Baba Ahmed University Kano Nigeria

Faculty of Social and Management Science

Department of Entrepreneurship
Course: Venture Creation
Course Code: GSP 3212

Chapter 2: Business Plan

Dr. Saidu Nasiru Sulaiman

Associate Professor: Entrepreneurship and Innovation
 Modules
Entrepreneurial Process phase 1: Idea and
Opportunity Recognition & Business Plan:
(continuation)

Business Plan: Business opportunity

implementation
• What is a business plan?
• Why do entrepreneurs need a business
plan?
• The components of a business plan?
• Assignment on Business Plan

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Business Plan: Business Opportunity Implementation
Once the opportunity is identified, the entrepreneur
needs to implement it into real business through
creating a comprehensive business plan.

What is a business plan?

• A business plan is a road map that provides
implementation guide to a start up venture. For
instance, travelling without road map will likely getting
you lost along the way.
• A business plan can also be defines as a plan for how
your business is going to work, and how you’re going to
make it succeed.

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Why Entrepreneurs Need a Business Plan?
• A good business plan guides entrepreneurs through each
stage of starting and managing the business.
• It help business owners to plan ahead, make important
decisions, and improve the overall likelihood of success.
• It's a way to think through and detail all the key elements of
how your new business will be structured, understand the
market, define product, outline go to market strategy and
create an operating plan to run and grow the business.
• Back up a business loan application: Lenders (e.g. banks)
want to see the prospects of any business seeking loan from
them. As such, they require venture’s detail business plan.
• Seeking investment for the business: Investors (i.e. venture
capitalists, angel capitalists etc.) need to see a business plan
before they decide whether or not to invest in a business.
They will expect the plan to cover all the main points.
• Grow your existing business: business plan is required for
any growth strategy. Entrepreneurs usually develop
business plan to allocate resources according to strategic
priority to achieve growth. 4
The components of a Business Plan?
Cover page
Executive Summary
Chapter 1: Business Description
Chapter 2: Product or Services Plan
Chapter 3: Market and Marketing
Plan
Chapter 4: Business Model
Chapter 5: Operation Plan
Chapter 6: Management and
Organization Plan
Chapter 7: Financial Plan
-Appendix
5
Cover Page

Business Name
Company Logo
Business
Address
Correspondence
Address
Telephone
Email address
Date 6
 Executive Summary
Executive summary section should appear first in your
business plan, but write it last. Because it should summarize
what you expect your business to accomplish and highlight
what you intend to discuss in the rest of the plan. Ideally it is
only one to two pages. Items under executive summary are:
• Problem Summary: Describe very briefly why your
business needs to exist. What problem do you solve for
your customers?
• Solution Summary: Briefly summarize what your company
does, but you can go into more detail later in the plan.
• Market: Describe your target customer or market
segments. Again, keep things very brief in the executive
summary and add more detail later in the plan.
• Competition: Summarize your key competitors. Who will
your customers also consider?
• Why You?: Write a brief overview of you and your team.
Why are you the right people to build this business?
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Chapter 1: Business Description
This component provides a brief description of your business. This involves the
followings:
1.1 Entity Name
1.2 Business Registrations
1.3 Business Goals, Mission and Vision
1.4 Products and Services
1.5 Target Customer Base
1.6 Company Ownership: Specify who owns your company. If there are multiple owners,
describe each of them and how much each owner have and percentage.
1.7 Company Ownership type: including sole proprietor, partnership or limited company
1.8 Management Team and their Experience
1.9 Start-up funding Summary: include operating expenses, assets, investment and loan
1.10 Business Location: describe the offices or locations of your company
1.11Business Proposition: the value your business will create or the benefit it will offer
and the price it will charge as against the competitors
1.12 Competitive Advantage: how is your company better than the competitors?
Examples can be having a proprietor technology, product, process etc.
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Chapter 2: Product or Services Plan
It Include all relevant information about your products and
services such as:
2.1 A description of the products or services you are
offering
2.2 What customer’s needs the product or service will meet
2.3 Describe product or service as stand out against the
competition.

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Chapter 3: Market and Marketing Plan

Market and Marketing

Plan should cover how
you plan to market and
sell your products and
services. In short it
involves:
market analysis,
marketing strategy
competitors analysis 10
3.1 Market Analysis
Market Analysis involves target market and
segmentation analysis and market research.
Who are you selling to?
It involves defining your customer personalities
and their market size.
Give a rough estimate of how many of them are
there and get their segmented name, gender,
income level and so on. Then, authenticate their
need of your product or service.
A market segment is a group of people (or other
businesses) that you could potentially sell to.
And can be identified based on certain features
e.g. gender, age, income, class etc. All these
information can be obtain via market research.
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3.2 Marketing Strategy
Marketing Strategy involves sales strategy via
marketing efforts to increase awareness and visibility
of the product in the market to convert the potential
buyers toyour customers. This comprises of 4ps
strategy, which are as follow:
3.2.1 Promotion Strategies: This is to specify the
means through which you can communicate your
product or service to the target market. Such medium
of communication can be used on platforms such as
printing media, digital media, TV program,
exhibitions, events shows, social media, radio,
personal selling, advertisement, sales, promotion etc.
3.2.2 Pricing Strategies: List the prices of your
business offerings and compare them with
competitors’. Give your value proposition vis-à-vis
how your product/service is priced against
competitors'.
3.2.3 Place (distribution) Strategies:
Distribution is how you will get your product into the
hands of your customers using channels of
distribution (i.e. retailers, wholesalers etc.) and
physical distribution (i.e. transportation, logistics and
storage facilities). 12
3.3 Competitive Analysis
Competitive Analysis involves understanding of
what your competition is offering.
The strengths and weaknesses of your competitors.
Make a list of your main competitors and understand
the products/services they offer.
What is their value proposition and competitive
advantage?
Why customers buy from them? What are their
weaknesses?
How can you serve your customers with what your
competitors can not be able to serve?
4.4 Pilot location: assess potential location of the
venture based onfactors like proximity to market, acess
roads, availability of power, access to raw materials etc.
4.5 Creativity and innovation to be introduced
Unique technology/process introduce
Business model innovation (unique value/selling
proposition, )
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Chapter 4: Business Model
Business Model Canvas

Key Partners Key Activities Value Propositions Customer Relationships Customer Segments

Who are your What Key Activities do What value do you What type of relationship For whom are you
Key Partners? your Value Propositions deliver to the does each of your creating value? Who
Who are your require? Your Distribution customer? Which one Customer Segments are your most
expect you to establish
key suppliers? Channels? Customer of your customer’s important
and maintain with them?
Which Key Relationships? Revenue problems are you Which ones have you customers? Is your
Resources are streams? helping to solve? established? customer base a
you acquiring What bundles of How are they integrated Mass Market, Niche
from partners? CATEGORIES: products and services with the rest of your Market, Segmented,
Which Key are you offering to business model? How Diversified, Multi-
Production, Problem
Activities do each Customer costly are they? sided Platform
Solving,
partners Platform/Network Segment? Which
perform? customer needs are
Key Resources you satisfying? Customer Channels
MOTIVATIONS
FOR What Key Resources do CHARACTERISTICS: Through which Channels
PARTNERSHIPS: your Value Propositions Newness, do your Customer
Optimization require? Your Distribution Performance, Segments want to be
and economy, Channels? Customer Customization, reached? How are you
Reduction of Relationships Revenue “Getting the Job reaching them now? How
risk and Streams? Done”, Design, are your Channels
uncertainty, Brand/Status, Price, integrated? Which ones
Acquisition of TYPES OF RESOURCES: Cost Reduction, Risk work best? Which ones
particular Physical, Intellectual Reduction, are most cost-efficient?
resources and (brand patents, Accessibility, How are you integrating
activities copyrights, data), Human, Convenience/Usability them with customer
Financial routines?

Cost Structure Revenue Streams

What are the most important costs inherent in your For what value are your customers really willing to pay? For
business model? Which Key Resources are most what do they currently pay? How are they currently paying?
expensive? Which Key Activities are most expensive? How would they prefer to pay? How much does each
IS YOUR BUSINESS MORE: Cost Driven (leanest cost Revenue Stream contribute to overall revenues?
structure, low price value proposition, maximum TYPES: Asset sale, Usage fee, Subscription Fees,
automation, extensive outsourcing), Value Driven (focused Lending/Renting/Leasing, Licensing, Brokerage fees,
on value creation, premium value proposition). Advertising
SAMPLE CHARACTERISTICS: Fixed Costs (salaries, rents, FIXED PRICING: List Price, Product feature dependent,
utilities), Variable costs, Economies of scale, Economies of Customer segment dependent, Volume dependent
scope DYNAMIC PRICING: Negotiation (bargaining), Yield
Management, Real-time-Market

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 Chapter 5: Operation Plan
Operation is concern with what business do on repeated basis to deliver product to
customers. Operation plan involves procurement, manufacturing and logistics
strategies that enable enterprise to undertake production.
It is concerned with how to source materials and prepare product or service for sale.
And it’s different depending on whether you’re a manufacturer, a retailer or a service
firm. It covers just the major areas such as labor hiring, source of materials,
technology, facilities, equipment and production processes:
5.1 Source of Materials: This involves your sources of raw materials, bye product
if you are in manufacturing or product or service if your company is in buying and
selling. Are your materials or products source locally or from overseas. Establish
strong relationships with supplliers to ensure steady supply of high qaulity materials
and equipments
5.2 Technology and Equipment: If you are a technology company, it’s critical for
you to describe your technology. You don’t have to describe trade secrets, but you
need to describe how your technology is different and better than other solutions out
there. If you are into manufacturing or distribution you need to explain your
operational technology (i.e. important software, hardware, or other information
technology ).
5.3 Facilities: Describe the facilities in which your business will be housed. This
might be your office, store locations, manufacturing plants, storage facilities —
whatever is relevant to your business. Then consider the location and the utilities
around. You may need to be close to a labor force and materials suppliers.
Transportation needs, such as proximity to rail, interstate highways, or airports, can
also be important to mention.
5.4 Production Processes: Important production or distribution processes, those
essential to your production or distribution that give you a special competitive
advantage.
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Chapter 6: Management and Organizational Plan
Management and organizational plan involves legal
structure of the company and who are the key
management team members. Details of these are
especially important to investors/borrowers as they
will want to know who is behind the company in
terms of expertise and experience.
6.1 Business Structure and Ownership:
company’s current legal business structure (e.g. sole
proprietor, partnership or limited company). Provide
how the business is owned and how is ownership
divided (where possible)?
6.2 Key Management Team: The old adage is
that investors don’t invest in ideas, they invest in
people. Some investors even go as far as to say that
they would rather invest in a ordinary idea with a
great team behind it than a blockbuster idea with a
ordinary team. Highlight background and relevant
experiences of each key team member. Have
members of the team that had entrepreneurial
successes before. 17
Chapter 7: Financial Plan

Financial Plan should cover

resources requirements/start up cost/start up
capital for the business
sources of funds
financial forecast on sales and revenue,
cash flow statement
income statement, and
balance sheet.

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 7.1 Resources Requirements/Start Up Cost/Start Up Capital
Resources requirements/start up cost/start up capital involves identify your
resources requirement determine their costs and add them up to determine your total start up
capital
 land/building/premises: this involves workspace where the venture will be housed (you
can outrightly buy them if you have enough or use renting as an option)
 Machines/technology: you have to identify machines/technolgy (website, softwares)
required by the business and determine their cost
 Raw materials/inventory: you have to identify raw materils/inventory required by the
venture at start up and dtermine their cost
 Furnitures/fittings: you have to identify raw furnitures/fittings required by the venture
at start up and dtermine their cost
 Operational expenses for the first year: transport, marketing and promotion,
stationeries, electricity, water, repair and maintennce, interst, tax, legal etc.
 Personnel cost: you have to identify your team members that give you insight how many
your employees are and then you determine how much you plan on paying them. For a
small company, you might list every position on the personnel plan and how much will be
paid each month for each position.
 Intellectually related resources: trade secrets and intellectual property rights
registration (e.g. brand, patents, copyrights, trademarks, logo).
 Just like cybercafe start up costs by the right, you have to identify your resources
requirement determine their costs and add them up to determine your total start up capital
 The resources requirements/financial needs of a business will vary according to the type 19
and size of the business.
7.2 Sources of Funds
Sources of Funds: after entrepreneur has
determine the total worth of start-up
resources/costs needed, and he/she has to
determine whether he/she can supply total
capital needed to start, if not hence how could
he/she use other outside sources to fund the
business activity.
Describe your financing plans. Are you
investing your own money in the business? Do
you have line of credit? What other types of
funds —
Personal savings
Family and friends investment and/or loans
Business loans from comercial banks/micro
finance bank, development banks etc
Equity investments from others like venture
capitalst, angel capitalist, etc. 20
7.3 Sales and Revenue Forecast
Sales and revenue forecast involves
monthly sales and revenue forecast for the first
12 months, and then annual projections for the
next two years.
Your sales forecast is just involves
projections of how much products you are
going to sell and revenue earned over the next
few years.
A sales forecast is typically broken down into
several rows, with a row for each core product
or service that you are offering.
For example, if you are forecasting sales for a
restaurant, you might break down your
forecast into these groups: lunch, dinner, and
drinks. Include column indicating Cost of
Goods Sold and sales.
Determine breakeven sales required to cover 21
costs and start to make profit
7.4 Cash Flow Statement
The cash flow statement often gets confused with the profit
and loss statement, but they are very different and serve very
different purposes. Normally in Profit & Loss you calculates
your profits and losses, the cash flow statement usually keep
track of how much cash comes at any given point.
• For example, you have cash flow when you make a sale
cash down.
• But, when you make a sale to be paid in 30 or 60 days, you
don’t have the cash from the sale right away. But, you will
have booked the sale in your P&L and shown a profit from
that sale the day you made the sale.
• A typical cash flow statement has inflows and outflows of
cash and it starts with the amount of cash you have at
hand/bank, adds new cash received through cash sales
and paid invoices (inflows).
• Then subtracts cash that you have paid out (outflows) as
you pay bills, pay off loans, pay taxes, etc.
• This will then leave you with your total cash flow (cash in
minus cash out).
• your ending cash will be starting cash + cash in – cash out
= (ending cash).

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7.5 Projected Income Statement
Income statement is best known as profit and loss
accounts. Is where your numbers will all come together
and show if you are making profit or loss. The Profit &
Loss pulls data from your sales forecast and your
personnel cost and also includes a list of all your other
ongoing expenses associated with running your
business. It includes the following:
• Sales (or income or revenue). This number will
come from your sales forecast worksheet and
includes all revenue to be generated by the business.
• Cost of goods sold (COGS). This number comes
from sales forecast and is the total cost of your
product sold.
• Gross profit. Subtract your COGS from your sales
to get this number.
• Operating expenses. List all of your expenses
associated with running your business. It includes
salaries and wages, research and development
(R&D) expenses, marketing expenses, interest on
loan and other expenses.
• Net profit. This is the all-important bottom line
that shows if you have made a profit, or taken a loss,
during a given month or year.
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7.6 Projected Balance Sheet
Balance sheet is last financial
statement that most businesses will
need to create as part of their business
plan is the balance sheet.
• The balance sheet provides an
overview of the financial health of your
business.
• It lists the assets in your company, the
liabilities, and your (the owner’s)
equity.
• If you subtract the company’s
liabilities from assets, you can
determine the net worth of the
company.
Appendix: If you need more space for
product images or additional
information, use the appendix for those
details 24
Appendix

Appendix: If you need

more space for product
images or additional
information, use the
appendix for those
details

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