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UGANDA MANAGEMENT

INSTITUTE
DPPM(EVE)
Business Planning Process for SMEs

BY
HENRY BAGAMBE
0772823610
henrybagambem@yahoo.com
INTRODUCTION
• Planning is a process than never ends for a
business.
• As the venture grow up to mature business,
planning will continue.
WHAT IS A BUSINESS PLAN
• A business plan is a written document prepared
by the entrepreneur that describes all the
relevant internal and external elements and
strategies for starting a new venture.
Cont’d
• It is a integration of functional plans such as
marketing and sales, finance, manufacturing,
and management team and human resources
etc.
• A Business Plan is a written document that
defines the goals of your business and describes
how you will attain those goals.
• A Business Plan is worth your considerable
investment of time, effort, and energy.
Cont’d
• A Business Plan sets objectives, defines budgets,
engages partners, and anticipates problems
before they occur.
• Who should write the plan?
• The business plan should be prepared by the
entrepreneur.
• The entrepreneur may consult with many other
sources in its preparation, such as lawyers,
accountants, marketing consultants, engineers
and other consultants..
Who Reads The Plans?
• The business plan may be read by employees,
investors, bankers, venture capitalists,
suppliers, customers, advisors, and
consultants.
• There are three perspectives that should be
considered in preparing the plan :
• Perspective of the entrepreneur
• Marketing perspective
• Investor’s perspective
Reasons Why You Need a Strong Business
Plan
• To attract investors.
• To see if your business ideas will work.
• To outline each area of the business.
• To set up milestones.
• To learn about the market.
• To secure additional funding or loans.
• To determine your financial needs.
• To attract top-level people.
• To monitor your business.
• To devise contingency plans.
Information Needs

• Before committing time and energy to


preparing a business plan, the entrepreneur
should do a quick feasibility study of the
business concept to see whether there are
any possible barriers to success.
What is a feasibility Study?
• In order to get business plan implemented in
real life, an entrepreneur needs to understand
its financial viability as well as well as its
business feasibility.
• It is unrealistic to expect an investor for
example to spend large sums of money
without any regard to a return on theses
investments.
Cont’d
• The production of a feasibility study, especially in
the situation of a new venture, should help in
generating support for the business plan, assuming
of course that the results of the study are positive
• The assessment of the feasibility of any business
plan is concerned with whether it can be
implemented.
• The scale of the proposed business venture needs
to be achievable in resource terms..
Cont’d
• Within the planning and control process the
assessment of feasibility should start during
the identification of a strategic alternatives,
has a large role to play in strategic evaluation
stage and continues through into the process
of assessing the detail of implementation.
• Johnson and Scholes suggest a number of
fundamental questions which need to be asked
when assessing feasibility;
Cont’d
• Can the business be funded?
• Is the organization capital of performing to the required
level, for (quality and service)
• Can the necessary market position be achieved and will
the marketing skills be available?
• Can the competitive reaction be coped with?
• How will the organization ensure that the required skills at
both managerial and operative level are available?
• Will the technology , both product and process, to
compete effectively be available?
• Can the necessary materials and service be obtained?
Cont’d
• Pearson provides guidelines for the form and
content of a feasibility that is intended to
reduce or avert risk and whose report wail
have the following contents;
(i) Corporate Audit
• This would outline the corporate Vision,
Mission statements and objectives in order to
see if the business proposal harmonized with
the business intended business purpose.
Cont’d
(ii) The business scenario
• The operation detail such as the size of the
business, the target markets and positioning, the
services to be offered and the prices to be charged.
(iii) Assumptions
• Any necessary assumptions should follow, such as
the successful completion of negotiations with the
local authority or the generation of funds from the
sale of other interests.
Cont’d
(iv) The feasibility Research
The feasibility should cover three areas;
• Experimental/technical contribution-would cover design
studies of technical alternatives and the feasibility of any
construction work required. An estimate would be
needed for development time and costs.
• Marketing research – would centre around forecasting
market potential. Research would be commissioned to
examine the market characteristics, size and trends,
competition levels, etc.
Cont’d
• Financial analysis-would be required in terms of
cost and profit forecasting for a business requiring
substantial investment. Costs and revenues will
need to be projected using discounted cash flow
techniques over a five year period.
• The business implications arising from any
feasibility study are the go/no go decision.
• Should the study prove favorable then a business
is developed.
Assembling a Business Plan
Every Business Plan should include some essential components:
• Overview of the Business: Describes the business, including its products and
services.
• The Marketing and Sales Plan: Describes the target market for your product
and explains how you will reach that market.
• The Financial Plan and Projection: Details the costs associated with operating
your business and explains how you will pay for those costs, including the
amount of financing you may need.
• The Operations and Production Plan: Details the set up of your business
infrastructure, facilities your business will have, from Business machinery,
buildings, technology and Management Information systems(ICT).
Describes how you will manage the core processes and deliver services
and products to your customers, including use of human resources.
Eight Common Parts of a
Good Business Plan
Business plans must help investors understand and gain
confidence on how you will meet your customers’ needs.
Eight common parts of a good Business Plan are:
• Executive Summary
• Business Concept
• Market Analysis
• Management Team
• Marketing and Sales Plan
• Financial Plan and Projections
• Operations and Production Plan
• Performance measurement, monitoring and control
Part 1: Executive Summary
• The Executive Summary of a Business Plan is a
3-5 page introduction to your Business Plan.
• The Executive Summary is critical, because
many individuals (including venture capitalists)
only read the summary.
Cont’d
The Executive Summary section includes: A first
paragraph that introduces your business.
• Your business name and location.
• A brief explanation of customer needs and your
products or services.
• The ways that the product or service meets or
exceeds the customer needs.
• An introduction of the team that will execute the
Business Plan.
Cont’d
• Subsequent paragraphs that provide key
details about your business, including
projected sales and profits, unit sales,
profitability, and keys to success.
• Visuals that help the reader see important
information, including highlight charts, market
share projections, and customer demand
charts.
Part 2: Business Concept
• The business concept shows evidence that a product or service is
viable and capable of fulfilling an organization's particular needs.
• The Business Concept section:
-Articulates the vision of the company, how you plan to meet the
unique needs of your customer, and how you plan to make money
doing that.
-Discusses feasibility studies that you have conducted for your
products.
-Discusses diagnostics sessions you had with prospective customers
for your services.
-Captures and highlights the value proposition in your product or
service offerings.
Part 3: Market Analysis
• A Market Analysis defines the target market so that you
can position your business to get its share of sales.
• A Market Analysis section:
-Defines your market.
-Segments your customers.
-Projects your market share.
-Positions your products and services.
-Discusses pricing and promotions.
-Identifies communication, sales, and distribution channels.
Part 4: Management Team and Human
Resources
The Management Team section outlines:
• Organizational Structure: Highlights the hierarchy and
outlines responsibilities and decision-making powers.
• Management Team: Highlights the track record of the
company’s managers. You may also offer details about key
employees including qualifications, experiences, or
outstanding skills, which could add a competitive edge to
the image of the business.
• Working Structure: Highlights how your management team
will operate within your defined organizational structure.
Cont’d
• Expertise: Highlights the business expertise of your
management and senior team. You may also include
special knowledge of budget control, personnel
management, public relations, and strategic planning.
• Skills Gap: Highlights plans to improve your company’s
overall skills or expertise. In this section, you should
discuss opportunities and plans to acquire new
information and knowledge that will add value.
• Human Resources Plan: Highlights current and future
staffing requirements and related costs.
Part 5: Marketing and Sales Plan
• The Marketing Plan section details what you
propose to accomplish, and is critical in obtaining
funding to pursue new initiatives.
• The Marketing Plan section:
-Explains (from an internal perspective) the
impacts and results of past marketing decisions.
-Explains the external market in which the business
is competing.
-Sets goals to direct future marketing efforts.
Cont’d
-Sets clear, realistic, and measurable targets.
-Includes deadlines for meeting those targets.
-Provides a budget for all marketing activities.
-Specifies accountability and measures for all
activities.
Part 6: Financial Plan and Projections

• The Financial Plan translates your company's


goals into specific financial targets.
• The Financial Plan section:
-Clearly defines what a successful outcome
entails. The plan isn't merely a prediction; it
implies a commitment to making the targeted
results happen and establishes milestones for
gauging progress.
Cont’d
-Provides you with a vital feedback-and-control
tool. Variances from projections provide early
warnings of problems. When variances occur,
the plan can provide a framework for
determining the financial impact and the effects
of various corrective actions.
Cont’d
-Anticipate problems. If rapid growth creates a
cash shortage due to investment in receivables
and inventory, the forecast should show this. If
next year's projections depend on certain
milestones this year, the assumptions should
spell this out.
Cont’d
• The Financial Plan is the most essential part of
your Business Plan. It shows investors the
timeframes you have scheduled to make
profits.
• Some elements of the Financial Plan include:
-Important Assumptions
-Key Financial Indicators
Cont’d
-Break-even Analysis
-Projected Profit and Loss
-Projected Cash Flow
-Projected Balance Sheet
-Business Ratios
-Long-term Plan
Different Financial Planning Options
• Strategic Forecast: Incorporates the strategic goals of
the company into the projections. For startup
companies, the initial Business Plan should include a
month-by-month projection for the first year, followed
by annual projections for a minimum of three years.
• Cash Forecast: Breaks down the budget and 12-month
forecast into more detail. The focus of these forecasts
is on cash flow, rather than accounting profit, and
periods may be as short as a week in order to capture
fluctuations.
Part 7: Operations and Production Plan
• The Operations and Management section outlines
how your company will operate.
• The Operations and Production Plan section
includes:
-Organizational structure of the company. Provides a
basis for projected operating expenses and financial
statements. Because these statements are heavily
scrutinized by investors, the organizational structure
has to be well-defined and realistic within the
parameters of the business.
Cont’d
-Expense and capital requirements to support
the organizational structure. Provides a basis to
identify personnel expenses, overhead
expenses, and costs of products/services sold.
These expenses/costs can then be matched with
capital requirements.
8. Performance measurement, monitoring
and control
• There is need to ensure that business
evaluate performance of the strategies so that
timely corrective actions can be taken in case
certain decisions are not yielding the desired
results.
Differences between a feasibility study and
business plan
• A feasibility study is not the same thing as a business
plan. The feasibility study would be completed prior
to the business plan.
• The feasibility study helps determine whether an idea
or business is a viable option. The business plan is
developed after the business opportunity is created.
• A feasibility study is filled with calculations, analysis
and estimated projections while a business plan is
made up of mostly tactics and strategies to be
implemented in order to grow the business.
Conclusion
• Business Plans are critical for the success of a
company.
• Different businesses will require different
types of Business Plans.
• All Business Plans have some essential
sections that explain the core aspects of the
company.
Cont’d
In order to help your business have a better chance of
gaining interest and investors, a Business Plan should include
eight essential sections:
• Executive Summary
• Business Concept
• Market Analysis
• Management Team
• Marketing Plan
• Financial Plan
• Operations and Management Plan
• Performance measurement, monitoring and control