what is business plan?

 

Chapter two

Business planning

Opportunity Identification and Evaluation:

The first step in the entrepreneurial process involves identifying and refining a viable economic opportunity in the market. Without recognizing an opportunity, the entrepreneurial process is likely to fail. This stage involves five main steps:

1.     Scanning the Environment/Getting the Idea:

·         Scanning the environment can provide ideas and business opportunities.

·         An idea is a thought or suggestion about a possible course of action.

·         An opportunity is a favorable time or set of circumstances for doing something.

·         Business opportunities arise from gaps in the market, allowing others to add value by performing differently and better than competitors perform.

 

2.      Opportunity Identification: is the ability to recognize, discover, and utilize opportunities that others may miss.

·         It involves seeking better ways of competing, scanning the informational environment, and making effective use of changing information.

·         Entrepreneurs need to understand the cause of the opportunity, whether it's technological change, market shift, government regulation, or competition.

·         Recognizing opportunities often requires alertness to possibilities, and in developing countries, problems can be transformed into business opportunities.

3.     Opportunity Development:

·         Once an opportunity is recognized, timely adaptation to suit actual market needs is crucial for success.

·         Opportunity development is the process of combining resources to pursue a market opportunity.

·         Systematic research is involved in refining the idea into the most promising, high-potential opportunity that can be transformed into marketable items.

4.     Opportunity Evaluation:

·         Opportunity screening and evaluation are critical elements of the entrepreneurial process.

·         Professional evaluation determines if the specific product or service justifies the investment and risk.

·         Evaluation involves assessing the creation and length of the opportunity, its real and perceived value, risks and returns, fit with personal skills and goals, and differential advantage in the competitive environment.

5.     Assessment of the Entrepreneurial Team:

·         Regardless of the perceived opportunity, success relies on a team with strong skills.

·         After evaluating the opportunity, it's essential to assess the people who will run the company.

·         Questions about the entrepreneurial team's skills and capabilities become pertinent at this stage.

Business idea development

A business idea is a short and concise description of the fundamental operation of a prospective business. There are three main types of business ideas:

1.      Old Idea: Involves copying an existing business idea from someone else.

2.      Old Idea with Modification: Encompasses accepting an old idea from someone and modifying it to fit potential customer demands.

3.      New Idea: Involves inventing something entirely new for the first time.

Business Idea Identification

Before starting a business, it's crucial to have a clear understanding of the intended business. The business idea answers essential questions such as:

1.      Fulfilling Customer Needs:

·         What need will the business fulfill for customers, and what kind of customers will it attract?

·         For example, starting a daycare center in a commercial area to address the needs of working parents.

2.      Goods or Services Offered:

·         What goods or services will the business sell?

·         Consider the skills available and the needs of customers. Goods or services should be something people are willing to pay for at a profitable price.

3.      Identifying Potential Customers:

·         Who will be the customers of the business?

·         Understanding the target audience is crucial for the success of the business.

4.      Selling Strategy:

·         How will the business sell its goods or services?

·         This could involve opening a shop, selling directly to customers, working with retailers, or using various distribution channels.

5.      Environmental Impact:

·         How much will the business depend on and impact the environment?

·         A good business idea should align with sustainable practices and respect the social and natural environment.

Method of generating business idea

Generating business ideas requires a creative and open mindset. Here are some approaches you can consider:

1.     Learn from successful business owners:

·         Seek advice and insights from local business owners who have been successful in their ventures.

·         Understand how they came up with their business ideas, developed them, and made them profitable.

·         Learn about their target customers, sources of funding, and how their businesses fit into the local environment.

2.     Draw from personal and others' experiences:

·         Reflect on your own experiences as a customer and think about goods or services that you have had difficulty finding in your area.

·         Talk to family, friends, and members of your community to understand their unmet needs or frustrations when it comes to products or services.

·         Consider their comments and identify potential business ideas that address those needs.

3.     Survey your local business area:

·         Explore your local community and identify existing businesses in the area.

·         Look for gaps or opportunities where certain goods or services are lacking or underserved.

·         Concentrate on sectors or industries that lack representation and consider how you can address those gaps.

4.     Scan your environment:

·         Use your creativity to identify business ideas based on the resources and institutions in your area.

·         Consider natural resources, characteristics and skills of the local community, import substitution, waste products, publications, trade fairs, and exhibitions

Ø  Natural Resources:

·         Identify abundant natural resources in your area.

·         Explore ways to turn these resources into useful products without harming the environment.

·         Ensure sustainability by considering long-term use of the natural resource.

Ø  Characteristics and Skills of People in the Local Community:

·         Identify special characteristics or skills of people in your area that can be leveraged for a business.

·         Consider skilled artisans, tailors, carpenters, recent graduates, caregivers, and the digital connectivity and infrastructure in your community.

Ø  Waste Products:

·         Explore opportunities to use waste materials for creating marketable items.

·         Analyze recyclable waste products from agricultural processing, household garbage, used machinery, and industrial waste.

·         Consider starting a business that turns waste products into valuable and marketable items.

Ø  Import Substitution:

·         Identify goods that are imported and explore the possibility of producing them locally.

·         Investigate businesses that can provide local alternatives to imported goods with high import duties.

Ø  Publications:

·         Utilize online resources and printed publications to find business ideas.

·         Explore internet sites for business ideas and franchise opportunities.

·         Read newspapers for articles about business trends and classified advertisements for potential ideas.

Ø  Trade Fairs and Exhibitions:

·         Attend trade fairs and exhibitions to discover new business ideas and trends.

·         Explore different fields of business at these events for exposure to diverse opportunities.

5.     Brainstorming:

·         Open up your mind and generate many ideas by associating words or topics.

·         Write down everything that comes to mind, even seemingly irrelevant or odd ideas.

·         Engage a group, such as family, friends, or classmates, for collaborative brainstorming sessions.

6.     Structured Brainstorming:

·         Focus on different processes involved in the operation of a business and the goods/services related to those processes.

·         Identify businesses involved in production, selling, recycling, spin-offs, and servicing within a specific field.

·         Follow basic brainstorming rules: no criticism, uninterrupted flow of ideas, and no limitations.

7.     Focus Group:

·         A group of individuals led by moderators provides information on a structured format.

·         Characterized by open and in-depth discussions to solicit responses and insights.

·         Moderators can focus discussions either in a directive or non-directive manner.

·         Useful for obtaining new ideas on existing products or screening ideas/concepts.

8.     Problem Inventory Analysis:

·         Similar to focus groups but involves providing consumers with a list of problems in a product category.

·         A method to generate new ideas and solutions by focusing on identified problems.

9.     Free Association:

·         Involves writing down words or phrases related to a problem.

·         Aims to create a chain of ideas, leading to the emergence of a new product or service idea.

10.    Forced Relationships:

·         Involves forcing relationships among product combinations.

·         Asks questions about objects or ideas to develop new ideas through creative associations.

11.  Attribute Listing:

·         Entrepreneurs list the attributes of an item or problem.

·         Examines each attribute from various viewpoints, bringing together unrelated objects to form new combinations and potentially new products or services.

Business idea screening Top of Form

 

Idea screening is a critical process in which entrepreneurs evaluate and assess potential business ideas to determine their viability and potential for success. There are three approaches commonly used for idea screening:

1.      Macro Screening: involves narrowing down a large pool of ideas to a more manageable number, typically around 10. Common criteria include assessing personal competencies, financial capacity, and Market demand.

2.      Micro screening takes the selected ideas from the macro-screening phase and further narrows them down to approximately three ideas. The criteria used for micro screening may include solvent demand, raw material availability, personal skills, and financial resources.

3.      Scoring the Suitability of Business Idea Involves scoring business ideas (BI1, BI2, BI3) based on various criteria.

·         Questions cover familiarity with the business, investment and income goals, profitability, comfort level, growth projections, risk factors, and more.

·         Scores are assigned (1 to 3), and the idea with the highest total score is selected.

Concept of Business Plan

A business plan is a detailed document that provides the goals, strategies, and operational details of a business. It serves as a roadmap for entrepreneurs to guide them in starting and running a successful venture.

·         The key elements and purposes of a business plan include Identifying opportunities, Allocating resources, attracting stakeholders, Guiding decision-making, Monitoring progress, Seeking funding, Communication and documentation.

·         Overall, a well-prepared business plan helps entrepreneurs clarify their vision, assess the feasibility of their business ideas, and guide them in effectively implementing and managing their ventures.

Objectives of a business plan include providing direction, evaluating prospects, monitoring progress, persuading stakeholders, seeking loans, visualizing feasibility, guiding implementation, identifying strengths and weaknesses, and more.

Developing business plan

Business Planning Process:

1.      Preliminary Investigation: Before starting the business planning process, it's important to review existing business plans, identify key assumptions, and scan the external and internal environments to assess strengths, weaknesses, opportunities, and threats.

·         Seeking advice from professionals or individuals with experience in a similar business can also be beneficial.

2.      Opportunity Identification and Idea Generation: This step involves generating new concepts, ideas, products, or services that have the potential to satisfy market demand.

·         It can include both innovative ideas and incremental improvements to existing offerings.

 

3.      Environmental Scanning: Once a promising idea is identified, environmental scanning is conducted to analyze the external and internal environments.

·         This involves assessing factors such as market trends, competition, regulatory environment, technological advancements, and internal capabilities.

 

4.      Feasibility Analysis: Feasibility analysis is done to assess the viability of the proposed project within a specific environment.

·         It involves a detailed assessment of various aspects, including market feasibility, technical feasibility, financial feasibility, operational feasibility, and legal feasibility.

·         This analysis helps identify potential challenges and assess the project's likelihood of success.

5.      Report Preparation: After conducting environmental scanning and feasibility analysis, a business plan report is prepared.

·         The report typically includes various sections and components that provide a comprehensive overview of the business concept, strategies, and financial projections.

 

Essential Components of a Business Plan:

1.      Cover Sheet includes the name of the project, address of the headquarters (if applicable), and the names and addresses of the promoters.

2.      Executive Summary: The executive summary provides a concise overview of the entire business plan. It highlights the key aspects of the business, such as the company's background, financial figures, and salient features of the project.

·         The executive summary aims to capture the reader's attention and generate interest in the business proposal.

3.      The Business: This section provides detailed information about the business concept, objectives, ownership structure, and headquarters address.

4.      Funding Requirement: This section outlines the financial needs of the business and describes how the funding requirements will be fulfilled. It may include information on the total funding required, sources of funding (equity, debt, grants, etc.), and the projected debt-equity ratio.

5.      The Product or Services: This subsection describes the product or service offered by the business. It includes details about the product's features, range, advantages over competitors, and any intellectual property rights associated with it.

6.      The Plan: This section includes functional plans for marketing, finance, human resources, and operations.

·         Marketing Plan: Outlines the marketing strategies, target market, pricing, distribution channels, and promotional activities.

·         Operational Plan: Covers aspects such as plant location, material requirements, inventory management, quality control, and budgeting for operations.

·         Organizational Plan: Describes the organizational structure, roles and responsibilities, manpower requirements, and relevant employment laws and regulations.

·         Financial Plan: Presents financial projections, including projected sales, income and expenditure statements, break-even analysis, profit and loss statements, balance sheets, cash flow projections, funds flow statement, and key financial ratios.

7.      Critical Risks: This section identifies and assesses the potential risks and challenges that the business may face. It helps stakeholders evaluate the viability of the business and understand the associated risks.

8.      Exit Strategy: The exit strategy outlines how stakeholders can exit or dissolve the business. It provides details on the distribution of assets and shares in case of winding-up or sale of the business.

9.      Appendix: The appendix includes additional supporting information, such as the curriculum vitae of the owners, ownership agreements, legal documents, market research data, and other relevant documents.

                Thank you!!!