MODULE 1: CONCEPT OF BUSINESS AND NEW VALUE CREATION

1. Business Planning Process

Introduction/Definition of Concepts
A business is an activity or entity, normally engaged in the provision of products and or
services, for commercial gain, extending to non-Commercial organizations that may or may not
be profit oriented. This is irrespective of the size and autonomy. With this definition, non-
governmental organizations, private, public service 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 corner shop; 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, an hospital, a joint-venture; a project within a
business or department; a business unit, division, or department within another bigger
organization or company, a profit centre or cost centre within an organization or venture, an
individual or joint ventures, etc

Business plan therefore could be referred to as the activities and aims of any entity, individual,
group or organization with the purpose of converting efforts to results. It is a formal statement
of a set of business goals, the reasons why they are believed attainable, and the plan for
reaching those goals. It may also contain background 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 or larger community. When the existing business is to assume a major change
or when planning a new venture, a 3 to 5 year business plan is required, since investors will
look for their returns within that timeframe. Invariably, the business 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.

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The process of determining all the goals, strategies and projected actions that you intend 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 making profits and the other focused on dealing with risks that might
negatively impact the business. Business plan serves as a blueprint to guide the organization’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 the business. Typically, this also contains pro-forma balance sheet, income
and cash flow statements to show how the required fund shall positively affect the financial
position of the business.
Business Planning Process:
When writing a business plan from the scratch, from a template or from the guide of an
experienced business plan consultant, there are five required steps to create a new business
plan. It is a detailed process here referred to as business 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, start
up 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 start up expenses up to maturity at
calculations for running early operations. Most start up businesses pack up before gestation
stage due to financial assumptions.

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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 Up Venture

From the foregoing, one will agree that business plans are decision-making tools. There is no
fixed content for a business plan. Rather the content and format of the business plan is
determined by the goals and audience of that enterprise. Some entrepreneurs simply see a
business plan representing all aspects of business planning process that include only the
vision and strategy with sub-plans to cover marketing, finance, operations, human resources
as well as a legal plan when required. To some others, 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, who will be involved in the business, how you will
provide your product or service, your marketing and sales strategy and financial situations and
forecasts for the expected profitability. Consequently, it is essential to know that the structure of
business plans varies. However, this discussion uses a typical structure for a business plan for a
start up 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:

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

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What is the market? A description of the product 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, trade marks)

What is 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

What are the forecast profit figures? A statement of what the business should achieve over a
given time target (three or five year period)
What are the Funding requirements?
What are the prospects for investors and lender?

Please note that all these need not be in detail as they are only the overview of the whole 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 market and 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 of objectives while tactics refer to the details of the strategy. This
includes the business name, the image and how they will be protected.

• Determines how to get to the market?

• Summarizes how to fulfill the entrepreneur’s objectives.
• The detail will be contained in programmes and budgets.
• the pricing structure to be established.
• 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

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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 of the market?
• How is the market segmented?
• What is special about the product or service?
• 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 or service
• 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 control plans
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• 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 the external finance required. This will be
equal to the finance required, less the finance raised internally from
existing owners and from operations
• The plan will outline how it is proposed to raise the finance
• Sources of finance: Short, medium and long term; Debt v equity
• Evaluation criteria for performance review
• Ratio analysis: net profit margin, Gross profit margin, return on capital employed,
liquidity and solvency analysis

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Effective business planning has to begin with an honest and realistic appraisal of the
current position of the business.
Reasons for a Business Plan: Planning about your business is a necessary process to undertake
before, during and after start up. The business venture could be a fresh proposed start-up, a new
one developing within an existing corporation, a new joint-venture, or any new organizational
or business project for as long as it is purposely to convert action into results. As the backbone
of any enterprise, it is very essential for an entrepreneur to ask him or herself why he needs a
business plan. An axiom says if you fail to 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 entrepreneur through the various
phases of his business. Note that it is not a static document that you write once and put away. It
should be simply taken as a guide or checklist of questions that constantly need to be attended
to at every stage of gestation, growth, maturity and decline of the business.

Assurance of potentiality: The headings in a business plan will reassure all that the venture will
work. The plan helps to clarify the entrepreneurs thinking and demonstrates his commitment to
carry on as planned. It also identifies where he/she intends to get to and how to get there. This
will also convince them that the tools, talent and team to make your plan work are already
available.
Define a Business: It helps to identify the business, its objectives/goals and programmes that
must be achieved.
Serves as Résumé for the Business: This happens when there is the need for communications
to attract more investments, loans and profit potentials of the business. Regular Business
Review and Course Corrections: The business plan is your regular reference to ensure you stay
focused on its objectives. It will need to be constantly reviewed as the business develops. It
provides the chance to focus one’s mind on how one intends to run the business and to identify
early on any areas or issues that might have been forgotten or neglected.

Review Current Progress Against The Initial Forecast: The progress of the business shall easily
be feasible against the earlier forecasts. This makes any review or necessary adjustments to get
it back on track possible. Having a clearly presented business plan document will also
make it easier for any specialist support needed.
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Support For A Loan Application Or Raise Equity Funding: Whenever a business is seeking
fund from a bankers, venture capitalist or investor, a comprehensive business plan that is
clear, focused, realistic and contains sound business reasoning shall be a necessary requirement
to show that it is worthy of financial support. Banks are more favorably disposed to
applications with a business plan whenever it is approached for capital to expand.

Defines Agreements Between Partners: It helps to define agreements, shares, etc between
partners, shareholders and other stakeholders in the business. Proper Allocation 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 business is
placed on sale, it helps to set a value for it. This is also required at most times for legal
purposes.
CONTENT CURRENT STATUS DEVELOPMENT PLAN
1. Executive Summary

2. Business Description
3. Business Environment Analysis
4. Market Analysis
5. Marketing Plan
6 Operations Plan
7. Management & Organization
8. Financial Plan
9. Conclusion
WORKSHEET A: Typical Structure for a Business Plan. Parents and some of the students are
involved in one business venture or the other. These ventures need to be developed. Use the
worksheet below, to provide information that could be in a business plan that will improve the
business.
Name of the Business venture____________________________________________
Students Names:_______________________________________________________
Matriculation Number:___________________________________________________
Faculty/Department:____________________________________________________

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 Group work 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. Start Up Decision - What Motivates People to Begin New Businesses
A. Introduction/Definition of Concepts It is worthy of note to consider what motivates
people to begin new businesses particularly when one reflects on what it takes to start a
new one in the Nigerian environment. It should be understood that new businesses are not
created by accident, but clearly intentional. Entrepreneurs are driven by challenges which they
pursue and overpower. These challenges in Nigeria include the fears of funding, hardworking,
complete failure and universal delayed profit in the stabilizing years.

With the current problems of joblessness, poverty, miss-trained graduates and graduates in
unneeded courses, many Nigerians are venturing into entrepreneurship without considering
their personality. Only your interest to be an entrepreneur is not enough, your personalities,
whether in-born or developed in skills, experiences, lifestyles and resources along with your
individual suitability for the different available options; majorly determine your success at
business creation. Your personality has a lot do in determining the choice of business that is
right for you.

In Nigeria, a lot of successful entrepreneurs today failed at several attempts in business before
achieving the desired outcome in just one or two. They always claim to ‘hit it’ in the successful
one. Yet a lot are still beginning theirown businesses on daily basis. Besides the personality,
certain factors available to individuals also assist to motivate them to begin a business. What
are these factors?
Factors That Motivate People to Begin New Businesses
Joblessness: As students the main factor that could motivate you to begin a new business
on graduation is non availability of Government or private jobs in Nigeria. However, there are
several other factors motivating people to begin businesses.
Financial Ambition: The necessity to be rich legally and fast may motivate someone to begin a
new business. His interest is the financial reward that entrepreneurship can bring him. It has to
generate enough profit. This is very common in Nigeria.

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Desire to Control the Economy: There are some entrepreneurs who want to control the
entire or certain aspects of the economy of their people. In Nigeria today, Odua Group of
Companies, Jimoh Braimoh, Wale Tinubu, Otedola, Dangote are individuals being motivated
by their desire to control certain aspects of the Nigerian industry. Today is controlling the
building industry, haulage; petroleum and food industries. The desire of such persons or their
group motivates them to continue to start new businesses.

Desire to pursue a business idea: A business idea may occur from any source to a prospective
entrepreneur. He may eventually be motivated to pursue this idea and begin a new business.

Advantage of an opportunity in the market: When an opportunity opens up in the market, some
entrepreneurs could take advantage of this, explore it and eventually get motivated to start a
new business Inherited Family Business: An inherited family business can be a motivating
factor for the establishment of a new one.

Desire to be their own boss: An employee could be motivated by his desire to be his own boss
and become an entrepreneur. He/she eventually begins a new business that will be under his or
her full control. They want to be their own boss and in charge of all of the day-to-day
operations of a company. He entrepreneur wants to be the one making the important
business decisions, determining the direction the company will take, making the call on
product development and marketing and being responsible for every aspect of the
company's operation.

Replicating a Business Idea found in Another Environment: Some entrepreneur who travel
may come in contact with a business idea that is new to his environment. This may be
replicated in the new place by the entrepreneur on his own or with the assistance of the original
environment.
Frustration with low Pay: A worker frustration in a company may decide to get out to establish
his own outfit which he believes can compete favourably with his previous employer. Note that
he must have acquired enough experience from them. He knows the weaknesses and strength of
the previous company. The desire to control their own destiny,

Preference for a Smaller Company Environment: The preference for a small company
environment with the desire to put a personal touch back into doing business may be a
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motivator for beginning a new business. The drive to start a business comes from. Someone
might feel upset working in a large corporation/company, can become very impersonal.

Lack of opportunity in previous employer: Just like being frustrated with low pay, an employee
that lack opportunities one way or the other may be frustrated. This may be the motivating
factor that will turn him into an entrepreneur with a new business. A talented person that the
employers could not retain could be motivated to begin a new business.

The desire "to make things improve the world": someone can be motivated to begin a new
business if he/she feels highly pressed to make things that will improve the lot of common man
in his society.

Invite to begin someone else's business: There are situations where an entrepreneur invites
someone to begin a new business for him/her.

Maintain own ethical values which their employer didn't share: The desire by a
prospective entrepreneur to maintain his own ethical values may motivate him to
establish a new business. The mis-match between the values, goals and ambitions of these
entrepreneurial spirits and their employers is a very strong motivating factor for establishing a
new business
Desire to be involved in operations: Some entrepreneurs could be frustrated in a business and
feels confident that he/she possesses the necessary capacity and interest in running a successful
business. This motivates him/her to start his own and be directly involved in all operations - the
design team, sales, marketing, engineering and production.
Exposure to Some Available Fund: The availability of some excess fund that is not being used
may motivate the idea of beginning a new business. A lot of bankers, civil servants
politicians retire with a lot of gratuity to become entrepreneurs.

Spirit of returning to the society: Whilst a number of motivations could come from
entrepreneurs driven by the spirit of returning to the society who already feels
accomplished but now want to contribute back to the society by offering valuable
services to their customers. He/she may then decide to start for them new businesses that may
or not even compliment his/her original business

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Life after Retirement: The fear of what to do to augment their pension salary challenges retirees
to begin a new business. Retirement age in Nigeria is between 60 and 70 year depending on
one’s profession. To prevent their early death, medical doctors have recommended that retirees
at that age range should be involved in continuous activities like that of their offices while in
service. Retirees are therefore motivated by these two challenges to begin their own businesses.
Favourable Government Policies and Procedures: A favourable Government policies
and registration procedures can motivate entrepreneurs to begin new businesses. The Nigerian
Government has a lot of polices in place to assist entrepreneur. These include the establishment
of special banks like the bank of commerce, agriculture and industries, Government policy
tolerates Civil Servants to venture into any area of agriculture while still in service and
the protection of creativity and innovations of original works with the Nigerian.
Copy right Law policy. Several registration rules and procedural requirements of businesses in
Nigeria are also made less cumbersome and majorly and electronically online.
Opportunity Search and Identification
Introduction/definition of concepts
Opportunity refers to the extent to which possibilities for new ventures exist and the extent
to which entrepreneurs have the leeway to influence their odds for success through their
own actions. Simply put, opportunity is a perceived means of generating incomes that
previously have not been exploited and are not currently being exploited by others. Opportunity
identification can, in turn, be defined as the cognitive process or processes through which
individuals conclude that they have identified an opportunity. It is important to note that
opportunity identification is only the initial step in a continuing process, and is distinct both
from detailed evaluation of the feasibility and potential economic value of identified
opportunities and from active steps to develop them through new ventures. It is essentially
a situation in which new goods, raw materials, markets and organizational strategies can be
introduced through the formation of new means, ends or means-ends relationships.

The focus these days is on innovative opportunities which are the ones that truly break new
grounds rather than merely expand or repeat existing business models. Opening a new Hausa or
Igbo cafeteria in a neighbourhood dominated by a populace from these extractions that
currently do not have one is an example. Not everyone can identify opportunities. Some
individuals are more likely to identify and exploit opportunities than are others. Opportunity is
a major process of self-evaluation of one’s ability to start, operate and run a business venture
with the popular analysis often referred to as SWOT (Strength, Weaknesses, Opportunity and
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Threat). It helps to check the chances of succeeding in a particular choice of venture
open to an individual through his experiences. These experiences include family, religious
or professional linkages, membership of any network group.

Searching for a business opportunity that is right for them is the major challenge would- be
entrepreneurs face. New start ups always focus on introducing a new product or service
based on an unmet need, select an existing product or service from one market and offer it in
another where they are not available; and sometimes the firm relies on a tried and tested
formula that has worked elsewhere in a franchise setup.

Business Opportunity Identification Process

It is pertinent to know how entrepreneurs identify and decide a new business
opportunity with the best chance to succeed. The most important part of all business attempts
common to most successful start ups is answering an unmet need in the market. Customers are
always interested in products that add value. They buy products needed only to satisfy some
problems. In actual fact, there is no substitute for indulging the unmet needs of customers. Most
entrepreneurs searching for new business ideas fundamentally consider three central issues. The
main one is the potential economic value. He first considers if the venture has the capacity to
generate profit. The second is the newness of such a venture. He / She will prefer products,
services or technology that does not previously exist in that environment. The third is the
perceived desirability whether their product has the moral or legal acceptability in that
environment. He then considers if:

• his final business decision idea corrects a deficiency in the market.

• the resources and capability to carry out this business idea are available to him/her.
• the market for it are readily available and at profit sales.
• the new business idea can compete favourably with existing related competitors
and their market.
• this business market is growing or not and how one should prepare to join that business.
.
ii. The Stages of Opportunity Identification process Opportunity identification is the
collection of three main factors, which are the entrepreneur’s background, the business
influence and the general business environment. Opportunity identification has five stages

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that lead to ‘recognition’. The five stages are discussed in relationship with the
process of opportunity identification. These stages are:
a. Preparation
b. Incubation
c. Insight
d. Evaluation
e. Elaboration
f. Preparation
Preparation stage is that knowledge and experience exercised just before the opportunity
discovery process. These knowledge and experience are not often deliberately acquired.
However, preparation itself is usually a deliberate attempt to widen capability in an area and
become sensitive to concerns in a field of interest. In an organized situation, the background of
the business, the products or services or the technological knowledge must have majorly
informed the main ideas of the successful venture. One cannot however, rule out the role
of new ideas and expertise originating from individuals in the organization that will
eventually result in a new business.
Incubation
Incubation stage is the part of the opportunity identification process that involves the
consideration of a concept or a specific problem ordinarily not subjected to conscious or
formal analysis by a businessman or his team. It is usually not consciously done and
therefore more often than not, an instinctive and unempirical approach for the consideration of
several potential alternatives.
Insight
Insight stage occurs at the moment a fundamental solution suddenly becomes recognized
unexpectedly. It is a particular moment that keeps occurring persistently right through the
process of opportunity identification. Insights have been found to be extensive channels to the
discovery of startup businesses and sometimes reveal additional knowledge for the
development of a current process of discovery. In respect of a business venture,
insight predictably encompasses the abrupt recognition of an opportunity in business, the
answer to an adequately pondered crisis and the possession of a concept from social networks
and associates.

Evaluation

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Evaluation stage is about investigating if the recognized and developed ideas are feasible, if the
businessman has the required abilities to realize the ideas and if the idea is sufficiently
innovative for prospects. It sometime involves full feasibility analysis of the ideas through
all forms of research instruments and criticisms from relevant business acquaintances. It is
fundamental to also investigate the prospect and viability of the new insight ideas as the spirit
of entrepreneurship is to make satisfactory and sensible profits.
Elaboration
Elaboration is that stage that exposes the opportunity/ideas to external analysis with the
tedious and time–consuming options selection, choice decision and organization of
resources. It is customarily in search of all legalities that could build confidence and guarantee
the practicability of the business. Elaboration also reduces uncertainties by providing
the detailed planning activities after the evaluation viability confirmation. This will
eventually reveal the concept areas that still need further analysis and attention
Types of Opportunity
The main purpose of any type of opportunity is to strategize to achieve appropriate search. In
other words, appropriate searching strategies are a function of the type of opportunity. Business
search opportunities could be classified into three types, these are the:
i. recognized type
ii. discovered type
iii. created/enacted type

Each of these type of opportunity is associated with a certain level of uncertainty. These are
low uncertainty for recognition opportunity, moderate uncertainty for discovery
opportunity and ultimate uncertainty for created/enacted opportunity.

Recognition Type: For opportunities that are recognized, deductive reasoning is used to
either actively or passively filter for venture worthy ideas. Entrepreneurial alertness attitude
enables recognition because the entrepreneur will be very sensitive and alert to information
available in his/her environment. Personal insights and intuition are equally important for
identifying opportunities as a purposeful search. Recognition type consists of accidental
recognition of an opportunity for a business solution to a challenge and realization of idea or
ideas from others like colleagues and associates. Accidental recognition occurs in the passive
search style and is more likely when the entrepreneur possesses a very sensitive entrepreneurial

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alertness. It could also be noticed that businesses established through accidental recognition
break even earlier than any other formal one. Recognition type is characterized by
several other factors such as the background of the entrepreneur, the influence of the business
and its general environment. This type of opportunity has to do with the exploitation of the
existing markets where both sources of supply and demand that exist are recognized and
brought together. Opportunity recognition occurs under condition of near certainty. This low
uncertainty or near certainty opportunity in recognition type is referred to as analysis inducing.
Discovered Type: In this type of opportunity, when only the demand exists, but supply does
not, and vice versa , then the non-existent side has to be discovered. This type of opportunity
has to do with the exploration of existing and latent markets. For the discovered type
opportunities to occur, a purposeful search is necessary. The entrepreneurs of the discovery
type narrowed their search to areas where they had specific prior knowledge and they basically
do not rely on alertness. An example is demand exists for ‘Published texts in entrepreneur
education in Nigeria’ while the supply has to be discovered. Another example is the
existence of supply for ‘application of computers in Nigerian rural schools,’ demand has to
be discovered. As earlier mentioned, with opportunity discovery the uncertainty level is
moderate. With this moderate uncertainty task, the discovery opportunity is known as quasi-
rationality inducing.
Creation/Enactment Type: This type of opportunity is based on the principle of
enactment where the entrepreneur creates new means and new ends by using effectual
reasoning. This reasoning includes three types of means. The entrepreneur themselves, prior
knowledge and experience, whom they know especially in the social, religious and professional
sector. In this type of opportunity, the supply and demand will not apparently exist; one or both
of them have to be created. This demands that several economic inventions like marketing,
financing and others have to be created for the opportunity to exist.
This opportunity exploits principally the creation of new markets. The entrepreneurs
imagine, rather than recognize or actively search for opportunities that represent the execution
of a selection of possible futures. Creation or enactment opportunity is associated with true or
ultimate uncertainty. This high uncertainty task in opportunity creation can be recognized as
intuition-inducing. Factors that Influence Business Opportunity Identification There are five
factors that influence identification of opportunities. These are:
a. Entrepreneurial Alertness
b. Prior Knowledge
c. Discovery versus Purposeful Search
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d. Networking versus Solo Entrepreneur
e. Creativity
f. Entrepreneurial Alertness Factor
This is a predisposition to observe and be responsive to information about objects, incidents,
and patterns of behaviour in the environment, with special sensitivity to maker and user
problems, unmet needs and interests, and novel combinations of resources. This is usually
preceded by a position of enthusiastic awareness of information. Entrepreneurs constantly
search about for opportunities that have been overlooked before then but unfortunately not all
that have entrepreneurial alertness become successful entrepreneurs. Opportunity identification
is only an indispensable stage of a process in initiating a new successful business.

There are two types of alertness. These are the potentially worthwhile goals that have remained
unnoticed and the unnoticed but potentially valuable resources. The alert entrepreneur is said to
be alert to the receipt of information rather than already being in possession of it.
Entrepreneurial alertness is of major importance in opportunity identification. Alertness
for a venture is built upon the three ideas of personality traits, social networks and prior
knowledge.

People’s self-perception of creativity, high intelligence and a supportive family

environment that encourages creative thinking contributes highly to execution of
entrepreneurial plans. The optimism acquired from these builds up a self confidence attitude
and eventually success in recognizing entrepreneurial opportunities when it comes. It is the
belief by many people that they are very good experts in decision making, thereby detect
opportunities and take risks.
Prior Knowledge Factor
People tend to discover opportunities from the information that is related to the
information they already know. Prior knowledge and experience are the primary source
of searching for opportunities. Entrepreneurs narrowed their search to areas where they had
specific prior knowledge. Prior knowledge triggers identification of the value of new
information. There are two main areas of prior knowledge relevant to the identification
process. The first one is the knowledge that is of special fascinating interest to the
entrepreneur. The second area is the knowledge accumulated over the years and
eventually got familiar with customer problems and issues involved. The fascinating interest

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compels the entrepreneur to intensify his or her competences that eventually result in an
insightful knowledge of the subject matter.

Discovery versus Purposeful Search Factor

Some entrepreneurs absolutely believe that opportunity identification has to be through a
purposeful search for opportunities while others believe that opportunity is something that had
been readily available and overlooked but now discovered accidentally. Businesses
established on accidentally discovered venture ideas and which had not been subjected to
prescribed screening achieved break-even sales faster than those businesses that had undergone
purposeful searches.
Networking versus Solo Entrepreneurship Factor
Entrepreneurs’ network is vital in opportunity identification. The main contribution of network
to identifying potential venture opportunities is from information gathered from social
exchange of ideas. The common sources for such opportunity are from friends, relatives,
businessmen, lawyers, bankers, participation in professional seminars, workshops and
conferences, newspapers, books, periodicals and manuals. It is the belief that an
individual’s strong-tie network within the family and friends set up are fragile information
sources compared with weak ties that are casual acquaintances. People with widespread
networks discover more pungent opportunities than those businessmen who do not have
social networks. There are three categories of opportunity recognition attitudes from social
networks. These are the solo, the network and the informal categories. The solo entrepreneur
category has a very creative, opportunistic and distinctive alertness attitude. They develop
business ideas on their own with the belief that new opportunities which is claimed to be theirs
alone, come naturally. Network entrepreneurs obtain their ideas from their social networks.
With them, enduring opportunities are not related to each other while entrepreneurial ideas
emanate only from accidental routes. Entrepreneurs with informal attitudes get their ideas
when relaxed.
Creativity Factor
There is a link between creativity and entrepreneurship and are sometimes refer to be same. The
nature of creativity is about innovation leading to the creation of new ventures while
entrepreneurship itself is a form of creativity or can even be referred to as business creativity
and in most cases new businesses are creatively original and functional. Most successful
entrepreneurs identify opportunities that others do not see due to the special creativity attribute
they possess. These creative attributes has a lot to do in business decision making and
18
therefore very significant inopportunity- identification process. To entrepreneurs, the more
innovative the idea the better the idea This makes creativity a fundamental
component in the entrepreneurial process. Hence creative entrepreneurship is described
as the accomplishment of original useful ideas to start a new business to product and
service delivery level.
Opportunities from SWOT Analysis
Some opportunities are sometimes identified while the entrepreneur is having his or her self
assessment in terms of strength, weakness, opportunities and threats universally referred to as
SWOT. SWOT Analysis is a useful self-appraisal system for your strengths and
weaknesses that helps establish your business or develop your business by exploiting your
abilities, talents and opportunities. It is frequently used to understand, underline and identify the
opportunities open to you and the threats you are likely to encounter. SWOT Analysis could
also be that initial self appraisal of the ability of the business opportunity to start and survive.

SWOT analysis was originated in the 1960s by Albert S Humphrey and has remained useful till
date as a simple start for strategy articulation or as a vital strategy instrument. SWOT also
allows achievable goals or objectives to be set for the business while future procedure for the
accomplishment of the planning and development of the objectives could easily be derived
from its SWOT. With your understanding of the weaknesses of your business, unexpected
threats can be eradicated or controlled well ahead, thereby compete favorably in the market
environment. In essence, there is Business SWOT Analysis (BSA), and there is Personal
SWOT Analysis (PSA). It all depends on what you want to evaluate but both are good sources
of opportunity identification and with little efforts, it can facilitate identification of
exploitable opportunities. To use SWOT Analysis, one should understand that Strengths and
weaknesses are internal to your organization while opportunities and threats generally relate to
external factors. Hence SWOT analysis is often described as internal/external analysis.
Strengths:
Your strengths should be perceived from both an internal position, and from the
judgment of the customers and others in the market. You should also be realistic and a list of
your company's characteristics of the business or project team that give it an advantage
over others should help. In the study of your strengths, consider them with your competitors in
mind. The situation where your competitors manufacture good products, but of less
quality packaging to yours; your own strength will be quality packaging. However,
quality product remains a necessity and therefore a weakness and a threat to your own product.
19
Such strengths could be economical, availability of adequate funding, abundant raw materials,
etc.
Weaknesses:
Your weaknesses are your limitations that characteristically place you or the team at a
disadvantage when compared with others. You are aware of your own weaknesses than any
other. It is a time to be truthful to yourself by asking yourself some unpleasant
questions and answers about your weaknesses. Like your strength, this should also be
considered from an internal and external pedestal. Such weaknesses in Business SWOT
Analysis (BSA) are poor funding, unconducive location, inadequate infrastructure, outdated
and poor equipment, poor staffing, while poor comportment, restlessness, drunkenness,
low education, irresponsible attitudes, unwarranted socializing, reckless
financial management, lack of skill and general ineptitude are mostly the weaknesses in
Personal SWOT Analysis (PSA). Constant survey of the market and your competitors’
progress should be done to inform you of your weakness.
Opportunities
Opportunities are external chances for accomplishing the goals and objectives of the venture.
These objectives may be to improve productions and achieve better profits in the market or to
start up a new business from emergence to survival. In considering opportunities, it is best to
search your strengths for possible business or development opportunities. Another tactic is to
search your weaknesses for possible reduction of your weaknesses to identify and
explore opportunities from them. Such opportunities may open up from associations,
connections and affiliations in ones religious, political group, family especially inheritance
and an acquired experience by the entrepreneur.
Threats:
This refers to external factors usually outside the control of person or persons in the market
environment that could impede the business or the entrepreneur from achieving the expected
goals and objectives. These external factors include unpleasant environment, new
government regulations, technological upgrades in the industry, Government support for local
production of cassava – a major drug component and the ban on imported drugs, Chief
Omotosho is deciding to establish a new pharmaceutical venture of international standard in
Aawe, Nigeria, to commemorate his 60th birthday. He is thinking of handing over the business
to his children in three years time and would need a SWOT analysis for the new venture. This
has been prepared for him.

20
 Legal Issues at Start Up

A. Introduction/Definition Of Concepts
Starting a business venture can be a difficult task involving many important decisions, but it is
highly exciting that the business idea is taking shape with every decision ready for takeoff.
However, one major decision prospective Nigerian entrepreneurs often jump is the legal aspect.
All over the world, there are some laws that entrepreneurs must follow to ensure their
businesses are legally sound right from its foundation. One needs to make sure that all legal
formalities have been put in place. To avoid severe legal and liability consequences in future, a
targeted business plan should list all legal concerns that might negatively affect the business
and invariably other investors. The right legal structure that will suit ones particular type of
business or circumstances and ambitions should be considered.

In Nigeria, whether it is a corporate or limited company or even an enterprise, you will need to
register with some Government bodies, parastatals, agencies or even some professional bodies.
It all depends on your business idea and hence you need to seek specialist legal advice that
could cover copyright, trade marking, design registration or patenting. The summary is that all
start up business owners need the legal lowdown on the little-known legal issues that often
collapse new enterprises. You need a good attorney. Whether you are going alone or joint your
company is structured so that it protects your interests and fits your goals. It is important to
converse with a lawyer experienced in Nigerian business formation law to help you evaluate all
the options available at start up. Lawyers are not as expensive as you may be assuming and the
value one gets is very significant. You should know that lawyers are regularly abreast of tax
and corporate laws that keep changing all the time. These also vary significantly from one state
to the other. Some metropolitan urban states like Lagos often charge more as tax. To be sure of
the business being successful, the business team should probably include a lawyer who can
keep up with changes in the laws, legal and tax codes and advise as one progresses in the
business. This will reduce unknown legal issues and thereby save money and negative images.
In conclusion, Start-up must make provisions for legal expenses right from the onset to avoid
significant legal problems later.
Legal Formalities for Business Start up
Legal issues at start up involves dealing with setting up the business entity, business name and
trademark registrations, labor and employment issues, intellectual property and vendor
contracts among others. It is advisable to run your plans along with an experienced lawyer that
21
can handle the unique start up requirement of your business. It is paramount to set up
proprietary rights in the business and avoid infringing on the rights of others. As just earlier
mentioned, start up is a vital time to consider certain legal issues. The legal formalities you
must meet will depend on the entity you choose and the state in which you live. To learn more,
speak with a business formations lawyer near you. However, four major legal issues that should
be attended to are:

Address legal restrictions/Limits:

There are some Legal restrictions by the Federal and State Governments which have
regulations for the establishment of businesses in Nigeria. Business operation permits and
licenses are obtained for the establishment of businesses, business name permit, their
premises, their operations, their materials and even the quality of their products. You have to
fill and file certain forms with the Corporate Affairs Commission (CAC); the autonomous
body responsible for regulating the formation and management of companies in Nigeria.
Besides the Corporate Affairs Commission (CAC), some common Government agencies
involved in business start up are Standard Organization of Nigeria (SON), Nigerian Copyright
Council, National Agency for Food and Drug Control (NAFDAC), Customs and
Immigrations, State Licensing Offices, health Departments, fire Department, land use
Department, tax offices, liquor licensing offices, professional bodies, and other licensing or
permit offices. All these depend on the type of business. It should however be noted
that the CAC requires the inclusion of a Lawyer or Accountant as Company Secretary for
the registration of business liability companies. Sometimes states determine the formalities
peculiar to it for permits and licenses. All these may involve signing agreements that may
require the services of lawyers or other professionals.
Choose a Business Entity Type

There are several corporate structures in the Nigerian business registration system which
includes sole proprietorships, partnerships, Limited Liability Corporation and Corporations.
The business structure one chooses depends on some number of factors. These consist of the
number of business partners to be accommodated in the business, the number of employees, the
amount of personal liability for business debts one can afford and how one would like to be
taxed among several others. It is best to contact an experienced business lawyer. Each of these
types of business entity has its strengths and weaknesses. Some of them are:

22
Sole Proprietorship:
A sole proprietorship lets the entrepreneur/proprietor/business owner to have full control over
the business. It is therefore easy and cheap to start and run. For sole proprietorships and
partnerships, the core strength is that income is only taxed once – as personal income.
The weaknesses are that there is no protection for liability in a sole proprietorship while there is
limited ability to raise capital. There is lack of continuity or transferability whenever the
proprietor has problem with the venture.
Partnership:
Partnerships have few formal requirements making them inexpensive to run in comparison to
corporations. In this business entity, not only is there no protection for the corporation, but also
the one partner could be liable for the unscrupulous acts of another. It has tax advantages while
management flexibility is high. It is also easy and cheap to start. There is also no limit of
liability for partners. Just like sole proprietorship, there is Lack of continuity/ or
transferability while the ability to raise capital is unlimited.
Limited Liability Corporation:
Limited Liability Corporations are created and controlled by an operating agreement
which is a complex contract. It is extremely important that the operating agreement be properly
written even though it may involve additional charges from the lawyer, especially as this
entity seem the most attractive. Limited Liability Corporation is a combination of corporation
and partnership entities with a weakness of being a recent conception that still has to evolve.
Like corporation, limited liability company entity reduces personal liabilities. It has some tax
advantages as well as continuity or transferability. It has greater ability to raise capital while its
management flexibility is higher.
Corporations:
Corporation is the most common business entity that offers protection for its
shareholders. Its disadvantage is that income may be taxed twice, in the corporate and
at individual levels. Corporation has an advantage of having a clearly define structure where
shareholders who own the corporation, appoint officers to run the corporation and directors
that oversee the officers.
The percentage of rights of ownership by all stakeholders is determined by the number of
shares. This sometimes attracts different voting rights. It has restricted liability continuity and
transferability as well as greater ability to raise capital. Its other weaknesses include more

23
limited tax advantages that require additional filing, more formalities while more expenses are
required. It has a very marginal tax management flexibility.
Protect Intellectual property
However, there are several aspects of intellectual property that a start-up needs to put in proper
place. People often misconstrue the entire intellectual property for patents only. Patent is just
the main type of Intellectual Property for the protection of invention. Others aspects are
trademarks for the protection of logo while copyright for the protection of artistic, dramatic and
literary works. Shareholder's Agreement is another aspect of Intellectual property required
to regulate the relationship of shareholder in a company that has them. Company trademarks
also include trade names and trade dress like its colours. Companies need to register all their
Intellectual Property Rights from start up to protect their intellectual property marks and
prevent litigations on plagiarism at later stages.
Generating and Registering a Business/company name:
Finding a befitting business name could be an interesting aspect of legal issues at start up. It is
however required by the Government that this name is registered. Such a registration is to
guarantees that no other business can exploit that your trade name. The idea of creating a
business name for some people may be easy, while others may have to toil with it for long. A
good business plan can be marred with an unbefitting business name or trade mark.
To assist you generate business name ideas is mainly by brainstorming and listing. Think about
and jot down as many keywords related to your product or service, your mission, add your own
name or names of your loved ones’, your hero or heroes, your location etc. You may need to
build up on this list from dictionaries. It is advised that the more words, the easier for you to
find exciting and interesting words that will fit your dream business name. Consider if you can
combine some words or phrase from your list.
It is essential to keep these characteristics of a business name at hand while choosing a
new one:
• It should be easily and proudly expressible.
• It should be easy to comprehend and spell.
• It has to be creative and imaginative. (Sound well)
• avoid common or generic names.
• It must clearly advertise your business ideas and represent all you do so that your
production line will not be limited.
• It should be distinctive and concise and without ambiguous words. consider the
generated name in an alphabetical list such as the yellow pages.

24
It is also advisable that the chosen name be subjected to family and associates’ criticism.
Ruminate over it for some days before confirming it the chosen. After generating the
business name, it has to undergo registration at the Corporate Affairs Commission (CAC)
office. The trade marks like trade names, logo, colours, trade dress, etc which can be obtained
from an artist can be carried and registered along.
Checking the Company name and trademark
When your business name is submitted to the Corporate Affairs Commission
(CAC), the body will help you check if the proposed company name or trade mark is not
already in existence or similar to one earlier registered. This will be checked on their computer
which has the search facility (database) with the full list of registered businesses in Nigeria.
It is better to check the proposed company names and trademarks at the same moment once you
have decided to have the two. This will ensure you don’t infringe on other peoples’ trademarks.
At the end of the detailed checking, the CAC’s business checker will report the availability or
otherwise of your proposed business name. Detailed checking at the CAC is to confirm the
registration of your intellectual property which no other business in Nigeria can ever use
again. It becomes the business link and marketing strategies with your customers.
Develop Basic Legal Documents
After the registration of the business name and trademarks, the business can now develop its
basic legal documents and common forms needed. Purchase and services agreement that have
to be signed should be prepared for the customer. Apparently, the business has to employ
staff to assist run it. Employment legislation should be abided with by ensuring that employees
receive their terms and conditions of service document, not too long upon assumption of duty.
Company policies and procedure in respect of staff health, safety and general welfare should be
documented, and be handed over to them on employment. There should be a general
employment manual while agreement forms should also be prepared. Business companies
are required to file an annual return with the Corporate Affairs Commission (CAC).
This may include the company account depending on the type of entity and the annual turnover.
There are penalties for not complying every year. Where there is the need for capital, directors
should consider and declare shareholding for potential investors. The potential type of shares
including rights each shares attract in the company should be specified. All these presumably
attest to the fact that a professionally qualified and experienced lawyer and or an accountant be
employed to prepare the company documents including forms and agreements. Feasibility
Analysis of New Ventures and New Venture Financing

25
Introduction/definition of concepts
Feasibility analysis is a comprehensive research study required by the entrepreneur or his agent
to determine the practicability, profitability and viability of the business idea. Before jumping
into a start up business, expanding an existing one or even acquiring an existing one, it is very
necessary to analyze the feasibility of that business. For whatever purpose, the main task of
feasibility analysis is to express the model of the business and its marketability; check its
prospect for financial profitability and success; and convey the managing group’s
capability to implement and accomplish the business objectives. Feasibility analysis is
therefore an overview of the business and a preliminary appraisal of the business idea to
consider if it merits pursuing. It reasonably reveals without prejudice the strengths and
weaknesses of the business, its opportunities and threats through the background and the assets
required to carry through as well as the eventual diagnosis for achievement. A feasibility
analysis provides the entrepreneur the opportunity to flesh up the initial business plan,
consider the missing and available features needed to be put in position for the business to
succeed. It is an opportunity to consider if it is visibly feasible and viable; despite the
challenges one is likely to experience and how to solve those challenges. The main concern
and tool of feasibility analysis are the necessary expenditure and the profit to be accomplished.
This means it is all about finance.

A new start up business requires some financial funding which comes in several unique
categories of financing options. Some universal and reliable funding sources easily
available to most entrepreneurs are through the entrepreneur’s savings and personal bank soft
loans, financial supports from friends and family which may or may not involve interests.
These are typically the first stage of financing whereby the entrepreneur invests his own
funds and raise funds from friends and family. For more ambitious businesses, the next
stage source is usually the funding from angel investors. These are private investors who use
their own capital to finance businesses. After this is the next stage of financing from
institutional investors like venture capitalists companies who are specialists in funding
new businesses for profitable gains. Such venture capitalists also sometimes provide any
observable potential weakness in the business. These include legal, marketing or operational
deficiencies that may be threatening the survival of the business. Sometimes angel investors and
Venture capital companies’ bargain cash exchanges for an equity stake in start up businesses
struggling to start operating.

26
Reasons for Feasibility Analysis
Feasibility analysis is all about questioning your concept, ascertaining which components are in
place to make it realistic to easily execute and recognizing the biggest obstacles you're likely to
face.

Feasibility analysis mainly assists to:

Appraise the business marketplace for the new business idea; assess if the Managing team have
the personality generally known with successful business persons. It is advisable to have self
assessment first. One must have that personality suited, skilled and knowledgeable to run a
business and lead a group to success. Identify the challenges of start ups and how one can
overcome those challenges, consider the financial feasibility of the business viz-a-viz its
expected sales incomes, fixed and variable costs as well as break-even calculations;
decide to continue with the business plan due to its viability and other attractions or
not. Sometime it takes asking oneself some bitter but pertinent questions whether to scrap
the idea if it is no longer as originally envisaged or needs to be amended, redirected or altered
immensely. In this wise, an ingenious suitable feasibility analysis will supply the historical
setting of the business, describe the products and services, the account/financial
profile/data, information on its operations as well as management, marketing research and
strategy, including legal necessities. In actual fact, for such a serious research, all strata of the
business are subjected to feasibility analysis, depending on the type.

How to Write a Feasibility Analysis Report

A feasibility analysis report for a start up business can be a simple or complex exercise,
depending on the type of business. The best approach is to first determine what the entrepreneur
requires it for and what interests him/her. Then, set the criteria that need to be fulfilled in order
to justify the start up business or convince decision makers who have to approve whatever for
the business. The structure/contents template of a feasibility analysis report is neither rigid nor
limited, and depends only on the needs, type and organization that require it. The template set
out below is therefore a general model that could satisfy most businesses. This report
template is comprehensive so some items may not be relevant to the needs of some
businesses while some specific requirements may be added. However, in writing a business
feasibility report the write up should be creatively kept simple, clear and concise, straight to the
facts and figures, evidences laden and stylishly assertive.

27
Template and Structure for a Feasibility Analysis Report
a. Proposing Entrepreneurs’ Profile:
b. Team Members Names:
c. e-mail addresses:
d. GSM Telephone Members:
e. Positions of Team members in the Business:
f. Postal and Residential Addresses:
g. Educational Qualifications:
Business Name: This indicates the type of registration, whether a sole proprietorship,
partnership, corporation or limited liability venture. Please note that a public limited
liability company carries the “Plc” after the name or the “Ltd” when proposed as a private
limited company.
Business Location Headquarters and Branches: A good description of the possible headquarters
location of the company, its branches and facilities including offices and manufacturing
plant. The report needs to specify the required size of the location, its adequacy and the costs to
be involved in acquiring, constructing or renovating buildings and required utilities that
will suit their operations. The proposed location should have adequate access to infrastructure
and services like highways, railway, airport and other utilities in relation to customers.
Background History of the Business: This refers to the business overview and
should briefly describe the proposed business. It should be specifically spelt out how it shall be
organized and a proposed aspiration of the venture to be a small company forever or to be
developed into an international standard later.

Business Objective: This is always as conceived by the business team. It describes the main
concept and the essence of the business. The main objectives usually put forward by most
entrepreneurs are the generation of income, provision of jobs for the youth, improving the
economic status of the business location and setting new standards or products in the business
environment. Along with their own views, the feasibility report should consider the products
and services being offered to highlight the essence. It is only when a business is able to produce
products and services, distribute them to the market environment and still makes return a profit
to its investors that it can be described as economically feasible.

28
Required Technical skills: This section assesses the technical and professional
readiness of the business. A business can only be considered technically and operationally
feasible if it has the necessary expertise, infrastructure and capital to develop, install,
operate and maintain the proposed venture, and be able to deliver the proposed goods or
services at a profit.

Proposed financial Contributions (Capitalization): A start up business requires a lot of fund

to provide sufficient access to resources. Most businesses die prematurely for the primary
reason of under-capitalization. Financial provisions from all proposed sources of funding the
business must be ensured to keep the business running from start up until it starts to make
profits and breakeven.

Management and its Strategy: This section should spell out the organizational
structure appropriate for the business and decide whether management would run the business
by direct labour, contract, consultancy, etc. There is the need to specify the management
team’s needed experience to identify the required staff positions that must be filled. The
management team’s key skills and areas of expertise for executing this plan should be critically
scrutinized to determine their competences. If there is any need to advise an additional key skill
area of expertise; don’t hesitate to do so. Likewise, stipulate the qualifications needed to
supervise operations and how easy or otherwise it could be to find potential qualified
and experienced staff in their environment. It is also imperative to detail what it will cost to
acquire and retain such staff on the job. Lastly, the management should be made aware of
the significance of distribution and delivery contracts to the business growth.

Sources of finance at Start up: The report is supposed to give details of capital fund required
and to enumerate the various sources of raising capital to sustain the business for the first one
year. It should identify the short, medium and long term sources of funding. This could be
from personal savings, contributions from other owners including shareholders, donations,
bank loans and other loans, existing operations in the first year, etc.

Production and operational requirements: Operations must define the production and other
operational processes necessary to deliver the products and services from pre-production
level to the market environment. These include manufacturing, consulting, logistics, after-sales

29
service, travel and transportations, printing, etc. This section delineates how to run the business
and deliver the products and services to the market.

A vital aspect of operations which the report must emphasize is the production line. The
required technological equipment and human resources for the business, its purchase set up and
running costs for profitability must be determined. The production process should be clarified
whether it is full automation, semi-automation, mechanical or manual operation. Expectedly,
most of the working employees, expenses and time will be used up on production and
operational challenges.
Market Potential Assessment and Strategy: This is essentially all about distribution and sales
strategy. Product or service businesses are considered feasible based only on evidences
that it has sufficient market demand. This means that it must have enough customers to
purchase a sufficient quantity of products or services in the target location and provide the
strong potential that the product or service will return pleasant profit figures. Please note
in the report that it is much easier entering a market where demand exceeds supply. In such an
environment, customers will buy the product or services without much effort from the business.

The report has to decide the distribution channel whether the marketing strategy ought
to adopt the cash-and-carry, direct sales, credit sales, wholesale outlet, commission
agents or middlemen structure or the combination of the arrangements. The growth
characteristics and the key drivers of the market, existing and potential competitors should be
identified with the aim to suggest how they could be outwitted. The essence of this section is
for all interested stakeholders and decision makers to understand the developments,
opportunities and challenges obtainable in the business market and its environment.

Financial Assessments and Projections: The main essence of the financial assessment and
projections is to determine whether the business is financially feasible or not. This is a
vital aspect of the entire feasibility report. This financial appraisal also entails the payback
and discounted cash flow as well as break even analysis. It offers the expected expenses and
incomes of the business including the sales and advertising projections as well as how long it
will take the business to break even. It should also be able to predict the total start-up
costs required to begin operations right through the cost of land and buildings,
plants and equipment, legal costs, accounting costs, day-to-day running costs, wages, rent,
utilities, interest payments on debts, etc. All these will eventually be weighed against the

30
business's projected revenue on weekly, monthly, and or annual/bi-annual basis to determine
the projected profit or loss of the business. However, it is important to note that just because a
business has potential, is not a guarantee for its success. There are a lot of other financial
factors. The report should formulate an evaluation criterion for regular performance self
assessment.
Growth and the break-even period: A business must have a lifecycle. The start up stage is
always the planning and take off period. All resources are put into it to ensure its birth and
survival in the market. The feasibility report should be able to predict the timing of the various
growth stages especially the break even, peak period in the life cycle of the product and the
revenue dropping period. An average feasible start up business ought not to aim longer than
18 months to break even, depending on its type. The report should know what stage of the
product life-cycle is a particular target population in. if it is a mature industry, it may mean
the market has been saturated, or that sales are no longer growing and may even be dropping.

Re-investment Policy: The feasibility report would need to find out the current status of the
business, examine the up to date developmental programme of the business and be able to
predict how the business should be in the future. It should also be able to define the basis for
the business signposts for predictable periods of time. These are to aid the setting up of re-
investment policy for the business in the next 2, 5 or 10 years.

Risk analysis: Risks especially the financial one is a major consideration for any business. The
feasibility analysis ought to envisage and prepare for risks which sometimes could be major.
These major risks could be in the organization, competitive, regulatory, etc sectors
associated with the business. It must also be able to calculate how to alleviate such possible
risks. Some entrepreneurs insure their entire system including staff and equipment.

Conclusions and Recommendations: When it has been decided to establish a business entity the
business feasibility analysis must after all consideration conclude whether the business is
viable, promising and gainful. This is to guide the entrepreneurs to go ahead with it or
start thinking of another business. Feasibility analysis must also show when is the best time for
the business to start for a rapid generation of income, its maturity time, its decline an possible
natural death time.
Recommendations must be clear and straight to the points.
Other Feasibility Considerations

31
They assess certain specifics when there is a challenge in a particular identified section
of the business. These depend on the section but they are:
iv.i. Economic feasibility
Economic analysis commonly known as cost-benefit analysis is the most frequent
approach for evaluating the effectiveness of a business by determining the benefits
and savings expected from it after comparing them with costs. It is crucial to
objectively weigh the cost against the benefits before going ahead with the start up.
The benefits must outweigh the costs, if it is viable.

iv.ii. Legal feasibility

This is to investigate and ensure that the proposed business conforms with all legal
prerequisites. All registrations are already done with the various Government and
professional bodies. They all depend on the type of business.

iv.iii.Operational feasibility
Operational feasibility assesses how competently the proposed business gets to the
bottom of challenges and exploits all the opportunities earlier noted during capacity
description. It also checks how the business complies with the necessities
established in the requirements analysis part of the business development .

iv.iv. Schedule feasibility

Schedule feasibility is a appraisal to determine how suitable the business take off
timetable is. It considers the available technical skills, how realistic the business
deadlines are, how compulsory and considered necessary are those time limits.
Some businesses may require certain time span to develop and mature, to be
viable. For example a few months time limit for a Cocoa plantation business is
unrealistic when it is obvious that it will require some years to start yielding. It
however becomes a highly rewarding at pay off subsequently.
iv.v. Resource feasibility
Resource feasibility entails examining and determining the availability of the type and
amount of required resources for the business start up. Such resources include the time/period
available, its dependencies, its interferences with other operations, etc

32
Financial feasibility: In a start up business, the financial feasibility tests the financial
viability of the proposed business based on the total estimated cost of the business,
financing format like the intended capital configuration, debt equity ratio and promoter's share
of total cost, existing investment by the promoter in other businesses and the expected
cost–benefit analysis
New Venture Financing Startup businesses are usually much easier to finance and source fund
for than established businesses because they have the potential to grow rapidly with limited
resources of fund, land and labour. Funding such startup businesses provide the opportunity for
providing a progressing chain of financing. This fund sources leads from one link to the other at
a particular time from gestation stage to maturity. See the diagram on page. These funding
sources are arranged below in progressively required.
Founders, Friends & Family or Bootstrapping Phase
Business Angels
Venture Capital (VC)
Initial Public Offering (IPO)
Founders, Friends and Family
The most simple and familiar method used to raise capital funds for a start up business
is through you as founders, family and friends often referred to as the “3Fs”. It is a group that
could be interested in investing in your ideas due to your time-honored personal relationship
with them. Despite the possible substantial danger inherent in such with mixing personal
relationships with business, they are not likely to be interested in the details of your idea as
other business financiers. A similar means of self-funding a business by limiting or avoiding
outside investment or running a business venture on a shoestring financial plan is
bootstrapping. This is a means of funding a small scale business with highly creative attainment
and exploit of all available resources without elicit borrowing money from any bank or other
finance houses. It strictly rely greatly on internally generated earnings, credit cards, second
mortgages, and customer advances and other few sources. It provides the main strategy
of positioning an operating venture to seek equity capital from external investors later.

Angel Financing
Some individuals who invest their money in business ventures for high financial profits better
than what they can get from banks and other investments are Angels doing angel financing.
They are majorly motivated to offer this second round financing by the profit in it usually
calculated in percentages. The business of angel investing is becoming very lucrative in Nigeria

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not just for businesses but to other people in financial stress. For start-ups, angels are usually
ready to grant the required finances before incomes and administrative supports. Some of them
are well known while others are not, but they are mostly professionals who have made their
money in their businesses. These include engineers, lawyers, medical doctors, company
executives, public servants, academicians, entrepreneurs, etc. They sometimes willingly take
the risk to have a slice in your business that could hopefully become big in future. Affiliated
and non-affiliated are the two types of angels known. An affiliated angel has some sort of
contact with you and or your business but not necessarily related to you. With this familiarity, it
is advisable to approach the affiliated angel since he will be interested in your affairs. However,
a non-affiliated angel has no association with either you or your business. They are both more
accommodating than banks and other financial sources to tap the ingenuity of startup
businesses. They play a very contributive roles in finance, knowledge and other supports.

Venture Capital Financing

Some investors are interested in financing early stage and more risk-oriented ventures by
offering seed funding to early-stage businesses with high potential growth ventures for
high profit generation. Known as venture investors, they are often not interested in innovations
and high-tech developments and to be the first investor for start up businesses.

Initial Public Offering (IPO) or mergers & acquisitions (M&A) Initial public offering (IPO) or
merger and acquisitions (M&A) or the stock market is the first sale of stock by a small or large
scale company to the public to raise expansion capitals and become a publicly traded enterprise.
It allows a company to source for capitals from a wide pool of investors for growth and debt
repayment. This first fund from the shares goes directly to the Company while further trade of
shares on the stock market has to pass between investors. A company selling common shares is
never required to repay the capital to investors. This financing source was first employed by the
Dutch East Indian Company to issue stocks and bonds in an initial public offering. A company
proposing this funding source will through the assistance of an investment bank as underwriters
help to correctly assess their shares price.

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