THE OPEN UNIVERSITY OF TANZANIA FACULTY OF BUSINESS MANAGEMENT POSTGRADUATE DIPLOMA IN BUSINESS STUDIES OBM 599: COMPREHENSIVE BUSINESS PLAN COURSE OUTLINE Overview In most cases, a business plan is created to explain and illustrate the vision a person has for his or her business, and to persuade others to help him or her achieve that vision. Under this course, a business plan will need to demonstrate on paper that a person has a firm visualization of what his or her business is going to be. The business plan needs to convince others that his or her business concept can be successful and that a student possesses the expertise-alone or collectively-to assure that it will be both successful and profitable. The process of developing a comprehensive business plan will require a student to focus on exactly what he/she is trying to achieve, precisely where he/she wants to be going, and exactly how he/she plans to get there. It will require a student to detail all the expenses involved to open a business, the projected sales and monthly expenses of actual operation, and the volume of business you will need to generate to meet his/her obligations. Course Objective The course focuses on enabling a student to employ entrepreneurial strategies in the analysis and assessment of business opportunities. Specifically, the course covers analysis of the strategic aspects involved in the initiation, evolution, development, and control of entrepreneurial ventures. Key Learning Objectives At the end of this course a student should be able to: Critically analyzing and developing comprehensive business plans. 1
Integrating theory and practice in business strategy assessment. Write and evaluate effective business plans for launching and growing entrepreneurial ventures. Critically assess the effectiveness of new venture strategies. Develop critical thinking and problem solving skills for effectively addressing various issues and challenges facing business ventures, especially at the initiation stage. Mode of Delivery Each candidate will be required to write a comprehensive business plan, after successful completion of course work. The project (comprehensive business plan) is an independent work done by the student under supervision. Each candidate shall be allocated a supervisor with whom regular contacts will be held during the period of the project. The concept note, duly signed by both the candidate and the supervisor shall be submitted to the coordinator of postgraduate diploma. A candidate shall submit a comprehensive business plan of approximately 10,000 to 15,000 words in partial fulfillment of the Postgraduate Diploma in Business Administration. Guidelines for Writing a Comprehensive Business Plan Business plan writing is a vital part of this course, a student will be asked to develop detailed business plans for launching, growing, or restructuring an entrepreneurial firm. The plan must include a clear identification of entrepreneurial opportunity, external (industry/market) analysis, internal (resource/capability) analysis, and strategy development and implementation. The evaluation standard used for assessing the quality of this assignment is that of a venture capitalist considering whether or not to provide funds for the business plan. Thus, a student must exercise due diligence and professionalism in developing and writing a business plan. Details of the guidelines for writing an effective business plan will be provided in the appendix. A comprehensive business plan must be thorough and rigorous, applying relevant analytical models and 2
concepts gained from related courses. The report must also reflect evidence of sound research and critical thinking. The comprehensive business plan is expected to be 40-50 pages of text (double-spaced, with regular font (i.e., 12-point font), with at least oneinch margin on each side). The supervisor s prior approval of business plan selections is required, in order to determine its scope, feasibility and relevance to course learning objectives. Assessment and Evaluation The duration of this course is scheduled to take 3 months. The course shall carry 4 credit points and be graded by supervisors following FBM-project grading guidelines, with the highest score being 100%. Appendix 1. Comprehensive Business Plan Guidelines The following section contains guidelines that are intended to help a candidate developing and write a comprehensive plan a business. A comprehensive plan represents a road map toward a successful venture. This set of guidelines does not address every aspect of every possible business plan. A candidate should consider more questions than those that are posed in each section. Each numbered section below (I, II, III, etc.) should be a page heading, while other underlined items will probably be one to three paragraphs long. I. TITLE PAGE The Title Page should contain the following items, doubled spaced, horizontal centered, and positioned just above the center of the page: Business Name Business Address Business Telephone Owner s Name(s) II. TABLE OF CONTENTS 3
The Table of Contents should list the title of each section of the document and indicate the page number where each is located. It should also list specific support items (appendices) by name. This page will be done last, since it requires the entire document as input. It allows the reader to quickly locate specific sections. III. BUSINESS CONCEPT or EXECUTIVE SUMMARY The Business Concept, or Executive Summary, should be a one-page explanation of what a business is, and its competitive advantage. A candidate should provide a clear description of the industry in which he/she is competing, and a precise explanation of a business s unique qualities that set his/her venture apart from others who are competing for the same customers. An explanation should answer these questions: In what general market does a business compete? What does the business do? What quality image will it have? In what price range will it compete? What volume of sales is expected? What customer needs are met? What makes it unique form the competition? IV. MARKETING PLAN This section should contain a narrative description of the following five factors: A. Industry Description and Position 1) Describe your primary industry. 2) Describe the size of the industry. Historically: Currently: What is the total expected market volume? What is the growth potential in five years? In ten years? 3) Describe the industry characteristics and trends. 4
Historically: Currently: What benefits are sought by the market that the business s product/service will satisfy? Where in the industry is its life cycle? Future potential. 4) Describe intended customer base. Consumers It is important for a candidate to develop a clear, mental picture of his/her ideal customer. Describe the prospective potential customers using the following factors: Age Sex Income Level Education Level Geographic Location Occupational Area Leisure Interests Buying Habits Goals and Aspirations Business If an intention is to provide a product or service to another business, the description would include: Type of business (service, retail, manufacturing, etc.) Size of business Priority placed on purchasing the product Projected image of the business Markets that the business services Trade publications read by the business Trade organizations memberships of the business B. Competition A description of the competition should answer the following questions: Who are the major competitors? Why are they successful? 5
What substitutes are there for business s product? What impact do these substitutes have on sales? What distinctive difference separated the business from its competitors? Why should customers leave the competitors to choose our product? What market share does the business expects to get? Why? C. Location Analysis Describe your business location and how it will enhance the sale of intended product or service. This description should answer the following questions: What strategic advantages does the business have at this location? Is there opportunity for expansion? What are the neighboring businesses? Do they complement/detract from the business? Are building renovations needed? Cost? What is the zoning classification? Is the neighborhood stable, changing, improving, deteriorating? How? How is customer access, parking, etc.? D. Price Determination A description of the price structure for your product or service will answer the following questions: What price will you set for your product? How does is our price compare with the competition's? Why will customers pay our price? What image will be projected by this price? What special advantages do our customers get that are included in the price? Will credit terms be offered? E. Marketing Approach A description of the intended marketing effort should answer the following questions: What are the preliminary or test market results? 6
How does our product or service satisfy our customers' needs and wants? How will our image be clearly and consistently conveyed to potential buyers? Which media are most suitable? Why? How will you evaluate the effectiveness of each advertising and promotional effort? How will a sales staff be used? Evaluated? V. MANAGEMENT PLAN OR OPERATIONAL PLAN This section contains a description of who will run the business and how they will do it, including the following: A. Management Team A description of how the business will be managed will answer the following questions: What management background does the owner have? What is the owner s business track record? How is the education and/or experience of key people related to this type of business? What legal form (corporation, partnership, proprietorship, etc.)? Who does what? Who reports to whom? What other resources (accountant, lawyer, etc.) will be used? B. Employee Relations A description of the owner s methods for hiring, training, and communicating with his/her staff will answer these questions: What are the owner s personnel needs now? In the future? What skills will be required? How will the owner go about hiring and training? What salary and benefits will be provided? How will the owner determine and communicate wage increases to employees? How will personnel policies be provided to the employees? C. Operational Controls 7
A description of the kinds of management systems and how they will be used will answer these questions: What is the business s production capacity? What operating advantages do it have? How will the owner/s capitalize on them? What elements are critical to the business success? How will the owner/s make sure they are available? What will be key indicators of success? How will the owner monitor these factors? What hazards are anticipated for the business? What protection and / or alternate plans does the business have? What policies will the owner establish for the operation of his/her business? VI. FINANCIAL PLAN A description of how the business will be financed and how the owner will maintain a sound financial condition will answer the following questions: A. Current Funding Requirements How much money will be needed for start-up? What will be the sources of start-up capital (debt, equity, etc.)? What business and personal assets will be pledged as collateral? B. Use of Funds How will the money be spent (working capital, debt retirement, capital expenditures, acquisitions, etc.)? How will borrowed funds make the business more profitable? C. Long-Range Financial Strategies How will the business liquidate its investors' position? What terms of repayment are feasible? What back-up plan will be used if repayment cannot be accomplished as planned? 8
D. Financial Statements To support this section, several financial statements will be required, such as the following: Personal Financial Statement of Owner Business Start-Up Costs Pro Forma Cash Flow Analysis (expected) Balance Sheet (actual or proposed) Income Statement (actual or proposed) Capital Equipment List VII. STRATEGIC PLAN It is very important to include a description of where you want your venture to be in the next few years and how you intend to move toward those goals. This strategic plan should focus on Years 2 through 5 and include descriptions of the following items: Strengths within the organization Weaknesses within the organization Opportunities available to the business (and its competitors) Threats impeding the business (and its competitors) Using the preceding four factors, the owner should describe strategies that use his /her strengths to take advantage of opportunities and overcome threats; and strategies to reduce weaknesses and avoid threats to the business. The strategies should identify intermediate goals (yearly) and the marketing, management, and financial resources that will be used to accomplish these goals. VIII. EXIT STRATEGY, PAYBACK ANALYSIS AND CLOSING DETAILS Too many business plans overlook this last important section. Investors and lenders want to know how they'll get their money back. The Exit Strategy is most important for businesses that take on investors or venture capital, while Payback Analysis is for borrowers who take on a small business loan from a bank or lender. Your business plan 9
must demonstrate that you will be able to make timely payments on your loan. If the owner is seeking investors, they will want to see how they will recoup their investment in a well laid out business plan exit strategy. The exit strategy of the business plan needs to include a narrative addressing these issues. A. For Loans: State when the company will be able to start making loan payments Refer to the financial statements, which must show the ability to make payments at the time indicated. B. For Equity Investments: A statement about how and when investors should expect to be able to sell their stock, or the exit strategy Whether or not it s included in the plan, be prepared to talk about the feasibility of the business exit strategy. REFERENCES 1. Pinson, Linda. (2004). Anatomy of a Business Plan: A Step-by-Step Guide to Building a Business and Securing Your Company s Future (6th Edition). Page 20. Dearborn Trade: Chicago, USA. 2. Patrick L. Burkhart and Suzanne Reuss (1993). Successful Strategic Planning: A Guide for Nonprofit Agencies and Organizations. Newbury Park: Sage Publications. 3. Bradford and Duncan (2000). Simplified Strategic Planning. Chandler House. 4. Stephen G. Haines (2004). ABCs of strategic management: an executive briefing and plan-to-plan day on strategic management in the 21st century. 5. Michael Allison and Jude Kaye (2005). Strategic Planning for Nonprofit Organizations. Second Edition. John Wiley and Sons. 6. Kotler.P, Armstrong.G, Saunders.J and Wong.V. (2001). Principles of Marketing. Pearson Education Limited. 10