The Sigalagala National Polytechnic

Faculty of Commerce
Department of Management

BUSINESS PLANNING GUIDELINES

BUSINESS PLAN FORMAT

There is no single format that must be followed all the time when one is making a
business plan. However there are guidelines that suggest the kind of information
entrepreneurs should include in their plans to make them acceptable to different
recipients.

COVER PAGE
 The cover page should include the information;
 The name of the business.
 The name of the plan recipient.
 The name, addresses and telephone numbers of the principal.
 Copy number of the business plan
 Confidentiality statement.

TABLE OF CONTENT
Business plan should have a complete table of content including section headings and
page numbers

EXECUTIVE SUMMARY
The most critical part of a business plan is the executive summary, because it determines
whether the remainder of the plan will be read or not. The summary should be written
twice before any other sections of the plan and again when the plan has been completed.

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The first writing provides an outline of the information the entrepreneur will expand in
the plan and the second writing reflects what has actually been included in the plan. The
summary should generally be no more than two pages and should provide readers with
the following information:
 A brief description of the company and its products.
 The background and qualifications of the principal
 The size and growth prospects of the market
 The investment needed and the amount contributed by the principal
 The amount of money needed from outside sources and then they will be repaid or
be able to recoup their investment.

CHAPTER 1: BUSINESS DESCRIPTION

The first chapter of the business plan is description/background information of your
business. In this chapter, just as the chapter title denotes, you are expected to provide a
description of various issues of your potential business, under the subtopics below. No
listing, or note-form kind of write ups will be acceptable. You are expected to use
continuous prose, complete sentences in well organized paragraphs. Make your work
readable and communicate your ideas clearly. The questions posed under each subtopic
should be a guide for the guide of information being sought from you, regarding that
particular part of the business plan.

1.1 Business Name

Select a suitable name for your business. The name you choose, should show some
creativity, originality and relevance to the kind of business being operated. You should
also come up with a name that is easy for customers to remember. (Note. you could check
on naming trends for your kind of business).

1.2 Business Location and Address

The location of a business is very important. Before selecting the business location, there
are certain factors you need to consider. Do so and then, describe clearly, your physical

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address i.e. city or town, Street, building, floor, etc. In addition, show the postal address
of your business, telephone contact. E-mail address and website if applicable.

1.3 Form of Business Ownership

There are three different kinds of ownership options available to you. You could go into
business alone (Sole Proprietorship) or with partners (Partnership) or you could
incorporate a private company.
a) What is the form of your business ownership?
b) What role, will you and other business owners in case of partnership, play in the
business?
c) How much do you intend to invest in the business? What are your sources of
business finance? If it is a loan, how do you plan to obtain it, from where and how
do you plan to repay it? (it would be advisable for each point to be presented in its
own paragraph)

1.4 Type of Business

This part describes the major and minor activities to be carried out in your business. It is
this part that ill form the basis for your job analysis, job description, and determination of
the kind and number of employees required later in chapter 3.

What will be the major activities to be carried out in your business?

Are there other minor activities? Which ones?

1.5 Products/Services
Products or services of your business are the mainstay of the business. For customers to
come to you they should know exactly what you are selling to them. As you describe
your products or services, remember customers do not just buy the tangible item or the
named service. They go for much more than that. This should come out in your
description of the products or services you intend to offer the market.
a) What exactly are you planning to sell to your customers?

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 b) What will be the features (describable) of your products/services? (Note: size.
Shape, texture, quality, colours, variety etc. in case of products; or quality,
promptness, etc.
c) What are the unique features of your products/services that are likely to give them
a competitive edge over what is being offered by your competitors?
d) Show how you plan to develop or innovate new products or services to beat/cope
with competition.

1.6 Justification of Business Opportunity

There are many business opportunities existing. Yet, you chose this particular one. Why?
In this section, you are expected to justify your choice for coming up with this kind of
business. Do so by giving at least five (5) reasons why you prefer this business
opportunity.

1.7 The Industry

Every business operates within a bigger picture. It’s not the only one offering the kind of
products or services in the market. There are other businesses doing the same. Grouped
together, all the business ventures enterprise offering similar products services form what
is referred to as Industry.
a) What industry will your business be operating under?
b) How can you describe this industry in your analysis? Is it growing, declining or
stagnant? Provide evidence for whatever industry analysis you come up with.
c) What are the trends or future prospects of the industry that could either cause a
threat. or present opportunities to your business? Again provide documentary
evidence.

1.8 The Goals of Business

Business goals provide direction for the business. They also set targets to be met. In this
section, you are expected to describe your business goals. Your goal statements should be
SMART i.e. each goal statement should show a specific target, which is measurable,

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attainable, and realistic and the time frame within which it can be achieved. Select areas
in which you set specific targets.

1.9 Entry and Growth Strategy

As a new business, you will be entering a market that is already occupied by other market
players. Some of them have been their, for long and are well established. Some have
already cut for themselves a market niche and a segment that they are serving. Some are
starting like you. Thinking ahead into the marketing plan, picture the nature of your
competitors and answer the following questions.
a) How do you plan to attract first-time customers to your business? How will you
create awareness about your business?
b) How do you plan to retain the customers and ensure there is always a repeat
purchase?
c) For every business, there are certain areas of strength and weakness. What are
yours? For ever; business, there are certain threats to the business. What are
yours? What opportunities do you foresee that are likely to present your business
with a growth or success indicators?
d) How do you plan to expand or grow the business? (Be comprehensive about this).

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 CHAPTER 2: MARKETING PLAN

2.1 CUSTOMERS
One of the key elements that contribute to business success is selling a product or service
that satisfies the needs of your customers, to be able to identify a product or service that
meets these criteria, the starting point is identifying the customers, and profiling them, in
order to know exactly what they will be buying from you. In profitability your customers,
the following questions must be address:
Who exactly are the targeted customers for my business? What group or groups of people
are likely to buy from my business?
 Where are they located? Or how do they access my business?
 Wh1at is their occupation? What is their income profile? E.g. high level income
bracket, middle level or low income earners?
 What is their buying behaviour? Do they buy this kind of product or service on a
daily, weekly, monthly, annually or how else? (Frequency)
 What quantities are they likely to buy, how often? (Demand rate)
 I-low are they likely to pay for their purchases? Is it cash over the counter? By
cheque? Credit card or how else?
 Is there any special need that will drive/motivate them to buy from my business
rather than competitors?
 Is there any special group among these customers that has unique demand or
requirements from the rest? (Market segmentation)
Once you address yourself to the issues raised above, you will have provided adequate
profile for the kind of customers you are targeting.

2.2 MARKET SHARE

It is impossible to serve everybody in the market. It is actually to meet the needs of all
customers. So do not try to be everything to everyone. Instead you select the right target
group to sell to. This group however, plus those you are not counting as your customers,
constitute the total market for the kind of product or service you are offering.

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It is important to remember that you are entering a market that already has other
suppliers, whom von should identify as your competitors. As you do this, you realize that
you are competing for the same market and you are likely to capture only a certain
percentage of the market. This is the percentage von are required to determine here. What
size of the market are you likely to capture in the initial stages of the business? What % is
this size of the whole market size? How do you justify your ability to capture the % you
are have stated? Illustrate this diagrammatically, preferably using a pie chart.

2.3 COMPETITION
Business competitors are those other companies offering the same products or services as
your business, to the same customers or in the same market area. To be a competitor, the
business must be operating relatively at your level, near you and offering similar or
substitute products that present the customers with an alternative to your products or
services.
 Who are your competitors? Mention them by name and where they are located, in
proximity to your business.
 Analyze each competitor on their own, show their strengths and weaknesses in
comparison to your business.
 Show how you plan to cope with competition.

2.4 ADVERTISING AND SALES PROMOTION

Advertising creates awareness and provides knowledge about your prospective products
or services to the target customers. There are many methods of advertising, but you need
to select the most effective methods that will work for your kind of business products or
services, and also that are likely to reach your target customers without extra and
unnecessary costs.
 How do you propose to advertise your products or services?
 How long or how frequently do you plan to advertise?
 How much do you plan to spend on this?
 How will you measure the effectiveness or success of your advertising effort?

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Sales promotion is an exercise carried out for the purpose of increasing sales volume. It is
not an everyday thing, but a campaign that is well planned and executed for only a
limited duration. As in advertising, there are many options in sales promotion. But not all
will be applicable to your business. Select the most cost effective methods of sales
promotion.
 What techniques will you employ to ensure that customers are induced to buy
more?
 How and when do you plan to execute this?
 How much do you plan to spend on this?
 How will you measure the effectiveness or success of your advertising effort?

2.5 PRICING STRATEGY

A business raises its income buy selling its products for a price that is able to sustain it
and also give an acceptable profit or return on investment. Setting a price for some
products or services can be easy and straightforward, while for others, it can be
complicated. You need to strategize on how you xviii arrive at your selling price for the
product or service you are offering. Certain factors will however, influence your pricing
techniques.
 What factors will you consider when setting prices for your products or services?
 What pricing techniques will you employ to ensure effective and sustainable
value for your effort?
 Determine prospective prices for your products (of course subject to change with
prevailing circumstances at the time you are actually operating the business.)

2.6 SALES TACTICS

Methods of selling are diverse and applicable to certain circumstances. You could sell
your products or services directly to your customers over the counter, or through personal
service. But you could also sell indirectly through other agents like retailers, distributors
etc. In selecting your methods of selling, it is important to bear in mind the most suitable
methods that are applicable for what you are offering, and also for the target customers.
 What methods of selling do you plan to employ?

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  What customers’ services or customer care issues to you plan to introduce in your
business to maximize customer satisfaction?
 Any after sales services to be offered to your customers? In what way?
 How do you plan to promote good public relations in your business?

2.7 DISTRIBUTION STRATEGY

Distribution strategy simply refers to the effort made or method employed to ensure that
the products or services reach your target customers.
 What channels of distribution do you plan to use?
 What are the cost implications of the choice you have made above? (if any)
 What problems do you anticipate in your distribution effort?
 How do you propose to solve those problems?

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 CHAPTER THREE: ORGANIZATION & MANAGEMENT PLAN

This chapter outlines the management structure; giving details of the organization outline
in as far as the lines of authority and responsibility are concerned. In this chapter, you are
expected to describe how you plan to manage your business, by identifying and
addressing several important management factors that include:
 Owner’s role in the management of the business
 Key management team
 Key tasks or job activities to be carried out in the business
 Relevant personnel, their qualifications and duties
 The recruitment procedures
 Staff training
 Staff promotion
 Staff compensation or payment of salaries
 Incentives that can motivate employees to give greater outputs and contributions
 The legal aspects and requirements of the business
 The additional services required to enhance the success of the business that can be
outsourced.
It is important to bear in mind that despite the fact that most small businesses may not
have a lot of money to pay their workers a good salary or even to employ qualified
personnel, this does not diminish the need for the same. Part of the testing here is to see
how you plan to reconcile your scarce resources with the business needs for qualified and
skilled personnel. Research to benchmark with the best practices in your line of business
may be a key to writing a successful management and organization plan.

The chapter is outlined in the following sub-topics.

3.1 Business Manager and Qualifications

The business manager here refers to the overall manager of the business. Various titles
can be used including: Managing Director (private company), Managing Partner
(partnership) and Owner Manager (sole proprietorship). Ensure you select the appropriate
title for your business manager.

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  Describe the role of the business manager and show what qualifications
(academic and professional) he/she should have to effectively manage the
business.
 What will be the major sections or departments in your business? How will they
be managed or supervised?
 Draw an organization chart to summarize your organization and management
structure described in the first two points.

3.2 Key Personnel

This is the team that should assist the business manager in managerial roles such as
heading various departments, making decisions jointly with the overall manager and
supervising the work in those departments or sections. As you pick on your key
personnel, remember that each job title has certain implications. The job titles you select
should correspond to the needs of your business, as well as to your ability to pay a good
salary to those who hold these titles. If you need a particular type of professional, but you
realize you are unable to pay them, there is no cause for alarm. The final part of’ this
chapter provides for that. You could place this professional as your support service that
you will outsource from time to time, as the need arises, since you cannot place them on
your permanent pay role. Again study the trends and bench mark with successful
businesses in your line of business, operating at your level.

For example, you need the services of a qualified accountant who may have the highest
qualifications i.e. CPA (K). But, the salary level of such a person is ranging between 3
50.000 - 500,000 +. Those paid the least are earning above 60,000 shillings. The option
left to you is to employ a lower cadre of professional in this area, e.g. Accounts Clerk
with CPA 1 who earns 15,000 – 30,000. You can then outsource the services of the
Accountant with CPA (K) for auditing or financial management consultancy.
 For each of the key personnel, outline clearly what qualifications, qualities etc
you will be looking for.
 Show the duties and responsibilities of each.

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3.3 Other Personnel
In this part, you identify all your other personnel, according to the tasks or activities to be
carried out in your business. For each, show the qualifications expected and duties and
responsibilities that are going to be assigned to them. Qualifications should always
correspond to the duties and responsibilities an employee is expected to undertake.

NOTE: Again here, as in key personnel, ensure you use appropriate job titles for your
potential employees.

3.4 Recruitment, Training and Promotion

This section is farther divided into three: recruitment training and promotion.

Recruitment:
 Describe in detail, how you plan to identify and attract qualified personnel for
employment into your enterprises.
 Describe how you will carry out your selection process to ensure that you end up
with the best.

Training
All employees need some form of training, to enhance their job performance. Once
employed, the workers need to be taken through some form of induction or orientation
process to familiarize themselves with how the work is done in your enterprise.
 Describe how you plan to induct or orientate new employees.
 Describe how else you plan to train, or encourage training and development
among your employees, and how this process will be carried out, where it will be
done and who meets the cost of training.

Promotion
Upward mobility is one of the motivating factors for workers. Every employee expects to
be promoted to a higher rank after a satisfactory period of time in employment.
 Describe your criteria for promotion
 Describe your methods of promoting your employees.

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3.5 Remuneration and Incentives
This section is divided into Remuneration (Salaries) and Incentives (motivating factors).

Remuneration
Every employee deserves to be paid, and paid well for the job they do. Your employees
will be to be paid a salary, and some may have to enjoy certain allowances. Show how
you plan to compensate your employees. Use the format below:
SN Job Title Basic salary Allowance Total monthly Total annual
(Kshs) (Kshs) salary salary
1.
2.
3.
4.
5.
6.
Total XXXXX XXXXX

As said before, incentives represent the extras, over and above the salary and allowances.
Incentives can be both financial e.g. bonuses or non-financial e.g. good working
conditions etc.
 What financial incentives do you plan to give to your employees?
 What non-financial incentives to you plan to give to your employees?

3.6 Licenses, Permits and By-laws I

For a business to operate, it has to obtain certain licenses and permits from the relevant
authorities.
These documents vary from one business to another. You should do some research and
find out:
 What kind of licenses you will need to operate your business? And where you will
obtain then from, for how much and how often?

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  What special permits must you obtain from government authorities to allow you
to operate your business? (if any). Where will it be obtained from, for how much
and how frequently will you need to renew it?
 Are there any special City Council. Municipal Council by-laws you have to
adhere to? Give details of what is expected of you.

3.7 Support Services

These represent all the necessary services that can enhance the success and efficiency of
the business, yet they are not required continually. They can therefore be outsourced at
regular intervals, depending on when they are required. Examples include: financial
management consultancy, legal services, banking services, insurance, technical services,
environmental management consultancy etc.
 Identify the support services you will need for your kind of business and for each
of them show the source i.e. the specific service provider, the exact services that
will be offered, how often and in some cases, for how much?

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 CHAPTER FOUR: PRODUCTION/OPERATIONAL PLAN

This chapter is a key to the success of the business. Just like marketing and finance,
operations or the production function of the business is very important. It is the technical
part that takes care of the aspects of the business that result in the final product or service
for the customer. How this is achieved, must be planned for carefully to ensure that the
output is acceptable and of good quality that customers will be willing to spend their
money one. The chapter is divided into various sections that address the issues of:
production/operational facilities; production/operational strategy; production/operational
process and the regulations likely to affect the operations of the business.

4.1 PRODUCTION/OPERATIONAL FACILITIES & CAPACITY

To be able to process products and services, a business needs to carefully identify the
facilities to be used for that. These include the machines, tool and equipments that may
be required for operations. Other facilities include furniture and fittings, necessary for
smooth operations. The entrepreneur can also identify other facilities such as transport
vehicles that may be hired from time to time or other sophisticated equipment that cannot
be afforded during the start-up phase of the business.
a) Give a brief description of your business requirements in terms of the resources it
requires for production.
b) Format those requires in the following:
Facility Details
Machine/ No. Capacity Cost per Total Supplier/Source
Tools/ Required Unit Cost
Equipment

Total XXXXX

Furniture and
Fittings

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Total XXXXXX
c) Describe your business premises giving details of the room/hall/yard etc: how it will be
partitioned, what task will be carried out where etc. Follow up with a drawing (sketch) to
illustrate the layout of your premises.
d) Provide any other relevant information on production facilities that may be unique to
your type of business.

4.2 PRODUCTION/OPERATIONAL STRATEGY

Production planning and control is important if the operations of your business are being
carried out effectively and efficiently. In this portion, you describe how your business
operations will be organized, costs involved and techniques of ensuring efficiency.
a) Describe in detail, how your business operations/production activities will be
supervised, who will do the supervision, what measures will you put in place to
ensure that costs are minimized, wastage of resources eliminated, production or
operations are optimized and resource utilization is used efficiently.
b) Provide the costs involved in your operations as follows:

Cost of Materials Per Month

Item Amount (Ksh)

Total costs XXXXX

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Cost of Labour Per Month

Personnel Salary/Month

Total monthly costs XXXXX

Overhead Costs
Overheads are expenses that the business pays for a monthly basis, or otherwise,
expenses incurred as operational costs, mostly for the amenities, energy, and other
utilities that support the efficient running of the business. These may include: electricity,
water, telephone, insurance premiums, transport, postage, e.t.c. Show what overhead
costs your business will incur. Follow the format below:

Item Amount (Ksh)

Total costs XXXXX

Total cost of production per month

This takes into account the costs for materials, labour and overheads. This gives the total
cost of production/operations that the business will incur every month.

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 Item Amount (Ksh)
Cost of materials
Cost of labour
Overhead costs
Total costs XXXXX

4.3 PRODUCTION/OPERATIONAL PROCESS

The production process describes the procedure to be followed in ensuring that the
product or the service gets to the final customer. Give a detailed step-by-step process of
your operations, right from the time the customer makes an order, to the point where the
customer pays for the product and leaves.

NOTE: Do not just list the steps. Give details of exactly what happens in each stage.

4.4 REGULATIONS AFFECTING OPERATIONS

Production or operations of any business are affected and regulated by certain
government laws and regulations. These may be varied ranging from taxation laws,
factory act, etc. Find out which government regulations are likely to affect your
operations. Show how you plan to adhere or fulfill the requirements.

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 CHAPTER FIVE
FINANCIAL PLAN

5.1 PRE-OPERATIONAL COSTS

Item Cost
Business registration
Trading licenses and permits
Rent + Rent deposit
Insurance policy
Machines, equipment and tools
Installation expenses
Stock
Installation of electricity
Water installation
Telephone installation
Internet installation
Total Cost

5.2 Working Capital

Item Amount

Total Working Capital XXXXXXX

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PROJECT CASH FLOW STATEMENT

YEAR 1 MONTHS
ITEM Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec Total
CASH INFLOW
Opening balance
Cash sales
Other cash inflows
Total Cash Inflow

CASH OUTFLOW
Purchases
Payment to creditors
Wages/Salaries
Rent
Water
Telephone
Electricity
Transport
Stationery
Mail
Loan repayment
Interest
Repairs
Advertising
Taxes
Others
Total cash Outflow
Net Cash
Explain the assumptions you are making.

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PRO-FORMA INCOME STATEMENT
Pro-forma income statement for the year ending ………………………
ITEM YR 1 YR 2 YR 3
Sales
Less cost of goods sold
Gross profit
Expenses
Wages
Rent
Water
Telephone
Electricity
Advertising
Stationery
Postage
Transport
Depreciation
Loan payment
Interest
Repairs
Total expenses
Net profit before tax
Tax
Net profit before tax

Explain the assumptions you are making

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PRO-FORMA BALANCE SHEET

ASSETS At Start End of YR 1 End of YR 2

Current assets
Cash
Debtors
Stock of finished goods
Stock of raw materials
Work in progress
Total Current Assets
Fixed Assets
Machines and equipment (cost)
Depreciation
Vehicles (cost)
Depreciation
Furniture and fittings (cost)
Depreciation
Other fixed assets (cost)
Depreciation
Total Fixed Assets
TOTAL ASSETS

LIABILITIES
Current Liabilities
Creditors
Short-term loans
Bank overdraft
Total current liabilities
Long-term Liabilities
Bank loan
Owner’s equity
Net profit (retained)
Total Liabilities and Equity

Explain the assumptions you are making

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CALCULATING BREAK-EVEN POINT

Total Contribution Margin

= Sales – Total variable costs
Amount of Sales =
Variable Costs (List all the variable costs)
Total Variable costs
Sales – Total Variable Costs

Calculate the Contribution Margin

Contribution margin% = Contribution Margin x 100/Sales

Determine the total fixed costs i.e. operating express for year 1:
List all fixed costs
Total fixed costs

Calculate the break-even level of sales in shillings:

Break-even level = Fixed costs/Contribution margin %

Break even units (level of production at B.E.P.

= Contribution margin/fixed costs

Profitability

PROFITABILITY RATIOS
Gross Profit Ratio:
= Gross Profit x 100/Sales

Net Profit Ratio:

= Net Profit before Tax X 100/Sales

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Return on Equity:
= Net After Tax X 100/Owners equity

Return on Investment:
= Net Profit after Tax X 100/Total investment

DESIRED FINANCING
ITEM AMOUNT (KSH)
Pre-operational costs
Working capital
Contingency/Miscellaneous
Total Desired Financing

PROPOSED CAPITALIZATION
SOURCE AMOUNT (KSH)
Personal Savings
Friends/Relatives Contribution
Bank Loan
Total Investment

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KEY PEOPLE
Key people section identifies key managers and gives details of their experiences and
background. Also important in this section is the number of employees. Some
information about the required employees may be included:-
 Responsibilities and skill requirement of employees
 Recruitment and training
 Benefits
 Appraisal, e.t.c.

CONCLUSION
The conclusion highlights the important items needed in the business plan; it should
summarize the main points that have been discussed in detail in each of the previous
sections.

APPENDICES
Appendices should include detailed descriptions and diagrams of the product, Market,
research methodology and results, sample advertisement, break–even analysis
calculations, résumé’s of key people and any other vital information.

PRESENTING THE BUSINESS PLAN

Many investors and lenders will request a written business plan before they agree to meet
with the entrepreneurs to discuss the plan. Entrepreneurs presenting their business plans
should keep the following in Mind:-
 Keep it short and to the point
 Use visual Aids e.g. Bar charts, graphs, flip charts etc.
 Involve other key personnel if there is a management team starting the company,
each should prevent the part of the plan for which he will be responsible.
Try to demonstrate the product or service. If possible bring a sample.

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