BUSINESS PLANNING

MK 307 BUSINESS PLANNING (PROJECT

Dr. D. R. Olomi Mrs N. Maliva

Objectives of the Course At the end of the course, students should be able to identify business ideas and develop these into business plans.

Objectives Students should actively learn, not so as to pass the course (which is important), but in order that they can acquire the skills The only way you learn to develop a business plan is by developing it

Specific Objectives Students should be able to: Identify, screen and select viable business ideas; Carry out market assessment and prepare marketing plans; Prepare operational, organisational and management plans; Prepare financial plans; and Package and market the plan

Methodology
Highly participatory do it Learning by doing Actually preparing business plans Group and within group work (dont loaf, or dont allow loafing!) Quality of output (language, presentation) is important

WHAT IS A BUSINESS PLAN It is a detailed analysis and description of all aspects of a business over a given time frame. It analyses the products, activities and processes and operations of the business, objectively assessing their viability charting the course of action that will yield to maximum effectiveness and efficiency. Finally, the business plan projects the financial results of the business over the planning period

CONTENTS OF A BUSINESS PLAN The owners goals for the enterprise, both short and long term (vision, mission and objectives) A description of products or services to be offered History to-date, if existing business or background to the business idea if a new business Description of the market opportunities identified, how they have been identified/validated/confirmed and analysis of the competitive situation in the sector

Contents -- continued Description of the marketing strategies to be used to realise the objectives in light of the identified opportunities and competition Description of how the business will be organised, managed and staffed Description of the operations (facilities, inputs, processes, outputs) envisaged Projections of financial results (income, cash flows, balance sheets ratios, etc

BENEFITS OF THE BUSINESS PLAN The business plan can significantly increase the chances of success/reduce the chances of failure. It serves the following purposes: It is a map/framework to be followed by management. By analysing every aspect of the business and projecting financial results, it provides the promoter with a basis for deciding whether or not to proceed with the idea

Benefits (Cont) The promoter learns a lot about products, customers, competition, regulations, taxes, constraints, etc in the course of doing the background study/assessment as inputs into the business plan. This can compensate for lack of experience It may compensate for lack of capital. A welldeveloped business plan can be used to solicit funds from banks, venture capitalists, individuals, etc. The plan provides an opportunity for the promoter to display his/her entrepreneurial flair and managerial talent and to communicate his/her ideas in a way that is easy for them to understand.

PROCESS OF DEVELOPING Identify ideas/ concepts for new businesses or expansion Screen ideas to choose one for further development Validate the Idea: Assess the viability of the market Develop a Marketing Plan, on the basis of knowledge from market assessment Develop an operations plan

Process (Cont..) Prepare a financial plan (sources and uses of money) and projections of financial results Show assumptions Show benefits Package it: define your vision, mission and objectives for the business and mesh them with the rest of the plan, such that the plan is a means to realise your personal economic and other aspirations.

PRE-REQUISITES FOR DEVELOPING A GOOD BUSINESS PLAN Commitment of the promoter Hard work and perseverance Personal involvement and ownership of the process by the owner. This ensures his/her values are embedded in the business, and maximised learning about the business Willingness and readiness to learn from various sources Alertness to opportunities and problems and readiness to change/modify the initial idea in light of new knowledge/information Money and time

A Concept Vs a Businesses Activity

A Concept (the specific, sometimes unique ways in which the product, service, method of delivery, packaging, positioning will be produced, sold, served or marketed) An activity (e.g. a shop, a butchery, a Day Care Centre).

SOURCES OF BUSINESS IDEAS Copying existing activities, e.g. dala dalas, shops, grocery, (copycats) Modifying existing businesses by coming up with different concepts (e.g. luxury pre-paid dala dala service, 24 hour corner shops, mobile toilet service, mobile conference centres, floating restaurant, packed and branded safe vegetables, etc Completely new (novel) concepts, e.g. ???

 Organising ceremonies, private burial services, elderly/sick care,

SCREENING BUSINESS IDEAS Are you convinced that there is a ready market for the product/service. Do you have some indications? Do you have, or can you quickly acquire the key success factor (KSF) for the business? Is the market saturated?. If yes, think twice Is the idea compatible with promoters values and life style/your significant others?

SCREENING BUSINESS IDEAS (Cont..) Does the promoter have or can she/he develop Sources of Competitive Advantage (SCA) quickly? Is it apparently more attractive than any other alternatives? Have enough alternatives been considered? The first idea is not necessarily the best Avoid concentrated industries unless you have a unique product concept Can you possibly raise the investment capital required?. If not, dont waste your time and energy on developing a business plan which will not be implemented

ASSIGNMENT
Identify a number of business ideas. Screen them and select one that fits you most Present to seminar

MARKET ASSESSMENT First be clear about your business concept (product, service, features, target market, key selling proposition). Decide on objectives of the market assessment (information/ knowledge to be acquired) Decide on the method for acquiring each type of information you need. You may need to review secondary sources of information, carry out a sample survey and draw inference about a population, interview some informed people in the industry or make visits and observations or a combination of these, depending on the nature of information you need).

Market Assessment (Cont..) Decide on and design the instruments for collecting the information from sources/respondents (it can be a structured questionnaire, a checklist of questions/points to be observed or a combination) Decide on how you will summarise/analyse and interpret the data/information in order to reach your market assessment objectives State the outputs/results expected from the assessment

COMMON OBJECTIVES OF MARKET ASSESSMENT To identify/gauge the important/relevant economic (employment levels, inflation, interest rates) conditions and trends and how are they affecting the industry you plan to enter To identify the important political and social (demography, types of jobs/employers, number of women in workforce, income levels, types of jobs, leisure habits, etc.) conditions and trends and how are they affecting the industry you plan to enter?

Common objectives of Market Assessment (Cont..) To estimate the size of the market/demand To determine whether the market growing, stable or declining and at what rate? To identify and measure any (qualitative or quantitative or both) gaps in the market To determine whether it is possible to take a big enough share of the market from current competitors

Common objectives of Market Assessment (Cont..) To determine the important characteristics of the customers? names/groups and characteristics (age, education, life style) To determine the key segments in the market (demographic, geographical, etc) To determine where each segment currently buy from To determine the extent to which each segment is satisfied with current products/services/suppliers To determine major influences on each segments buying decisions

Common objectives To determine important trends in buying and consumption patterns To identify major competitors (or groups of competitors) To determine the capacity of each competitor/groups of competitors To determine the key strengths of each competitor/group of competitor To identify the major weaknesses of each competitor? To gauge the trend on intensity of competition and other important trends on competitors behaviour/sophistication To identify potential SCAs?

OUTPUTS OF MARKET ASSESSMENT Demand estimates and projections for 3 or 5 years A profile (key characteristics) of the targeted customers and market segments (if applicable) A profile of competitors A summary of trends in the industry (number and behaviours of customers and suppliers) and their implications for the promoters business List of KSFs in the industry

MARKET ASSESSMENT METHODOLOGY Survey: sample survey structured questionnaire to a random sample; drawing inference about a population Qualitative methods Observation Unstructured interviews Focus group ASSIGNMENTs Literature review Previous studies Publications: newspapers Government reports

ASSIGNMENT Prepare a plan for carrying out a market assessment for your business idea, specifying: The business idea Objectives of the market assessment Methodology for the market assessment Expected outputs of the market assessment Present to seminar

MARKETING PLAN Key findings of the market assessment and their implications Marketing objectives Marketing strategies

MARKETING OBJECTIVES Sales volume and value Market share Market penetration Leadership Awareness Profit amount, %

etc

MARKETING STRATEGIES Positioning relative to competitors, etc

Product Product features, package, labels, brands, etc

Costs and Pricing Fixed and variable costs levels Basis for pricing/policy (penetration, skimming, survival/cost plus, competition, etc, combination) productsthers

Prices for different discrimination, discounts

Promotion

Promotional mix Advertising: objectives, message, audience, channel (media) cost Personal selling: objectives, recruitment, remuneration and motivation, supervision, cost Publicity: objectives, tactics, media, cost Sales promotion: objectives, tactic, cost

Distribution Location of the business/office Physical movement of goods/services Intermediaries: whom, criteria for selection, motivation, etc and cost Use simple tables and graphs to present key data. Include details in appendices.

Competitive Strategies How competitive will your business's offerings in terms of price, quality, features etc. be? How will your business deal with competitors? How will they respond? What are your business's contingency plans? Will these strategies realistically achieve your projected sales levels and market shares.

ASSIGNMENT
Prepare and present a carefully designed marketing plan, which builds on the findings of the market assessment. The plan should show:
Synthesis of market assessment Marketing objectives Sales projections/forecasts Marketing strategies (product/service, target market and positioning, pricing, distribution, promotion, other competitive strategies, etc Marketing expenses per activity and marketing budget Present to seminar

OPERATIONS PLAN Indicate locations and main facilities. Discuss plant/office/facilities capacity utilisation (past, present and future). &

Specify investments to date and future plans. Include or append maps, charts, pictures etc. Highlight major elements of operations. Use simple diagrams to illustrate processes or complex relationships.

Operations Plan (Cont) Specify key materials or goods to be purchased. Indicate prices, purchasing arrangements, and stock-holding policies. Describe transport/ distribution arrangements.

Operations Plan - Technology

If relevant, explain progress, plans, and resources and highlight any technological advances. What are the key technology trends/developments? Keep technical details to the minimum and explain unusual terms as soon as used. Use simple drawings or flow diagrams to explain any complex issues.

Operations Plan

What expertise has been acquired or is needed? What are the qualifications/backgrounds of technical staff and advisers? Summarise any (planned) patents and intellectual property rights. Indicate R&D expenditure to date and specify future expenditure plans.

ASSIGNMENT
Prepare an operational plan Present to seminar

MANAGEMENT & ADMINISTRATION MANAGEMENT PLAN Introduce the management team and their roles. Include short profiles but relegate details to an appendix. Indicate organisation, human resources (manpower, grades, skills, training etc.), Use a simple organisation chart to illustrate the structure Indicate any gaps and explain measures to recruit present job descriptions.

Administration Indicate locations and facilities. Describe administrative arrangements. Explain key operational, accounting and related management systems. Specify communications and IT needs. Indicate main components of overhead costs and projections.

ASSIGNMENT
Prepare a management and organisation plan

FINANCIAL PLAN

Sources of funds Uses of funds Present key financial projections e.g. P&Ls, Cash flows,

ASSIGNMENT
Prepare a financial plan, converting all planned so far into Present to seminar

Sensitivity Analysis

What happens to the financial outcome when the critical assumptions (costs, price, sales volume) change from expected to pessimistic or optimistic levels?

ASSIGNMENT
Carry out sensitivity analysis present

Project Benefits State benefits of the business: Employment Services/goods Role model A market for others etc

ASSIGNMENT
Discuss project benefits Present to seminar