, Business planning

1. COLLAGE Of Engineers
Lecturer: mukhtar Elmi
Feb , 2021

2. Chapter 3
Business planning for
entrepreneurship
Most Slides from Book called
Entrepreneurship for engineers, 7edition ,

3. Learning Objectives
After successfully completing this Chapter,
students will be able;-
1. To define what the business plan is, who
prepares it, who reads it, and how it is
evaluated.
2. To understand the scope and value of the
business plan to investors, lenders,
employees, suppliers, and customers.
3. To identify information needs and sources
for each critical section of the business plan.
4. To enhance awareness of the value of the
Internet as an information resource and
marketing tool.

4. Learning Objectives (cont’d)
5. To present examples and a step-by-step
explanation of the business plan.
6. To present helpful questions for the
entrepreneur at each stage of the
planning process.
7. To understand how to monitor the
business plan.

5. LEARNING GOAL 1:
1. To define what the business plan is
,who prepares it,
who reads it, and how it is evaluated
 PLANNING AS A PART OF A BUSINESS OPERATION

6. CLASS DISCUSSION
1) Who Needs to Write/See the Business
Plan?
2) How can a business plan help a
company?
3) What are similarly and difference
between of a Business Plan and
proposal project ?

7. Answer 1
a) Most banks loaning money, especially if the
business does not have a track record
b) Farmers, to insure they have considered
everything
c) Investors or partners who have some doubts
about your abilities/integrity
 Highly required or important potential
employees
 Anyone wondering if they should take the risk

8. Answer 2
a) obtain bank financing (separates you from the
run-of-the-mill competition, you are serious
enough to do formal planning, those that plan are
better risks)
b) seeking investment funding: this is the
document most venture capitalists first ask for
c) arranging strategic alliances: small/large
companies
d) obtaining large contracts: proof of recognition
to large companies checking out small ones

9. Answers 2
e) attracting key employees: can help an
executive come over to your side
f) completing mergers and acquisitions: for
selling and buying companies, buyers seldom
look at only one company
g) motivating management team: causes
everyone to be working toward the same goal,
reduces customer confusion, lays out financial,
marketing and production goals

10. The concept of Business planning
 Planning in is a process of establishing
priorities for future actions in an attempt to
solve economic problems, which stem from
the existence of scarce resources.
 Or Plan is a blueprint for goal achievement
and specifies the necessary resources
allocations, schedules, tasks and other actions
of the organization.

11. Types of Planning
 There are four basic kinds of planning:
1. strategic
2. operational
3. Standing plan
4. Contingency plans
1. Strategic Planning
 It is as long range, comprehensive, integrated,
overall and managerial planning.
 Strategic Planning is link between the
organization’s objectives and resources and its
environmental opportunities.

12. 2. Operational planning And 3. Standing
plan
2. Operational planning
 Operational planning is known as divisional planning
and it is concerned with the implementation of the
larger goals and strategies that have been determined by
strategic planning. It is also concerned with improving
current operations and with the allocation of resources
through the operating budget
3. Standing plan: are ongoing plans that are used to
provide guidance for tasks performed repeatedly within
the organization. The major tools for single use are
included programs and projects while standing plans
generally pertain maters such as employee illness, absence,
discipline, hiring and dismissal

13.  4) Contingency plans: plan that defines company
responses to specific situation, such as emergencies or
unexpected conditions

14. planning as a part of a business operation
 The business plan is a written document prepared by
the entrepreneur that describes all the relevant external
and internal elements involved in starting a new venture.
A business plan is a document that request support-
usually money- for work a proposer wants to do. what
makes a business plan , a business plan is that it asks
the audience to approve, fund, or grant permission to do
the proposed project.

15.  Business plan an integration all of
functional plans such as
 marketing,
 finance
 manufacturing,
 and human resources the integration and
coordination of effective business objectives
and strategies when the venture contains a
variety of products and services.

16. planning as a part of a business operation
Business plan ,
• It is addresses both short-term and long-
term decision making for the first three
years of operation.
• Thus, the business plan- or road map-
answers the questions,
• where am I now? Where I am going? And
how will I get there? Potential investors,
suppliers, and even customers will request or
require a business plan.

17. WHO SHOULD WRITE THE PLAN
The business plan should be prepared by
the entrepreneur, He or She :
Lawyers
Business people
accounts,
 marketing consultants,
engineers are useful in the preparation
of the plan.

18. CLASS DISCUSSION ( 3 marks )
1) Discuss with the students about region’s
peace and culture as major economic assets.
Why peace and culture is important to
business and is a major economic assets?
2) Discuss about the level of trust in between
Somaliland businesses? If some of the students
identified a valuable business idea, would the
financial sector trust and invest them? What is
the level of truth? Discuss with the students.

19. Sources can needed be found/funded
through Entrepreneurship
Governmental institutions of Somaliland,
ministry of commerce
 industry,
services offered by small business
development centers
International and UN organizations
involved in business skills training
 Universities,
 local owner business people , Friends
or relatives.

20. Be aware internet ,
The internet also provides a wealth
of information as well as actual
sample templates or outlines for
business planning

21. LEARNIG GOAL 2:
To understand the scope and value of
the business plan to investors, lenders,
employees, suppliers, and customers.
SCOPE AND VALUE OF THE
BUSINESS PLANWHO READS THE
PLAN?

22. SCOPE AND VALUE OF THE BUSINESS
PLAN,WHO READS THE PLAN?
The business plan may be read
investor’s bankers,
venture capitalists,
 suppliers,
 customers, advisors/consultants.
All of as, for example Who is expected to
read the plan can often affect its actual
content and focus

23. Important and process questions in
business planning
 “Does the idea make sense?
 Will it work? Who is my customer?
Does it satisfy customer needs?
 What kind of protection can I get
against imitation by competitors?
 Can I manage such a business?
Whom will I compete with?”

24. How do lenders or investors evaluate the
plan?
 The strengths of management and personnel.
 The product/service.
 Available resources.
Lenders or investors are interested in the
venture’s ability to pay back the debt.
Lenders Focus on the four Cs of credit -
Character/quality, cash flow,
collateral/security , and equity contribution.
Banks want an objective analysis of the business
opportunity and the risks inherent in the new

25. LEARNING GOAL 3
3. To identify information needs and sources for
each critical section of the business plan
should focus on :
a) Marketing information needs ,
b) finance information needs , and
c) production information needs
The entrepreneur should clearly define the goals and
objectives of the venture. These goals help define
what needs to be done and how it will be
accomplished.
 These goals and objectives also provide a framework
for the business plan, marketing plan, and financial
plan.

26. a) MARKET INFORMATION NEEDS
 It is first necessary for the entrepreneur to
define the market.
 Market is a place or event at which people meet
in order to buy and sell things
 For example, is the product most likely to be
purchased by men or women? People of high
income or low income? Rural or urban
dwellers/residents? Highly educated or less
educated people? A well-defined target market
will make it easier to project market size and
subsequent market goals for the new venture.

27.  To build a strong marketing plan with
reasonable and measurable market goals and
objectives the entrepreneur will need to
gather information on the industry and
market. Most entrepreneurs have difficulty
with this stage and do not often know where
to begin. The best way to start is to first
visualize this process as an inverted pyramid/
traingular (see Figure 4.1).

28.  Pyramid
Figure
1.General Environmental & demographic trends
2. National food industry trends
3. Local Environmental and demographic
Trends
4. Local food industry
5. Local competition strength
& weaknesses
6. Market Positioning
7. Market Objectives

29. B. OPERATIONS INFORMATION NEEDS
The entrepreneur may need operational
information’s needs on the following:
 Location: The Company’s location and its
accessibility to customers, suppliers, and
distributors need to be determined.
 Manufacturing operations: Basic
machine and assembly/meeting operations
need to be identified, as well as whether
any of these operations would be
subcontracted and to whom.

30. The entrepreneur may need operational
information’s needs on the following:
 Raw materials: The raw materials needed
and suppliers' names, addresses, and costs
should be determined
 Equipment: The equipment needed should be
listed, with its cost and whether it will be
purchased or leased.
 Labor skills: Each unique skill needed, the
number of personnel required for each skill, pay
rate, and an assessment of where and how these
skills will be obtained should be determined.

31. The entrepreneur may need operational
information’s needs on the following:
 Space: The total amount of space needed
should be determined, including whether the
space will be owned or leased.
 Overhead: Each item needed to support
manufacturing-such as tools, supplies,
utilities, and salaries should be determined.

32. c. FINANCIAL INFORMATION NEEDS
 The entrepreneur will need financial
information to prepare a budget that includes a
list of all possible expenditures in the first year
and a list of all revenue sources, including sales
and any external available funds. Thus the
budget includes capital expenditures, direct
operating expenses, and cash expenditures for
non-expense items.

33. LEARNING GOAL 4
 To enhance awareness of the value of the
Internet as an information resource and
marketing tool
 USING THE INTERNET AS A RESOURCE
TOOL

34.  The changing world of technology offers new
opportunities for entrepreneurs to be able to
access information for many business
activities efficiently, expediently, and at very
little cost.
 The Internet can serve as an important
source of information in the preparation
of the business plan for such segments as
the industry analysis, competitor analysis,
and measurement of market potential, to
name a few.

35.  Entrepreneurs will also find the Internet a
valuable resource in later-stage planning and
decision making. Besides being a business
intelligence resource, the Internet also
provides opportunities for marketing
strategy; through its Web site, a firm can
provide information on the company, its
products and services, and ordering
instructions.

36. Business plan process
1) Assessing the situation
2) Developing a mission
3) Getting ready
4) Setting goals
5) Working out the business plan
6) Setting employee objectives
7) Monitoring the process

37. Business plan process
 This should be an assessment of how your customers,
partners, competitors and suppliers view your business.
 It should answer the question “where are we now?” It
should also be a honest and self-critical exercise trying
to answer the important questions any businesspersons
should be asking themselves regularly: “What are our
important strengths and main weaknesses?” “What can
we do well and what should we not be doing at all?”
“What are the major mistakes we have made in the past
and what can we learn from them?” “Do we make a
reasonable number of mistakes?

38. Developing a mission
 Before proceeding further you should formulate a clear
mission statement for your enterprise. Developing
your mission is often the most valuable part of the
dynamic planning process since it can change or
reconfirm the direction of your business. Missions are
intended to provide a sense of purpose and act as a
tool for communicating where the business is heading.
Shareholders, employees and business partners can be
better motivated and support the mission if they know
what it is.

39. Getting ready
 Some important matters you need to address when
getting ready are:
• Appointing a coordinator. Appoint the staff
member who will be responsible for coordinating
the business planning process and for delivering
the final document (business planning project
manager) in time.

40. Setting goals
 Setting goals for the future development of the business is a
prerequisite for the preparation of the business plan.
 Although these goals will have to be adjusted in the iterative
planning process, they can still be of great value in setting the
“tune” and “spirit” for further work. The goals should be time-
bound, realistic and measurable. Examples of such goals can
be:
 Over the next three years increase sales volume by an average
of 20 per cent per year by intensifying marketing and sales
effort in the neighboring countries (export);
 In the coming year reduce production costs by 10 per cent
through greater automation of production lines;
 By the end of the second planning year launch three new
products on the local market

41. Working out the business plan
 Working out the business plan basically
involves synthesizing and harmonizing your
marketing, sales, development,
manufacturing, operations and financing
targets in such a way as to enable the
enterprise to meet its overall objectives.
 This “matching work” is usually conducted in
an iterative process until full consistency of all
elements of the business is achieved

42. Setting employee objectives.
 One of the most important actions after your business plan
has been completed is to use it as a basis for setting the
objectives of units and individuals in your firm. The
objective of your sales manager is to achieve the sales
volumes set in the plan. The production manager has to
meet the quality standards and production rates
anticipated. The development staff have, among other
things, to meet the schedules planned for bringing into
production the new product.
 These individual objectives should be fixed in writing and
the results of the work should be monitored and assessed
periodically

43. Monitoring the process.
 Systematic monitoring of the implementation of your
plan is a very important factor for the success of your
business. Action plans, monitoring systems and
constant feedback should be integrated to ensure
successful implementation of the plan and
achievement of its objectives. Participation in this
process can have a profound effect on the way your
team members view their role in the enterprise, and
can have an immediate impact on their performance.
If the business plan is completed and then locked up
in a cupboard and forgotten for a year, your employees
will never take business planning seriously again.

44. LEARNING GOAL 5
To present examples and a step-by-
step explanation of the business plan
WRITING THE BUSINESS PLAN

45. WRITING THE BUSINESS PLAN
 The outline for a business plan is illustrated
in Table 4.3. Each of the items in the outline
is detailed in the following paragraphs of this
chapter.
 Key questions in each section are also
appropriately detailed.

46. TABLE 4.3 Outline of a Business Plan
1. Introductory Page
A. Name Of Business , Logo and address of
business
B. principal(s)
C. Nature of business
D. Statement of financing needed
E. Statement of confidentiality of report

47. 2. Executive Summary-Two to three pages
summarizing the complete business plan
 The executive summary is often thought to be the
most important section of the business plan or
 The fundamentals of the proposed business:
What will your product/service? Who are the owners?
Management team? Who will your customers be? What
do you think the future holds for your business and what
is your target market? If applying for a funds and
investment from outside sources, state clearly how much
you want? Precisely how you are going to use it?

48. 2. Executive Summary-Two to three pages
summarizing the complete business plan
 And how the money will make your business
more profitable? Statement of financing
needed, professional, complete, and
concise/short And legal status
 ………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
……………………………………………………………

49. TABLE 4.3 Outline of a Business Plan
2. Executive Summary-Two to three pages
summarizing the complete business
plan
3. Industry Analysis
A. Future outlook and trends
B. Analysis of competitors
C. Market segmentation
D. Industry and market forecasts

50. 3. Industry Analysis
 How many companies operate this sector? What
are the general trends?
 How is your Business changing? How will these
changes affect you? Are you aware of legislation
and/or regulations that could affect your
business? Have you thought about any other
changes -political, economic or technological –
that could affect your business?

51. TABLE 4.3 Outline of a Business Plan
4. Description of Venture
A. Product(s)
B. Service(s)
C. Size of business
D. Office equipment and personnel
E. Background of entrepreneur(s)

52. 4. Description of Venture
 Provide an overview of your business idea, State
why you chose to go into this particular
business, Show any personal skills and/or
experience that will help you in your business.
 State why you believe the business will be a
success.

53. 4. Description of Venture
1. What is the mission of the new venture?
2. What are your reasons for going into business?
3. Why will you be successful in this venture?
4. What development work has been completed to
date?
5. What is your product(s) and/or service (s}?
6. Describe the product(s) and/or service(s), including
patent, copyright, or trademark status.
7. Where will the business be located?

54. 4. Description of Venture
8. Is your building new? Old? In need of
renovations? (If renovation is needed, state costs.)
9. Is the building leased or owned? (State the terms.)
10. Why is this building and location right for your
business?
11. What office equipment will be needed?
12. Will equipment be purchased or leased?
13. What experience do you have and/or will you
need to successfully implement the business plan?

55. TABLE 4.3 Outline of a Business Plan
5. Production Plan
A. Manufacturing process (amount
subcontracted)
B. Physical plant
C. Machinery and equipment
D. Names of suppliers of raw materials

56. 5. Production Plan
 1. Will you be responsible for all or part of the
manufacturing operation?
 2. If some manufacturing is subcontracted, who will
be the subcontractors? (Give names and addresses.)
 3. Why were these subcontractors selected?
 4. What are the costs of the subcontracted
manufacturing? (Include copies of any written
contracts.)
 5. What will be the layout of the production process?
(Illustrate steps if possible.)

57. 5. Production Plan
 6. What equipment will be needed immediately
for manufacturing?
 7. What raw materials will be needed for
manufacturing?
 8. Who are the suppliers of new materials and
what are the appropriate costs?
 9. What are the costs of manufacturing the
product?
 10. What are the future capital equipment needs
of the venture?

58. If a Retail Operation or Service:
 1. From whom will merchandise be
purchased?
 2. How will the inventory control system
operate?
 3. What are the storage needs of the venture
and how will they be promoted?
 4. How will the goods flow to the customer?

59. TABLE 4.3 Outline of a Business Plan
6. Operations Plan
A. Description of company's operation
B. Flow of orders for goods and/or services from
production to the customer.
It might include inventory or storage
of manufactured products, shipping, inventory
control procedures, and customer support
services. A non manufacturer such as a retailer or service
provider would also need this section in the business plan to
explain
the chronological steps in completing a business transaction.
C. Technology utilization

60. TABLE 4.3 Outline of a Business Plan
7. Marketing Plan
Marketing plan describes market conditions and strategy
related to how the product(s) and service (s) will be
A. price
B. Distribution
C. Promotion
D. Product forecasts
E. Controls
F. Place

61. TABLE 4.3 Outline of a Business Plan
8.Organizational Plan
{Organizational plan describes form of ownership and
lines of responsibility of members of the new
venture}
A. Form of ownership
B. Identification of partners or principal shareholders
C. Authority of principals
D. Management team background
E. Roles and responsibilities of members of organization

62. TABLE 4.3 Outline of a Business Plan
9. Assessment of Risk
{Assessment of risk identifies potential hazards
and alternative strategies to me et business
plan goals and
objectives}
A. Evaluate weakness (es) of business
B. New technologies
C. Contingency plans Or Possibility plan

63. TABLE 4.3 Outline of a Business Plan
10. Financial Plan
{Financial plan projects of key financial data that
determine economic feasibility and necessary
financial investment commitment}
A. Assumptions
B. before/Pro forma income statement
C. Cash flow projection/budget
D. Pro forma balance sheet
E. Break-even analysis
F. Sources and applications of funds

64. TABLE 4.3 Outline of a Business Plan
11. Appendix (contains backup material)
A. Letters from customers, distributors, or
subcontractors are examples of information
that should be included in the appendix.
B. Market research data

65. LEARNING GOAL 7
 To understand how to monitor the business plan.

66. Measuring Plan Progress
 the entrepreneur should check the profit and
loss statement; cash flow projections; and
information on inventory, production, quality,
sales, collection of accounts receivable, and
disbursements for the previous month.
 Company Web sites should also be assessed as
part of this process.

67. Measuring Plan Progress
 Inventory control: By controlling inventory, the
firm can ensure maximum service to the customer.
The faster the firm gets back its investment in raw
materials and finished goods, the faster that
capital can be reinvested to meet additional
customer needs.
 Production control: Compare the cost figures
estimated in the business plan with day to -day
operation costs. This will help to control machine
time, worker hours, process time, delay time, and
downtime cost.

68. Measuring Plan Progress
 Quality control: This will depend on the type of
production system but is designed to make sure that
the product performs satisfactorily.
 Sales control: Information on units, dollars, specific
products sold, price of sales, meeting of delivery
dates, and credit terms is useful to get a good
perspective of the sales of the new venture. In
addition, an effective collections system for accounts
receivable should be set up to avoid aging of
accounts and bad debts.

69. Measuring Plan Progress
 Disbursements: The new venture should also
control the amount of money paid out. All bills
should be reviewed to determine how much is
being disbursed and for what purpose.
 Web site control: With more and more sales being
supported or garnered from a company's Web site,
it is very important to continually evaluate the Web
site to ascertain its effectiveness in meeting the
goals and objectives of the plan. There are many
services and software packages available to assist
the entrepreneur in this process.

70. Updating the Plan
 The most effective business plan can become out-
of-date if conditions change.
 Environmental factors such as the economy,
customers, new technology, or competition- and
internal factors such as the loss or addition of key
employees-can all change the direction of the
business plan.
 Thus, it is important to be sensitive to changes in
the company, industry, and market.

71. WHY SOME BUSINESS PLANS FAIL
 Generally, a poorly prepared business plan
can be blamed on one or more of the
following factors:
 Goals set by the entrepreneur are
unreasonable.
 Objectives are not measurable.
 The entrepreneur has not made a total
commitment to the business or to the family.

72. WHY SOME BUSINESS PLANS FAIL
 The entrepreneur has no experience in the
planned business.
 The entrepreneur has no sense of
potential threats or weaknesses to the
business.
 No customer need was established for
the proposed product or service.

73. THE END