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UNIT 1.

THE BUSINESS PLAN

Planning. Planning is the process of thinking about and organizing the activities required to achieve a
desired goal. Planning is also a management process, concerned with defining goals for a company's
future direction and determining the missions and resources to achieve those targets.

Preparing and presenting a business plan;


A business plan is a planning document that summarizes the activities of a business for a given period of
time. The plan communicates the business elements to lenders and others, provides the basis for
managing the business, and provides a yardstick by which progress may be measured and changes
evaluated.
Developing the Business Plan
1. Get organised and the find energy to write the business plan
2. Start with some of the easy steps first
3. Describe your business and your product or services
4. Explain the market you are targeting, the industry, customers and competitors
5. Make a first draft fast without concern for perfection
6. Keep in mind your intended audience and why you are writing the plan
7. Disclose the risks and uncertainties in your business
8. Show that the loan will be repaid if you intent to get a loan
9. Evaluate the strengths and weaknesses of each competing firm
10. Look for opportunities in the marketplace.
11. Create a strategy for your business
12. Outline how you will execute the strategy
13. Link your products and services
14. your marketing and your operations to your strategy
15. Find a particular market niche to focus on and a unique strategy
16. Avoid overestimating sales projections and underestimate costs.

A business plan can be seen as a collection of sub-plans including a marketing plan, financial plan,
production plan, and human resource plan. The business plan has many forms. There is however a
format that is common:
FORMAT – Business Plan
1. Executive summary
2. Explains the basic business model
3. Gives rationale for the strategy
4. Background -Gives short history of company (unless it is a new company) o provides
background details such as: age of company number of employees annual sales figures
location of facilities form of ownership including o background of key personnel including
owners senior managers
5. Marketing
 the macro-environment
 the competitive environment
 the industry
 the customers priorities
 product strategy
 pricing strategy
 promotion strategy
 distribution strategy
6. Production and manufacturing
 describe all processes
 production facility requirements - size, layout, capacity, location
 inventory requirements - raw materials inventory, finished goods inventory, warehouse
space requirements
 equipment requirements
 supply chain requirements
 fixed cost allocation
7. Finance
 source of funds
 expected return
 break even analysis
 monthly pro-forma cash flow statement
 existing loans and liabilities

8. Human resources
 Assign responsibilities
 Training required
 Skills required
 Union issues
 Compensation
 Skills availability
 New hiring

Attachments o Brochures and advertising materials o Industry studies o Maps and photos of location o
Magazine or other articles o Detailed lists of equipment owned or to be purchased o Copies of leases and
contracts o Letters of support from future customers

Presenting the Plan; Will involve: o Prepare well; o Make eye contact wit audience; o Give a smile; o
Avoid distracting movements; o Pause to catch a breath; o Use a wide range of voice tones; o Speak
clearly; o Answer questions briefly, honestly and accurately; o After the presentation, review your
performance.

Resources is a stock or supply of that can be drawn on by a person or organization in order to function
effectively.
Typically, resources are money, materials, energy, services, staff, or other assets that are transformed to
produce benefit and in the process may be consumed or made unavailable.
money, materials, staff, and other assets

Introduction

This unit deals with the first stage in the process of establishing an enterprise- writing the
business plan. Two stories of enterprise are used as running examples to illustrate the
procedures. The trainee is required to collect and record information for his/her own
business plan in the Business Plan Worksheets. The examples are ultimately developed
into two model business plans as the final illustration to the trainee. The trainee is
required to write his/her business plan and make a presentation.

Learning Objectives

By the end of this Unit the trainee should be able to:


1. Prepare a business plan.
2. Present a business plan to stakeholders.

Learning Outcomes

On completion of this Unit the trainee will be able to:


1. Describe a business plan
2. Explain the importance of a business plan in an enterprise.
3. Outline the contents of a business plan.
4. Explain the contents of a business plan
5. Identify factors to be considered when preparing a business plan.
6. Explain the factors involved in making a business plan.
7. Prepare a business plan
8. Define the terms “presentation” and “presentation skills”.
9. Explain the importance of presenting a business plan to stakeholders.
10. Present a business plan.

Unit 1.1 Importance of a Business Plan


What is a Business Plan?

A Business Plan can be described as a document in which you present your business idea,
goals and objectives, and how you are going to achieve them.
There are many reasons why you need a business plan, the following being the most
notable:-

▪ For Management of the Business – writing the business plan enables you to
refine your business idea and to think through the challenges you are likely to
encounter before you have to deal with them. The goals and objectives you set in
your business plan provide a means for measuring your performance. The
business plan is a valuable tool for communicating the goals and objectives of the
business to employees.
▪ For obtaining financial support – the business plan is a key document when you
are seeking loan finance from banks, or equity finance from investors or partners.
▪ For securing business contracts – a well written business plan does inspire
confidence in those you seek supply contracts or tenders from, as well as those
you wish to procure goods and services from.
▪ A communication tool to professional service providers – such as lawyers and
business consultants.

Exercise 1

(a) In your own words, give a brief description of a business plan.

(b) Besides those outlined above, think of any other useful purpose(s) a business
plan can serve.

Unit 1.2 Contents Of A Business Plan

There is no standard layout or format for a business plan. You are free to tailor your
business plan to your specific needs and taste. However, you do need to adhere to logic in
the arrangement of the elements of the plan.

Similarly, the length of your business plan may range from a few pages, if you intend it
for internal use only, to over thirty pages if it is intended to secure financial support. In
general, ten (10) pages to twenty-five (25) pages are considered sufficient for most
purposes.

Following below is an outline showing the contents of a business plan. It represents the
longer, comprehensive version of a business plan, one which would result in a document
of twenty (20) pages or more. If you wish to prepare a shorter document, you will need to
reduce detail by grouping sub-headings and some headings under existing titles or new
ones altogether.
Numbering of the elements of the document is essential for clarity and for cross-
referencing. You may come across documents in which the Executive Summary is
numbered as the first element. In our illustrations, we will adopt the formal approach
where the Executive Summary is not numbered, but numbering starts with the first
element in the main body of the document.

Outline of a Business Plan

EXECUTIVE SUMMARY

This is a very important part of your business plan since it is the first part people are
going to read. If you do not write it well and interestingly enough the reader may form a
low opinion of your business plan – and choose not to read the main document.

Note that although it is the first part of your business plan, you prepare the Executive
Summary only after you have completed all the sections of the main body.

A good Executive Summary is short (no more than 2 pages in length), brings out all the
important aspects of your business plan, and holds the attention of the reader. The
following will normally sufficiently cover the content of your business plan in the
Executive Summary:

➢ Business Description
➢ Ownership and Management
➢ Key Initiatives and Objectives
➢ Market Opportunities
➢ Competitive Advantages
➢ Marketing Strategy
➢ Summary of Financial Projections

1.0 BUSINESS OVERVIEW

This section introduces the reader to your business. You present your business idea,
history of the business (if any), your vision and mission, business objectives, ownership,
location and facilities. Thus:

1.1 Business History


1.2 Vision and Mission Statement
1.3 Objectives
1.4 Ownership
1.5 Location and Facilities

2.0 PRODUCTS

Here, you tell the reader about the products (goods and/or services) you will be selling.
 Describe your products and their key features: why will customers buy your
products and not your competitors’? What makes your products unique in the
market place? How will they differ from those of your competitors?
 Describe your production process and comparative advantages you may be
having.
 Mention any improvements you plan to make to the existing products, and any
new products you plan to introduce.
Thus:
2.1 Products And Key Features
2.2 Production Process
2.3 Comparative Advantages in Production
2.4 Future Products

3.0 INDUSTRY OVERVIEW

In this section, you describe the industry in which your business will operate. This will
assist your reader to understand your business plan. Conversely, it also demonstrates to
the reader that you understand your industry and hence inspire their confidence in your
business plan.
Discuss the overall size of the industry, the key product and market segments, customer
behaviour ( buying criteria and processes), types of business in the industry, trends in the
industry and its general outlook. Thus:

3.1 Market Research


3.2 Size Of The Industry
3.3 Key Product Segments
3.4 Key Market Segments
3.5 Purchase Process And Buying Criteria
3.6 Description Of Industry Participants
3.7 Key Industry Trends
3.8 Industry Outlook

4.0 MARKETING STRATEGY

In this section, you now show the reader how your business will fit into the industry you
have described above. You achieve this by describing your marketing strategy, that is,
what your target markets will be; who your competitors will be; your competitive
position; and how you will approach the pricing, promotion and distribution of your
products. Thus:

4.1 Target Markets


4.2 Key Competitors
4.3 Competitive Position
4.4 Pricing Strategy
4.5 Promotion Strategy
4.6 Distribution Strategy
5.0 MANAGEMENT AND STAFFING

This is a very important section of your business plan. Ultimately the success or failure of
your business is determined by the quality of personnel. You will therefore tell the reader
about your management team and staff and their relevant expertise and experience. Thus:

5.1 Organizational Structure


5.2 Management Team
5.3 Staffing
5.4 Labour Market Issues

6.0 REGULATORY ISSUES

All businesses are subject to regulation of one kind or other. Depending on the nature of
industry and type of business, the regulatory issues you have to take account of may be
few or many.

 Do your products need to be protected by copyrights, patents or trademarks? Have


you ensured that by selling your products you are not breaking copyright, patent
and trademark laws?
 Besides trading licenses, do you require any other? Do you need a permit from a
specific Government Ministry or Institution? Does the Revenue Authority require
you to meet certain conditions before you commence operations?
 Are there any other regulations specific to your products?

Thus:
6.1 Intellectual Property Protection
6.2 Regulatory Issues

7.0 RISKS

It is good to show the reader that you have thought of things that could go wrong in your
business and that you have you have put in place protective measures.

In this section, you identify the risks faced by your business and how you would
minimize their negative impacts. Thus:

7.1 Market Risks


7.2 Other Risks

8.0 IMPLEMENTATION PLAN

Your business plan includes various things that will need to be done. In this section you
summarize these activities, state who is going to do them and when. Thus:

8.1 Activities and Dates


9.0 FINANCIAL PLAN

This section considered by many to be the most important as it shows your financing needs
as well as the profit potential of your business. A good financial plan gives confidence to
the reader that you have a good understanding of your business.
The financial plan basically comprises projections or forecasts of four financial statements.
You will need to discuss each of the projected statements, focusing on anticipated trends.
You will also include notes (assumptions) to the financial projections which, for purposes
of clarity, may be presented as an appendix. Thus:
9.1 Projected Annual Profit And Loss Statements - Three (3) Years.
9.2 Projected Monthly Cash Flow Statements - One (1) Year.
9.3 Projected Annual Cash Flow Statements - Three (3) Years.
9.4 Projected Annual Balance Sheets - Three (3) Years.

ASSUMPTIONS (MAY BE PRESENTED AS AN APPENDIX)

Note 1: Revenue Assumptions


Note 2: Sales Revenue Collection Assumptions
Note 3: Costs of Sales Assumptions
Note 4: Sales and Marketing Assumptions
Note 5: Property and Utilities Assumptions
Note 6: Operations Assumptions
Note 7: Banking and Other Assumptions
Note 8: Salaries, Wages and Other Assumptions
Note 9: Other Sources of Funding
Note 10: Other Uses of Funding

This would mark the end of your business plan.


Exercise 2

Assume that you wish to write a business plan only for your own use within the
business. You have therefore opted to use the shorter format of the business plan.
Your task is to critically consider the comprehensive business plan outline shown
above and to compress it to fit one element per lime given below.

Unit. 1.3. Factors to Consider In Preparing A Business Plan

Having known the contents and format of a business plan, you now will be introduced to
the actual process of writing a business plan.

It is very helpful to break the writing process into two phases:-

Phase 1:
Collect the required data and information and record it in worksheets. Ensure that all
necessary information under each business plan element is captured in the worksheets
before you proceed to writing the actual plan. At this stage you may use bullet points to
capture the information. Note that the ordering of elements differs from that in the final
documents. The reason will become apparent later.

Phase 2:
Compile the information from the worksheets into the business plan as per given format.

The whole process is as follows:

Steps Involved In Writing a Business Plan

1. Have at hand the Business Plan Worksheets and the following documents:
 Your strategic environmental analysis report.
 Your market research/survey report.
 Your research and development report (if any)
 Your business idea/concept.
2. Formulate your business goals.
3. Prepare a description of your industry.
4. Prepare a description of your business venture.
5. Prepare your marketing strategy/plan.
7. Prepare your production strategy/plan (for manufacturing or service).
8. Prepare your management/corporate structure.
9. Prepare your risk assessment.
10. Prepare your action plan.
11. Prepare your financial statements (if it is an on-going business).
12. Prepare your financial forecasts
13. Prepare your financing and capitalization requirements.
14. Prepare your references.
15. Prepare your appendices.

This point marks the end of phase 1. You are free to go back and add information to the
worksheets until you are confident that you have sufficient information. Then you proceed
to phase 2.

16. Write the main body of the business plan, as per format given above, using
information from the business plan worksheets:
 Bearing in mind your target audience.
 25 pages inclusive of appendices is sufficient length for most purposes.
 Decide on font and size of letters.
 Clear and simple business language.
 Try and give it a story-like character.
 Let someone read through and offer comment. Feel free to revise several times if
necessary until you are satisfied with it.

17. Write the Executive Summary.


18. Prepare the “confidentiality clause” and the “recognition of risks” (if desired).
19. Prepare the table of contents (especially if the business plan will be given to
external users).
20. Prepare the cover sheet.
21. Finally, arrange the pages in the following order and bind in an attractive manner:
 Cover sheet
 Table of contents
 Executive summary
 Confidentially clause and recognition of risk (if desired)
 Main body
 Appendices
Unit 1.4. Preparing a Business Plan

You are now going to be guided through the entire process of preparing your business plan.
Examples will be drawn - sometimes simultaneously, other times alternately - from two
imaginary start-up businesses whose stories start as follows:

(i) Peter Moonga has a Crafts Certificate in Auto-body Repair obtained from
Livingstone Institute of Business and Engineering Studies (LIBES). John
Mweemba has a Crafts Certificate in Auto Mechanics from Choma Trades
Training Institute (CTTI or Mawaggali). The two met three years ago when they
were both employed as fresh graduates by a successful auto repair company in
Lusaka. Peter and John have now agreed to come together and establish a
business in the auto industry.

(ii) Mr. Rotson Bombwe was Shop Manager in a parastatal chain store until it went
into voluntary liquidation in the early 1990s. He has since then been into farm
production at a family holding west of Lusaka. Mrs. Amelia Ngosa Bombwe,
his spouse, has just been retrenched by a private manufacturing firm where she
had worked in the accounts section for over 20 years, rising to the position of
Assistant Accountant. She is awaiting her substantial redundancy package.
After much thought and discussion, the couple has agreed to invest in a
household goods retail shop.

Ultimately, the above two examples are developed into Model Business Plan presented as
Annexure.

You the trainee must decide on a business idea which you will develop in a series of
assignments into a business plan. Your idea need not to be the real thing. It just has to be
realistic enough to give you meaningful guidance. You will be recording your information
in the Business Plan Worksheets. You are free at any point to go back and revise or change
your business idea or concept.

Let us now start working on the process of preparing information necessary for writing a
business plan. We will proceed worksheet by worksheet as listed in the steps above.

(i) The Business Idea/Concept

In this worksheet you identify the business by name as well as by activity, stating the core
business and any other activities. You also state the customers’ needs which are going to
be satisfied by your products.

Observe how Peter and John, after much thought Reference: Details of how to
and discussion, write down information in the develop business ideas are
Worksheet. found in Module 138-02-A
Unit A 2.2
(i) Business Idea/Concept

Business Name:

P J Utility Motors

What the Business will be doing:

Rehabilitating Vanettes and light trucks for sale to owners of


small businesses and to local farmers.

Customers’ needs to be satisfied:

Business owners in town need means of transport which they have


control over, for movement of supplies and products as well as
other transport purposes.

Local farmers in rural areas too need means of transport under their
control, for movement of inputs and produce, and also to provide
transport services to their communities to and from urban centres.

Both types of customers need models that are readily serviceable.

For Mr. and Mrs. Bombwe the completed worksheet looks like this:

(i) Business Idea/Concept

Business Name:

ROTAM Shoppers’ Delight

What the Business will be doing:

Retail sale of household goods

Customers’ Needs To Be Satisfied:

High quality, trendy products


Develop your own business concept. You may need to refer to
Module 138-02-A Unit A 2.2 or other similar training materials. After
you have carefully thought out your business name, the activities you
will be carrying on, and your customers’ needs, turn to the worksheet
provided at the back if this workbook and fill in the information.

(ii) Business Goals

In this worksheet you write down the vision, mission and key objectives of the business.
Collectively, these statements define the destination of your business. You establish your
business goals by carrying out a strategic analysis.

Reference: More about the Strategic Planning Process in Module 138-03-A Unit A 3.8

Peter and John, after working on their strategic plan, wrote down the following
information in the worksheet.

(ii) Business Goals (P J Utility Motors)


Vision
To become leading firm in motor vehicle rehabilitation in Zambia.
Mission
To provide high quality, reliable rehabilitated utility vehicles to urban
business and rural farming communities in Zambia.
Values
Honesty in dealing with customers and other stakeholders.
Carrying on business in an environmentally responsible manner.
Development of communities.
Objectives
Have the business registered by 31st December, 2006.
Raise total capital of K84.2 million by 31st January, 2007.
Commence production by 28th February, 2007
The Bombwes filled in their business goals as follows;

(ii) Business Goals (ROTAM Shoppers’ Delight)


Vision
To be the number one choice for middle and upper class households in Zambia.
Mission
To provide our customers with popular original brands of household goods at
affordable prices.
Values
Honesty and fairness in dealing with customers.
Objectives

Register business by 30th November, 2006


Finish preparation of premises by 31st January, 2007
Commence trading by 31st March, 2007

Business Plan Worksheet

Think about your own business concept. In similar manner to the


examples given above, write down your business goals in the
business plan worksheet.

(iii) Description of the Industry

In this section, you discuss the industry in which your business is. Sources of information
include chambers of commerce, business associations and national development plans and
other government economic reports. Presently in Zambia, there are no independent
consultancy firms providing such information on commercial basis. However, you must
collect as much information as you can about the industry in which you will operate.

Peter and John wrote down the information in their workbook.


(iii) Description of the industry (P J Utility Motors)

Market Research

No formal market research into the automotive industry has been carried out.

Informal enquiries were carried out at the Road Traffic Commission Offices in
Choma and in Lusaka. Local individuals who supply used motor vehicle from
South Africa and oversees were also interviewed.

Some business owners and farmers were also asked for their opinions on
rehabilitated motor vehicles.

Size of the Industry

Estimated at no less than 50,000 units per year. This figure covers all manner of
Motor vehicles.

Key Product Segments

Two broad categories: the brand new and the second hand. Across these the
following segments can be identified:

 Industrial vehicles – graders, dump trucks, haulage trucks.


 Light commercial vehicles – light trucks, Vanettes.
 Family utility vehicles – Vanettes and station wagons.
 Executive vehicles – cars and station wagons.
 Luxury vehicles – mainly cars, such brands as Mercedes Benz, Volvo, Lexus

Key Market Segments

Users of motor vehicles in Zambia may be segmented as follows:

 Heavy industry
 Light industry and commerce
 Farm sector and small business sector
 Institutional (Government, NGOs, Business Executives)
 Family.

Purchase Process and Buying Criteria


Industrial, institutional and formal business consumers have procurement
procedures to ensure the “best buy” for the purpose. A minimum of three
quotations are considered by a procurement committee and the best offer is
selected and the order is made. The whole process, from decision to buy to the
actual buying, can take several weeks.
Farmers, small businesses and families have a less formal buying process but it
is no less thought out. Reliability and extended use are key considerations.
Much time is invested in considering the available options.

Luxury buyers pay particular attention to outward appearance and the


convenience features of a particular model. Here too, the buying process is
lengthy.

Description of Industry Participants

Presently, there is no motor vehicle manufacturing or assembly going on in


Zambia. Motor vehicles on the market are from three sources:

 Registered commercial dealers such as Star Motors Zambia Limited, Southern


Cross Motors Limited, Honda Zambia Limited and Toyota Zambia Limited.
Some of these deal in used vehicles as well.
 Numerous individual informal sector dealers who normally deal in used cars
from South Africa and Japan and target mainly the small business, farmer and
family sector.
 Motor vehicle repair firms do sometimes rehabilitate and sell vehicles as
incidental business.

Key Industry Trends

Since privatization of the economy 19 years ago, and the subsequent growth in
the informal sector and decline in the formal sector, there has been a steady
increase in the consumption of used motor vehicles. The primary consideration
is affordability by the general cash – starved small businesses.

Industry Outlook

With the continued strengthening of the private sector in general and the small
business sub-sector in particular, annual purchases of used motor vehicles are
expected to continue rising over the next several years.

In s similar manner, Mr. and Mrs. Bombwe analysed their industry and note down key
information in the business plan worksheet.
Exercise 3

Assume you are in Mr. and Mrs. Bombwe’s position. Think about the industry in
which their business will operate. Describe the industry, recording this information
on a separate sheet of paper.

Share your description with the rest of the class.

Business Plan Worksheet

Think about your business concept and identify the industry in which
it fits. Fill in the ‘industry’ section of the business plan worksheets.

(iv) Description of Business Venture

Under this section, you record information on the specifics or particulars of your
products(s) or service(s). If you feel there is need to show images of the product, this is the
stage at which you prepare the photographs or drawings. You discuss the characteristics
and quality of your product.

You also identify and discuss your target markets, the competitive advantage of your
business concept, location and size of your business premises, the staff and equipment
required.

You may also discuss the history of the business in terms of the guiding principles and
development work done.

For Peter and John, the business plan worksheet is filled in as follows:
(iv) Description of Business Venture (P J Utility Motors}

Products

Rehabilitated vanettes (half ton to two ton capacity) and light trucks (two
ton to five ton capacity) finished to high standards of mechanical
condition and outward appearance.

In order of preference, the brands: Toyota, Datsun/Nissan. Other brands


will only be done on order. There will be the by-product of scrap metal.

Product Protection

There are no product rights to be protected. Neither are there rights that
will be infringed by this business.

Target Markets

Owners of existing and new small businesses in the urban centres of


Southern Province; small and medium indigenous farmers throughout
Southern Province; urban middle class families.

These groups are showing increasing awareness of the need for own utility
transport. Within the range of half ton to five ton capacity rehabilitated
vehicles, these groups would consider as a bargain prices ranging from
K10 million to K30 million.

These groups’ need is for reliable, affordable utility transport with a


serviceable lifespan of at least 5 years, all without the anxieties associated
with imported motor vehicles.

Competitive Advantage

The key competitors are the businesses specializing in used car imports, as
well as the individual informal sector dealers.

Our products will appeal to that niche which appreciates the fair-priced but
well finished rehabilitated utility vehicles which also carry a guarantee and
After-sales maintenance service. Risk is also reduced by virtue of dealing
with a traceable local supplier.

Estimated market share is one percent, or 500 vehicles, per year across the
entire country. For Southern Province in particular where the business will
initially be launched a market share of 50 motor vehicles per year is
anticipated.
Location and Size of Premises
The business will operate from rented premises in the light industrial area
of Choma Town in Southern Province. This is well located in the centre of
the Province.
The premises have a total area of 1,500m2 out of which 500m2 is built up
and comprises a motor vehicle service bay and other utility structures.
Staff and Equipment Needed
The two partners, Peter and John, will work full-time in the business
and will constitute the key technical personnel.
They will be assisted by two full-time Technical Assistants and one full
time Book Keeper/Cashier.
Security services will be hired. So too will accounting and legal services.
Equipment will include the following:
 Heavy duty hydraulic jacks
 Heavy lifting tackle
 Full auto body repair kit
 Full auto electrician’s kit
 Full auto mechanic’s kit
 Assorted hand tools and power equipment
Business History
This is a start-up enterprise but the partners have worked together for
three years under one employer and have developed mutual respect,
understanding and share the values of honesty and fair play in the
conduct of business, as well as the virtue of aiding the less privileged
in society.

Once again, the business venture of Mr. and Mrs. Bombwe would similarly be addressed
as above and the information written down in their business plan worksheet.

Exercise 4

On a separate sheet of paper, write down the information that would make up
the business venture worksheet for Mr. and Mrs. Bombwe’s business concept.

When you are done, share your results with the rest of the class

Business Plan Worksheet

Describe your business venture, filing in the appropriate worksheet at the


back of this workbook.
(v) Marketing Strategy/Plan

This is where you show how you are going to achieve your sales. Peter and John
complete their worksheet in the following manner:

(v) Marketing Strategy/Plan (PJ Utility Motors)

Sales Strategy

The two partners will share the responsibility of selling.

Monthly sales targets: Year 1 – 2 vehicles


Year 2 – 3 vehicles
Year 3 – 4 vehicles

To be targeted are the urban small business owners, urban middleclass


families, and indigenous rural farmers.
Product promotion will include advertisements in the press and on Sky Radio;
posters with pictures in urban areas; flyers given out at rural transport stations.
Distribution
Direct selling will be employed. The finished vehicles will be displayed at the
Workshop premises for viewing. They will be collected by the buyers, or will
be delivered to them upon their own request. In the longer term, sales agency
arrangements will be considered, especially for areas outside the Province.
Pricing
Each unit rehabilitated will be individually costed and a mark-up, added,
bearing in mind the price range acceptable to the customers.
Guarantees
A six month guarantee will be given against mechanical and/or systems failures
not attributable to users’ carelessness. Concessionary after-sales service rates will
be offered to customers, despite that maintenance will not be normal business.
Tracking Methods
Enquiries, whether by physical visit, by phone or by mail, will be recorded
together with how the enquirer got to know about our products. The information
will be analyzed periodically to elicit patterns and indications for future product
promotion.

Let us now see how Mr. and Mrs. Bombwe devised their marketing strategy.
(v) Marketing Strategy/Plan ( ROTAM Shoppers Delight)

Sales Strategy
Experienced till operators will be employed.
State-of-the-art tills will be used, including electronic funds transfer machines.
Shelf arrangement and relative positioning of the various goods categories
will be designed to achieve maximum exposure to and convenience for the
customers.

Monthly sales targets:


 Alcoholic/other beverages K20 million
 Foodstuffs K50 million
 General groceries K50 million
 Kitchenware K50 million
 Electrical/electronic appliances K60 million
 DIY Hardware K 5 million
 Other household stuff K10 million

Target customers will be the middle to upper-class of Lusaka City.


Business promotion will take the form of advertisements on national and
Private radio, the press and popular publications such as the Lowdown.
Distribution
For the period of this business plan, there will only be this one retail outlet. In
the longer term, other outlets will be considered in and outside Lusaka.
Pricing
Cost plus a percentage mark-up, ultimately fairly priced to give value-for-
money to the customer.
Guarantees
For electrical/electronic equipment, only those brands with warranties from the
manufacturers will be stocked, so that such warranties may be available to
customers. For other goods, a case by case money-back policy will be pursued.
Tracking Methods
Periodically a brief questionnaire will be given randomly to customers at the
till. This will seek to establish whether the customer is a first time customer, an
irregular customer, or a regular customer, and ask for suggestions on how the
service may be improved.

Business Plan Worksheet

Consider your own marketing strategy. You may refer to Module


138-03-A Unit A 3.2. Fill in the business plan worksheet at the
back of this workbook.
(vi) Sales Forecast

Up to this point, you already have an idea of the sales levels you wish to achieve, as set out
in your marketing strategy above. What you now need to do is formulate realistic
assumptions for sales quantities and values:
- For the first twelve months of the first year.
- Annual figures for years 1 to 3.

These sales forecasts are the starting point for your profit and loss as well as cash flow
forecasts.

(vi) Sales Forecast (P J Utility Motors)

Assumptions

1. Production: Year 1 – 2 Vehicles per month


Year 2 – 3 Vehicles per month
Year 3 – 4 Vehicles per month

2. Product Mix: Yea 1 Vanettes only


Year 2 – 02 Nos. Vanettes
01 Nos. Light truck
Year 3 – 03 Nos. Vanette
01 Nos. Light truck

3. Scrap Metal: Year 1 – 1000kg per month


Year 2 – 2000kg per month
Year 3 – 3000kg per month

4. Sales Prices: Vanette - K15 million each


Light truck - K25 million
Scrap Metal - K100 per kilo

Monthly Sales forecast for Year 1

Values in K’million

Month 1 2 3 4 5 6
Vehicles 30.0 30.0 30.0 30.0 30.0 30.0
Scrap Metal 0.1 0.1 0.1 0.1 0.1 0.1
TOTAL 30.1 30.1 30.1 30.1 30.1 30.1
7 8 9 10 11 12 TOTAL
30.0 30.0 30.0 30.0 30.0 30.0 360.0
0.1 0.1 0.1 0.1 0.1 0.1 1.2
30.1 30.1 30.1 30.1 30.1 30.1 361.2

Annual sales forecast

Year 1 2 3 TOTAL
Vehicles 360.0 660.0 840.0 1,860.0
Scrap Metal 1.2 2.4 3.6 7.2
TOTAL 361.2 662.4 843.6 1,867.2

Mrs. Bombwe and her husband similarly work out their sales forecasts. They assume an
average sales price for each unit in each category of merchandise.

Sales Forecast (ROTAM Shoppers’ Delight)


Assumptions

Product Group Quantity per Month Average Unit Price


(units) (K)
Alcoholic/ Other beverages 500 40,000
Foodstuffs 5,000 10,000
General groceries 3,000 16,667
Kitchenware 700 71,429
Electrical/Electronic 120 500,000
appliances 500 10,000
DIY Hardware 1,000 10,000
Other household stuff

Sales will increase 10 percent annually

Monthly Sales Forecast for Year 1


Values in K’million
Month 1 2 3 4 5 6
Alcoholic/other beverages 20.0 20.0 20.0 20.0 20.0 20.0
Foodstuffs 50.0 50.0 50.0 50.0 50.0 50.0
General groceries 50.0 50.0 50.0 50.0 50.0 50.0
Kitchenware 50.0 50.0 50.0 50.0 50.0 50.0
Electrical/Electronic appliances 60.0 60.0 60.0 60.0 60.0 60.0
DIY Hardware 5.0 5.0 5.0 5.0 5.0 5.0
Other Household stuff 10.0 10.0 10.0 10.0 10.0 10.0
Total 245.0 245.0 245.0 245.0 245.0 245.0

Month 7 8 9 10 11 12 Total
Alcoholic/other 20.0 20.0 20.0 20.0 20.0 20.0 240.0
beverages
Foodstuffs 50.0 50.0 50.0 50.0 50.0 50.0 600.0
General groceries 50.0 50.0 50.0 50.0 50.0 50.0 600.0
Kitchenware 50.0 50.0 50.0 50.0 50.0 50.0 600.0
Electrical/Electronic 60.0 60.0 60.0 60.0 60.0 60.0 720.0
appliances
DIY Hardware 5.0 5.0 5.0 5.0 5.0 5.0 60.0
Other Household stuff 10.0 10.0 10.0 10.0 10.0 10.0 120.0
Total 245.0 245.0 245.0 245.0 245.0 245.0 2,940.0

Annual Sales Forecast


Values in K’million
Year 1 2 3 Total
Alcoholic/other beverages 240.0 264.0 288.0 792.0
Foodstuffs 600.0 660.0 720.0 1,980.0
General groceries 600.0 660.0 720.0 1,980.0
Kitchenware 600.0 660.0 720.0 1,980.0
Electrical/Electronic appliances 720.0 792.0 864.0 2,376.0
DIY Hardware 60.0 66.0 72.0 198.0
Other Household stuff 120.0 132.0 144.0 396.6
Total 2,940.0 3,234.0 3,528.0 9,702.0

Business Plan Work Sheets

Turn to the Business Plan Worksheets at the back of this workbook and write down
your sales forecast, starting with your assumptions. Bear in mind that your forecasts
can only be as good as your assumptions. Be as realistic as you can.

(vii) Production Strategy /Plan


Having set your sales targets, you may now turn your attention to the question of how you
are going to produce or acquire those goods. You must now formulate your production
strategy plan.
Observe how Peter and John put together their production

(vii) Production Strategy /Plan (PJ Utility Motors)

Production Process
Old and accident wrecked vanettes and light trucks will be completely dismantled, all parts
thoroughly checked for mechanical soundness, unsound parts will be scrapped and
replaced with brand new or very good used ones, and the vehicle re-assembled and spray
painted.

Physical Plant Requirements.


A large utility structure with provision for working space, storage space and a display area
is needed.
Premises for rent have been identified, 1,500 m² in extent with 500m² of building structure
comprising a motor vehicle service bay, a large room for storage of equipment and
salvaged spare parts, and a smaller room to be used as office space. There is sufficient
extra space to provide for display area and a transit dump for the scrapped vehicle parts.

Machinery and Equipment


 Heavy duty hydraulic jack
 Block and Tackle
 Air compressors
 Work benches with vices
 Assorted power tools
 Spray painting kit
 Auto body repair kit
 Auto mechanics repair kit
 Auto electrics kit
 Assorted hand tools.

Raw Materials
 Used vehicles in various conditions will be bought from auctioneers, and
from institutions, including GRZ, by tender. Acquisitions from individuals
will be avoided, as a matter policy, to minimize risk.
 Accident damaged vehicles will be bought from insurance companies.
Beyond- repair vehicles will be bought for salvaging spare parts.
 Brand new spare parts will be bought directly from supplier in South Africa.
 Auto body paints will also be bought directly from South Africa

Stocking Requirements
A stock of brand new as well as second hand spare parts will be maintained. A stock record
will be put in place.
Suppliers
Key raw materials will be acquired from GRZ, NGOs and insurance companies. Others
will be bought from South Africa. No discounts are expected.

Staff Required
Two full-time Technical Assistants
One full-time Book Keeper/ Cashier
Security will be hired.

Capital Estimate
Start – up Requirements:
Business Registration K 150,000
Licences and Permits K 50,000
Machinery and Equipment K22,000,000
Utility Vehicle (used) K15,000,000
Initial vehicles stock (04) K20,000,000
Initial stock of spares K 2,500,000
Other stock K 1,500,000
Electricity (3 months) K 1,200,000
Water (3 months) K 600,000
Rentals (6months) K 6,000,000
Preparation of premises K 1,500,000
Security fees (3 months) K 900,000
Salaries (3months) K12,000.000
Business promotion K 800,000
Total K 84,200,000

Mr. and Mrs. Bombwe on the other hand will not engage in production. They will simply
be retailing already manufactured goods. They fill in their worksheet as follows.

(vii) Production Strategy /Plan (ROTAM Shoppers’ Delight)

Production Process
No production involved

Physical Plant Requirements


A structure of at least 1,000m² with a high roof, power ventilation, secure doors and
reliable utilities supply is needed.
Machinery and Equipment
1 Ton utility panel Vanette
Electronic cash registers with funds transfer facility
Trolleys and baskets
Movable shelving
Cold room
Display chest and upright fridges
Electronic balances
Raw Materials
None as there will not be any production.

Stocking Requirements
The policy will be never to run out of any of the items on sale.

Foodstuffs are expected to be fast selling and to turn over two to three times a month. Slower
selling items will be stocked to last a month. New orders will be made one week and a half
before stocks run out.

Suppliers
There are many local manufacturers of foodstuffs, and these will be preferred so long as
they meet our quality standards. Discounts will be negotiated.

Other merchandise will be sourced mainly from abroad. Quality brands will be stocked
which come with warranties/guarantees.

Staff Required
 Five (5) sales staff (Till Operators)
 Five Shelf/sanitary attendants
 One (1) Accounts Assistant
 Security and other services will be hired.
Capital Estimate
Start-up requirements:

Business Registration K 2,000,000


Licences and Permits K 250,000
Utility Vehicle (used) K30,000,000
Stocks K115,000,000
Rentals (3 months) K 6,000,000
Preparation of Premises K 3,000,000
Security Fees (3 months) K 9,000,000
Salaries (3 months) K 45,000,000
Cold room Installation K 15,000,000
Refrigerators K 25,000,000
Electricity (3 months) K 1,500,000
Water (3 months) K 1,500,000
Cash Registers K 15,000,000
Trolleys and Baskets K 5.000,000
Shelving K 5,000,000
Electronic Balances K10,000,000
Business Promotion K 7,000,000
Packaging/Other K 4,750,000
Total K300, 000,000
Business Plan Worksheet
Turn to the Business Plan Worksheet and write your Production Strategy/Plan.
Remember that this should be based on the sales targets that you have set.

(vii) Management/Corporate Structure

Here, you address the legal form of the business; who the owners are; their stakes in the
business; and their terms of association. You also give the management structure; the key
qualifications of the managers; and the professionals or consultants on call. An
organisational chart is very useful in showing reporting relations, and if it is rather large
you may do well to put it in appendices.

Peter and John have decided to settle for an ordinary partnership, as it is then much easier
to get the business started. Here is their business structure.

(viii) Management/Concept Structure (P J Utility Motors)

Legal Form

Partnership, registered under the business name “P J Utility Motors.”

Share Distribution

Peter Moonga 50%


John Mweemba 50%
TOTAL 100%

Contracts

1. The partners will be guided by a comprehensive partnership agreement.


2. Full-time employees will be engaged on contract.

Management

The two partners will, on top of providing the main technical input, also
discharge the management functions as follows:

Peter Moonga Finance and Administration

John Mweemba Production and Sales/Marketing

The responsibility of “Managing Partners” will alternate annually.

Peter Moonga has a Craft Certificate qualification in Auto Body


Repair obtained from Livingstone Institute of Business and
Engineering Studies (LIBES), which training had a strong
Entrepreneurship component. He has had 3 years experience in auto
Body repair work with a leading auto repair firm in Lusaka.

John Mweemba has a Craft Certificate qualification in Auto


Mechanics obtained from Choma Trades Training Institute (Mawaggali). He
too underwent entrepreneurship training and has had 3 years experience in auto
mechanics/electrical repair work with the same firm mentioned above.
C Vs of the two are appended.
Contract Professionals/Consultants
None will be required. No areas of deficiency are anticipated.

Organization Chart

Managing
Partner

Partner
Book Keeper
Cashier

Technical Technical
Assistant Assistant
The Bombwes have opted for the corporate form of business, given the expected level of
investment. Their business structure is as follows:

(viii) Management/Corporate Structure (ROTAM Shoppers Delight)


Legal Form
Limited Company under the name “ROTAM Shoppers’ Delight Limited”
Share Distribution

Director No. of Shares Values of Shares Percent share


K holding

Rotson Bombwe 150,000.00 150,000000.00 50

Amelia Ngosa
Bombwe 150,000.00 150,000,000.00 50

TOTAL 300,000.00 300,000,000.00 100

Contracts
1. The Directors will be guided by the Articles of Association.
2. All full-time employees will be engaged on contract
Management
The two Directors will discharge the management function. The position of
Managing Director will alternate on three year basis, starting with Mr.
Robson Bombwe; Mrs. Amelia Ngosa Bombwe will take charge of the day
running of the business.
Mr. Robson Bombwe holds a higher Diploma in Business Management with
over 10 years experience in managing a large retail outlet.
Mrs. Amelia Ngosa Bombwe holds a Certificate in Accounting and Business
Studies and has over 20 years experience in handling business records and
Accounts
. She will initially be in charge of all operations.
C Vs of the Directors are appended.
Contracts Professional/Consultants
Professional marketers will be hired to formulate the initial marketing and
sales program.
Organization Chart

Managing Director

Director of
Operations

Assistant

Sales

Shelf/Sanitary
Attendants

Business Plan Worksheet

Think about your business and write down the most suitable
Management structure for it.

(xi) Risk Assessment

What things could go wrong in the course of your business operations? What are the
measures you will put in place to minimize, or avoid altogether, the negative impacts of
such factors? These are the questions you answer in this section.

Peter and John wrote down their risk assessment in the business plan worksheets as
follows:

(ix) Risk Assessment (P J Utility Motors)

Competitors’ Reaction
Competitors, especially the individual informal dealers in imported used
vehicles, are most likely to reduce their prices and also to insinuate
inferiority of a rehabilitated vehicle to an imported second hand one.

On the first point, we do not think our competitors can match and sustain
our price levels for long. As a counter-measure we would be willing to
reduce our sales prices by 10 to 15 percent and still remain afloat.

On the second count, our offer of 6 months guarantee is sufficient to give


confidence to our customers. We will ensure supreme workmanship such
that none of our products fails the guarantee test.

External Factors

1. The Landlord may terminate the Lease Agreement for the business
premises at any time. We will seek to develop our own property in the
shortest possible time.
2. New direct competition is inevitable from the numerous auto mechanics
who will attempt to replicate our business concept. We will maintain our
lead by sticking to technical excellence and aggressive product
promotion.
3. A favourable change in policy regarding duty on imported second hand
vehicles could occur. We are confident even then to maintain our
competitive advantage in terms of price and reliability.
4. Handling a stolen vehicle would have dire consequences for the business.
We will avoid this by dealing only with institutional sources and also by
ensuring that we pay for only those vehicles with prior clearance from the
Road Traffic Commission and Interpol.

Internal Factors

1. Sales reductions of up to 50 percent are possible over certain periods,


notably from December to April. The business would be able to
survive with some measure of profit.
2. Demand increases of up to 100 percent may be possible in the period
July to October. We would meet it by securing bank overdraft
facilities and by engaging temporal Technical Assistants.
3. Government could at some point increase the national minimum
wage for workers. Given our relatively high budgeted wages, we
would not expect a drastic change in the wage bill.
4. If any of the Technical Assistants were to decide to leave us, there
would be some slackening in the production process. However, there
are many experienced –though not formally trained – mechanics
available for employment.
Exercise 5

Assume you are in the position of Mr. and Mrs. Bombwe. On a separate sheet of
paper, write down a risk assessment for their business.

Business Plan Worksheets

Think about your business. Prepare a risk assessment in the Worksheets provided.

(x) Implementation/Action Plan

This section presents a summary of the key things to be done in order to achieve the first
year’s objectives, when they must be done and who will be responsible.

For Peter and John, the implementation plan is as follows.

(x) Implementation Plan (PJ Utility Motors)

Activity By When By Whom


Register Business Name 31/12/2006 P. Moonga
Prepare Partnership Agreement 10/01/2007 P. Moonga and J. Mweemba
Sign Partnership Agreement 11/01/2007 P. Moonga and J. Mweemba
Open Business Bank Account 20/01/2007 P. Moonga
Mobilise K30million Start-Up Capital 31/01/2007 P. Moonga and J. Mweemba
Order Initial Stocks 10/02/2007 J. Mweemba
Prepare Premises 25/02/2007 J. Mweemba
Recruit Staff 25/02/2007 P. Moonga and J. Mweemba
Start Operations 28/02/2007 P. Moonga and J. Mweemba
Finish First Two Vanettes 20/03/2007 P. Moonga and J. Mweemba

For Mr. and Mrs. Bombwe’s business, the implementation plan looks like this.
(x) Implementation Plan (ROTAM Shoppers’ Delight)

Activity By When By Whom


Prepare Memorandum & Articles of Association 20/11/2006 Lawyers
Register Business 30/11/2006 Lawyers
Open Business Bank Account 10/12/2006 A.N. Bombwe
Mobilise K300million Start-Up Capital 31/12/2006 R. Bombwe & A.N. Bombwe
Work on Premises 31/01/2007 R. Bombwe
Recruit Staff 31/01/2007 R. Bombwe & A.N. Bombwe
Order Stocks 15/02/2007 R. Bombwe
Launch the Business 31/03/2007 Advertising Consultants
Review Performance 10/05/2007 R. Bombwe & A.N. Bombwe

Business Plan Worksheet


Write down the implementation plan for your business in the Worksheet provided.

(xi) Financial Statements


These give an indication of the past performance of a business, normally for at least the
last three years. In this case neither business has a history to report.

(xii) Financial Forecasts/Projections


To be able to turn your plan into monetary figures you need to come up with a set of
assumptions as to what conditions are expected to prevail within the business in the
future. These assumptions must be founded on the realities obtaining within the business
as well as the environment within which the business will operate. With poor unrealistic
assumptions even the most beautiful looking financial projections are useless, and
misleading to the user.

Let us look at how Peter and John make their financial forecasts.
(xii) Financial Forecasts/Projections (PJ Utility Motors)

Assumptions
(i) Revenue/Income
Will only come from sales of rehabilitated motor vehicles, the scrap metal generated, and
the after- sales repair and maintenance service to be offered only to the customers. Thus
the monthly revenues are assumed as follows:

Monthly Revenue (K’million)


Product/Year 1 2 3
Motor Vehicles 30.0 55.0 70.0
Repair/ Maintenance Service 0.5 1.0 1.5
Scrap Metal 0.1 0.2 0.3

(ii) Sales Revenue Collection


All sales will be made, and revenue collected, within the month of production.

(iii) Cost of Sales


Monthly Cost (K’million)
Product/ Year 1 2 3
Motor Vehicles 10.0 20.0 25.0
Repair/ Maintenance Service 0.0 0.2 0.5
Scrap Metal 0.0 0.0 0.0

End- of- year stock values of K2m, K3m, and K4m for respective successive years are
anticipated.

(iv) Sales and Marketing


Monthly cost: Year 1 K 400,000
Year 2 K 800,000
Year 3 K1,000,000
(v) Property and Utilities
Depreciation
 Buildings: None to be rented.
 Motor Vehicle, Machinery, Equipment: 10% pa i.e. K3,700,000
Maintenance
 Buildings: None. Borne by landlord
 Motor Vehicles, Machinery, Equipment: 5% pa. i.e. K1,850,000
Utilities
 Electricity: K 400,000
 Water: K 200,000
 Telephone: K 100,000
 E-mail : K 50, 000

(vi) Operations
 Rent K1,000,000 pm 3 months in advance
Fuel & oils : K 600,000 pm
Stationery/Postage : K 50, 000 pm

Banking and Other


Monthly bank charges K100,000
No loan facilities will be taken in the period of projection
Insurance of Motor vehicle: 7.5% pa

Salaries/ wages and other


Salaries/ wages: 02 Partners K3,000,000 pm
02 Assistants K 500, 000 pm
01 Book Keeper K 500,000 pm
Salaries /wages will be increased by 25 percent annually
Other services will be hired:
Security K500,000
Legal K500,000 per quarter
Accounting K500,000 per quarter
Hired services will also increase by 25 percent annually.
Taxes/ statutory Payments
being a partnership, individual partners will pay personal tax on their
share of profit, at 35 percent
Pension Fund contributions: K 250,000
Workers Compensation Fund: K150,000

Other Sources of Funding


All start-up capital will be financed equally by the two partners from their savings.

Other Uses of Funding


Annual cash surpluses will go towards expanding business in subsequent years, as well
as to build up capital reserves.

PROJECTED PROFIT AND LOSS STATEMENT (K'M)

Year to 28 February 2008 2009 2010


Total Sales 367.20 674.40 861.60
Cost of Sales 122.50 242.40 306.00
Gross Profit 244.70 432.00 555.60

Fixed Costs
Salaries/wages 48.00 60.00 72.00
Rent 12.00 12.00 12.00
Electricity 4.80 4.80 4.80
Water 2.40 2.40 2.40
Telephone/Email 1.80 1.80 1.80
Stationery and Postage 0.60 0.60 0.60
Security Service 6.00 7.50 9.00
Legal Services 2.00 2.50 3.00
Accounting Services 2.00 2.50 3.00
Sales and Marketing 5.20 9.60 12.00
Insurance 1.10 1.10 1.10
Fuel and Oil 7.20 7.20 7.20
Repair/Maintenance 3.40 1.80 1.80
Depreciation 3.70 3.70 3.70
Bank charges 0.10 0.10 0.10
Statutory payments 4.80 6.00 7.20
Total Fixed Cost 105.10 123.60 141.70
Net Profit before Tax 139.60 308.40 413.90
Tax @ 35% 48.86 107.94 144.87
Net Profit 90.74 200.46 269.04
Drawings 0.00 0.00 0.00
Profit Retained 90.74 200.46 269.04
Cumulative Profit 90.74 291.20 560.24
PROJECTED MONTHLY CASH FLOW (K'M)

Month: Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Total
Receipts (Inflow)
Sales 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 367.20
Capital 47.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 47.00
Loans, Overdrafts Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 77.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 30.60 414.20
Payments (Outflow)
Raw Materials 22.50 0.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 122.50
Salaries/Wages 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 48.00
Rent 3.00 0.00 0.00 3.00 0.00 0.00 3.00 0.00 0.00 3.00 0.00 0.00 12.00
Security Services 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 6.00
Legal Services 0.00 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 1.50
Accounting Service 0.00 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 0.50 0.00 0.00 1.50
Electricity 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 4.80
Water 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 2.40
Telephone/E-mail 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 1.20
Sales and Marketing 0.80 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 5.20
Insurance 1.10 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 1.10
Fuel and Oil 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 7.20
Stationery/Postage 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.05 0.60
Repair/Maintenance 1.65 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 0.15 3.30
Capital Purchases 37.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 37.00
Loans/OD Repayment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Bank charges 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 1.20
Statutory Payments 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 4.80
Tax 0.00 0.00 12.20 0.00 0.00 12.20 0.00 0.00 12.20 0.00 0.00 12.30 48.90
Licences/Permits 0.25 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.25
Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Drawings 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 72.65 6.90 29.10 20.90 16.90 29.10 20.90 16.90 29.10 20.90 16.90 29.20 309.45
Cash Surplus 4.95 23.70 1.50 9.70 13.70 1.50 9.70 13.70 1.50 9.70 13.70 1.40 104.75
Opening Balance 0.00 4.95 28.65 30.15 39.85 53.55 55.05 64.75 78.45 79.95 89.65 103.35 104.75
Closing Balance 4.95 28.65 30.15 39.85 53.55 55.05 64.75 78.45 79.95 89.65 103.35 104.75 209.50

197
PROJECTED ANNUAL CASH FLOW STATEMENTS (K'M)

Year to 28 February 2008 2009 2010


Receipt (Inflow)
Sales 367.20 674.40 861.60
Capital Introduced 84.20 0.00 0.00
Loans, Overdrafts, Other 0.00 0.00 0.00
Total 451.40 674.40 861.60
Payments (Outflow)
Stocks 122.50 242.40 306.00
Salaries/Wages 48.00 60.00 72.00
Rent 12.00 12.00 12.00
Security Services 6.00 7.50 9.00
Legal Services 1.50 2.50 3.00
Accounting Services 1.50 2.50 3.00
Electricity 4.80 4.80 4.80
Water 2.40 2.40 2.40
Telephone/E-mail 1.20 1.20 1.20
sales and Marketing 5.20 9.60 12.00
Insurance 1.10 1.10 1.10
fuel and Oil 7.20 7.20 7.20
Stationery and Postage 0.60 0.60 0.60
Repair and Maintenance 3.30 1.80 1.80
Capital Purchases 37.00 0.00 0.00
Loans/OD Repayment 0.00 0.00 0.00
Bank charges 1.20 1.50 1.80
Statutory Payments 4.80 6.00 7.20
Tax 48.86 107.94 144.87
Licences/Permits 0.20 0.10 0.10
Other 0.00 0.00 0.00
Dividends 0.00 0.00 0.00
Total 309.36 471.14 590.07
Cash Surplus 142.04 203.26 271.54
Opening Balance 0.00 142.04 345.30
Closing Balance 142.04 345.30 616.84

Projected Annual Balance Sheet (K'M)

Year to 28 February 2008 2009 2010


Fixed Assets
Buildings 0.00 0.00 0.00
Plant and Equipment 19.80 17.60 15.40
Vehicles 13.50 12.00 10.50
Total Fixed Assets 33.30 29.60 25.90
Current Assets
Stocks 2.00 3.00 4.00
Debtors 0.00 0.00 0.00
Total Current Assets 2.00 3.00 4.00
Current Liabilities
Bank OD 0.00 0.00 0.00
Creditors 0.00 0.00 0.00

198
Total Current Liabilities 0.00 0.00 0.00
Net Current Assets 139.64 342.80 614.54
Long Term Liabilities
Capital 84.20 84.20 84.20
Retained Earnings 90.74 291.20 560.24
Total Liabilities 174.94 375.40 644.44

Mr. and Mrs. Bombwe's financial forecasts are worked out as follows:

(xii) Financial Forecasts/Projections ( ROTAM Shopper's Delight )

Assumptions

1. Revenue/Income

Monthly Revenue/Income (K’million)

Product Group/ Year 1 2 3


Alcoholic/other beverages 20.00 22.00 24.00
Foodstuffs 50.00 55.00 60.00
General groceries 50.00 55.00 60.00
Kitchenware 50.00 55.00 60.00
Electrical/Electronic appliances 60.00 66.00 72.00
DIY Hardware 5.00 5.50 6.00
Other Household stuff 10.00 11.00 12.00
Total 245.00 269.50 294.00

Monthly income will increase by 10% in years 2 and 3. Year end stock will be 10% of monthly
sales

2. Sales Income Collection

The shop will operate on "cash and carry" basis. No credit will be given to
customers.

3. Cost Of Sales

Monthly Cost (K' Million)

Product Group/Year 1 2 3
Alcoholic/other beverages 10.00 11.00 12.00
Foodstuffs 25.00 27.00 30.00
General groceries 25.00 27.00 30.00
Kitchenware 20.00 22.00 24.00
Electrical/Electronic appliances 30.00 33.00 36.00
DIY Hardware 2.00 2.20 2.40
Other Household stuff 3.00 3.30 3.60
Total 115.00 125.50 138.00

Monthly cost of sales will increase by 10% per annum. There will be one month’s trade credit on
25% of stock.

199
4. Sales and Marketing
Monthly cost: Year 1 - K1, 000,000 from month two (2)
Year 2 - K1, 500,000
Year 3 - K2, 000,000

5. Property and Utilities

Depreciation
o Buildings: None. To be rented.
o Motor vehicles, machinery, equipment: 15% (K15, 750,000.00) per annum.

Maintenance
o Building: None, borne by landlord
o Motor vehicles, machinery, equipment: 10% (K10, 500,000.00) per annum.

Utilities
o Electricity: K500, 000 per month
o Water: K500,000 per month
o Telephone: K300,000 per month
o E-mail: K200,000 per month

6. Operations
o Rentals: K2, 000.000 per month; 3 months in advance, will increase by 50% annually.
o Stationery/postage: K100,000 per month
o Fuel and oils: K1,500.000 per month

7. Banking and Others


o Monthly bank charges: K500,000 per month
o No loan/overdraft facilities are envisaged
o Insurance: Motor vehicle - 7.5%; Equipment- 2%; stock - 2% of monthly value.
8. Salaries/wages and others
o Salaries/wages: 02 Directors - K10, 000,000
05 Sales staff - K 2,500,000
05 Sanitary staff - K 1,500,000
01 Accounts Assistant - K 1,000,000
Total per month K15, 000,000
Note: Salaries will increase by 25% annually

o Hired services: Security - K3,000,000 per month


Legal - K1, 000,000per quarter
Accounting - K2, 000,000 per quarter
Note: Hired services will also increase by 25% annually.

o Taxes/statutory payments: Corporation tax @ 45%


Pension fund contribution: K1, 000,000 per month.
Workers compensation fund contributions: K500, 000
per month
Licences and permits: K250, 000 per annum

9. Other sources of funding


None. All start up capital will be financed by equity.

10. Other uses of funding


Annual cash surpluses will go towards reserves for future expansion of the business.

200
Projected Profit and Loss Statement (K' Million)

Year to 31 March 2008 2009 2010


Total sales 2,940.00 3,234.00 3,528.00
Cost sales 1,380.00 1,518.00 1,656.00
Gross Profit 1,560.00 1,716.00 1,872.00
Fixed Costs
Salaries/wages 180.00 184.50 189.00
Rent 24.00 36.00 48.00
Electricity 6.00 6.00 6.00
Water 6.00 6.00 6.00
Telephone/E-mail 2.40 2.40 2.40
Stationery and Postage 1.20 1.20 1.20
Security services 36.00 45.00 54.00
Legal service 4.00 5.00 6.00
Accounting services 8.00 10.00 12.00
Sales and Marketing 18.00 18.00 24.00
Insurance 6.00 6.00 6.00
Fuel and oil 18.00 18.00 18.00
Repair/maintenance 13.50 10.50 10.50
Depreciation 15.80 15.80 15.80
Bank charges 6.00 6.00 6.00
Statutory payments 18.30 22.80 27.30
Total fixed cost 363.20 393.20 432.20
Net profit before tax 1,196.80 1,322.80 1,439.80
Tax @ 45% 538.56 595.26 647.91
Net profit 658.24 727.50 791.90
Cumulative Profit 658.24 1,385.74 2,177.64

201
Projected Monthly Cash Flow (K' Million)
Month Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar Total
Receipts (Inflow)
Sales 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 2,940.00
Capital Introduced 300.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 300.00
Loans, OD, Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 545.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 245.00 3,240.00
Stocks 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 115.00 1,380.00
Salaries/wages 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 15.00 180.00
Rent 6.00 0.00 0.00 6.00 0.00 0.00 6.00 0.00 0.00 6.00 0.00 0.00 24.00
Security services 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 36.00
Legal services 0.00 0.00 0.00 1.00 0.00 0.00 1.00 0.00 0.00 1.00 0.00 0.00 3.00
Accounting services 0.00 0.00 0.00 2.00 0.00 0.00 2.00 0.00 0.00 2.00 0.00 0.00 6.00
Electricity 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 6.00
Water 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 6.00
Telephone/E-mail 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 0.20 2.40
Sales and marketing 7.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 18.00
Insurance 6.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 6.00
Fuel and oil 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 18.00
Stationery/postage 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 1.20
Repair/maintenance 3.00 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 0.80 2.50 13.50
Capital purchase 105.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 105.00
Loans/OD payment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Bank charges 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 0.50 6.00
Statutory payments 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.50 18.00
Tax 0.00 0.00 134.90 0.00 0.00 134.90 0.00 0.00 134.90 0.00 0.00 134.90 539.60
Licences/permits 2.30 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 2.30
Other 4.70 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 4.70
Dividends 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total 271.80 139.60 274.50 148.60 139.60 274.50 148.60 139.60 274.50 148.60 139.60 276.20 2,375.70
Cash surplus 273.20 105.40 -29.50 96.40 105.40 -29.50 96.40 105.40 -29.50 96.40 105.40 -31.20 864.30
Opening balance 0 273.20 378.60 349.10 445.50 550.90 521.40 617.80 723.20 693.70 790.10 895.50 864.30
Closing balance 273.20 378.60 349.10 445.50 550.90 521.40 617.80 723.20 693.70 790.10 895.50 864.30 1,728.60

202
Projected Annual Cash Flow Statement (K' Million)
Year to 31 March 2008 2009 2010
Receipts (Inflow)
Sales 2,940.00 3,234.00 3,528.00
Capital introduced 300.00 0.00 0.00
Loans, Overdrafts, Others 0.00 0.00 0.00
Total 3,240.00 3,234.00 3,528.00
Payments (Outflow)
Stocks 1,380.00 1,518.00 1,656.00
Salaries/wages 180.00 225.00 270.00
Rent 24.00 36.00 48.00
Security services 36.00 45.00 54.00
Legal services 4.00 5.00 6.00
Accounting services 8.00 10.00 12.00
Electricity 6.00 6.00 6.00
Water 6.00 6.00 6.00
Telephone/E-mail 3.60 3.60 3.60
Sales and Marketing 18.00 18.00 18.00
Insurance 6.00 6.00 6.00
Fuel and oil 18.00 18.00 18.00
Stationery and postage 1.20 1.20 1.20
Repair and maintenance 13.50 10.50 10.50
Capital purchases 105.00 0.00 0.00
Loans/OD repayment 0.00 0.00 0.00
Bank charges 6.00 6.00 6.00
Statutory payments 18.30 22.80 27.30
Tax 538.60 595.30 647.90
Licences/permits 2.30 0.30 0.30
Other 4.70 0.00 0.00
Dividends 0.00 0.00 0.00
Total 2,379.20 2,532.70 2,796.80
Cash surplus 860.80 701.30 731.20
Opening balance 0.00 860.80 1,562.10
Closing balance 860.80 1,562.10 2,293.30

Projected Annual Balance Sheets (K' Million)


Year to 31 March 2008 2009 2010
Fixed Assets
Buildings 0.00 0.00 0.00
Plant and equipment 63.70 52.40 41.10
Vehicles 25.50 21.00 16.50
Total fixed assets 89.20 73.40 57.60
Current Assets
Stock 24.50 27.00 29.40
Debtors 0.00 0.00 0.00
Total current assets 24.50 27.00 29.40
Current Liabilities
Bank OD 0.00 0.00 0.00
Creditors 28.80 31.60 34.50
Total current liabilities 28.80 31.60 34.50
Net current assets 873.30 1,616.90 2,425.10
Long Term Liabilities
Capital 300.00 300.00 300.00
Retained earnings 658.20 1,385.70 2,177.60
Total liabilities 987.00 1,717.30 2,512.10

203
As you many observe, this section has so much information in terms of assumptions and figures
that you may have some trouble getting your message through to the reader. Remember that
this section is considered by many to be very important. It does help to attach this information
as appendices and only summarise it in the narrative of the main text.

Business Plan Work Sheets

Prepare your financial forecasts and write them down in the business plan Worksheet
provided. As you work through the figures, you may find it necessary to revisit your
assumptions. Feel free to do so - it is part of the process of refining your business plan.

(xiii) Financing Requirements


In this section, you write down the total funds required by the business, as well as the
breakdown according to where these funds will come from. This is especially important if
you propose to borrow some of the funds.
In the cases of PJ Utility Motors and ROTAM Shoppers’ Delight Limited, both
businesses will be financed with own (equity) funds. The Worksheet for ROTAM
Shoppers’ Delight Limited would look something like this;

(xiii) Financing Requirements (ROTAM Shoppers’ Delight Limited)


Total funds required: K300,000,000.00
Means of financing:
Equity K300,000,000.00
Bank Loans Nil
Government Loans Nil
Micro Finance Loans Nil
Family Loans Nil
Government Grants Nil
Other Grants Nil

Business Plan Work Sheet

Write down your proposed financing plan in the business plan


Worksheets provided.

(xiv) References

These are an important attachment when the business plan is meant for external
circulation. They are names and addresses of institutions and/or professional individuals
with whom your business has transacted and who thereby are in a position to vouch for it.
If the business is just beginning, the partners or directors may draw upon their personal
references.

Mr. and Mrs. Bombwe wrote out the references Worksheet as follows:

204
(xiv) References

Present Bankers: None. Proposed - Standard Chartered Bank (z) Ltd


Present Financing Institution: None
Lawyers: None. Proposed – Mutende Chambers
Accountants: None. Proposed – Moores Rowland
Auditors: None. Proposed – MTN Associates
Others: None

(xv) APPENDICES
These contain supporting information and data. They are a device for de-congesting the
business plan.
Peter and John have agreed that initially they will use their business plan internally only.
They therefore decide that they do not require a lengthy document with appendices.
Mr. and Mrs. Bombwe, on the other hand realize that they will need the business plan to
facilitate negotiations for trade credit with suppliers. They therefore decide to prepare an
elaborated document with the following list of appendices to be included.

(v) Appendices (ROTAM Shoppers’ Delight Limited)

References
Detailed assumptions and financial/forecasts
CVs of Directors

Business Plan Work Sheet

Assume your business plan will be made available to outsiders.


Prepare your list of appendices in the Worksheet provided.

Read through your business plan work sheets once more and make any additions and
changes that you feel are necessary. You may then proceed to write your business plan in
the format suggested on page and following steps 17 to 22 outlined on page .

Sample business plans for P J Utility Motors and ROTAM Shoppers’ Delight Limited are
available at the back of this workbook. Read them and use them as guides only. Do not be
afraid to let your personal style of writing come through.

205
Unit 1.5 Presenting a Business Plan

Your business plan may be for purposes of securing a loan from a bank or micro
financing institution, or from convincing partners to be part of the business. Whatever the
case may be, it is usual for such stakeholders to request you to present your proposal in
person to them. They want you to speak to them about your business plan, despite that
they will already have read it.
When stakeholders request a presentation from you, it is generally a sign that you wrote a
good business plan. Why then do these people want to listen to you in person? There are
two main reasons,
1. To seek clarification and elaboration on some aspects of the business plan.
2. To know the person behind the plan, as this is what ultimately determines its
success or failure. This is perhaps the main reason why you are asked to present
your plan.
As you speak, the audience will be hopping to make a good judgment that you possess
the qualities necessary to make the business plan actually work. You must therefore know
what these qualities are, and then manage the entire presentation process in such a way
that you give a maximum demonstration of these desirable qualities.

But, first and foremost you must know what you are going to present.

1.5.1 Areas of Focus When Presenting a Business Plan


Be sure that you thoroughly know and understand all aspects of your business plan and
then prepare notes specifically for the presentation focusing on the following areas.
1. A very brief background.
2. Statement of the business concept that is, the products, the customers, the
customers’ needs which will be satisfied, and how the product will be made
available to the customers.
3. Discussion of the market and your competitive advantage. This is a key area;
ensure you give it sufficient emphasis.
4. Discussion of the competencies of the managers and key staff. This is another key
area which you must give sufficient stress.
5. Discussion of the financial forecasts. Do not forget to make a statement on the
underlying assumptions.
6. Discussion of some of the weak areas of your business plan and how they will be
addressed. Demonstrate that these weaknesses are not beyond correction.
7. Conclusion, summing up the overall benefits of the business proposition to the
various stakeholders.

(ii) The Key Qualities Being Looked For By Stakeholders/Audience


The following are the personal qualities you must demonstrate and project to your
audience as you present your Business Plan.

Motivation
Your desire to make a success of your business must show.

206
Enthusiasm
You must portray genuine interest in the plan you are presenting.

Integrity
As you speak, the audience must get the impression that you re trustworthy and subscribe
to a code of good conduct in business.

Managerial Ability
You must portray to the audience that you have the ability to direct both material and
human resources to the ultimate success of the Business Plan.

(iii) Skills Necessary for a Successful Presentation


To be able to get desired impressions and information to the audience, you need to
develop ad refine the following.

Poise
The way you carry yourself has a lasting impression upon the audience. Show that you
are calm and in control. This is quite different from giving off airs of arrogance.

Voice Control
Speak strongly without being overly loud. Develop a good voice modulation and
intonation without which you are certain to be boring.

Address the audience


Do not talk to the board, the flip chart, or the notes in your hand.
Always keep the audience interested in what you are saying. Maintain frequent eye
contact with each and every one of them. If the audience comprises only a few people,
try and turn the presentation into a discussion.

Manage your time well


Keep the presentation short. A duration of 20 minutes is good enough. It is difficult to
hold the interest of the audience beyond 30 minutes. Avoid being asked to wind up.

Manage the feedback well


You will be required to answer questions and make clarifications. Respond with
thoughtfulness and honestly. If you do not know or are not sure of a particular point, say
so and pledge to supply the answer in a few days.
Graciously acknowledge any valid criticism.
Note down any comments, suggestions and criticisms which require to be acted upon and
be sure to do so in due time.

207
Assignment

Read your Business Plan so that you are thoroughly familiar with each and every one of
its aspects.

Prepare the notes for a 10- minute presentation which you will be required to make to
either a panel of 5 people, or to your full class.

208

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