Chapter5-The-Business-Plan the environmental Analysis .pdf

The SWOT analysis is an extremely useful tool for understanding and reviewing the company’s
position prior to making decisions about future company direction or the implementation of a new
business idea. A SWOT analysis can be completed by an individual within the organization (provided
they can take an overview of the current situation) but is often best completed in a team or group. The
discussion itself is informative, and the quality of the output is better if perceptions are gathered from a
number of people.
The PEST analysis is a tool to evaluate external factors. It is often helpful to complete a PEST analysis
prior to a SWOT analysis, although it may be more useful to complete a PEST analysis as part of, or
after, a SWOT analysis. A SWOT analysis measures a business unit; a PEST analysis measures trends
and changes in the market.
A SWOT analysis is a subjective assessment of information about the business that is organized using
the SWOT format into a logical order that helps understanding, presentation, discussion and decisionmaking. The four dimensions are a useful extension of a basic two heading list of pro's and con's. The
SWOT analysis template is normally presented as a grid, comprising four sections, one for each of the
SWOT headings: Strengths, Weaknesses, Opportunities, and Threats. The SWOT template below
includes sample questions, whose answers are inserted into the relevant section of the SWOT grid. The
questions are examples, or discussion points, and obviously can be altered depending on the subject of
the SWOT analysis. Note that many of the SWOT questions are also talking points for other headings -
use them as you find most helpful, and make up your own to suit the issue being analyzed.
A SWOT analysis can also be used to examine different aspects of the business, in our case examining
the businesses solutions, customers, capabilities and organizational capabilities. Each represents a
different element of the business, and requires a separate assessment. In the template provided we
suggest specific questions that need to be answered relevant to each aspect of the business. As you
work with this framework you may add questions that are relevant to the specific context of your
business. Importantly, the SWOT analysis can include many different ideas that make it difficult to
process decisions. It is therefore useful to define the relevant level of significance you will consider
when including a factor before completing the analysis. That said, it is important that you identify at
least one factor to go in each box, even if you cannot determine the relative importance of a factor. At
the evaluation stage you will be better able to determine this, and will have to do this when you use the
summary sheet to incorporate the most important elements and prioritize the outcomes. The first time
you perform a SWOT analysis it can be challenging, but like most things, the more you do it, the easier
it gets.

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Chapter 5:
The Business Plan:
Creating & Starting the
Venture Entrepreneurship

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PlanningasapartoftheBusinessOperation
•Planningisaprocessthatneverendsforabusiness.Itis
veryimportantintheearlystagesofanynewventurewhen
theentrepreneurwillneedtoprepareapreliminary
businessplan.
•Foranyorganizationitispossibletofindfinancialplans,
marketingplans,humanresourceplans,productionplans,
&salesplanstonameafew.Plansmaybeshortorlong
term.
•Allplanshaveoneimportantpurposethatistoprovide
guidancetomanagementinarapidlychangingmarket
environment.

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The importance of a business plan
1.Tohelpyouwithcriticaldecisions
2.Toavoidthebigmistakes
3.Toprovetheviabilityofthebusiness
4.Tosetbetterobjectivesandbenchmarks
5.Tocommunicateobjectivesandbenchmarks
6.Toprovideaguideforserviceproviders
7.Tosecurefinancing
8.Tobetterunderstandthebroaderlandscape
9.Toreducerisk

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What is the Business Plan
BusinessPlanis“awrittendocumentpreparedby
theentrepreneurthatdescribesalltherelevant
internalandexternalelementsandstrategiesfor
startinganewventure”.
•Itisanintegrationoffunctionalplanssuchas
marketing,finance,manufacturing,salesand
humanresources.italsoaddressesbothshort&
longtermdecisionmakingforthefirstthreeyears
ofoperation.

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WhoshouldwritethePlan?
•Thebusinessplanshouldbepreparedbytheentrepreneur.
•Theentrepreneurmayconsultwithmanyothersourcesinits
preparation,suchaslawyers,accountants,marketing
consultants,andengineers.Internetalsoprovidesawealthof
informationaswellasactualsampletemplatesoroutlinesfor
businessplanning.
•Tohelpdeterminewhethertohireaconsultantortomake
useofotherresources,theentrepreneurcanmakean
objectiveassessmentofhis/herownskills.Throughsuchan
assessmenttheentrepreneurcanidentifywhatskillsare
needed&wheretoobtainthem.

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Who Reads The Plan?
Thebusinessplanmaybereadbyemployees,investors,
bankers,venturecapitalists,suppliers,customers,advisors,
andconsultants.Sinceeachofthesegroupsreadstheplan
fordifferentpurposes,theentrepreneurmustbepreparedto
addressalltheirissues&concerns.Therearethree
perspectivesshouldbeconsideredinpreparingtheplan:
i.Perspectiveoftheentrepreneur:
•Entrepreneurunderstandsbetterthananyoneelsethe
creativity&technologyinvolvedinthenewventure.The
entrepreneurmustbeabletoclearlyarticulatewhatthe
ventureisallabout.

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ii.Marketingperspective:
•Toooften,anentrepreneurwillconsideronlythe
productortechnology&notwhethersomeonewouldbuy
it.Entrepreneursmusttrytoviewtheirbusinessthrough
theeyesoftheircustomer.
iii.Investor’sperspective:
•Theentrepreneursshouldtrytoviewhis/herbusiness
throughtheeyesoftheinvestor.

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Why Have a Business Plan?
• The business plan is valuable to the entrepreneur, potential
investors, or even new personnel, who are trying to familiarize
themselves with the venture, it goals, and objectives.
• It helps determine the viability of the venture in a designated
market
• It provides guidance to the entrepreneur in organizing his or
her planning activities
• It serves as an important tool in helping to obtain financing.

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Information required before writing a business plan
•Beforecommittingtimeandenergytopreparingabusiness
plan,theentrepreneurshoulddoaquickfeasibilitystudyof
thebusinessconcepttoseewhetherthereareanypossible
barrierstosuccess.
•Theinformation,obtainablefrommanysources,should
focusonmarketing,finance,&production,internetcanbea
valuableresource.
•Beforebeginningthefeasibilitystudy,theentrepreneur
shouldclearlydefinethegoals&objectivesoftheventure.
Thesegoalshelpdefinewhatneedstobedone&howitwill
beaccomplished.
•Goals&objectivesthataretoogeneralorthatarenot
feasiblemakethebusinessplandifficulttocontrol&
implement.

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Writing the Business Plan
•Abusinessplanshouldbecomprehensiveenoughto
giveanypotentialinvestoracompletepictureand
understandingofthenewventure.
•Itshouldhelptheentrepreneurclarifyhis/herthinking
aboutthebusiness.

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Outline of a Business Plan

12. 12

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Business Plan
1. Introductory Page:
This is the title/cover page that provides a brief summary of
the business plan’s contents. The introductory should contain
the following:
• Name and address of business
• Name of the entrepreneur(s), telephone number, fax number,
e-mail address, and web site address if available.
• A paragraph describing the company & nature of business •
Statement of financing needed
• Statement of confidentially of report

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Sample Introductory Page
•Thistitlepagesetsoutthebasicconceptthattheentrepreneur
isattemptingtodevelop.Investorsconsideritimportant
becausetheycandeterminetheamountofinvestmentneeded
withouthavingtoreadthroughtheentireplan.

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2. Executive Summary:
Thissectionofthebusinessplanispreparedafterthetotal
planiswritten.Abouttwotothreepagesinlength,the
executivesummaryshouldstimulatetheinterestofthe
potentialinvestor.
Generallytheexecutivesummaryshouldaddressanumberof
issuesorquestionsthatanyonepickingupthewrittenforthe
firsttimewouldwanttoknow:e.g.
•Whatisthebusinessconceptormodel?
•Howisthisbusinessconceptormodelunique?
•Whoaretheindividualsstartingthisbusiness?
•Howwilltheymakemoneyandhowmuch?

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3. Environmental and Industry Analysis:
Theenvironmentalanalysisassessesexternaluncontrollable
variablesthatmayimpactthebusinessplan.
Examplesoftheseenvironmentalfactorsare:
Economy:Theentrepreneurshouldconsidertrendsinthe
GNP,unemploymentbygeographicarea,disposableincome
&soon.
Culture:Anevaluationofculturalchangesmayconsider
shiftsinthepopulationbydemographics.
Technology:Advancesintechnologyaredifficulttopredict.
Entrepreneurshoulddevelophistechnologyusedinbusiness.

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Legalconcerns:Therearemanylegalissuesinstartinga
newventure.Theentrepreneurshouldbepreparedforany
legislationthatmayaffecthisproductorservice.E.g.banon
cigarettesads.
Oncetheenvironmentalassessmentiscompletethe
entrepreneurshouldconductindustryanalysiswhich
reviewsindustrytrends&competitivestrategies.Examples
are:
Industrydemand:knowledgeofwhetherthemarketis
growingordeclining,thenumberofnewcompetitors,the
possiblechangesinconsumersneeds.
Competition:Mostentrepreneursgenerallyfacepotential
threatsfromlargercooperation's.Theentrepreneurmustbe
preparedforthesethreats&shouldbeawareofwhothe
competitorsare&whattheirstrengths&weaknessesare.

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4.DescriptionofVenture:
Thedescriptionoftheventureshouldbedetailedinthissection
ofthebusinessplan&Providescompleteoverviewofthe
product,service,sizeofbusiness,officeequipmentand
personnel,backgroundofentrepreneurs&operationofanew
venture.
Therearesomeoftheimportantquestionsthatanentrepreneur
needstoanswerwhenpreparingthissectionofthebusiness
plan.
Note:ifthebuildingorsitedecisioninvolveslegalissues,such
asaleasethentheentrepreneurshouldhirealawyer.

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Describing the venture

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5. Production plan:
Detailshowtheproductwillbemanufactured.Ifthenew
ventureisamanufacturingoperation,aproductionplanis
necessary.Thisplanshoulddescribethecomplete
manufacturingprocess.Ifsomeorallofthemanufacturing
processistobesubcontracting,theplanshoulddescribethe
subcontractor,includinglocation,reasonsforselection,costs,
&anycontractsthathavebeencompleted.Ifthe
manufacturingistobecarriedoutinwholeorinpartbythe
entrepreneur,he/shewillneedtodescribethephysicalplant
layout,machinery,equipment.Rawmaterials&suppliers
name,address&costofmanufacturing.Someofthe
importantquestionsofthissectionare:

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6. Operation plan:
Allbusinesses(manufacturingornonmanufacturing)should
includeanoperationsplanaspartofthebusinessplan.This
sectiongoesbeyondthemanufacturingprocess&describesthe
flowofgoods&servicesfromproductiontothecustomer.Some
keyissuesforboththemanufacturing&nonmanufacturingnew
ventureare:
1.Fromwhomwillmerchandisebepurchased?
2.Howwilltheinventorycontrolsystemoperate?
3.Whatarethestorageneedsoftheventureandhowwilltheybe
promoted?
4.Howwillthegoodsflowtothecustomer?
5.Whatarethestepsinvolvedinabusinesstransaction?

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7. Marketing plan:
Describesmarketconditionsandstrategyrelatedtohow
theproduct(s)andservice(s)willbedistributed,priced,
andpromoted.Ithelpsinforecastingofsales,budget&
appropriatecontrols.Marketingplanningwillbean
annualrequirement(withcarefulmonitoring&changes
madeonaweeklyormonthlybasis)fortheentrepreneur
&shouldberegardedastheroadmapforshortterm
decisionmaking.

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8. Organizational plan:
Describes form of ownership and lines of authority and
responsibility of members of new venture. It describes the
venture form of ownership that is proprietorship, partnership or
corporation. If the venture is a partnership, the terms of the
partnership should be included. Entrepreneur should answer the
following questions in preparing the organizational plan:
1.What is the form of ownership of organization?
2.If a partnership, who are the partners & what are the terms
of agreement?
3.If incorporated, who are the principal shareholders & how
much stock do they own?

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4.Whoarethemembersoftheboardofdirectors?(give
name,address,resume)
5.Whohaschecksighingorauthority?
6.Whoarethemembersofthemanagementteam&what
aretheirbackgrounds?
7.Whataretheroles&responsibilitiesofeachmemberof
themanagementteam?
8.Whatarethesalaries,bonuses,orotherformsof
paymentforeachmemberofthemanagementteam?

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9. Assessment of risk:
Identifiespotentialhazards&alternativestrategiestomeetbusinessplan
goals&objectives.Assessmentofriskshouldbebasedon:
•Potentialriskstothenewventure.
•Discussionofwhatmighthappenifrisksbecomereality.
•Strategyemployedtoprevent,minimize,orrespond.Majorrisksforanew
venturecouldfrom:
•Competitor’sreaction.
•Weaknessesinmarketing/production/managementteam.
•Newadvancesintechnology.
Ingeneralform,thereare5TypesOfRiskAssessment.Those
methodsareQualitativeRiskAssessment,QuantitativeRisk
Assessment,GenericRiskAssessment,Site-SpecificRisk
Assessment,DynamicRiskAssessment.

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10. Financial plan:
It determines the potential investment commitment needed
for the new venture & indicates whether the business plan is
economically feasible.
Generally three financial areas are discussed in this section:
• The entrepreneur should summarize the forecasted sales
and the appropriate expenses for at least the first three
years.
• Cash flow figures for three years.
• Projected balance sheet.

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11. Appendix:
The appendix of the business plan generally contains any
backup material that is not necessary in the text of the
document. Appendix may include:
• Secondary data or primary research data used support plan
decisions.
• Leases, contracts, or other types of agreements.
• Price lists from suppliers and competitors.

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Using&ImplementingtheBusinessPlan
•Thebusinessplanisdesignedtoguidetheentrepreneur
throughthefirstyearofoperations.Implementationofthe
strategycontaincontrolpointtoascertainprogressandto
initiatecontingencyplanifnecessary.Businessplannotend
upinadrawersomewhereoncethefinancinghasbeen
attainedandthebusinesslaunched.
•Therehasbeenatendencyamongmanyentrepreneursto
avoidplanning.Thereasonoftengivenisthatplanningisdull
orboring&issomethingusedonlybylargecompanies.This
mybeanexcuse,perhapstherealtruthisthatsome
entrepreneursareafraidtoplan.
•Withoutgoodplanning,theventuremayfacemanyproblems
likeemployeeswillnotunderstandthecompanygoals&how
theareexpectedtoperformintheirjobs.

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Measuring plan progress:
Typically the business plan projections will be made on
12 month schedule, however the entrepreneur cannot wait
12 months to see whether the plan has been successfully
achieved. Instead on a frequent i.e. at the beginning of
each month the entrepreneur should check the profit &
loss statement, & information on inventory, production,
quality, sales, collection of accounts receivable &
disbursements for the previous month.

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UpdatingthePlan:
Themosteffectivebusinessplancanbecomeout-of-dateif
conditionchange.Environmentalfactorssuchasthe
economy,customers,newtechnology,orcompetition&
internalfactorssuchasthelosscanallchangethedirectionof
thebusinessplan.Ifthechangearelikelytoaffectthe
businessplan,theentrepreneurshoulddeterminewhat
revisionsareneeded.Inthismanner,theentrepreneurcan
maintainreasonabletargetsandgoalsandkeepthenew
ventureonacoursethatwillincreaseprobabilityofsuccess.

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Why some Business Plan Fails?
Generally a poorly prepared business plan can be blamed on
one or more of the following factors.
1. Pursuing a bad idea
2. Not having the expertise
3. Not being realistic
4. Assuming everything will go smoothly
5. Neglecting the finances
6. Not checking the spelling and grammar
7. Not believing in the plan
And much more reasons