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Part Three: Setting a Business The process of Business Development

Enterprise
3.1 The Entrepreneurial cycle (The process of Business Development)
3.1.1 What is basic business idea
3.1.2 Steps in business setting
3.2 Assessing the feasibility of new venture
3.2.1 Assessment and evaluation of Entrepreneurial
3.2.2 Elements in evaluating new ventures
3.3 Developing a Business Plan
3.3.1 the purpose of business plan
3.3.2 When business plan are produced

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What is basic business idea?

 The basic business idea facilitates choice of product under an overall
 It is logical to think of a goal for the unit in long run rather than to plan.
look for the immediate tomorrow. This long-term thinking is called
basic business idea  Thus, entrepreneur may think of being in the entertainment film,
in automobiles, in medicines, in services, in industries, etc.
…….draw fig on board
 Businessmen/businesswomen should think of long-term goal and the
profit when they start a business.

 The basic business idea, which is at the top of the hierarchy, is to meet
the broadest needs of the customers, and has the long life perhaps
from 5-50 years.

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What project an entrepreneur should have?

 In a dynamic business scheme, one has to carefully assess and
evaluate the basic business idea and the business opportunities in  A project is a complex of economic activities in which the key players
terms of commit scarce/limited resources in the expectation that the
 Its ability to generate quick returns benefits gained will exceed these resources.
 Its ability to permit quick changes in the
 Also, a project, broadly defined, in a way of using resources: a
products/services decision between undertaking and not undertaking a project is a
 Its ability to achieve the founders long term choice between attentive ways of using resources.
goals
 The project should have to consider the SWOT and should be
designed accordingly.

 The SWOT approach compels individuals to think or reason out

systematically and analytically the important factors strengths,
weakness, opportunities, and threats.
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 Strength: is an inherent capacity, which an organization can use

to gain strategic advantage over its competitors.
 Weakness: is an inherent limitation or constraint, which creates
a strategic disadvantage
 Opportunity: refers to any factor that offer promise or
potential for moving closer or more quickly towards the firms
goal
 Threat: is any factor that may limit or impede the business in
the pursuit of its goals

 Discussion
classify them as internal and external factors to the firm.
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Steps in business setting

To be a successful entrepreneur, one major determinant factor is
1. The first key to success in any manufacturing activity is to
the choice of a good business idea. To select the best business idea,
the following general steps needs to be pursued. select the right product. These must be examined with a
Define objective, identify problem, select best alternative, analyze view to assess:
the possible alternatives …
a.The marketing aspects
a. Identify your problem b.Technical aspects
b. Define your objectives c. Financial aspects
c. Identify, develop and analyze the possible alternative
d. Select the best alternative in light of the specific criteria set to the better
fulfillment of the objective.

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3. Implementation of the detailed project report. Includes:

2. Having selected a product, a detailed project report to be a. Deciding on form of ownership and registration
prepared. This will cover the following aspects.
b. Obtaining finance ,Obtaining license
… c. Establishing necessary infrastructures
a. A detailed estimate of demand is to be made.
b. Technical specifications of the process should be carefully studied. 4. Once all the required authorizations and sanctions have been obtained,
c. The equipment required and their sources are to be specified simultaneous action is to be taken for the following. Pre-commissioning
requirement
d. Requirement of space.
e. The total cost of the project to be worked out, the means for financing it
…
identified a. Ordering machinery from suppliers
f. The economics of the entire scheme at projected operating level is to be b. Obtaining utilities like power and water connections after constructions of
assessed. shed, if necessary.
c. Recruitment of staff,
d. Arranging supplies of materials
e. Arranging for distribution of the products
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5. Once these are complete, the plant is ready for commissioning trial
run may be made. Commissioning of plant, Includes:

a. Trial run of machineries Conducting feasibility study and

b. Promotional activity for the product
developing business plan…
c. Introduce the product to the market and obtain feedback

6. The unit is then ready for commercial production.

a. Commercial production

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Conducting Feasibility study Assessing the Feasibility of a New Venture…

Assessing the Feasibility of a New Venture

 A feasible business venture is one where the business will

 As the name implies, a feasibility study is an analysis of the viability  generate adequate cash-inflow and profits,
of an idea. It focuses on helping answer the essential question of  withstand the risks it will encounter,
“should we proceed with the proposed project idea?” All activities  remain viable in the long-term and meet the goals of the
of the study are directed toward helping answer this question. founders.

 Entrepreneurs with a business idea should conduct a feasibility

 The venture can be a new start-up business, the purchase of an
study to determine the viability of their idea before proceeding existing business, franchise, an expansion of current business
with the development of the business. Determining early-on that a operations or a new enterprise for an existing business.
business idea will not work, saves time, money and heartache later.

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Elements in Evaluating New Ventures Guidelines of business feasibility study

 Market Opportunity
 Industry Trends & Regulatory Matters I. Description of the Business
 Proprietary approach …is the intellectual property stand alone
or platform IP II. Market Feasibility: Enterprise description, Enterprise
 Technology impact - what is the nature and outgrowth of the competitiveness, Market potential, sales projection, Access
technology? to market outlets …
 Financials - is the model articulated for how products will be sold,
who will buy them, how much revenue is projected and by when?... III. Technical Feasibility: Determine facility needs,
 Team - does the team have the requisite skills to move all aspects of Suitability of production technology, Availability and
the company forward? suitability of site, Raw materials, HR …
 SWOT is a series of steps one has to consider in evaluating a
business opportunity and arriving at a decision on starting a business
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or not.

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Guidelines FS… DEVELOPING A BUSINESS PLAN

IV. Financial Feasibility: Estimate the total capital WHAT IS A BUSINESS PLAN?
requirements, Estimate equity and credit needs and  A business plan is a comprehensive set of guidelines for a new
determine sources, Budget expected costs and returns venture.
of various alternatives…
 A business plan is also called a feasibility plan that encompasses the
V. Organizational/Managerial Feasibility: legal full range of business planning activities, but it seldom requires the
structure of the business, Business founders, depth of research or detail expected for an establishment enterprise.
VI. Study Conclusions: it contain the information you
will use for deciding whether to proceed or not with  A business plan would present your basic business idea and all related
creating the business operating, marketing, financial and managerial considerations.

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THE PURPOSE OF BUSINESS PLAN

 What ever the name, it should lay out your idea, describe where
you are, point out where you want to go, and how you propose to 1. It can help the owner/manager crystallize and focus his/her idea.
go there.
2. Although planning is a mental process, it must go beyond the realm of
thought. Thinking about a proposed business becomes more rigorous as
 The business plan may present a proposal for launching an entirely rough ideas must be crystallized and quantified on paper.
new business. More commonly, perhaps; it may present a plan for
a major explanation of a firm that has already started operation 3. It can help the owner/manager set objectives and give him a yardstick
against which to monitor performance.

4. It can also use as a vehicle to attract any external finance needed by the
business. Eg. To get fund…

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WHEN THE BUSINESS PLANS ARE PRODUCED?

PURPOSE…

Discuss
5.It can convince investors that the owner/manager has identified  At the start up of a new business: After the concept stage of
high growth opportunities. initial ideas and feasibility study, a new business startup may go through a more
detailed planning stage of which the main output is the business plan.
6. It entails taking a long-term view of the business and its
environment.  Business purchase: A detailed plan, which tests the sensitivity of
changes to key business variables, greatly increases the prospective purchasers
7. It emphasizes the strengths and recognizes the weaknesses of the understanding of the level of risk they will be accepting, and likelihood of rewards
proposed venture. being available.
 On going: Ongoing review of progress, against the objectives of either a
8. The plan can uncover weakness or alert the entrepreneur to startup or small business purchase, is important in a dynamic environment.
sources of possible danger  Major decisions: at a time of major change, For example, the need for
major new investment in equipment or funds to open a new outlet. It may be
linked to failure, such as a recovery plan for an ailing (or in bad condition)
business.
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WHO PRODUCED THE BUSINESS PLAN? THE FORMAT OF A BUSINESS PLAN

1. Where are we now?
Managers:, Owners:, Lenders:
 An analysis of the current situations of the market place, the
competitions, the business concept and the people involved. It will
WHY THE BUSINESS PLANS ARE PRODUCED? include any historical background relevant to the positions to date.
 Assessing the feasibility and viability of the business/project: it is in every ones
interests to make mistakes on paper, hypothetically testing for feasibility, 2. Where do we intend going?
before trying the real thing.  Qualitative expression of the objectives, quantifiable targets will
clarify and measure progress towards the intended goals.
 Setting objectives and budgets: having a clear financial vision with believable
budgets is a basic requirement of everyone involved in a plan.
3. How do we get there?
 Calculating how much money is needed: a detailed cash flow with assumptions
 Implementing of accepted aims is what all the parties to a plan are
is vital ingredient to precisely quantify earlier the likely funds required.
interested in as a final result.
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COMPONENTS OF BUSINESS PLAN (OUT LINE OF A BUSINESS PLAN)

OUT LINE OF A BUSINESS PLAN…
I. Analysis of the current situation (where are we now?)
1. Identification of the business
2. The key people
a. Introduction
- relevant history and background
a. Existing management- Outline of background experience
- Proposed date for commencement of trading /beginning of a plan , skills and knowledge.
b. Names -Names of the management team
-name of the business and trading name b. Future requirement -gaps in skills and experience and how
- name of the managers/owners they will be filled ,- future recruitment intentions
c. Legal identity
-company/partnership/sole-trade/cooperative
- details of share or capital structure
d. Location
-address-registered and operational
- brief details of premises.
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e. Professional advisers, -Accountants, solicitors, bank

II. FUTURE DIRECTION (where do we intend going?)

OUT LINE OF A BUSINESS PLAN…

3.The nature of the business

a. Product(s)or service(s)-Description and applications
-Key suppliers
-Planned developments of product or service
b. Market and customers
–Definition of target market, classification of customers
- Trend in market place
c. Competition- description of competitors; strength and
weakness of the major competitors.

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III. IMPLEMENTATION OF AIM (how do we get there?)

OUT LINE OF A BUSINESS PLAN…

1. Management of resources
a) Operation:-premises, materials, equipment, insurance, management
3. Money: financial analysis
information system.
a. Funding requirement- start up capital, working capital,
b) People/Human resource/- employment practices, recruitment, team
asset capital, timing of funds required, security offered.
management, training etc
b. Profit and loss:-- 3 years forecast, sales variable costs, profit,
overheads, net profit
2. Marketing plan c. Cash flow:-- 3 years forecast, receipts, payments, monthly
a)Competitive edge- unique selling point of business (Critical products and cumulative cash flow
or service characteristics or uniqueness in relation to competitors) d. Balance sheet - use of funds, source funds
b) Marketing objectives - specific aims for product or service in the
market place
c) Marketing methods- product, pricing, promotion, distributions=4ps Assignment 3: write the difference b/n feasibility
study and business plan briefly with examples
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(min 2pages); DL=next week