plan your business and work your plan -a presentation at the enugu sme week theme : nurturing and...

PLAN YOUR BUSINESS AND WORK YOUR PLAN -A PRESENTATION AT THE ENUGU SME WEEK THEME : NURTURING AND SUSTAINING SMEs IN ENUGU STATE BY ENGR. CHIKE MADUEKE npom CEO, INDEV GROUP

All over the world SMEs represent the core engine of economic growth. In Nigeria, the belief is the same but the SME sector is yet to significantly prime the economy despite many earlier intervention programmes The most recent of these intervention is the CBNMSME Development Fund launched on 19 th August 2014 by President of Nigeria. From the pictures being presented here it seems there is a deliberate effort to get it right by adequately preparing the SMEs to take effective advantage of the scheme. The Indev Group is therefore, delighted to be part of the efforts at getting it right for SMEs in Enugu State. Hence I consider this workshop and planned discussions very apt Therefore whether you are an entrepreneur by choice, a business owner by accident or inheritance, an aspiring entrepreneur by necessity, you surely need to Plan and also work your Plan in order to succeed. This is the core message of this paper. INTRODUCTION

A BUSINESS PLAN is a write up that answers the questions; Who? What? Why? When? Where? With? How? and Other matters of our business intent The 6WHO WHAT IS A BUSINESS PLAN

A Business Plan is a Confidential Written Document of what you desire to achieve. It is peculiar to you and encompasses Your Thoughts, Your Vision, Your Strategies for Success, The Innovations you intend to bring into the business in order to beat competitors etc. It remains a guide in the course of the business Therefore only relevant stakeholders should have access to it. These include: The Business Promoters Board of Directors and Shareholders Lenders and creditors Prospective investors Financial institutions SME Centre in this particular case WHY A BUSINESS PLAN

Because a Business Plan takes a holistic view and assessment of a business it Defines the business and Scope Identifies target customers, competitors, new markets, acceptable pricing regime and key market conditions that lead to success. It also identifies tools and equipment, sources and brands Helps an enterprise to take proactive actions to halt challenges that can harm the enterprise. It becomes an agreed covenant by all drivers and Stakeholders of the plan. It Helps in funds sourcing by detailing the amount, time, type and sources of funds required. It Serves as an explanatory material for creditors on the activities of the enterprise. It is a give-them-before-they-ask (GTBTA) strategy. It shows seriousness and can be used as a memorandum of information that help prospective investors make up their mind. Preparing a BP gives total ownership and understanding to the promoters It becomes the GUIDE for the project and improves management skills of Managers in the enterprise OF WHAT USE IS A BUSINESS PLAN?

Generally, we need a business plan; AS A WRITTEN EVIDENCE OF OUR INTENTION PLAN SECONDLY AS A GUIDE FOR OUR BUSINESS WORKING THE PLAN This is applicable both for existing businesses and for Start-ups. Therefore we shall take this discussion in two parts to elucidate the content of each and the importance in a business WHY DO WE NEED A BUSINESS PLAN?

BUSINESS PLANNING PART I

According to United Conference and Trade(UNCTAD 2002) a standard Business Plan must be: Comprehensive, Current, Factual, Well Structured and Reader-friendly. and it must have A Time Span Therefore in preparing a Business Plan, we MUST have the afore mentioned in Mind A GOOD BUSINESS PLAN

Generally, a business plan is a well prepared document that tells the detailed story of the business as in: WHO you are and the status of the enterprise or promoters, the past, present and expected future status. WHAT it is doing and or it intends to do WHY it intends to do so and the intended benefits WHERE the enterprise is and wants to be WITH which resources and means that will get the enterprise to the desired destination. WHEN it intends to do it and HOW it intends to do it as to be profitable OTHER issues concerning the business including Risks and Competition and the general Economic and Political climate A GOOD BUSINESS PLAN 6WHO

No two Business plans are the same. A typical BP contains 5-8 chapters or sections including Appendices, References, Tables etc. Generally a standard BP starts with the Executive Summary and ends with the Tables or Appendices. A standard business plan can be laid out as follows Cover Page Content Page Executive Summary Chapter 1. Business Overview Chapter 2. Costing and financing plan Chapter 3. Organisation and Management Chapter 4. Technical Review Chapter 5. Market and Competition Chapter 6. Financial Analysis and Projections Chapter 7. Conclusion Appendices Tables A TYPICAL BUSINESS PLAN

No two Business plans are the same. A typical BP contains 5-8 chapters or sections including Appendices, References, Tables etc. Generally a standard BP starts with the Executive Summary and ends with the Tables or Appendices. A standard business plan can be laid out as follows Cover page Content Page Chapter 1. Executive summary Chapter 2. Business Concept and profile Chapter 3. Market strategies Chapter 4.Competitive analysis Chapter 5. Design and development plan Chapter 6. Operations and management plan Chapter 7. Financial Considerations Chapter 8. Conclusion Tables and Attachments A TYPICAL BUSINESS PLAN PROFILE

The BP opens up the enterprise. It gives a brief history of the enterprise so that the reader will know how it is with business. The history will generally address the following: a. Business ownership b. What triggered the establishment of the business c. Sponsors or stakeholders in the business d. Legal status to date e. Summary of operational results in the say, 3-5 years f. Any unique of the products or services. ii. Tenure The BP must have a time frame within which it remains valid. The tenure is usually between 3-5 years. However, the time span of each enterprise depends on a number of factors including type of industry, size, age, and structure of business. Samples. KEY CHARACTERISTICS OF GOOD BUSINESS PLAN

S/N BUSINESS TYPE LIKELY TENURE TENURE DETERMINANTS 1 Service Provision eg. ICT Short; 1-2yrs Market is open to all. Cost of operation is low Technology changes fast 2Agriculture ; Palm, rubber, etc,Long; 3-7yrs Long gestation period 3 Agric-Yam, cassava, plantain, tomatoes, citrus, etc Short; 3-12mths Short gestation period 4 Animal rearing;Poultry,fishery piggery, snail breeding, Short;6- 12mths Short maturity period 5EducationShort; 1-2yrsHigh labour turnover 6Family businessLong;5-10 yrs High commitment 7.Capital intensive businessLong 3-5yrsLikely to incur losses in first 2 yrs. 8In stable EconomyLongPlans can endure 9.In unstable economyShortMarket & policy volatility 10Hi-tech businessLongLong Pay back period TENURE A Good Business Plan must have a time frame within which it remains valid. The tenure varies depending on the business type, sector, size, etc. Some Examples are as follows

A business plan is firstly initiated by the promoter(s) The person with the Vision The Promoter(s) can write their own Business Plans Using guidelines from known Templates There are also a handful of materials in the internet for use in the writing of a business plans A qualified Consultant is however a best person to put a business plan together This is because he/she draws up from a wealth of experience in the particular sector and is able to easily identify Risks, Cheap Funds and good interest rates and conditions that will benefit the Promoters and the Business In most climes, Lenders and financial institutions tend to TRUST the consultant as the Promoter are often biased and may not give full Disclosures In existing businesses, It is advisable to involve as many workers as possible in order to achieve technical, psychological, and team building milestones. Participating staff will surely identify with targets, timelines, resources and the efforts set out in the plan and they are the best in WORKING THE PLAN WHO PREPARES A BUSINESS PLAN?

The Cover Page is as important as the contents of the document. In fact, the way you dress your BP cover is the way you will be addressed by the reader. Consequently, a little effort should be spared to present an attractive document professionally prepared on a quality paper to contain clear identification marks including: Business Logo where available Legal name Office address(es) Phone number Web and e-mail addresses You may also put the name of the contact person on the cover page for easy communication. Note that the cover page presents the first impression of both the enterprise and the promoter/CEO. We now discuss the various Chapters of a BP. COVER PAGE

This is the most important chapter of the BP. It takes the reader through a synopsis of the entire BP and beckons or repels the reader. The high points of an ES include brief but key verifiable information about the company. These are: The business Overview and Scope Vision and Mission of the business The products or services being offered The market and competition Financial Considerations Management structure Environmental, social and community issues. Profitability of the business Purpose of the Business Plan EXECUTIVE SUMMARY

Business Plan is usually tied to cost and funding. It is therefore, important to introduce the reader to the issues of costs involved in the planned project, proposed or known sources of funding and the expected contribution from each source. Main issues discussed in this chapter include: COST OF ACHIEVING THE BUSINESS PLAN. including the following fixed assets: ACCOMMODATION; l and, buildings, offices, (owned or leased) PLANT, MACHINERY AND ACCESSORIES: UTILITY ITEMS: LOGISTICS:. FURNITURE AND OFFICE FITTINGS: PRELIMINARY EXPENSES: WORKING CAPITAL: CONTINGENCY: This is an amount provided in the costing profile to take care of unforeseen occurrences such as fluctuations in the costs of the fixed and current assets indicated above. The amount of this provision depends on the expected volatility of the cost centres. However, the provision is usually 5-10% of the other costs. COSTING AND FINACIAL PLAN

This schedule will normally indicate internal and external funding sources, the amount from each source and the type of funding including leasing, equity, debt financing, refinancing, etc. Sometimes, funds from each source are tied to the asset being financed to provide more clarity. This schedule also shows the timing of the financing. This chapter is very crucial when the issue at stake borders on raising funds for a start-up as well as projects involving expansion, new products, new market entry, etc. A SCHEDULE OF FINANCING PLAN;

Key issues are the hierarchy of control from the shareholders, Board of Directors all through senior and middle level managers down to the office assistant. Here, the ownership of the company must be established, the CV of the CEO and other senior management personnel should be provided. The pool of skills, experiences and achievements recorded in the company and elsewhere should be showcased to show the strengths An organizational structure(organogram) may be inserted to explicitly explain the hierarchy of authority in the company. The impressions created by your staff at these meeting points are very crucial in the lend-reject decisions. Critical qualitative issues considered here include: i. skills, knowledge, competences ii. attitudes, character, values, culture, norms iii. Team spirit and we behaviour It is also important to show a list of staff, their designations and their responsibilities. The degree of networking with external competitors, those who produce similar products and other support service providers. The more intense the network, the more stable is the business ORGANISATION AND MANAGEMENT

Key issues include Full description of the plant, machinery indicating installed and projected utilization capacities accessories The production process from raw materials to products The technology involved in the production process Key technical manpower in the system or needed Production programme and capacity utilisation The main features of the products The raw materials and their supply Asset maintenance schedule Spares and components; inventory and their sources The Utilities and process of using and maintaining them Quantity and quality all raw and packaging material inputs Full disclosure of any Technical Partner arrangement including any agreement Any local technical support service provider Full description of the location indicating reasons for the choice, distance from major landmarks or city centre Features of the land including suitability, adequacy for present and future uses The premises in respect of space, occupation, location off buildings Working apparel where necessary, particularly for technical staff Waste management and disposal Effluent management Water supply system and treatment Procedure for managing noise, air or any other pollution Impact of weather on production and operations generally Logistic issues TECHNICAL REVIEW

The BP should provide market and marketing information as follows Full description of the products on offer including usage, re-usage, disposal Target clients or customers and how they are or can be reached Characteristics of customers and their likely reaction to changes in your operations The supply chain in respect of products and raw materials Delivery arrangements Existing and or anticipated competitors, their strengths and weaknesses Who is not your competition and why e.g. insignificant size, distance from you, uniqueness of your products Importation issues and government policies on them The supply and demand analysis Size of the market and market share of self and competitors Marketing and market penetration strategy Projected sales figures over the planned period Anticipated industry and market growth Key drivers of demand for your products e.g. population growth and shifts Price and pricing policy now and in future. eg is your price for profit maximization; volume maximization; or margin maximisation Do you want to make more money or more customers? It is best to maximize volume because Selling at lower price without compromising quality increases company reputation Gives wider market and Increases customer base Makes for full utilisation of facilities towards full capacity utilisation Stress the unique selling points ie what makes or will make your product the preferred choice over and above your competitors eg -- quality -- price -- discounts -- excellent service delivery -- quick and flexible provider of services -- trust worthy provider of consistent and reliable services. -- Above are factors that will position you strongly in the market. Note that people buy product is of value, affordable and competitive. In fact, people buy value and not product. It is important to set up a system of monitoring your competitors on regular basis. MARKETS AND COMPETITION

Critical issues relate to matching expenditures in the BP to income derivable from it. First, the basic assumptions upon which the income and expenditures are predicated must be shown. This is followed by details of the income and expenditure profiles The revenue side Sales profile Revenue centres -- proceeds from sale of goods and services -- account receivables -- asset disposals -- rentals -- interest receivable -- dividends -- professional services Income from these and other transactions form the total revenue over a period eg monthly or yearly FINANCIAL ANALYSIS AND PROJECTIONS

The expenditure profile. Direct costs of operation including raw materials, energy, etc Indirect costs of operation and administration Disbursement pattern Cost of funding Terms of borrowing where applicable Repayment schedule if funds were borrowed Contingency arrangement in situations of cashflow constraints Outstanding payables and receivables Outstanding credit facilities and their terms Statutory expenditures Insurance for company and staff Salaries and wages Marketing expenses Bank charges Rents Lease payments if any Vehicle and generator running expense s FINANCIAL ANALYSIS AND PROJECTIONS..cntd

The expenditure profile.contd Professional fees Repairs and maintenance Payment for utilities Stationeries Depreciation charges Communication expenses Entertainments After the determination of income and expenditure profiles, both of them are matched in summary of financials represented by Incomes statement aka profit and loss account Sources and uses of funds aka cashflow statement Balance sheet These accounts present in vivid pattern the outcome of operations over a pre-determined period. FINANCIAL ANALYSIS AND PROJECTIONScntd

Income statement Gross revenue - operational expenses = Gross profit Gross profit general and admin expenses = Net Income Net income -- depreciation and tax payment = Net profit Note that it is from net profit you repay loans, pay salaries and other repayable iv. Cash flow statement This is the report of actual cash receipts and disbursements. While income statement can include all sales, the cash flow will only include sales for which cash has been received. This is the reason amortizations are reflected in the cash flows and not in the income statement. Another area of difference is that while cash flow depicts the liquidity of the company, the income statement shows its attractiveness. Inflow sideGross income + depreciation Outflow side.Amortisations, preliminary expenses, overdraft retirements, working capital changes, contingency retirements, dividend provisions, tax payments, etc The health of a company is ultimately measured by the cash flow FINANCIAL CONSIDERATIONS cntd

This chapter focuses on the company in order to properly introduce it to the reader. Area of interest include Ownership shareholders Shareholding structure. This explains the control structure of the company The chief executive officer who must be prominent position in the BP as all operations depend on him/her. SWOT analysis of the company to indicate its strengths, weaknesses, opportunities and threats to its operations. Subsisting Material contracts or obligations Subsisting legal actions by or against the company Banking habits and credit worthiness Neighborhood and community relations Corporate social responsibilities- job creation, transfer of tech, value addition to local resources, contracts or subcontracts to local people, infrastructure development, education support, etc Statutory, legal and environmental compliance records eg, tax, pollution, filings, registrations, permits, etc, Here also the conclusion of the Plan must be captured CONCLUSION CHAPTER

WORKING THE PLAN PART II

To be able to monitor your business and work your plan, you must have good records of all your business activities over the years Good Book keeping Inventory RECORDS Assets Register Production RECORDS Sales Records Planting RECORDS Harvesting RECORDS ETC The Microsoft excel is a wonderful tool for record keeping and for monitoring and it allows you to present on one page your activities for many years TOOLS FOR WORKING YOUR PLAN

Before you decide to start your business there are several key considerations: WORKING YOUR PLAN Strengths Experienced Staff Located in a corporate area (market access) Opportunities Delivery service Corporate Christmas events Weaknesses Low capital may limit number of menu items No market presence Threats Regulatory restrictions Large establishments have capacity to deliver more EG. SWOT Analysis of a Potential Catering Business Internal Products and Services offered Cost to Set up Revenue Stream Human Capital Unique Selling Point External Target Market Customer Needs Industry Analysis Regulatory Framework

START UPGROWTHMATURITYEXPANTIONTRANSITION CONTINOUS MONITORING

Planning is a process that never ends for a business An effective business plan can become out-dated if the socio-economic climate changes As the business grows, it is important to Monitor and update your business plan Continuous review of your business increases the probability of success and ensures continuity OPERATIONS MONITORING Begin Operations Diagnostic Test Set New Targets Business Grows Plan a Business

MONITORING YOUR BUSINESS Infant Growth Maturity Decline Market Size/Sales Time In the course of your business, it is important to understand the overriding factors driving the industry What Stage of the Life Cycle is the industry in? You need an internal compass to guide you toward success. Without a targeted plan, you cannot effectively pinpoint growth patterns or determine why anticipated growth has not yet materialized. Sustain Unfortunately, business owners find it difficult and frustrating to break through the maturity barrier once sales mature and reach a plateau.

WORKING YOUR PLAN CHECKING YOUR PERFORMANCE VIA YOUR FINANCES You must monitor your Income and Expenditure. If Income is higher than Expenditure, then Business is Sustainable. But if Expenditure is more than Income, The business will die N Business N N N N N

Measuring performance Via Controls Entrepreneurs MUST check their businesses via profit and loss statement, cash flow projections, and information on inventory, production, quality, sales, collection of accounts receivable, and disbursements for the previous month etc INVENTORY CONTROL PRODUCTION CONTROL OPERATION CONTROL QUALITY CONTROL SALES CONTROL DISBURSEMENT CONTROL WORKING THE PLAN

A Business Plan is a written document that defines the goals of your business and describes how you will attain those goals IN SUMMARY WHAT IS A BUSINESS PLAN? Business Plan Sets objectives Defines budgets Engages Partners Structures business processes When preparing a Business Plan consider four perspectives Perspective of the entrepreneur Perspective of a worker Marketing perspective Investors perspective

Follow your plan in Starting up of your Business. Check your performance always Continue to Monitor and Control your Expenses and Improve your Business WORKING YOUR PLAN

FELICITATIONS THANKS YOU FOR LISTENING

plan your business and work your plan -a presentation at the enugu sme week theme : nurturing and...

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