Entrepreneurship

Entrepreneurship - Level 2 1Future Managers

Module 5: The business plan

Module 5: The business plan

• After completing this module, you will be able to:– Review the different components of a business plan

– Review components of a given business plan

– Explain basic principles of negotiation to secure new business

– Collect, and organise information relating to the individual selected business idea on the given template and complete an elementary business plan

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1. The business plan – planning your business plan

• At the end of this outcome, you should be able to:– Explain what a business plan is, using examples

and a generic template.

– Explain the need for a business plan.

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1.1 The business plan

• What is a business plan?– A business plan is a detailed action plan or

roadmap explaining every aspect of your proposed business venture and should explain the following:

• What you intend doing• With what you intend doing it• When you intend doing it• Why you believe your idea is viable• What values are important to you

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1.1 The business plan

• Why do we need a business plan?– It helps you to determine what you want– It simulates (dummy run) reality and helps you to anticipate

pitfalls before they occur– It assesses whether your goals are achievable– It is your roadmap or guideline when your business is up and

running– It will help you when applying for finance since it explains in

detail what you intend doing. The banker will ask for it– It can identify potential fatal flaws (mistakes) in your

business idea– It can save you a lot of money by helping you decide that

your idea is not viable

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1.2 Different components of a business plan

• Finance

• Marketing

• Production

• Human resources

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1.2 The different components of a business plan

• How should your business plan look?– attractive in appearance

– concise

– comprehensive

– logical

– simple and easy to read.

– based on facts and evidence as far as possible.

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1.2 The different components of a business plan

• Cover page• Contents page• Contents

– Executive summary– Personal information of the entrepreneur– Description of the business idea– Marketing plan– Production plan– Financial plan– People in you business

• Supportive materials

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1.2 The different components of a business plan

• The cover page– The name of the business

– Entrepreneur’s name

– The relevant addresses and telephone numbers

– Logo or emblem of your business

• The contents page– Overview of the contents of the business plan,

giving page numbers

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1.2 The different components of a business plan

• The contents– The business – an executive summary

– Personal information about the entrepreneur• Personal information

• Personal goals

• Personal monthly expenditure

• Self-analysis

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1.2 The different components of a business plan

• The contents– Description of your business plan

• A general description of the service or product you intend manufacturing or providing

• Unique features of your business and why you believe they should work (your competitive advantage)

• A ‘SWOT analysis’ you completed of your business. • Any legal requirements like licensing, permits and

tax regulations• The goals of your business

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1.2 The different components of a business plan

• The contents– The marketing plan

• A description of your specific target market • Market research done, example of a questionnaire and

results• What percentage of the target market you intend

capturing • A description of your potential competitors, their

marketing strategies and potential effects on your business

• Selection of your location (place) from where you will trade

• Your promotional strategy• Advertising plan and costing

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1.2 The different components of a business plan

• The contents– The production process

• Machinery and equipment needed and costs• Layout plan of the business• Handling and storage issues• Stock levels, how much• Recipes, methods or techniques • Office administration plan, inventory of office equipment, • Names of suppliers you intend using• Transport and the cost of transport• How much can you handle – capacity• Computer programmes (software)

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1.2 The different components of a business plan

• The contents– The Financial plan

• Product costing• Pricing of the products• A detailed income statement for the first year, highlighting the

income and expenditure you expect on a monthly basis• A calculation of your break-even point• Sales forecasts for the first year of your business• A balance sheet for the first year (optional)• A budgeted cash flow statement to reflect your cash position on

a monthly basis• A description of your administration or record-keeping system• If you intend applying for a loan, it should explain the purpose

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1.2 The different components of a business plan

• The contents–Conclusion

• A summary of why you believe your business plan will succeed

• A motivating factor for other people to have faith in your proposed venture

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1.2 The different components of a business plan

• The contents– People in your business

• How many people you will employ and the type of training they will need

• Salaries and wages structure

• Aspects of your remuneration policy, such as working hours, leave, medical aid and trade unions

• An organisational/business structure

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1.2 The different components of a business plan

• Supportive materials– Credit reports

– Letters of reference

– Legal documents

– Copies of contracts and leases

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2. Assessing the components of a business plan

1. Read the business plan carefully. Make sure you understand what this business is all about.

2. Compare it with the ‘Components of a business plan’. Determine whether this entrepreneur followed the guidelines to compile a business plan.

– Did this person cover all the major components of the business plan?

– If not, list the major areas which were omitted– Try to understand why the omissions occurred– Perhaps a particular business does not need to have that section– Were any subsections left out?

3. Decide how well each section was completed. This means that you will have to pass judgment. Use the SMART principle.

4. Reach your conclusion

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Activity 2

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• Compare this business plan on page 189 with the contents of your business plan workbook. Your task is to assess the plan by using knowledge and experience you acquired when you compiled your own business plan.

• Once you have evaluated the Sound Space business plan, revisit your own and look at your own business plan very critically. Where appropriate, make changes to improve your plan.

Activity 3

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• Analyse the business plan below and make a recommendation. Would you finance this business if you were a bank manager?

Activity 4

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• Hand in your business plan

Recap

• Can you:– Review the different components of a business

plan?– Review components of a given business plan?– Explain basic principles of negotiation to secure

new business?– Collect, and organise information relating to the

individual selected business idea on the given template and complete an elementary business plan?

• Good luck with drawing up your own business plan

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