Lesson 9 (A)-Financial Planning for Entrepreneurs

1. BUCU004-Entrepreneurship
Lecture Lesson # 9 (Part A)
Presenter:
Dr. Henry Yatich, Ph.D
School of Business and Economics
Class:
January-April 2020 Semester/Trimester
1BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

2. Lesson Highlights!
A. Financial Planning in Entrepreneurship-Definition
B. Empirical Justification for “FP”
C. Importance of Financial Planning in
Entrepreneurship
D. Basic Financial Planning Process for
Entrepreneurs
E. Financial Planning Tools-Further Reading
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BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

3. A: Definition: Finance Planning In Entrepreneurship
• Financial planning is the process of determining business cash
flow (revenues), savings, debts, investments, insurance and
other elements that enables the business attain its strategic
objectives and obligations (Agrawal, 2018).
• Financial Plan describes each of the activities a business
envisages to partake; resources, equipment, technology and
materials that are required to achieve business objectives within
stipulated timeframe.
3BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

4. B: Empirical Evidence of Need for Financial Planning
• In order to answer this question, we ought to ask if entrepreneurs need a
Financial plan & what who are these Entrepreneurs (key characteristic).
– All “serious” entrepreneurs have one distinct characteristic-high
tolerance for risk and utilize the “out of the box” thinking approach
in running their businesses.
– According to Small Business Administration (SBA) (2019), 50% of
business startups succumb to its failure within the first five years of
operation. One of the 7 reasons identified by Schaefer (2019) causing
the failure of start-ups is lack of planning-business plan.
– It should be observed that Financial plan ordinarily is the last step in
writing a business plan. It captures projected profit-and-loss
statement for the next two, three to five years and a cash flow
statement. It also indicates a break-even analysis.
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BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

5. C: Why Financial Planning-Importance?
– Address Feasibility of the Company-Business success becomes
elusive to many entrepreneurs. As such, a “FP” provides a feasibility
(practicability) study of anticipated business activities and
expectations.
– Plan for Business Finance: “FP” enables entrepreneurs to establish
how much money is required at inception and when it is needed in
the course of business operation-This paves way for identifying
sources of financing both in the short-term and long-term.
– Seek additional Funds: Creditors and Lenders usually request to see
the business plan with its projections and assumptions.
– Enable Monitoring of Business Performance: FP” provides the
business with tools that the it can continuously measure and monitor
herself against set parameters.
5BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

6. D1: The Financial Planning Process
• Financial planning is an organized-deliberate process aimed at achieving
pre-determined goals. A comprehensive business plan will not only enable
seamless performance of a business but also enables, control, right
investment decisions and avoid excessive debt that may shut down the
business.
• In planning for its finances, entrepreneurs may consider the following
simplified process;
1. Determine current business financial position:-The business can assess its
revenues, savings, expenses, and debts. This includes preparation of list of
current asset and debt balances and amounts to be spent for various activities or
processes.
2. Determine Financial Goals:-Entrepreneurs need to determine what goals to
pursue. Could it be saving for future operations or spending all profits for
continued operations? 6
BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

7. D2:The Financial Planning Process…Cont
3. Identify Alternative Courses of Action:-Entrepreneurs need to
identify possible alternative options for its business survival. These
can range from doing same business, change status quo,
diversify, grow, among other options.
4. Evaluate Risk:- Entrepreneurs face uncertainties in their day-to-day
operations. To mitigate financial risks, there is need to collect
sufficient information on prices of substitute products, cost of raw
materials, tax regime among many others. Such factors can impact
on financial performance of the start-up.
5. Develop an Action Plan:- At this level, one may require to assess
the best strategy to achieve both short-term and long-term
objectives. For example, you may need a property consultant (due
to expertise) to purchase land e.t.c.
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BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

8. D3: The Financial Planning Process…Cont
6. Monitor and Revise the Plan:- Due to uncertainties and dynamic
nature of the modern world, there is need for continuous evaluation
of the “FP” so as to identify change, short-comings and address
them appropriately. For example, change of tax, environmental
requirements, change in consumption patterns among consumers,
depletion of raw materials among others may have adverse effects
which can be mitigated through contingency actions and
continuous evaluation and revision of the plan.
8BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

9. E: Further Reading: (9th Lesson-Part B)- “FP”-Tools
–Income Statement-Examines profit and loss
–Cash Flow Forecast-Examines funds in and out of business
–Balance Sheet-Examines firm’s assets, liabilities, and capital
9BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020

10. Thank You
10BUCU004: Entrepreneurship Lecture: Dr. Henry Yatich (c) MKU-2020
BUCU004-Entrepreneurship
January-April 2020 Session
Presenter:
Dr. Henry Yatich, Ph.D
School of Business and Economics