Personnel
Plan, MarketingPlan, Revenue Plan, Financial Planand Summary of Project.
Developing the Plan
In developing the Business Plan, the individual sub-plans are integrated by bringing
each into the appropriate section or chapter of the plan and arranged to flow in a
compelling and persuasive manner.
Preparing the Executive Summary

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Preparing the Executive Summary involves pulling out the keyand vital highlights
from each section of the Business Plan in other to give a comprehensive over view
of the planned business.
Contents and Structure of a Business Plan
This section gives an insight into the planned business -
- Introduction of the business (history where applicable)
- Vision and Mission
- Ownership of the Enterprise
- Legal Status
- Location and Facilities
- Products/Services
- Business Strategy
- Key Success Factors for Operating in the Industry
- Revenue Base
Marketing & Clients
- Nature and Size
- Target Customers/Clients
- Key Competitors and Players
- Production Process
- Service Delivery Process
- Quality Assurance
- Demand/Supply Analysis
- Technology
- Competitive Edge
Marketing Plan

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 Indicate your marketing strategy – your roll-out plan
 Promotion Strategy/Marketing Channels.
 Alliances
 Market Positioning
 Customer/Client Relationship Management
 SWOT Analysis
Organization and Management
 Organizational Structure
 Shareholders and Directors
 Management Team
 External Support (Consultants/Specialists)
 Personnel Plan
 Values and Norms of the Enterprise
Legal, Regulatory, Social, Health, Safety &Environmental Issues.
 Legal Issues
 Regulatory Issues
 Social Issues
 Health, Safety and Environmental Issues
Financial Plan
 Project Cost
 Funding Requirement
 Funding Plan
 Projected Income Statement
 Projected Cashflows Statement
 Projected Balance Sheet

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 Profitability Analysis
 Break-Even Analysis
 Assumptions Behind the Figures (Assumptions Sheet)
Risk Analysis, Contingency Plan and Exit Strategy
 Risk Analysis and Mitigants
 Contingency Plan
 Exit Strategy
 Exit of the Investor
 Exit of the Entrepreneur
Other Considerations, Conclusion and Recommendation
 Economic Justification
 Commercial Viability
 Conclusion/Recommendation
Appendix
 Photocopy of the Certificate of Incorporation or Business Name
Registration
 Photocopy of Approvals
 Photocopy of Licenses
 Organogram
 Profoma Invoice for Equipment/Plant to be purchased
 Awards, Honours and Leadership positions during the school years of
the entrepreneur or promoters
 C.V of the entrepreneur and key management members (if the C.V in
particularly impressive)

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 Newspaper/Funeral/Magazine cut–outs that have supportive write-ups
on the planned business.
1.0 Executive Summary
Typical Executive Summary
- Two styles of preparing on executive summary are the – synopsis
summary (highlights) and thenarrative summary. The best practice is
the synopsis summary with some fleshy additions.
Synopsis Style
- Take the key highlight from each section of the business plan.
1.1 The following report and recommendations relate to the proposal by
WAZOBIA ConceptLimited to establish a Fast Food Business based on need
assessment, market survey and identified business opportunity.
1.2 The company’s vision is “to be a one-stop snacks outfit, providing quality
food and service to discerning customers”.
1.3 The proposed project is to be fully implemented with an investment of N 3.0
Million (Three Million Naira) made up of N 2.0 million fixed capital and N 1.0
million working capital
1.4 The proposed project will be located at NnebisiRoad, Asaba to ensure strong
visibility for the business.
1.5 A ready market exists for the planned business, based on our market survey.
1.6 Our marketing strategy will be launchingoutstrongawareness creation
through handbills, flyers etc.

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1.7 The company’s competitive edge is the management’s strong industry
knowledge and customerrelationship management skills.
1.8 The funding requirement isN2.5 million as the promoter is committing N0.5
Million to the project.
1.9 The financial projections reveal a good level of liquidity and stability. The
projected turnover for 2016, 2017 and 2018 respectively isN15.0 million,
N19.5 million, N27.3.Profit after taxation in 2016 isN1.5 increasing to N2.0
million in 2017 and N 2.9 million in 2018.
1.10 The profitability indicators as extracted from the projections embodied in
the plan, are as follows:
2016 2017 2018
N N N
Turnover 15,000,000 19,500,000 27,300,000
Operating Profit 1,710,000 2,145,000 3,065,000
Taxation (210,000) (145,000) (165,000)
Profit After Taxation 1,500,000 2,000,000 2,900,000
1.11 Our Exit Strategy for the Investor/Lender is effective cashflows management
to ensure the loan repaymentat the end of the tenor while interest payment
will be made as at when due.
1.12 Conclusion and Recommendation
 From the point of view of the analysis of our findings the proposed
project has been found to be technically feasible, financially viable and
economically desirable.

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 The project offers good investment benefits. We therefore highly
recommend it for funding and implementation.
2.0 Background
2.1 Introduction
Tell us about the business idea, how it was conceived by you, did you do any
need assessment, what is the state of the industry, - growing with future
prospects? Are their entry restrictions etc? Tell us about the current trend
or direction in the industry and communicate your passion for the planned
business.
2.2 Vision and Mission
Articulate your vision and mission for the business,you big picture and how
you to plan achieve it.
2.3 Ownership of the Enterprise
Indicate the ownership of the planned business. State their names and brief
information about them, their background, skills competencies and past
accomplishments (ifany)
2.4 Legal Status
State if the company has been registered at the Corporate Affairs
Commission and the nature of the registration.
2.5 Location
Let us know where you plan to locate the business and the reason for the
choice of the location, what facilities are you deploying to run the business.
2.6 Product/Services
Indicate the proposed products/services, their distinguishing features
compared to the competitors'.

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2.7 Business Strategy
Tell us how you will drive the business differently from your competitors, to
gain market share. How will you outperform your competitors.
2.8 Key Success Factors
Indicate the key success factors in this line of business to show that you
understand what it takes to succeed in it.
2.10 Revenue Base
- Highlight the enterprise’s revenue base.
- If there are multiple sources of revenue, indicate it.
- The more the sources, the better.
3.0 Marketing and Clients
Indicate the nature and size of the market you are entering into, your target
customers/clients.State the key players and competitors by names and
where available the volume of their business per annum. Give us an idea of
your production process possibly through a flow chart. On the other hand for
service-based business, tell us about your planned service delivery
process.Quality assurance is critical – tell us how you will ensure
product/service quality.Indicate your demand/supply analysis for the
industry and state if there is a supply gap. What technology are you
deploying, imported or locally available and reasons for the choice of the
technology. State your competitive edge, what will stand you out from your
competitors.
4.0 Marketing Plan

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State your marketing strategy – your roll-out plan, how you want to get to
your target customers/clients, how you plan to price your product/service.
Indicate what your promotion strategy will be –flyers, handbills, posters,
words of mouth or classified advertisement in the dailies. What marketing
channel will you adopt? Do you plan to form alliancesto market your
product/source?Indicate so. On market positioning, tell us how you want
your business to be seen in the market place, eg a provider of high quality
products/services, a quick and flexible service provider etc. Tell us how you
will use customer/client relationship to beat the competition.
SWOT ANALYSIS
- A Business Plan is incomplete unless a SWOT analysis has been carried-out.
SWOT means (strengths, weaknesses, opportunities and threats) seen in
your business. Identify each of the above as seen in your business and briefly
address what you intend to do about – the strengths (building on them).
Weaknesses (addressing the weaknesses), opportunities (exploiting them)
and threat (steps to check the threat to your business).
5.0 Organization and Management
Indicate the Organizational structure of the planned business. State the
names of the shareholders and the directors (if any), giving a brief
background of them, their experience, skills, competences and
accomplishments. Give the names of the management team members, their
qualifications, business experience and competencies. If you plan to seek
External Support (Consultants/Business Development and Support Services
Providers), state so and the firm indicating their suitability.Give an idea of

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your personnel plan – the positions to be filled with their annual
remunerations. State the company’s values and norms.
6.0 Legal, Regulatory, Social, Health Safety and Environmental Issues.
Legal, Regulatory, Social, Health Safety and Environmental Issues can have
serious negative impact on your business if they are not factored into your
business plan and effectively addressed.
Show that legality check has been done on the planned business and indicate
the registration status with CAC. On regulatory issues, demonstrate your
familiarity with the regulatory requirements in your line of business and
indicate if you have obtained the needed approvals. Highlight the social
benefits of the planned business - job creation, poverty reduction,
acquisition of business management skills etc. show us how you want to
address the health, safety and environmental challenges, that may come up
in running the planned business.
7.0 Financial Plan
This is a key element of your business plan and the projectedfigures, merely
reflect your decisions and assumptions.
 In this section you are expected to communicate effectively to your reader;
the project cost (startup cost) indicating the fixed cost and working capital
components.
 Your funding plan or structure, that is how you will source the project cost.
 You funding requirement, how much you need from a lender.
 Your projected Income Statement for three (3) years.
 Your projected CashflowsStatement for three (3) years.
 Your projected Balance Sheet for three (3) years

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 Your profitability analysis giving the indicators of how profitablethe planned
business is.
 Your computation of the Break-Even point. This is the point where the
business just recovers the cost:no profit nor losses.
 Note that if the business is already an existing one, you are expected to show
the historical (actual) financials for the past three (3) years
o Income statement
o Cash flow statement
o Cash flow statement
o Balance sheet
 Note also that underestimationof funding requirement is a major challenge
to most start-ups and it results in business being dead at start-up
8.0 Risk Analysis, Contingency Plan and Exit Strategy
Every business faces same degree of risk. A business plan is incomplete
unless inherent risks in that business are identified and mitigants indicated.
Your ability to identify and assess risks inherent is your business and proffer
mitigants, strengthens your business plan.
The standard approach is to state the identified riskon one side and the
appropriate mitigants on the other side.
Identified Risks Mitigants
In the area of contingency plan, you need to address what you will do if any
of the assumptions fail.
e.g if the operating costs go up

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if the turnover(sales) falls below the projected figure
if any change in regulatory policy affects your business.
In Exit Strategies, you are expected to address two issues
How will your lender take exit (get back his money) (principal + interest).Do
you plan to sell-off the business in future, call-in more investors or hand over
to family members? YourExitStrategiescanmotivate or de-motivate your
potential lenders or financiers. Promise of an effective cashflows
management, gives lenders some comfort on a hitch-free exit.
9.0 Other Considerations Conclusion and Recommendation
To properly wrap-up your business plans, you areexpected communicate in
a compelling manner.The economic justification for the planned business,
the commercial viability of the business: does it generate adequate cash
flow, is it profitable and is the return on investment strong?
You also need to draw your conclusion on the outcome of the business plan
and make recommendations. Whether the project should be founded for
implementation or not.