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KNOW ABOUT

BUSINESS
Entrepreneurship Education
in Schools and Technical Vocational Training Institutions
and Higher Education

MODULE 9
How to Elaborate One’s
Own Business Plan

Authors:

George Manu
Robert Nelson
John Thiongo
Klaus Haftendorn

Editors:

Peter Tomlinson and Klaus Haftendorn

International Labour Office, Geneva


International Training Centre of the ILO, Turin
Copyright © International Training Centre of the ILO 2008

This publication enjoys copyright under Protocol 2 of the Universal Copyright Convention. Applications for
authorization to reproduce, translate or adapt part or all of its contents should be addressed to the
International Training Centre of the ILO. The Centre welcomes such applications. Nevertheless, short
excerpts may be reproduced without authorization, on condition that the source is indicated.

Know About Business

ISBN 92-9049-396-8

First published 1996


Second edition 2000
Third edition 2002
Fourth edition 2004
Revised edition 2005
Revised edition 2007
Revised edition 2008

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Publications
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Know About Business Module 9: How to Elaborate One’s Own Business Plan

MODULE 9

How to Elaborate One’s


Own Business Plan
Module objective:
Ä To enable learners to apply KAB knowledge to a real
market situation and to evaluate a business idea for either
self-employment or a micro business.

Module coverage:
Page
1. How to Elaborate the Business Plan ............................ 5
Standard Business Plan............................................. 8

1
How to Use This Module
Module 9 is the last module of the Know About Business training programme.
Learners have learned the essentials about entrepreneurs, their role in society, how
enterprises contribute to the economic growth of a nation and how an enterprise
functions thanks to the personality and motivation of the entrepreneur as the key to
success.

By developing a personal business plan, Module 9 allows the learner to apply the
knowledge he/she has gained during the KAB training cycle to a real life situation.

There are different ways Module 9 can be used within the KAB training cycle:

1. The development of one’s own business plan at the end of the training can be
made compulsory and serve as the final examination for the subject
Entrepreneurship Education.
In this case the individual learner has to conduct all the investigations, and work
out the business plan and assess it alone. Alternatively, this could be done as
group work by 3 or 4 students. The business plan is based on an identified need
and a market survey.
The plan could also be presented in a business plan competition organized by the
school, a group of schools, or any other organization that may wish to launch such
a competition.
2. The development of a business plan could be done during the KAB training cycle
either as class work, group work or individual work. In this case, after each topic
that is relevant to the business plan, the facilitator will ask the students to do the
investigations and elaborate the corresponding chapter. At the end of the KAB
training cycle one or several business plans will have been worked out. The
facilitator will facilitate the process during the elaboration period. The business
plans can also be presented in business plan competitions.
3. The development of the business plan could be done as an out-of-school activity
by those learners who have a strong motivation to become self-employed or to
create a micro or small business as soon as possible after school. The KAB
facilitator will give advice to this group and facilitate the process of the business
plan development.
The business plan will help the learner to evaluate the feasibility of her/his
business idea and to search for partners and funding.
Participation in business plan competitions with a prize could help to gather the
initial funding.
I TOPIC 1: How to Elaborate the Business Plan

II SUGGESTED TIME:
• 2 sessions

III OBJECTIVE:
• To enable learners to apply KAB knowledge to a real market situation.
• To inform learners that a business plan must contain a number of items of
information. However, the layout of a business plan can and has to be
adapted to a concrete case.

IV RATIONALE:
• During the KAB training, the learners became familiar with all topics related
to:
- how to generate a business idea,
- how to organize a business, and
- how to operate a business.
• To elaborate the business plan learners have to apply the knowledge
acquired during the KAB training in order to collect and process information
related to their business idea. The business plan will allow them to set out
this information in a structured form.
• The business plan mainly has two functions:
- first, to show the business starter whether his business idea is viable or
not, and
- second, to raise money from family or friends or to get credit from a
bank.
• A Standard Business Plan makes sure that all the information required is
collected and taken into consideration. However, funding institutions, such
as banks or investment promotion schemes, often have their own
requirements and may ask for a business plan developed by them to be
filled in.

V ACTIVITIES:
1. Discuss with learners the links between the elements of the business plan
and the related KAB topics as you as teacher has taught them.
Business Plan KAB Topic
Business Idea Module 5
Topic 2: Generating Ideas
Topic 3: Identifying and Assessing
Business Opportunities
Market Module 6
Topic 1: Selecting a Suitable Market
Product, Price, Place, Promotion Marketing Mix (also Module 7: Topic 3)
Legal Form Module 6
Topic 3: Legal Forms of Business
Ownership
Start-Up Capital Module 6
Topic 4: Money Needed to Start an
Enterprise
Sources of Start-Up Capital Module 6
Topic 5: Obtaining Money to Start an
Enterprise
Organization and Staff Module 7
Topic 1: Hiring and Managing People
Business Operation and Costs Module 7
Topic 6: Knowing the Costs of an
Enterprise
Monthly Sales Plan Module 6
Topic 1: Handout 4 Developing a Sales
Plan (also Module 7: Topic 3)
Monthly Cost Plan Module 7
Topic 6: Knowing the Cost of an
Enterprise
Cash Flow Plan Module 7
Profit Margin Topic 7: Managing Money
Opening Balance Module 7
Topic 8: Using Financial Statements

2. Review with the learners the relevant topics one by one and give hints on
how to collect and process information for the business plan.

3. Show the learners the layout of the Standard Business Plan and discuss
with them the content. Explain that the learners should use the tables as
examples and adapt them to the needs of their own business plan.

4. Show learners other business plan forms collected from local banks or
funding institutions for micro and small businesses.
The elaboration of a business plan is a process that has to be done very carefully.
Data collection has to be executed very seriously.

The inexperienced student or learner needs close guidance from the facilitator who
should insist on reality checks at every stage of the business plan development.
Exposing the research findings of the learners to a peer review and peer critics will
often reveal the weak points of a research method or interpretation.
The most important part of the business plan is the market survey. The survey will
show if the business idea can be transformed into a business opportunity.
But apart from this, the market survey will also show if there are competitors and if
there is room for a new business in the market, and what could be the share.

The findings from the market survey are the foundation for the planned business. If
the market assessment has been done too optimistically, the business will not reach
the planned product sales or services in terms of quantity or prices and the business
will fail.

If the assessment is too pessimistic, then the planned income from the business might
look too low for a successful start.

A realistic and prudent estimation of the market for the planned business reduces the
risk of failure.

Another important element of the business plan is the cost side. An underestimation
of the start-up costs and the running costs may show a good profit margin on paper.
Once the business has started it can turn out that the revenues don’t cover the costs.

A realistic estimation of this cost aspect is required and in addition a certain


percentage for unforeseen costs should be calculated.

At the end of the elaboration process the business plan will show whether the
business idea is viable or not.
Standard Business Plan

Elaborated by:

Date:
Content
Page
Executive Summary .................................................... 10
Business Idea and Market ............................................ 12
Marketing Plan Product ................................................ 13
Marketing Plan Price .................................................... 14
Marketing Plan Place .................................................. 15
Marketing Plan Promotion ............................................ 16
Legal Form ................................................................ 17
Start-up Capital .......................................................... 18
Sources of Start-up Capital .......................................... 19
Organization and Staff................................................. 21
Business Operation and Costs....................................... 23
Cash Flow Plan ........................................................... 25
Profit Margin .............................................................. 26
Opening Balance......................................................... 27
Executive Summary

Name of business

Legal form

Contact address

Tel. E-mail

Type of business

‰ Manufacturer ‰ Service provider ‰ Wholesaler ‰ Retailer

Brief description of the business idea

Products or services

Customers
Owner(s)
(Name, Address, Qualification, Function in the business, Relevant experience)

Number of jobs to be created

Start-up capital

Investment

Working capital

Total

Source of capital

Own savings

Partner

Family loan

Bank loan
Business Idea and Market
Description of the business idea

(e.g. identified needs, who are the customers, type of products or services to
satisfy the needs, how to reach the customers, etc.)

Description of the market

(e.g. geographical area, town, type of customers, size of total market,


description of competitors, market share for the new business, etc.)
Marketing Plan Product
Detailed description of the product or product range or service

Product/service (1) (2)

Denomination

Specification
(e.g. size, colour,
quality)

Packaging

After sales service

Product/service (3) (n)

Denomination

Specification
(e.g. size, colour,
quality)

Packaging

After sales service


Marketing Plan Price

Product/service (1) (2)

How much are Highest ; Average; Highest ; Average;


customers willing Lowest Lowest
to pay?

Competitors’ price Highest ; Average; Highest ; Average;


Lowest Lowest

My price

Reasons for setting my


price

Margin for discount? Yes (? %) No Yes (? %) No

Product/service (3) (n)

How much are Highest ; Average; Highest ; Average;


customers willing Lowest Lowest
to pay?

Competitors’ price Highest ; Average; Highest ; Average;


Lowest Lowest

My price

Reasons for setting my


price

Margin for discount? Yes (? %) No Yes (? %) No


Marketing Plan Place
Location of the business

Description of the planned location for the business

Reason for choosing this location

Reaching the customers by selling to

‰ Individuals ‰ Retailers ‰ Wholesalers ‰ Others

Reason for choosing this way of distribution


Marketing Plan Promotion
Start-up promotion

Description of the planned actions to inform customers about the opening of


the new business (e.g. printed information, brochures, posters, newspaper
articles, radio advertisements, opening ceremony, etc. Also make inquiries
about the costs for the different types of promotion)
Legal Form

The legal form of the business will be:

Reason for choosing this legal form


Start-Up Capital

Estimation of start-up capital Amount

INVESTMENT

Land

Building

Equipment

Miscellaneous

Total Investment

WORKING CAPITAL

months of staff costs

months of operational costs

Total working capital

TOTAL START-UP CAPITAL

Specification of investment items

Investment item Specification Price

Land Surface

Building Surface

Equipment Type, technical specification

Tools

Transport

Miscellaneous

TOTAL ACQUISITION COSTS


Sources of Start-Up Capital

Sources of funding

Conditions
Type Source Amount
(duration/interest)

Equity capital ‰ Own savings

‰ Partner

Loan 1 ‰ Family

‰ Friends

‰ Money lender

Loan 2 ‰ Credit cooperative

‰ Government scheme

‰ Bank loan

TOTAL FUNDING

Information about funding sources


Loan 1

Name and address of creditor or credit institution

Credit agreement ‰ under discussion ‰ finalised

‰ money available on (date)

Loan 2

Name and address of creditor or credit institution

Credit agreement ‰ under discussion ‰ finalised

‰ money available on (date)


Debt Service

Repayment 1 2 3 4 5 6 7 8
period Amount Amount Amount Amount Amount Amount Amount Amount

Loan 1

Instalment

Interest

Loan 2

Instalment

Interest

Debt service
Sum of Instalments
Organization and Staff

Organization of the business

Staff requirements
Position Tasks, Responsibilities and Qualifications

Planned organization chart

(Sketch of planned organization chart)


Staff costs
Position Qualifications Salary Social Total
per month security staff cost

Organization of business premises

(Sketch of planned shop, office or workshop)


K
Business Operation and Costs no
w
A
Monthly Sales Plan bo
ut
All products, product range or services B
us
Month 1 2 3 4 5 6 7 8 9 10 11 12 in
es
Product 1 Price

Quantity

Turnover

Product 2 Price

Quantity

Turnover M
od
Product 3 Price ul
e
9:
Quantity H
o
Turnover w
to
El
Product n Price ab
or
Quantity at
e
O
Turnover ne
’s
All products Turnover O
w
n
B
us
23 in
es
24 Monthly Operational Cost Plan K
no
w
Planning is based on the monthly sales plan A
bo
Month 1 2 3 4 5 6 7 8 9 10 11 12 ut
B
us
Product 1 Quantity in
es
Materials All costs

Product 2 Quantity

Materials All costs

Product 3 Quantity

Materials All costs

Product n Quantity M
od
Materials All costs ul
e
9:
Materials Total costs
H
o
+ Staff Total costs w
to
+ Others Total costs El
ab
or
= Operation Total costs at
e
+ Capital cost Interest O
ne
’s
Depreciation O
w
= Total costs n
B
us
in
es
K
Cash Flow Plan no
w
A
Monthly Cash Flow Plan bo
ut
Pre- B
Month 1 2 3 4 5 6 7 8 9 10 11 12
operation us
in
Cash beginning of es
the month

+ Equity

+ Loans

+ Sales

+ Any other

I: Total cash in M
od
ul
+ Investment
e
9:
+ Operational cost H
o
w
+ Interest to
El
+ Any other ab
or
at
II: Total cash out e
O
ne
I – II Cash at the
’s
end of the month O
w
n
B
us
25 in
es
26 K
Profit Margin no
w
A
Monthly Estimation of Net Profit bo
ut
Month 1 2 3 4 5 6 7 8 9 10 11 12
B
us
Product 1 Quantity in
es
Turnover

Product 2 Quantity

Turnover

Product 3 Quantity

Turnover

Product n Quantity

Turnover M
od
I. Total Sales ul
e
- Operation Total costs 9:
H
- Capital cost Interest o
w
Depreciation to
El
II. Total Costs ab
or
I – II Profit at
(before tax) e
O
- Income tax % ne
’s
Net profit O
(after tax) w
n
B
us
in
es
K
Opening Balance no
w
A
Opening Balance of My Business (Date) bo
ut
B
Assets Value Liabilities Value us
in
es
Equity

Fixed Assets

Land Long-Term Liabilities

Building Mortgage

Equipments Loans

Others Others M
od
Total Fixed Assets Total Long-Term Liabilities ul
e
9:
H
Current Assets Cash Current Liabilities o
w
to
and bank Accounts Accounts payable El
ab
receivable Inventory Taxes payable or
at
e
Total Current Assets Others payable O
ne
Total Current Liabilities ’s
O
w
n
B
Total Assets Total Liabilities and Net Worth us
27 in
es

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