Introduction Chapter 2: Business Planning

• Definition the Concept of Business Planning

• Opportunity Identification and Evaluation
• Business Idea Development
• Business Idea Identification
• Methods for Generating Business Ideas
• Business Idea Screening
• Concept of Business Plan
• Developing a Business Plan
• Sample Business plan Format
 Business Planning
• Business planning refers to the process of creating a comprehensive
roadmap for the future of a business.
• It involves setting goals, determining strategies, and developing action
plans to achieve those objectives.
• Business planning is an iterative process that requires regular review and
adjustment as market conditions and business circumstances evolve.
• It serves as a valuable tool for guiding decision-making, securing financing,
attracting partners or employees, and communicating the business vision to
stakeholders.
• A well-crafted business plan serves as a guide for entrepreneurs, managers,
and stakeholders to understand the direction of the company and make
informed decisions.
• Here are the key elements typically included in a business plan:
 Key Elements typically included in a Business Plan

• Executive Summary: This section provides an overview of the entire plan, including
the business concept, objectives, and highlights of the key strategies.
• Business Description: It outlines the nature of the business, its mission and vision, and
the products or services offered. It may also include information about the target
market and competitive advantages.
• Market Analysis: This section examines the industry landscape, target market
characteristics, customer needs, and the competitive environment. It may include
market research, analysis of competitors, and identification of market trends.
• Organization and Management: the organizational structure of the business is
outlined, including the roles and responsibilities of key personnel. It may also include
details about the legal structure of the business.
• Product or Service Line: This section provides detailed information about the products
or services offered, including their features, benefits, and unique selling points. It may
also cover any intellectual property or proprietary technology associated with the
offerings.
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• Marketing and Sales Strategy: This component outlines how the business intends to promote its
products or services, reach its target audience, and generate sales. It includes marketing channels,
pricing strategy, distribution plans, and sales projections.
• Financial Projections: Here, the financial aspects of the business are presented, including historical
and projected financial statements such as income statements, balance sheets, and cash flow
statements. It may also include assumptions, break-even analysis, and return on investment
calculations.
• Funding Request: If the business plan is being used to seek funding from investors or lenders, this
section provides details about the funding requirements, the purpose of the funds, and the proposed
terms.
• Implementation Plan: This section outlines the specific action steps required to execute the
strategies and achieve the stated objectives. It includes timelines, milestones, responsibilities, and
key performance indicators to track progress.
• Risk Analysis: The business plan should identify potential risks and challenges that may impact the
success of the business.
• It should also outline strategies to mitigate those risks and contingency plans to address unforeseen
circumstances.
2.1. Opportunity Identification and Evaluation

• According to most authors, the first step in the entrepreneurial process is to

identify and refine a viable economic opportunity in the market.
• This stage is crucial because without recognizing an opportunity, the
entrepreneurial process is likely to fail.
• Opportunity recognition involves a series of activities that occur before a
business is established.
• It can be divided into five main steps:
• Getting the idea/Scanning the environment: This step involves generating
ideas and observing the market environment for potential opportunities.
Entrepreneurs gather information, stay updated on industry trends, and identify
potential gaps or unmet needs.
• Identifying the opportunity: Once entrepreneurs have gathered information,
they focus on identifying specific opportunities that align with their skills,
interests, and market potential.
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• This involves narrowing down the ideas and selecting the most promising opportunity.
• Developing the opportunity: In this step, entrepreneurs work on developing and refining the identified
opportunity.
They assess the feasibility and viability of the opportunity, conduct market research, and develop a clear
value proposition.
• Evaluating the opportunity: Entrepreneurs critically evaluate the potential of the opportunity by
analyzing market demand, competition, financial projections, and potential risks.
This step involves conducting a thorough assessment to determine if the opportunity has a strong
likelihood of success.
• Evaluating the team: Alongside evaluating the opportunity, entrepreneurs also assess the capabilities
and strengths of their team.
• This involves evaluating the skills, expertise, and experience of team members, as well as their ability to
execute the business plan effectively.
• These five steps of opportunity identification and evaluation are crucial in the entrepreneurial process as
they lay the foundation for the subsequent stages of starting and growing a successful business.
• By systematically going through these steps, entrepreneurs increase their chances of recognizing and
pursuing viable economic opportunities in the market.
 Business Idea Development
• A business idea is a short and precise description of the basic operation of
an intended business.
There are three types of business ideas. They are:
• Old Idea – Here an individual copies an existing business idea from
someone.
• Old Idea with Modification – In this case the person accepts an old idea
from someone and then modifies it in some way to fit a potential
customer’s demand.
• A New Idea – This one involves the invention of something new for the first
time
 3. Business Idea Identification
• Before starting a business, it is crucial to have a clear understanding of the
type of business you want to establish.
Your business idea should address the following points:
• Customer Needs and Target Audience: Determine the specific needs your
business will fulfill for customers and identify the type of customers you aim
to attract.
• Product or Service Offering: Define the goods or services that your business
will sell. This could be a physical product, an intangible service, or a
combination of both.
• Target Market: Identify the specific demographic or market segment that
your business will cater to. This involves understanding the characteristics,
preferences, and behaviors of your potential customers.
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• Sales Strategy: Determine the approach your business will take to sell its
goods or services.
This could involve various methods such as e-commerce, brick-and-mortar
stores, online marketplaces, or direct sales.
• Environmental Impact: Consider how your business will depend on and
influence the environment.
• A good business idea should align with sustainable practices, ensuring the
responsible use of natural resources and respecting the social and natural
environment it relies on.
• Not all business ideas are equally valuable, so it is essential to answer these
questions to identify a promising business idea among others.
• By addressing these aspects, you can develop a clear vision for your
business and increase the likelihood of success.
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• The Need will Your Business Fulfill for the Customers

Your business idea should always have customers and their needs in mind.
• Good or Service will your Business Sell
Depending on your skills and the needs of the customers, you should decide which good or service your
business will sell. Also, keep in mind that they must be goods or services that people are willing to pay for
and at a price that will allow you to make a profit.
• A good is an item that people pay for and use.
• It may be something you make yourself or it may be something you buy to resell.
• Tools, baked goods, clothes and retail items are all products.
• A service is something you do for people that they then pay you for.
• For example, delivering goods, banking, babysitting, repairing items, collecting recyclable waste from
apartment buildings, operating tours, etc. are all services
 Identifies Potential Customer

• Any business cannot succeed without customers. Therefore, it is essential that you know who
your customers will be.
• Will you sell to a specific type of customer or to everyone in an area?
• There must be enough people who are able and willing to pay for your goods and services or the
business will not survive
• Strategy for Selling Goods or Services/ How is Your Business Going to Sell Good or Services?
• How are you going to sell your goods or services? If you plan to open a shop, you know how
you will sell your product, but manufacturers or service operators can sell their products in
many different ways.
• A manufacturer, for example, can sell either directly to customers, to retailers or
to wholesalers
 Relation between Business and Environment

• Your business can only be sustainable in the long run if it works in harmony
with the social and
• natural environment.
• How much does your business depend on the environment?
• Does it rely on the weather, soil or other natural resources?
• Does it need any specific type of labor from the local
• community?
• Does it need the local community to support it?
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• What should you do to make sure that your business nurtures the natural
environment and helps the local community?
• Will your business nurture the natural environment or will it have a
detrimental impact?
• How would you minimize or reverse any negative effect that your
business might have
 Methods for Generating Business Ideas

• Every business idea should be based on knowledge of the market and its
needs.
• The market refers to people who might want to buy a good or service; i.e.
the customers.
• The market differs from place to place, depending on who lives in the
area, how they live and for what goods or services they spend their
money.
• When you understand the market in your area, you might recognize many
business ideas that you may have previously ignored.
• When generating business ideas, it is best to try to keep your mind open
to everything.
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• Your first goal is to think of as many ideas as possible and make a list of all
the possible business opportunities.
• With a list, you will have more choices!
• You then can scan the list and nail down the idea(s) that sound most feasible
to you and that you think will be most profitable.
• There are many ways to come up with business ideas, such as surveying
local businesses or asking existing business owners.
• The information gained from one approach may supplement another and
help you to clearly describe your business ideas.
• Below, we will examine a few different approaches to generating business
ideas
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• Learn from successful business owners
You can learn a lot from people in your area who have already gone
through the process of establishing a business. You should try to get the
following information from them:
 What kind of idea did these businesses start with?
 Where did the ideas come from?
 How did they develop their ideas into successful businesses?
 How does the business profit and fit into the local environment?
 Where did they get the money to start their business?
• When to meet successful business owners, use the Business Ideas Analysis
Form shown below,
to write down their answers to the above listed questions.
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• BUSINESS IDEAS ANALYSIS FORM

• Name of business: _____________________________________________________________

Goods or services to be sold: ____________________________________________________
Main customers: ______________________________________________________________
When and why did the owner decide to start this business?
_____________________________________________________________________________________
_______________________________________________________________________
Why did the owner think it was a good idea to start that kind of business?
_____________________________________________________________________________________
How did the owner learn what his potential customers wanted?
_____________________________________________________________________________________
__What strengths or assets did the owner use to start this business? (E.g., previous experience, training, family
background, contacts, hobbies)
_____________________________________________________________________________________
What problems did the owner face in setting up the business?
_____________________________________________________________________________________
______________________________________________________________________
Has the business good or service changed over time?
_____________________________________________________________________________________
_______________________________________________________________________
What is the impact of the business on the natural environment and the community?
_____________________________________________________________________________________
_______________________________________________________________________
Notes:
_____________________________________________________________________________________
_________________________________________________
 Draw From Experience

Your own Experience

Consider your interests, experiences, and networks to identify business ideas
derived from your past experiences.
• Start by reflecting on your market experiences, such as searching for items
you couldn't find in stores, and the goods and services you've desired.
Other People’s Experience
• Understanding potential customers involves listening to their experiences,
• Asking family and friends about their shopping needs, expanding social
knowledge by talking to different age groups, social classes, and visiting
community groups and colleges
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• Here are some examples of comments that would help with your search for a
business idea:
• I cannot find a lunch box that keeps the food warm.”
• The choice of cooking pots in the shops is very limited.”
• There is no reliable way of sending gift packages to my friends and relatives living in
the villages.”
• There is not enough entertainment in this town and the weekends are so boring.”
• I really need to buy some marketing textbooks, but there are no good bookstores in
this
town.”
• There is so much garbage on the streets. Somebody should do something about it.”
Survey Your Local Business Area
• Another way of discovering business ideas is to look around your local
community.
• Find out what type of businesses are already operating in your area and
see if you can identify any gaps in the market.
• If you live in a village or small town, you may be able to identify all the
fields of business in the whole town.
• Otherwise, you may need to focus on the preferred business fields and
business types that you identified.
• This is an activity that will be much easier to do with a business partner or
friend.
• Visit the closest industrial area, markets and shopping centers in your area
 Scanning Your Environment

You can use your creativity to find more business ideas in your area.
• Look at the list of existing local businesses.
• If the list has included most of the local markets, you may be able to learn about the
industries or service providers on which the local economy relies.
• It may be useful to think about business ideas by considering all the resources and
institutions in your area.
For example think about:
•  Natural resources,
•  Characteristics and skills of people in the local community,
•  Import substitution,
•  Waste products,
•  Publications,
•  Trade fairs and exhibitions ,