Business Plan Notes in Full
Business Plan Notes in Full
Business Plan Notes in Full
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.
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
Learning Outcomes
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
(b) Besides those outlined above, think of any other useful purpose(s) a business
plan can serve.
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.
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
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:
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
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:
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:
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:
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.
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:
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:
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.
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.
Having known the contents and format of a business plan, you now will be introduced to
the actual process of writing a business plan.
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.
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.
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.
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
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.
For Mr. and Mrs. Bombwe the completed worksheet looks like this:
Business Name:
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.
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.
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.
Estimated at no less than 50,000 units per year. This figure covers all manner of
Motor vehicles.
Two broad categories: the brand new and the second hand. Across these the
following segments can be identified:
Heavy industry
Light industry and commerce
Farm sector and small business sector
Institutional (Government, NGOs, Business Executives)
Family.
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.
Think about your business concept and identify the industry in which
it fits. Fill in the ‘industry’ section of the business plan worksheets.
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.
Product Protection
There are no product rights to be protected. Neither are there rights that
will be infringed by this business.
Target Markets
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.
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
This is where you show how you are going to achieve your sales. Peter and John
complete their worksheet in the following manner:
Sales Strategy
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.
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.
Assumptions
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
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.
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
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.
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.
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.
Production Process
No production involved
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:
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.
Legal Form
Share Distribution
Contracts
Management
The two partners will, on top of providing the main technical input, also
discharge the management functions as follows:
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:
Amelia Ngosa
Bombwe 150,000.00 150,000,000.00 50
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
Think about your business and write down the most suitable
Management structure for it.
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:
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.
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
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.
Think about your business. Prepare a risk assessment in the Worksheets provided.
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 Mr. and Mrs. Bombwe’s business, the implementation plan looks like this.
(x) Implementation Plan (ROTAM Shoppers’ Delight)
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:
End- of- year stock values of K2m, K3m, and K4m for respective successive years are
anticipated.
(vi) Operations
Rent K1,000,000 pm 3 months in advance
Fuel & oils : K 600,000 pm
Stationery/Postage : K 50, 000 pm
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
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PROJECTED ANNUAL CASH FLOW STATEMENTS (K'M)
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:
Assumptions
1. Revenue/Income
Monthly income will increase by 10% in years 2 and 3. Year end stock will be 10% of monthly
sales
The shop will operate on "cash and carry" basis. No credit will be given to
customers.
3. Cost Of Sales
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.
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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
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
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Projected Profit and Loss Statement (K' Million)
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
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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
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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.
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.
(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
(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.
References
Detailed assumptions and financial/forecasts
CVs of Directors
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.
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.
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.
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