Developing Business Plan: Tilahun H. (MSC)

CHAPTER 3
Developing Business Plan
By: Tilahun H. (MSc)
1
Main Issues to be Discussed
• What is business Plan?
• Why needs business Plan?
• Who develops it?
• When?
• What are its major components?
2
Definition
• A business plan can be defined as a written document
prepared by the entrepreneur that describes all relevant
external and internal elements involved in starting a new
venture.
• A business plan is a written statement of the proposed
business venture, its operational, financial, marketing
details and strategy, and its managers’ skills and abilities.
• A business plan is a planning document and it is a road

map/ guide for business operation.
• A business plan is a selling document.
• A business plan is a reflection of its creator
• Defines vision/mission
3
Reasons for writing business plan
• Obtaining bank financing
• Seeking investment funds/attract investors
• Arranging strategic alliances
• Obtaining large contracts
• Attracting key employees
• Completing mergers and acquisitions
• Motivating your management team
• Convince oneself that the new venture is
worthwhile before making a significant financial
and personal commitment.
4
Cont’d….
• Assessing the feasibility and viability of the

business
• Setting mission, objectives, and strategies
• Indicates the overall direction and financial
targets of the business.
• Calculating the amount of resources needed
for the business.
5
When Business Plan is needed?
A Business plan is produced;

• At the startup of a new business
• At the time of buying an existing
business
• At the time of reviewing on-going
operation to make major decision
6
Who is interested in a business plan?
Three types of people will be interested in a

business plan:
1. Managers
2. Owners/ perspective investors
3. Lenders
• Such as banks, micro financing institutions
etc
7
Who makes a business plan?
• Promoters of a new business venture

• Entrepreneurs
• Business managers
• Technical specialists
• Independent business advisors
• Accountants
8
THE FORMAT OF BUSINESS PLAN
Depth and detail in the business plan depend on the size and
scope of the new venture, its audience, the nature of business
(service/manufacturing), the size of the market, competition, and
potential growth may also affect the scope of the business plan.
A business plan needs to answer the following three questions:
1. Where are we now? SWOT analysis
– An analysis of the current situation of the market place, the
competition, the business concept and the people involved in a
necessary first steps.
2. Where do we intend to go?
– The direction that is intended for the business need to be clear
and precise, if others are to share it in the future.
3. How do we get there?
– Implementation of accepted goals is what all the parties to plan
are interested in as a final result.
9
SWOT analysis
10
The business development plan answers key questions
• Is the market real? • Is it worthy ?

– Market Identification • Financial plan
– Customer Analysis – Proforma capital budget
– Competitor Analysis – Proforma income statement
– Industry Analysis – Proforma balance sheet
– Environmental Analysis – Proforma sources and uses
• Is the product real? statement
– Product/Service Definition • Financing plan
– Physical and Functional – Type and amount of capital
Description – Timing and source of capital
– Distinctive Characteristics – Intended use of proceeds
(Features and Benefits) – Financial evaluation
• Can we win? – Pricing, breakeven,
– Competitive Analysis sensitivities, etc.
– The Business Strategy of the • What are the risks?
Venture
– Identification and evaluation
– Functional Plans (e.g.,
Marketing, Sales) – Contingency plans
11
Elements /Parts of business plan
1. Title /Cover page
• Business name
• Company logo
• Address
• Telephone number
• Fax number
• E-mail address
• The founder’s/chief executive’s name
• Other contact information
12
Cont’d…
2. The table of content
3. The executive summary
4. Environmental and industry analysis
– Identify trends and changes occurring on a national and
international level that may impact the new venture
(economy, technology, political, social, legal etc)
– Industry demand and competition
5. Business description
– Legalities (sole proprietorship, partnership, pvt ltd Co.,
corporation)
– Business type (merchandising, manufacturing, service)
– Product/service….what makes it unique?
– The location (location need, space requirements) 13
Cont’d…
6. The marketing plan
– This section of the business plan describes how the product(s)
or service(s) will be distributed, priced & promoted/advertised
– Marketing plays a vital role in successful business ventures
– The marketing plan should answers the following questions
• Who are my target customers (age, sex, income level, and other
demographic characteristics)?
• Where do they live, work, and shop?
• How many potential customers are in my company’s trading area?
• Why do they buy? What needs and wants drive their purchase decisions?
• What can my business do to meet those needs and wants better than my
competitors?
– Forecasting sales should be described in this section.
– The plan should show
• The 4P’s
• Competition
14
Cont’d…
7. Production/operation plan
– This section is only necessary, of course, if your
company is making a product.
– This part should describe the physical plant
layout; the machinery and equipment needed to
perform the manufacturing operations; raw
materials and suppliers’ names, addresses, and
terms; costs of manufacturing; and any future
capital equipment needs.
15
Cont’d…
8. Human Resource plan

• This section should include: the company’s
organizational structure; profiles of your
management team; the qualification of the
board of directors; duties and responsibilities
key personnel, etc
16
Cont’d…
9. The financial plan
• The financial plan determines the potential investment
commitment needed for the new venture and indicates
whether or not the business is economically feasible.
• Generally, three financial areas are discussed in this section
of the plan:
– The entrepreneur should summarize the forecasted sales and
the appropriate expenses at least for the first three years, with
the first year’s projections provided monthly- Income statement
– The second major area of information needed is cash flow
figures for three years, with the first year’s projection provided
monthly.
– The last financial item needed in this section of the business
plan is the projected balance sheet. This shows the financial
conditions of the business at a specific time.
17
Cont’d…
10. Appendix
• Credit history (personal & business)
• Resumes/CV of key managers
• Details of market studies
• Background of the business
• Price list from suppliers and competitors
• Any other relevant information or document
18
Guide Lines in Preparing a Business Plan
– Keep the plan respectably short

– Organize and package the plan appropriately T
– Orient the plan towards the future
– Avoid exaggeration H
– Highlight critical risks E
– Give an evidence of an effective entrepreneurial
team:
– Do not over diversify E
– Identify the target market
– Keep the plan written in the third person N
– Capture the reader’s interest: D
19
Project Work (35%)
• Objectives:
To develop a Business plan of your own for
Selected business type
• To be done in group of maximum 3 students
• Make a reasonable Assumptions where
necessary
• Identical and plagiarized works will be given
zero mark and candidates will be disqualified
from the course.
NB: Maximum Mark is 35%.
20

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CHAPTER 3

Developing Business Plan

By: Tilahun H. (MSc)

• A business plan is a planning document and it is a road

• Assessing the feasibility and viability of the

A Business plan is produced;

Three types of people will be interested in a

• Promoters of a new business venture

• Is the market real? • Is it worthy ?

8. Human Resource plan

– Keep the plan respectably short

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