business planning process
business planning

Introduction/Definitionof Concepts

Abusiness is an activity or entity, normally engaged in the provision ofproducts and or services, for commercial gain, extending to non-Commercialorganizations that may or may not be profit oriented.  This is irrespective of the size andautonomy. With this definition, non-governmental organizations, private, publicservice sector like schools and hospitals are regarded as ‘businesses’.Meanwhile, a  plan is  a  statement of  calculated  intention to  organize  effort and  resource  to achieve an  outcome.  This may  or  may not  be  in written  form,  but essentially comprising  explanations,  justifications   and   relevant  numerical   and   financial statistical data.

Business  can be  classified  into the  following  groups but  not  limited to:  a  small company; a large company; a cornershop; a local business; a regional business; a multi-million  naira business,  multi-national  corporation; a  charity  organization, a Federal, State or Local Government Ministry, Agency or Department, anhospital, a joint-venture; a project within a business or department; a businessunit, division, or department within another bigger organization or company, aprofit centre or cost centre within an organization or venture,  an individual or joint ventures, etc

Business plan therefore could bereferred to as the activities and aims of any entity, individual, group ororganization with the purpose of converting efforts to results. Itis a formal statement of a set of business goals, the reasons why they arebelieved attainable, and the plan for reaching those goals. It may also containbackground information about  the  organization or  team  attempting to  reach  those goals.

Business  plans may  also  target changes  in  perception and  branding  by  the customer, client, taxpayer  orlarger community. When the existing business is to assume a major change orwhen planning a new venture, a 3 to 5 year business plan  is required,  since  investors will  look  for their  returns  within that  time frame. Invariably, thebusiness plan simply serves as the detailed map of the venture that will  guarantee a  steady  start up,  a  steady but gradual  growth  and vitality  of  the business.

Theprocess of determining all the goals, strategies and projected actions that youintend  taking  to promote and ensure  the  survival and progress of  your business within  a  given time  frame  is referred  to  as business  planning  process. This characteristically has two key aspects, one focused on makingprofits and the other focused on dealing with risks that might negativelyimpact the business. Business plan serves as a blueprint to guide theorganization’s policies and strategies which are  continually modified  as  conditions change  and  new opportunities  or  threats appear.  If this  is  prepared for  external  audience like  lenders  and prospective investors;  it  has to  include  details of  the  past, the  present,  and a  forecasted performance of thebusiness. Typically, this also contains pro-forma balance sheet, income   and cash flow statements to show how therequired fund shall positively affect the financial position of the business.

Business Planning Process:

Whenwriting a business plan from the scratch, from a template or from the guide ofan experienced business plan consultant, there are five required steps tocreate a new business plan. It is a detailed process here referred to asbusiness planning process. These steps are:

Research:  Business  planning  process  starts  with  a  detailed research  into  the industry,  its  customers,  competitors,  and  costs  of  the  business.  This  research comes  in  various  forms  like  information  from  articles,  collected  data  or  direct interviews with prospective clients, experienced consultants or entrepreneurs. The result of the research should be meticulously organized and properly documented with its source.

Strategize:  The second step is to strategize based on the information gathered from the research. A good major source of strategizing is to watch the current  practices in  that  business  environment  to  have  a  foundation  to  build  the necessary  competitive  distinctiveness.  One  needs  to  ponder  over  the  strategy meticulously  to  consider  the  appropriate  location,  startup  finances,  equipment, operations, marketing and legal formalities.

Calculate: From the decided strategy activities, comes the third step to calculate.  It  is  essential  to  calculate  and  have  a  rough  draft  of  the  financial implications  in  terms  of  the  expected  expenditure  and  revenues  to  ascertain  a possible  profitability  at  the  end  of  the  day. There is the need to bring up all assumptions for startup expenses up to maturity at calculations for running early operations. Most startup businesses pack up before gestation stage due to financial assumptions.

Draft: The fourth step of a business planning process is to begin to draft and flesh up the background work made in the decided strategy and the financial calculations for the actual business plan detailed content.  One may require the services of a business plan writer or consultant, if there is any challenge in respect of this.

Revisitation and Proof-reading to finalize: The fifth step is to revisit the entire business plan details and reconsider any ambiguity or inappropriate wordings and ideas featuring in the plan. There may be the need to give it further fresh looks after setting it aside for some time. Soliciting for the assistance of an experienced proof-reader  may  be  necessary  to  prevent  grammatical,  spelling  and  formatting errors to finalize the plan.

Typical Structure for a Business Plan for a Start UpVenture

business planning structure

Fromthe foregoing, one will agree that business plans are decision-makingtools.There is no fixed content for a business plan. Rather the content andformat of thebusiness plan is determined by the goals and audience of thatenterprise. Some entrepreneurs simply  see  a business  plan  representing all  aspects  of business planning process that include only the vision and strategy withsub-plans to cover marketing, finance,  operations,  human resources  as  well as  a  legal plan  when required. To someothers, it has to be more detailed than that. It has to typically include  an introduction/overview,  a  short description  of  the business  idea  and opportunity, what makes it different, whowill be involved in the business, how you will provide your product or service,your marketing and sales strategy and financial situations and forecasts forthe expected profitability. Consequently, it is essential to know that thestructure of business plans varies. However, this discussion uses a typicalstructure for a business plan for a startup venture.

Executive Summary: 

This is the general overview of the entire business.  It is a  summary  of  the  business  idea,  the  mission  statement,  a  sketchy  report  of  where  your business  fits  in  the  market  place  and  why  it  will  succeed. Questions that have to be answered here include:

Whatis the business?A brief description of the business idea and why  it should  be  a success,  History  of the  enterprise  and its  ownership, Information aboutthe entrepreneur’s qualifications, experience and financial status andlocation.

Whatis the market? A description of theproduct and what it does, an explanation  of  ways in  which  the product  is  distinctive and  unique, Analysis  of the  competition,  How the product  will  be developed  and  what new products  are  being considered  as  replacements, Intangible  assets  & protection (e.g. copyright, trademarks)

Whatis the potential for the business?Size and expected growth of the  market,   Analysis   of  market   by   segments,  Identification   of   target segments, Competitors – who they are,ownership, size, market share, likely response to the challenge, Customers(existing & potential) – who they are, how they buy, why they buy,Distribution channels

Whatare the forecast profit figures?  A statement of what the business should achieveover a given time target (three or five year period)

What are the Funding requirements?

What are the prospects for investors and lender?

Pleasenote that all these need not be in detail as they are only the overview of thewhole plan.

Business Description:

This is a detailed description of the business, with an in-depth explanation of the product or service being planned for the marketa nd its benefits to those who will buy or use it.

Business   Environment  Analysis:   This  should   explain   the  detailed strategy and tactics to  be  employed for  bringing the product  or service to the market. Strategy is the broad approach to the achievement ofobjectives while tactics refer to the details of the strategy. This includesthe business name, the image and how they will be protected.

•           Determines how to get to the market?

•           Summarizes how to fulfill theentrepreneur’s objectives.

•           The detail will be contained inprogrammes and budgets.

•           the pricing structure to beestablished.

•           the estimated sales projections.

Market Analysis:

This should thoroughly describe the customers, your competitors, the need for your product or service, and the health and vitality of the market place. This cannot be guess work. It must be based on a careful and reliable research. Other key questions it must answer are:

•           What is the size and growth rate ofthe market?

•           How is the market segmented?

•           What is special about the product orservice?

•           What are the competitive advantages?

•           What is the marketing strategy?

Marketing Plan:

The marketing has to be  adequately  planned  for  and must include the:

•           Market research

•           Segmentation and targeting

•           Detailed outline of the product orservice

•           Unique selling points

•           Chosen pricing strategy

•           Promotional plans

•           Distribution strategy

•           Customer service strategy

Operations Plan:

Operations plan include the production process which must be explicitly explained. The process of bringing your product or service to the market, office space, production schedules, inventories, suppliers, supplies, official licenses, and insurance, meeting and existing business regulations must all be thoroughly discussed. The following may also be included depending on the type of business.

•           Physical location

•           Facilities

•           Equipment

•           Scale & location of operations

•           Capacity – potential and effective

•           ICT strategy

•           Engineering and design support

•           Materials required

•           Inventory levels and stock controlplans

•           Purchasing arrangements

•           Sources of supply of key resources

•           Quality control plans

•           Staffing requirements

Management   and   Organization:  

This   explains   the   organizational structure  of  the  enterprise  whether  it  will  be  sole  proprietorship,  partnership, Limited Liability Corporation, or other status and those to be involved. Other are

•           Details of senior management

•           Corporate governance

•           Staffing requirements

•           Key personnel

•           Recruitment and selection

•           Training

•           Rewards (financial &non-financial)

•           Labour relations

•           Employment and related costs

Financial  Plan: 

This  offers  the  idea  about  the  finances  to  be involved. The available amount, the required amount and how and where you will secure the difference. It should also be able to give the investment appraisal – payback and discounted  cash  flow as  well  as  break even  analysis.  Other expectations from the plan are:

•           Details of capital required and uses

•           The plan must include details of theexternal finance required. This will be

equal  to the  finance  required, less  the  finance raised  internally  from

existingowners and from operations

•           The plan will outline how it isproposed to raise the finance

•           Sources of finance: Short, medium andlong term; Debt v equity

•           Evaluation criteria for performancereview

•           Ratio analysis:net profit margin, Gross profit margin, return on capital employed, liquidity and solvency analysis

Effectivebusiness planning has to begin with an honest and realistic appraisal of the

currentposition of the business.

Reasons for a Business Plan:

importance of a business plan

Planningabout your business is a necessary process to undertake before, during andafter start up. The business venture could be a fresh proposed start-up, a newone developing within an existing corporation, a new joint-venture, or any neworganizational or business project for as long as it is purposely to convert actioninto results. As the backbone of any enterprise, it is very essential for an entrepreneurto ask him or herself why he needs a business plan. An axiom says if you failto plan, then you have planned to fail. A business plan serves as:

Road  Map/Guide For  The  Business:  It is  not  everyone that  starts  a business with  a  plan but  it  is better  to  have one  to  guide one.  It guides the entrepreneurthrough the various phases of his business. Note that it is not a staticdocument that you write once and put away. It should be simply taken as a guideor checklist of questions that constantly need to be attended to at every stageof gestation, growth, maturity and decline of the business.

Assuranceof potentiality: The headings in abusiness plan will reassure all that the venture will work. The plan helps toclarify the entrepreneurs thinking and demonstrates his commitment to carry onas planned. It also identifies where he/she intends to get to and how to getthere. This will also convince them that the tools, talent and team to makeyour plan work are already available.

Definesa Business: It helps to identify thebusiness, its objectives/goals and programmes that must be achieved.

Servesas Résumé for the Business: This happenswhen there is the need for communications to attract more investments, loansand profit potentials of the business.

RegularBusiness Review and Course Corrections: The business planis your regularreference to ensure you stay focused on its objectives. It will need to beconstantly reviewed as the business develops. It provides the chance to focusone’s mind on how one intends to run the business and to identify early on anyareas or issues that might have been forgotten or neglected.

ReviewCurrent Progress Against The Initial Forecast:The progress of the business shall easily be feasible against the earlierforecasts. This makes any review or necessary adjustments to get it back ontrack possible. Having a clearly presented  business  plan document  will  also make  it  easier for  any specialist supportneeded.

SupportFor A Loan Application Or Raise Equity Funding:When ever a  business  is seeking  fund  from a  bankers,  venture capitalist  or  investor, a comprehensive business plan that is clear, focused, realistic andcontains sound business reasoning shall be a necessary requirement to show thatit is worthy of financial  support.  Banks are more favourably disposed to  applications with  a business plan whenever itis approached for capital to expand.

DefinesAgreements Between Partners: It helps todefine agreements, shares,  etc  between partners,  shareholders  and other  stakeholders  in  thebusiness.

ProperAllocation of Resources: It helps to allocate resources properly, handle   unforeseen  complications   and   thereby  assist   in   making  adequate business decisions.

Sets  a Value  on  a Business  For  Sale or  Other  Legal Purposes: Whenever the businessis placed on sale, it helps to set a value for it. This is also required atmost times for legal purposes.

CONTENT     CURRENT STATUS DEVELOPMENT PLAN

1.         Executive Summary

2.         Business Description              

3.         Business EnvironmentAnalysis                      

4.         Market Analysis

5.         Marketing Plan                       

6          Operations Plan                      

7.         Management &Organization              

8.         Financial Plan             

9.         Conclusion                 

WORKSHEETA:

TypicalStructure for a Business Plan. Parents and some of the students are involved inone business venture or the other. These ventures need to be developed. Use theworksheet below, to provide information that could be in a business plan thatwill improve the business.

Nameof the Business venture____________________________________________

StudentsNames:_______________________________________________________

MatriculationNumber:___________________________________________________

Faculty/Department:____________________________________________________

Groupwork assignment, individual assignments/ test questions

1.)What is a business plan and why would an entrepreneur need a business plan?

2.)Itemize and discuss briefly the process of business planning.

3.) Can you recognize some business ventures being run within the University campus? List ten of them.