Entrepreneurship Development Training For GCOM (Oil & Gas Soft skills Ltd, Lagos Nigeria)

Graduate Certificate in Oil and Gas
Management
Basic Entrepreneurship
Daniel Chinagozi PalmNet Consult Ltd
daniel@palmnetconsult.com
08030907949

Outline
©PalmNet Consult Ltd 2010 2
 Introduction
 Business Plan - Definition, Uses and Benefits
 Outline of a typical Business Plan
 Qualities of a good Business Plan
 Questions and Answers

Course Objective
• To define the core ingredients for planning, establishing and
sustaining a successful business venture

Entrepreneurship - Definition
• The practice of starting new organizations
or revitalizing mature organizations,
particularly new businesses generally in
response to identified opportunities.
• Entrepreneurship is often a difficult
undertaking, as a vast majority of new
businesses fail.
©PalmNet Consult Ltd 2010
4

Business Venturing - Definition
• Venture: a risky or daring journey or undertaking OR
• A business enterprise involving considerable risk
• Business Venturing: a pursuit of a business enterprise after a
careful assessment of the Opportunities and Risks involved in that
particular business OR
• A balance between the reward of success and the risk of failure
– For some people, it is a specific level of owner income.
– For others, it is the joy of doing something they love regardless of the
amount of money they can take from earnings.
– For long-term success, the business must generate enough sales to
pay all its expenses and provide an adequate reward to the owner.
– It should produce an adequate return on your investment of time and
money relative to the amount of risk involved. Otherwise, you may be
better off doing something else.

Checklist For Starting a Business
• Step 1: Examine your motivation for business ownership
Your Personal Objectives
– Have you defined your personal needs and your financial objectives?
– Why do you think you will be happy as a business owner?
– Are you mainly interested in money, power, or flexibility?
– Have you examined your family needs?
Your Talents
– Do you have special skills or education in a particular industry?
– How will these talents help you in the development and operation of your own business?
– Do you like to sell?
– Can you sell? You will be required to sell yourself, your company, and your products and services.
Your Personality Traits
– Are you an authoritarian or a team player?
– How will this affect your relationship with employees, customers, and suppliers?
– Can you handle the stress of time deadlines from customers?
– Can you live with yourself if you have to fire an employee?
– Are you willing to risk everything you own? Will you be able to live with the fear of failure?
– Will your family?

• Step 2: Choose a business suitable for you
– A question often asked is “What kind of business should I start?”
• No one can answer this question for you. Businesses of all
types are both successful and unsuccessful. A business
generally succeeds or fails based on:
– the customer market,
– the skills of the owner(s) and workers, and
– the quality of the products, not because of the type of business.
Personal Areas to Consider When Choosing Your Business
– Your experience
– Your talents
– Your interests

• Step 3: Evaluate the feasibility of your chosen business
• A common mistake made by many people is to blindly begin a business without
evaluating whether it is feasible. A feasibility evaluation will allow you to make a more
informed “go” or “no go” decision
• A sampling of topics that should be honestly appraised includes:
– Do you have enough money to start your business without going into debt?
– If you need to borrow money, do you have some cash and own other pledgible assets?
– Are you willing to risk these assets to borrow money?
– If not, where are you going to get your money?
– Can the business generate enough cash to pay its expenses as well as your desired level of owner profit?
– Are the rewards from the business, both monetary and personal, worth the effort and investment you will
make?
– Are your management skills adequate to oversee and develop the business operation?
– Is there really a demand for your product or service?
– Have you researched market demand or have you just assumed that people need or want your product or
service?
– What is the worst thing that could happen if you go into business for yourself?
– Are you capable and willing to deal with the worst possibility if it occurs?

• Step 4: Consider start-up requirements and
common pitfalls
• Many Start-Up Requirements Are Ahead of You
– Learn about the legal forms of organization you may choose and what steps you
must take to establish a legal business entity.
– Learn which permits, licenses, rules and regulations are applicable to your
proposed business.
– Determine the types of records you will have to keep for tax purposes and for
management and control.
– Consider your professional needs, such as legal, accounting and tax, insurance, and
banking.

• Step 5: Develop your business plan

Some of the Common Pitfalls to Avoid:
• Blind optimism
• Not separating Management from ownership
• Thinking others will do your work for you
• Entering into verbal partnership agreements
• Paying licenses and fees before you have adequate
funds to start the business
• Entering into contracts before securing funds to open
the business.
• Thinking it will cost less and take less time to get into
business than it actually will.

Business Plan - Definition
• A Business Plan is a scheme for accomplishing a business
purpose. It articulates the business objectives as well as the
strategies for achieving them.

Business Plan - Uses
• Define a new business
• Define objectives and strategies to achieve those objectives.
• For periodic review of an on-going business
• Support fund raising application (loan and equity)
• For buy-in by stakeholders
• Set a sale value for a business
• Justify a new product line, promotion or expansion
• For managing a business

Business Plan - Benefits
• The business plan quantifies goals and objectives, which provide measurable
benchmarks for comparing forecasts with actual results
• Serves as a communication tool for outside financing as well as an operational
tool for guiding the business towards success
• The time, effort, research and discipline needed to develop a business plan
forces the entrepreneur to view the venture critically and objectively
• The entrepreneur in the course of developing the business plan will examine
operating strategies and expected results

Typical Business Plan Outline
1. Executive Summary
2 The Company/ Business Profile
3 The Market/ Industry
4 Strategies
5 Management structure
6 Financials
7 Investment considerations
8 Implementation plan

• The executive summary is a 2-3 page summary for people too busy to be bothered with the full text of the business plan
• Typically written after the full business plan has been done
• It must cover the following areas at a minimum (say one paragraph each):
– Statement of purpose -- The objectives of the plan... (i.e., to raise money, act as a
policy guide, etc.)
– Company background
– The company's product or service
– Strategy overview -- Why the product or service is unique or why market will buy
– The market potential -- Research findings
– Financial projections for at least 3 years into the future
– The qualifications of the management team
– Finance requirements – How much do you need and how you plan on spending
raised capital
– State in the summary why your business will succeed. (also possibly mission
statement)
The Executive Summary

• This segment of the business plan will x-ray the Business’ status quo for existing business or Business concept for
new business
• The information for this segment of the work will be from interviews with the client, review of their reports,
discussions with stakeholders especially customers
• These will include at a minimum the following information:
– Explain the legal structure – Company, Partnership, subsidiary,
Holding company etc
– Description of the business concept
– Description of current business activities
– Analysis of current financial statements with summary
– Description of ownership
– Description of Management structure and profiles of key managers
– Review of any licenses, contracts, franchises or patents with
description of key conditions and terms
The Company/ Business Profile

• This segment of the business plan will review the market conditions the Company will be facing
• Sources for this information will essentially be secondary market information, primary market information
(DIY or contracted), Interviews with client, competitors or customers/suppliers and to a lesser extent personal
experience
• This should cover the following at the minimum:
– Market size and growth projections
– Product life cycle
– Market seasonality or variation patterns
– Current market trends
– The competitors’ profile
– Industry value chain
– Market segmentation with buying behaviors and value
expectations – Geographic, demographic, income class, behavior
patterns, target customers and customer needs
The Market / Industry

• This segment of the business plan will seek to examine the Company’s
characterization
• These will include:
– Corporate Definition
– Corporate Vision
– Mission
– Corporate Goals and Objects
• This information will generally be gathered through a brainstorming process, which
will involve at a minimum the promoter and the PalmNet Consults Business
Development service team
The Strategy – Corporate strategy

• This segment of the business plan will seek to examine the Company’s strategy
for out performing its competitors in the market place
• These have been extensively studied by Michael Porter and summarized as:
– Differentiation
– Cost leader
– Focus
• This information will generally be gathered through a brainstorming process,
which will involve at a minimum the promoter and an independent facilitator
or consultant
The Strategy – Competitive Strategy

Competitive
Strategy
Required Skills &
Resources
Organizational
Elements
Associated Risks
Overall Cost
Leadership
Sustained capital
investment and
access to capital
Process
engineering skills
Intensive
supervision of labor
Products designed
for ease of
manufacture
Low-cost
distribution system
Tight cost control
Frequent, detailed
reports
Structured
organization and
responsibilities
Incentives based on
meeting strict
quantitative targets
Technological
change that nullifies
past investments or
learning
Low-cost learning by
industry newcomers
or followers through
imitation, or through
their ability to invest
in state-of-the-art
facilities
Inability to see
required product or
marketing change
because of the
attention placed on
cost
Inflation in costs that
narrow the firm’s
ability to maintain
enough of a price
differential to offset
competitors’ brand
images or other
approaches to
differentiation

Competitive
Strategy
Required Skills &
Resources
Organizational
Elements
Associated Risks
Differentiation Strong marketing
abilities
Product
engineering
Creative flair
Strong capability in
basic research
Corporate
reputation for
quality or
technological
leadership
Long tradition in
the industry or
unique combination
of skills drawn from
other businesses
Strong cooperation
from channels
Strong coordination
among functions in
R&D, product
development, and
marketing
Subjective
measurement and
incentives instead of
quantitative
measures
Amenities to attract
highly skilled labor,
scientists, or creative
people
The cost differential
between low-cost
competitors and the
differentiated firm
becomes too great
for differentiation to
hold brand loyalty.
Buyers thus
sacrifice some of
the features,
services, or image
possessed by the
differentiated firm
for large cost
savings.
Buyers’ need for the
differentiating factor
falls. This can occur
as buyers become
more sophisticated.
Imitation narrows
perceived
differentiation, a
common
occurrence as
industries mature.

Competitive
Strategy
Required Skills &
Resources
Organizational
Elements
Associated Risks
Focus Combination of the
above policies
directed at the
particular strategic
target
Combination of the
above policies
directed at the
particular strategic
target
The cost differential
between broad-
range competitors
and the focused
firm widens to
eliminate the cost
advantages of
serving a narrow
target or to offset
the differentiation
achieved by focus.
The differences in
desired products or
services between
the strategic target
and the market as a
whole narrows.
Competitors find
submarkets within
the strategic target
and outfocus the
focuser.

• This segment of the business plan will seek to examine the Company’s marketing
strategy
• These will include:
– Position i.e. Leader Vs follower, Differentiation Vs
Cost Leader, innovator Vs Adaptor, Customer Vs
Product, International Vs Domestic, Govt. Vs
Private Sector
– Product
– Price
– Place/distribution
• This information will generally be gathered through a brainstorming process, which
will involve at a minimum the promoter and an independent facilitator or
consultant
The Strategy – Marketing strategy

• This segment of the business plan will seek to examine the Company’s strategy for
optimizing its production activities – Mainly for manufacturing outfits
• This aspect should cover the following at a minimum:
– No. and nature of the production facilities
– Location of the facilities and why
– Sources of raw materials
– Envisaged capacity utilization and number of shifts
– Technical details of the facilities and arrangements for
maintenance
• This information will generally be gathered through a brainstorming process, which will
involve at a minimum the promoter and an independent facilitator or consultant
• as well as secondary research on sources of machines etc.
The Strategy – Production strategy

• This segment of the business plan will seek to examine the Company’s strategy
for attracting, developing and retaining talent
• This information will generally be gathered through a brainstorming process,
which will involve at a minimum the promoter and an independent facilitator
or consultant
Note that all functional strategies need to be consistent with the corporate
and competitive strategies highlighted previously etc.
The Strategy – Human Capital strategy

• The Management structure will seek to convey the character of the management
team and why they will make a success of the business
• This will include information such as:
– Names of key managers and their profiles,
highlighting relevant experience
– Key terms of management services agreements if
any
– Technical partners if any and their profiles including
years of experience in similar ventures
– Key terms of technical services agreements
• This information may be sourced from discussions with the promoter or secondary
research
The Management Structure

• This segment of the business plan reviews the
economics or viability of the project
– How much is required and envisaged sources, and when
– Use of proceeds
– Projected income statements
– Projected Balance sheets
– Projected Cash flow statements
– Projections should cover a minimum three years but frequently up to five
• This information will generally draw upon the
following information sources
– Discussions with the Promoter
– Environmental factors e.g. exchange rate, inflation etc.
– Basic understanding of accounting
– Reasonable assumptions
– Company’s corporate and functional Strategy
The Financial Analysis

• This segment of the business plan reviews the key features
of the business plan of interest to an investor
– SWOT Analysis
– Business Risk analysis
– Investment rationale – why the deal will work
• This information will generally draw upon the following
information sources
– Contents of the business plan
Investment Considerations

Investment Considerations – SWOT Analysis
•Strengths
•Internal
•Weaknesses
•Internal
•Opportunities
•External
•Threats
•External
SWOT

• A summary of the time lines for business implementation
Implementation Plans

What makes a Good Business Plan?
Simple
Specific
Realistic
Complete
RESULTS
ACTIONSPLAN
FOLLOW UP

Keys to a Good Business Plan
• Use the business plan to set clear and measurable goals, responsibilities and
deadlines
• A good business plan assigns tasks to people or departments and sets
milestones and deadlines
• A practical and realistic business plan includes 10 parts implementation for
every one part strategy
• As part of the implementation of a business plan, it should provide a forum
for regular review

Conclusion
• It is not an academic exercise
• Business plans are not just for starting a new business or applying for a loan,
but also vital for running a business
• Business Plan has a lot of uses
• The more realistic the Business Plan, the better it is
• The more rigorous effort is put into its preparation, the easier it is to achieve
the objectives of the business

Entrepreneurship Development Training For GCOM (Oil & Gas Soft skills Ltd, Lagos Nigeria)

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