Module 1 Unit 1 Business Planning Process PDF

Module 1 Concept of Business and New Value Creation --------------------------------------------------- ### Unit 1 Business Planning Process A plan is systematic and scientific. Before the launching of the business you logically organize the process you want to adopt to achieve the set business ob...

Module 1 Concept of Business and New Value Creation --------------------------------------------------- ### Unit 1 Business Planning Process A plan is systematic and scientific. Before the launching of the business you logically organize the process you want to adopt to achieve the set business objectives. The organized procedure is the planning. The term "business plan" has different meanings to different people. Banks that release their own planning guidelines consider formal business loan applications to be synonymous with business plans. Venture capitalists see them as investment proposals, purely fund raising documents. Corporate managers think of them in terms of departmental budgets and financial forecasts.(Touchie, 2005). According to Kuratko and Hodgetts (1998), the business plan describes to investors and financial sources all of the events that are likely to affect the proposed venture. Details are required for various projected actions of the venture, with associated revenues and costs outlined. A Business Plan describes a business opportunity. It is like a road map because it tells you what to expect #### A successful Business Plan and what alternative routes you can take to arrive at your destination. Planning helps you to work smarter rather than harder. It keeps you future oriented and motivates you to achieve the results you want. Perhaps most importantly, the process of completing a Business Plan enables you to determine what commitment you need to make to the venture (Department of Trade and Economic Development, 2010) #### Importance of Business Plan According to Cagan (2006), they include the following: - You plan to launch a new business. - Your business has grown substantially. - You want to expand your existing business into new markets. - You want to add a new product or product line. - You are thinking about buying a business. **Other reasons why business plan is** necessary according to Department of Trade and Economic Development (2010) are to: - Control future risks - Prepare for future uncertainty - Control business environment - Control business growth - Avoid sales crises - Avoid liquidity crises - Avoid succession crises - Ensure people development - Ensure work space available - Avoid stock buying crises According to Timmons and Spinelli, (2004), developing the business plan is one of the best ways to define the blueprint, strategy, resource, and individual requirements for a new venture. A good business plan must be developed with a view to exploiting the defined opportunity, developing the opportunity and determining the resources required, obtaining those resources and successfully managing the resulting venture (Hisrich, Peters and Shepherd,2008). Writing a business plan is time consuming and financial wastage. **Writing Business Plan** can be laborious and financially demanding, but it is really worth the trouble. A well writing business plan will enables an entrepreneur to control future risk, prepare for future uncertainty, control business growth, take charge of organizational growth and development. It allows for consistencies in decision-making. #### Principles of Planning in Feasibility Studies and Business Plan A plan must be: ***Explicit***: All steps completely spelled out. I***ntelligible***: Capable of being understood by those who will carry it out. ***Flexible***: Capable of accepting change. ***Written:*** Committed to writing in a clear and concise manner. #### Benefits of Planning 1. Reduces 'firefighting': Many small business owners spend so much time 'putting out the fires' that they never have a chance to do anything else. By preparing a Business Plan you can anticipate problems that are likely to occur and decide how they should be handled in advance. 2. Justifies your plans and actions: Often, one decides to do something because it 'sounds' or 'feels' right. You may do something because that is the way that you have always done it. Preparing a Business Plan forces you to prove the validity, or at least consider the reasoning of your plans. 3. Tests your ideas on paper: It is much better to produce a Business Plan and find that the business is likely to be unprofitable than to start the business and find out the same thing. 4. Indicates your ability and commitment: A well-prepared Business Plan is an impressive document. It shows outsiders such as lenders and suppliers that you understand the business. #### Components of a written plan A written Business Plan should contain the following: 1. The Business Idea: An outline and description of the product or service and background on the industry. 2. The Entrepreneurs: A history of the founders of the business including their skills, abilities and proposed ownership structure. 3. Business Objectives: · What the business intends to achieve including long range goals · The advantage of the product or service over existing competitors · The image and character of the business to be developed. **The product or service Technical description of the business**. 1. Manufacturing: · Description of process and machinery used · Patents and design registrations · Predictions on changes to the industry · Costs of materials, machinery, etc · Plant location and layout · Labour availability and costs. 2. Retailing: Goods to be sold; Location; Stocking policy and procedures; and Suppliers and potential suppliers and the sales terms. 3. Service: · Description of service · Qualifications necessary to enter the industry · Industry and/or legal controls · Processes and services to be offered. #### Financial information 1. Capital Needs: Fixed assets needed; Working capital needed; and Starting capital needed. 2. Sources of Finance:· Types of finance needed; and Owners funds to be used. 3. Cost of Finance: Set up costs; Current interest rates; Ability to meet borrowings and Current returns on owners funds. 4. Financial Viability:· Projected profit and loss accounts; Break even analysis; Projected balance sheets; Cash flow forecasts; Working capital needs; Budgets; Expenses/Sales/Income and Taxation. #### The market 1. Market Research: Market size; Market description; Market trends; Customer profiles; and target markets then Preliminary sales forecasts and estimated market share. 2. Competitive Position: Competitors; Unique selling position; Quality of existing products or services and Marketing practices of competitors. 3. Marketing Program: Distribution channels; Sales outlets; Storage and transport of goods; Pricing policy; Packaging; Sales promotions and sales strategy; Advertising strategy and costs; Public relations. **Management and operations** Personnel: Numbers of staff needed; Skills necessary; Training programs. #### Business organisation 1. Form of legal organization: Sole Trader; Partnership; Company or Trust; Registration of business name; Organization chart. 2. **Legal Considerations:** Licenses; Federal and State taxes; Consumer Law; Business Law; Insurance. 3. Premises: Space required; Buy or rent contracts; Commercial lease requirements and problems; Availability of suitable premises. #### Questions to be answered in a business plan 1. *Description of the business*: · What type of business are you planning 2. *Marketing:* - How will you attract and hold your share of the market? - Who are your competitors? - How are their businesses prospering? - How will you promote sales? - Who will be your best suppliers and why? - Where will the business be located? - What factors will influence your choice of location? - What features will your location have? - How will your building contribute to your marketing strategy? - What will your building layout feature? 3. Organization: - Who will manage the business? - What qualifications will you look for in a manager? - How many employees will you need and what are their job descriptions? - What are your plans for employees' hiring, salaries and wages, benefits, training and supervision? - How will you manage finances? - How will you manage record-keeping? - What consultants or specialists will you need? - What legal form of ownership will you choose? - What licences and permits will you need? - What regulations will affect your business? #### Components of a Good Business Plan - Executive Summary. Your executive summary should appear first in your **business** plan. - Company Description - Market Analysis. - Competitive Analysis. - Description of Management and Organization. - Breakdown of Your Products and Services. - Marketing Plan. - Sales Strategy.