BE 447: ENTREPRENEURSHIP

FUNDAMENTALS OF A
BUSINESS PLAN

Suma Mwaitenda
7th December, 2021
 Business Plan
! Learning Objectives
❑ To understand the many topics that should be
addressed in a business plan
❑ To realise business plans are helpful for both
start ups and existing business
❑ To be able to write a business plan that could
be submitted to a bank or investor for financing.
 Business Plan
! Introduction
Is a comprehensive document that helps an
entrepreneur analyse the market and plan a
business strategy.
Both existing business and start ups do prepare
business plan.
With existing business is to ensure that future
growth is properly managed and for start up
entrepreneurs is to avoid costly mistakes.
 Business Plan
! What is included in the Business Plan?
A business plan includes the following major
topic headings
❑ Executive Summary

❑ Mission Statement

❑ Business Environment

❑ Marketing Plan

❑ Management Plan

❑ Financial Data
 Business Plan
What is included in the Business Plan?
Cont ..
❑ Legal Considerations

❑ Insurance Requirements

❑ Suppliers

❑ Risks

❑ Assumptions/ Conditions
 Business Plan
! Executive Summary
Normally this is a two-page interview of the
most important facts in the business plan.

Although the executive summary is placed

in front of the business plan it is actually
easier to write it after you have written the
entire the entire business plan.
 Business Plan
! Executive Summary Checklist
❑ Briefly describe the proposed business and
product or service it will provide.
❑ Describe the most important trends in the
industry.
❑ Describe the type of advertising and
promotion that will be implemented.
❑ Give the sales and profits for the past three
years (if it is an existing company). Give
projected sales and profits for the three years.
 Business Plan
! Executive Summary Checklist
❑ Describe the education and relevant work
experience of the owners and key
management personnel.
❑ Include any important legal considerations
such as exclusive agreements, customer
contracts, and patents.
❑ Include any other information that you believe
the reader the reader should know in order to
understand the business operation.
 Business Plan
! Mission Statement
This is a concise, well-defined explanation of the
purpose of the business and the management’s
philosophy.

Experts suggest that the mission statement should

be 50 words or less because that restriction on
length forced the entrepreneur to be focused.
 Business Plan
! Mission Statement cont….
Though mission statement vary, common
elements include a description of the products
or services offered and management philosophy
of the company’s owner.
It provides direction for the company and prevents
the company owners from diversifying into
areas that do not serve the original company
purpose.
 Business Plan
! Mission Statement Checklist
❑ What is the purpose of your
business?
❑ What products and services will
be offered?
❑ What is your management
philosophy?
 HOME ABOUT US # SECTORS # SERVICES # CLIENTS PROJECTS CONTACT US

About Eco Services

Our Vision, Values & Principles

Why Work with Us

Our Vision, Values &

Principles

Download Pro@le

! HOME " ABOUT US " OUR VISION, VALUES & PRINCIPLES

About Eco Services Our Vision, Values & Principles

Why Work with Us Our Vision:

To be the environmental consultancy of choice throughout our region and beyond

Download Pro;le To be a company that is recognised for its culture of teamwork and mentoring that creates a rewarding working
environment where every team member can develop within their professional careers, and
To be innovative, passionate and reliable, while delivering quality technical and ;nancial performance.

Our Values:

Client Focus: we promote innovation, professionalism and @exibility in meeting client needs
Accountability: we are each personally accountable and jointly responsible for the success of Eco Services and for the
delivery of quality work to clients
Transparency: we expect the highest levels of ethical behaviour and personal integrity in all our transactions
Empowerment: we mentor our people to realise their potential and become leaders in our profession and their communities
Collaboration: we believe in the principles of partnership, diversity, fairness, and respect for each and every individual

Our Principles:

Our business is underpinned by a number of principles concerning our environment, business and the community at
large. We are committed to:

Providing clients with technical excellence and innovative solutions to help them respond to the challenges of sustainable
development
Conducting our business with integrity, applying ethical principles to our relationships with clients, employees, suppliers and
other stakeholders
Respecting the customs and laws of the regions where we work
Ensuring the health, safety, personal security and well-being of our employees.
 Business Plan
! Business Environment.
Scanning the environment, allows the
entrepreneur to see the entire business
environment and the industry and helps to
formulate the larger picture of the business
activity. It is an important step in determining
how the company will compete.
Successful entrepreneurs constantly analyse
the business environment and its impact on
the company. It helps to determine whether
the business can survive and grow.
 Business Plan
! The business environment composed of three
factors
❑ National trends
❑ Industry trends and,
❑ Local trends

National trends
What national trends will affect your business,
that often have an impact on consumer’s
buying habits.
 Business Plan
National trends
Each business will be affected by different trends,
so the entrepreneur must decide which trends
have the greatest impact on the business.
They include:
Demographic shifts
Demographic composition of the country create
demand for some products and services while at
the same time greatly reducing the demand for
others.
 Opportunities

• Market (176M +12M people)

• Technology and Internet
• Existence Business Opportunities across
sectors
• Funding opportunities
• Government willing to support the youth
(existence of different initiatives - NEEC, etc)
 Facts: Population
Countries of EAC
1. Tanzania: 59M
2. Kenya: 50M
3. Uganda: 44M
4. Rwanda: 12.9M
5. Burundi: 11M
6. South Sudan: 12M
Total Population: 176.9M + 12M

Tanzania Case
• 0-14 years: 23M (44%)
• 15-24 years: 11M (20%)
• 25-54 years: 16M (30%)
• 55-64 years: 2M (3.5%)
• Over 64 years: 2M (2.5%)
Source (UN. WB, NBS, UKAid)

“By 2030 Tanzanian population is estimated to be ranging at 83.7M”

 Business Plan
Lifestyle changes
An increase in the number of women
working outside the home and an
increase in the number of stay –at –
home fathers
Legislative trends
Passage of different laws by the
government that have major impact on
business.
 Business Plan

Industry trends
It is important to research the industry
that entering. It is common to see
industries with large increase or
decrease is sales, major shifts in how
the businesses operates, or
upheavals caused by technological
changes.
Tanzania - Exports and imports of goods, 2014
Industrial Sector in Tanzania
Facts, Figures, Issues.
• The industrial sector of Tanzania is comprised of
manufacturing (53%), Processing (43%), and assembling
industries (4%).

• The manufacturing sector in Tanzania consists mainly of

food processing (24%), textiles and clothing (10%),
chemicals (8.5%), and others.

• Manufacturing industries are those that engage in

the transformation of goods, materials or
substances into new products (new commodities or
value addition).
 Business Plan
! Local trends
It is important to consider trends in the
community in which the business will locate.
Local trends often have more impact on a
business than national trends. Factors
considered may include:
The economy of the community
The attitude of the community toward the type
of business proposed
The increase of the community’s population.
 Opportunities trends
Business Opportunities
• Fashion & Design
• tailoring, merchandising, franchising
• Real Estate (rentals, Property development etc)
• Transportation (easy/convenience, affordability)
• Food Industry
• restaurants, catering, franchise, packaging,
online stores, etc
• Technology and innovation (solving societal
problems).
 Opportunities in the EAC
Business Opportunities cont…
• Car Parking (a 2bn industry)
• Travel Agents (ticketing, tour operators etc)
• Insurance Agents
• Property Management
• Business Development
• Off-takers (middlemen traders)
• Personalised car service (washing, servicing
& repair)
 Business Plan
! CHECKLIST: BUSINESS ENVIRONMENT
National trends
❑ Demographic changes

❑ Legislative actions

❑ Technologies

❑ Health care reforms

❑ Two income families

❑ The economy and interest rates

❑ Faster pace of life

 Business Plan
! CHECKLIST: BUSINESS ENVIRONMENT
Industry information
❑ Is this industry dominate by large or small
firms?
❑ What is the failure rate in this industry?

❑ Is this a new industry or one that is well

established?
❑ What is the typical profitability in this industry?

❑ What are the trends in this industry?

 Business Plan
! CHECKLIST: BUSINESS ENVIRONMENT
Local trends/Community information
❑ Is the population increasing or decreasing?

❑ What is the attitude of the community towards

your business? Is it positive, negative, or
neutral?
❑ Will the community help provide any financing
for your business or help in getting it started?
❑ Is the local economy strong or in recession?
 Business Plan
! MARKETING
Learning objectives
• To be able to write a detailed description of how
a company will compete in the market place
• To be able to provide a comprehensive
explanation of a company’s product and
services
• To understand how to complete a competitor
analysis and develop a competitive advantage
for company.
 Business Plan
! MANAGEMENT AND PERSONNEL
Objective
To understand how to write the management section of
the business plan.
Checklist
❑ Include a paragraph describing the education, work
experience and entrepreneurial personality traits of
the owner(s). Emphasize any management
experience and any experience in the industry of the
proposed business. Include a complete resumes if
they are available. Also include resumes of key
personnel.
 Business Plan
! Management and personnel .. Checklist cont…
❑ Explain in paragraph form the type of

employee positions that will be filled and the

pay and benefits that will be provided. Then
complete the following chart to show all
personnel needed.
Example
Job Title Number needed Part-Time/ Full-Time
Salary or Hourly pay Benefits
 Business Plan
Checklist cont…
❑ What paid holidays will the company observe?
Which employees will be entitled to holiday pay?
❑ How will vacation time be accrued? Which
employees will have paid vacations? (Full-Time
and Part-Time, or only full-time?)
❑ What is your policy concerning funeral leave?
How many days are granted? For which
relatives?
❑ How many employees will you have? What will
legally govern your hiring and firing polices?
 Business Plan
Checklist cont…
❑ Complete an organizational chart

❑ Complete work schedule for a typical work

week
❑ Is this a family business?

❑ If so, state which family members will be

employed and give their relation to the

owner(s)
 Business Plan
START-UP COSTS AND FINANCING
Basically the financial section includes the
following topics
❑ Start-up costs

❑ Business financing

❑ The projected income statements

• Opening-day balance sheet
• Projected income statements
• Projected cash flow statements
• The break-even point
 Business Plan
START-UP COSTS
Initial costs necessary to open up a business.
Checklist
! Inventory
! Furniture and fixtures
! Machinery and equipment
! Prepaid expenses
• Insurance
• Grand opening advertising
• Legal fees
• Accounting fees
• Employers wages
• Other (specify)
 Business Plan
! Checklist cont..
Deposits
• Lease
• Utility
• Tax
• Other
Building and Renovation
▪ If purchased
• Sales price
• Construction and renovation
▪ If leased
• Leasehold improvement
 Business Plan
Checklist cont..
❑ Working capital
• Owners salary
• Employees salary
• Employees taxes
• Rent
• Advertising
• Utilities
• Suppliers
• Telephone
• Loan payment
• Repairs and Maintenance
• Inventory (if customer didn’t pay cash for purchase)
• Miscellaneous
• Other (specify)
❑ Business Plan
FINANCING
Checklist
❑ What are your total start up costs

❑ How much will you invest from personal funds

❑ How much will you obtain in other equity

• Family and friends

• Private investors
• Venture capital
• Silent partners etc
 Business Plan

Checklist cont…
❑ How much will you borrow?

• Friends and family

• Bank loan
• Finance companies
• Others
 Business Plan

! PROJECTED FINANCIAL STATEMENTS

These comprises of opening day balance sheet,
the projected income statement, and the
projected cash flow statements.
BALANCE SHEET
This comprises the possession of a company and
the debts it owes on a specific day. Therefore,
while the income statement records profit or
loss over a period of time, the balance sheet the
financial situation on a certain day.
 Business Plan
! Assets
These are company's possessions, may be
tangible items such as machinery and
equipments, or they may be intangible assets
such as a patent or goodwill. On the balance
sheet, assets are divided into several
categories – current, fixed, and other.
Current assets
Are those that are easily converted into cash.
 Business Plan
❑ Current assets
▪ Cash – all cash in hand and in the business
checking and saving accounts is recorded.
▪ Inventory – if a company extends credit and
customers owe for purchases, it is asset
because it will be received on future.
▪ Inventory – all items available for resale are
current assets.
▪ Supplies – such as shops, office supplies
▪ Prepaid expenses
 Business Plan
❑ Fixed assets
Permanent possession not meant to be
converted into cash, they include
▪ Machinery, equipment, furniture, fixtures – all

items listed as start-up costs in these

categories would be fixed assets
▪ Land and buildings

▪ Renovations

▪ vehicles
 Business Plan
! Liabilities
Includes all debts a company owes. As with assets,
liabilities are classified/categorized as
Current liabilities – those paid within 12 months
▪ Accounts payable - all bills due for inventory and
supplies
▪ Accrued expenses - bills due for utilities and other
miscellaneous expenses
▪ Notes payable – any short term loans that are
due within 12 months from the date of the
balance sheet.
 Business Plan
▪ Current portion of long-term debt – even if a
loan is to be paid over several years, a portion
of the loan is due within the next year, that
principal portion due within the next 12
months is considered the current portion of
long-tem debt.

! Long-term liabilities – those that are due

more than a year after the date of the balance
sheet.
 Business Plan
! Equity
This is another category in the balance sheet, equity,
net worth or capital account.
It represents the difference between the assets and
liabilities. Total assets minus total liabilities must
equal net worth or equity.
The equity includes all the money the entrepreneur
has invested from personal funds as well as
retained earnings. Retained earnings is an
accumulation of all profits and losses of the
company from the day it began until the day the
balance sheet is prepared.
 Business Plan
! Equity cont…
If the company makes profit, retained earnings
increases; if the company loses money, retained
earnings decreases.
Although the total equity figure does not
necessarily represent the market value of the
company, it is an important figure because
financial institutions often compare the total
liabilities to the total equity if the company
applies for a loan.
 Business Plan
! PROJECTED INCOME STATEMENT
The income statement is completed on a periodic basic
and records sales, cost of goods sold, expenses, and
profit or loss.
Sales - revenue a company has generated during a
specific period of time.
Cost of goods sold – includes any cost for products,
materials, or labor directly related to the sale.
Gross margin or gross profit – the difference between sales
and cost of goods sold.
Operating expenses – ongoing expenditure that occur in
the process of selling and managing a company.
Net profits – gross margin minus operating expenses.
 Business Plan
CASH FLOW
Factors affecting cash flow of a company
▪ The proprietor's or partners salary

▪ The principal paid on a loan

▪ Increase inventory

▪ Accounts receivable

▪ Seasonality

▪ depreciation
 Business Plan
! BREAK-EVEN POINT
The minimum amount of sales necessary for the
company’s survival. It is important for the
company to calculate the break even point. It
may prevent an entrepreneur form making a
costly mistake.
Calculating break-even point
The first step needed to determine the break even
point is to separate the company’s expenses
into two categories – fixed and variable.
 Business Plan
! BREAK-EVEN POINT
Fixed expenses are the expenses that do not
fluctuate with the company’s sales volume, i.e. are
not affected by the sales volume of the company.
Variable expenses, these increase or decrease with
fluctuation in sales.
2nd step
Determine the contribution margin.
This is calculated by dividing profits by the sales
volume. Can be calculated on a per unit basis, or
be determined by looking at the projected income
statement.
 Business Plan
! BREAK-EVEN POINT
Checklist
❑ Categorize all your operating expenses as

“fixed” and “variable”

❑ Determine your contribution margin

❑ Determine your break even point

❑ Determine the number of customers

needed to reach that break even point.

 Business Plan
! LEGAL SECTION
Learning objectives
❑ To be aware of the many forms of

organisation available for small business

❑ To understand the tax consequences of each

form of business
❑ To realize that the entrepreneur's liability is a

major factor in choosing a for of

organisation.
 Business Plan
INSURANCE: Checklist
• Research the laws covering workers’

insurance in the country and determine if the

insurance will be required by law.
• Identify the greatest insurable risk that your

business will face

• Identify risks that you would like to insure

• Determine how much you can afford to spend

on insurance
 Business Plan
Examples
• Property insurance (vehicle,

• Liability insurance (workers compensation,

surety bonds, etc.

• Earnings insurance ( bad debt, business

interruption
• Health

• Disability

• Life insurance
 Business Plan
SUPPLIERS: Checklist
• Identify your most important suppliers

• What are their credit terms

• How often do they deliver?

• What are the minimum order of quantities?

• Are inventory shortages a problem in this

industry?
• Are there many suppliers for your business, or

do you have to choose from only a few?

 Business Plan
RISKS, ASSUMPTIONS ANS CONCLUSION
Risks
Every business has two type of risks namely
controllable and uncontrollable risks.
Controllable risks cannot necessarily be prevented,
but the financial loss can be minimised by
purchasing insurance.
Therefore, the risks of fire, vandalism, damage from
storms, and so forth are considered controllable
because insurance is available to pay for the
financial loss.
 Business Plan
Uncontrollable risks
Are those that would have a detrimental financial
impact but can not be covered by insurance.
Uncontrollable risks are common to many
businesses include the following;-
• A new competitor

• A recession economy

• New technology

• Changes in consumer tastes

• A price war by competitor

 Business Plan
ASSUMPTIONS
The conclusion is reached by making assumptions
throughout the business plan report.
The following assumptions are common;
• A specific site

• A certain amount of shilling amount for start ups

• The ability to obtain financing

• No new competitors opening

 Business Plan

CONCLUSION
• Is this business feasible or not

feasible?
• What assumption did you make while

completing the business plan report?

• What assumption must hold true for

your conclusion to hold true?

End