Entrepreneurshi

p
Chapter Two:
Business Planning
1
 1. Introduction
• Lack of proper opportunity identification and evaluation,
idea development process and business planning are the
most often cited reasons for business failure.

• The outline of this chapter look like

Identify and Evaluate opportunity in the environment,
Generate business idea and Explain the concept of
business planning,

Identify components of business plan and Develop 2

business plan.
 2. Opportunity Identification and Evaluation
• Opportunity recognition corresponds to the principal activities that
take place before a business is formed or structured.

• The opportunity identification and evaluation stage can be divided

into five main steps namely;
I. Getting the idea/scanning the environment,
II. Identifying the opportunity,
III.Developing the opportunity,
IV. Evaluating the opportunity and
V. Evaluating the team.
3
 2.1. Scanning the Environment/ Getting the Idea
• Idea is a thought or suggestion about a possible course of
action. Whereas, opportunity is a favorable time or set of
circumstances for doing something.
• A business opportunity is a gap left in a market by those who
currently serve it. An opportunity is the possibility of occupying
the market with a specific innovative product that will satisfy a
real need and for which customers are willing to pay but idea is
all about opinion about anything we can have.
• Successful venturing may well rest Idea Opportunit
upon the ability of an
individual to recognize or distinguish an opportunity from y an
idea. Intention, Suggestion, Chance,
Impulse, Insight, Opening &
4

Concept & Connotation Prospect

 2.2. Opportunity Identification
• Opportunity identification is ability to see, to discover and
exploit opportunities that others miss. It is the process of
seeking out better ways of competing.
• Opportunity identification is a very difficult task, as most
opportunities do not just appear but rather result from an
entrepreneur’s alertness to possibilities.
• In developing countries, problems may be changed to business
opportunities.

5
 2.3 Opportunity Development 2.4.
Opportunity Evaluation

•Opportunity development • Opportunity screening and

evaluation
:- is the process of
:- is perhaps the most critical
combining resources to pursue
element of the entrepreneurial
a market opportunity identified. process, as it allows the entrepreneur

This involves systematic to assess whether the specific

research to refine the idea to product or service has the returns

needed for the resources required.
the most promising high
6

potential opportunity that can

 2.5. Assessment of
Entrepreneurial Team

• Regardless of how right the opportunity may seem to be, it

will not make a successful business unless it is developed
by a team with strong skills.

• Gartner et al (1999:230) advices that once the opportunity

has been evaluated, the next step is to ask pertinent
questions about the people who would run the company.
7
 3. Business Idea Development
•A business idea is a short and precise description of the basic
operation of an intended business.

•There are three types of business ideas. They are:

1.Old Idea – Here an individual copies an existing business
idea from someone.
2.Old Idea with Modification – In this case the person
accepts an old idea from someone and then modifies it in
some way to fit a potential customer’s demand.
8
3.A New Idea – This one involves the invention of something
 4. Business Idea Identification
•All business ideas are not equally worth. Therefore, to identify promising
business idea among others, it is important to answer raised questions below.
•Your business idea will tell you:
 What kind of customers will you attract?
 What good or service will your business sell?
 Who will your business sell to?
 How is your business going to sell its goods or services?
 How much will your business depend upon and impact the
environment?
9
 5. Methods for Generating Business Ideas

• Every business idea should be based on knowledge of the market and

its needs. The market refers to people who might want to buy a good
or service; i.e., the customers.

• The market differs from place to place, depending on who lives in the
area, how they live and for what goods or services they spend their
money.

• When generating business ideas, it is best to try to keep your mind

open to everything. Your first goal is to think of as many ideas as
possible and make a list of all the possible business opportunities.
16

Below, we will examine a few different approaches to generating

 5.1. Learn from successful business
owners
• You can learn a lot from people in your area who have already gone
through the process of establishing a business. We need to ask them:
What kind of idea did these businesses start with?
Where did the ideas come from?
How did they develop their ideas into successful businesses?
How does the business profit and fit into the local environment?
Where did they get the money to start their business?

17
 5.2. Draw From Experience
5.2.1. Your own 5.2.2. Other People’s
Experience Experience
• Look at the list of your interests, • It is important to understand the
your experiences and your experience of people around you.
• Here are some examples of comments that
networks. Start with yourself. would help with your search for a business
• What has your experience been idea:
as a customer in the market  “There is not enough entertainment in
place? this town and the weekends are so
• Have you ever searched all day boring.”
for some items that you could  “I really need to buy some marketing
not find in any store in your textbooks, but there are no good
area?
bookstore.”
18
 5.3. Survey Your Local Business Area
• Another way of discovering business ideas is to look around
your local community.
• Find out what type of businesses are already operating in
your area and see if you can identify any gaps in the market.
• If you live in a village or small town, you may be able to
identify all the fields of business in the whole town.
Otherwise, you may need to focus on the preferred business
fields and business types that you identified. This is an
activity that will be much easier to do with a business
partner or friend. Visit the closest industrial area, markets
and shopping centers in your area.
19
 A. Natural
Resources
5.4. Scanning Your include
Environment materials from
soil,
For example, think agriculture,
about: forest, mineral,
 Natural resources water, etc.
 Skills of people in B. Skill of Local
Community
the local
the people in
community
your area have
 Import substitution
some special
 Waste products characteristics
 Publications or skills that
 Trade fairs and could be useful
exhibitions. for a business. 20
 F. Trade Fairs
C. Waste Products
 Man-made waste has a & Exhibitions
 Organization
detrimental effect on
s hold trade
the environment.
 In fairs for
most cases,
different
companies are keen to
goods or
work with
services.
entrepreneurs who can  Attending
turn their waste
these fairs
D. Import
products into valuable
E. Publications may give you
and marketable items. 
Substitution Publications from the exposure to a
 Can you think of internet and other number of
anything that is printed material may new business
imported that help you find ideas. ideas that
Newspapers are a great you had not
might be made previously
source of ideas.
locally? 21
considered.
 5.5. Brainstorming
• Brainstorming means opening up your mind and thinking
about many different ideas. You start with a word or a topic
and then write down everything that comes to mind relating
to that subject.

• Brainstorming works best in a group.

22
 Let’s take the example of cotton
5.6. Structured T-shirts
Brainstorming

Structured
brainstorming; is
when you think of
the different
processes that are
involved in the
operation of a
particular business
and the 23

goods/services that
 5.7. Focus Group 5.8. Problem
Inventory Analysis
• Focus group is a group of • It is similar to focus group to
individuals providing generate new product ideas.
information on a structured • The difference is rather than
format which is led by generating new idea
moderators and useful for themselves, consumers are
both getting new idea on provided with a list of
existing product or problems in general product
screening ideas. category.
• It is a method of obtaining
“New Idea” and solutions by
focusing on problems.
24
 • To screen the business idea
6. Business generated, three
Idea Screening approaches are discussed
as follow:
Idea screening is Macro screening:
the process to spot Micro Screening:
good ideas and Scoring the
Suitability of Business
eliminate poor one.
Idea:
27
28
 7. Concept of Business Plan

• Planning is the first and the most crucial step for starting a business.
• A business plan is a road map for starting and running a business.
• It provides information to all concerned people like the venture
capitalist and other financial institutions, the investors, the employees.

• It provides information about the various functional requirements

(marketing, finance, operations and human resources) for running a
business.

29
The objectives of a business plan are to:
 Give directions to the vision formulated by entrepreneur.
 Objectively evaluate the prospects of business.
 Monitor the progress after implementing the plan.
 Seek loans from financial institutions.
 Guide the entrepreneur in the actual implementation of the
plan.
 To make SWOT Analysis
 Identify the resources that would be required to implement
30
the plan.
 8. Developing a Business Plan
8.1. Business Planning
Process
• The various steps involved in business planning process
are discussed here below:
1. Preliminary Investigation.
2. Opportunity Identification and Idea Generation.
3. Environmental Scanning.
4. Feasibility Analysis.
5. Report Preparation.
31
 8.2. Components of Business Plan
• Cover Sheet: It mentions the name of the project, address of the
headquarters (if any) and name and address of the promoters.
• Executive Summary: It should briefly describe the company; mention
some financial figures and some salient features of the project.
• The Business: This business concept section helps to articulate the
vision, mission, location, size, value and objective of the company, how
you plan to meet the unique needs of your customer and form of
ownership.
• Funding Requirement: Since the investors and financial institutions
are one of the key bodies examining the business plan report and it is
one of the primary objectives of preparing the business plan report, a
careful, well-planned funding requirement should be documented.

32
• The Product or Services: It includes the key features of
the product. It also gives details about the patents,
trademarks, copyrights, franchises, and licensing
agreements. Competitive advantage of the product.
• The Plan:
• Marketing Plan: Marketing mix strategies are to be
drawn, based on the market research.
• Operational Plan: The operational plan would give
information about
o Plant location
o Plan for material requirements, inventory management and
quality control. 33

o Finally, the budget for operational plan is also drawn.

 • Organizational Plan: The organizational plan indicates the
pattern of flow of responsibilities and duties amongst people in
the organization, it provides details about the manpower plan.
• Financial Plan: The financial plan is usually drawn for two to
five years for an existing company.
• Critical Risks: The investors are interested in knowing the
tentative risks to evaluate the viability of the business and to
measure the risks involved in the business.
• Exit Strategy: The exit strategies would provide details about how
the organization would be dissolved, what would be the share of
each stakeholder in case of winding-up of the organization.
• Appendix: The appendix can provide information about the
Curriculum Vitae of the owners, Ownership Agreement and the
like. 34
35