Module 8 - Business planning

What you will learn in this module

How planning reduces risks in business management.
Demonstrating to women how they can plan their businesses.

Session 1 - What is a business plan, why a business plan and structure of a business plan

• A business plan is the blueprint for implementing a business idea and the roadmap for a successful business by helping to minimize business risk.

• Ask the participants how they plan before spending 500 Baht on buying clothes. As they answer, note the key words on the board or flip chart such as design, quality, colour and price. This is planning. Make the point that even an individual purchase is a result of careful consideration and link this idea with the importance of planning in the business context as given in the handout.

• Explain the structure of business, highlighting each section in detail and linking this with what was covered previously in the training.

• Divide the participants into groups and provide them with Business Plan formats; ask them to prepare a plan for one of the businesses of which they know the financial and technical aspects.

• Hold a plenary session of the groups to find what difficulties the participants faced in preparing the business plans; explain and simplify.

• Encourage participants to critique each business plan, assessing it according to the MAIR model and checking the assumptions made for the projections.

Handout 1: what is a business plan and why it is important

A business plan is a data-base of information related to the details of a business activity such as production processes, raw material, finance, support services and market.

It is important to prepare a business plan for activities at all levels. For example, if a hotel has to organize a party for 50 people, it would need to plan the menu, the material needed to make the various items, the labour required, etc., at least two to three days in advance. All the information collected about these different areas would be part of the business plan for the party.

A business plan is like a road map which makes it possible to know if the business is on the right track and monitor achievements against objectives. It helps in identifying future financing needs and is a valuable document when seeking credit and other support from bankers, government and other agencies. The business plan also helps to evaluate the strengths and weaknesses of the proposed business as well as the opportunities and threats it faces. This can be translated into a detailed strategy and action plan for every member of the group.

It is very important for a rural women's cooperative business to succeed. The cost of failure is very high because it undermines motivation and discourages the women from starting another other business.

Handout 2: the structure of a business plan

A business plan has the following elements:

Basic information: About the women's cooperative group such as name and address of the group. It also includes the vision and mission statement of the group.

Product/service: What is the type of business - manufacturing, service or trading? What are the products and services that will be sold?

Reasons for selecting the activity: Explain briefly why this particular business has been selected. For example, a group has decided to make baskets because a member is a skilled basket maker, there is a regular market for this product and the required raw material is available locally.

Raw material: Details about the raw material used - sources, prices, nature of availability (seasonality, if any).

What resources/supplies are needed and from where are these to be obtained? How much do these cost?

Production: Detailed information about the product, process, production requirements and cycle. For example, three months are required for making some herbal sweets. What skills are needed for production and how can these be learnt?

Personnel (division of responsibilities): Information about responsibilities of committee members. Also spells out the tasks at hand and the nature of qualified personnel who must be hired for the same.

Technology and equipment: Information on types of equipment, sources, prices, etc. What equipment is needed and where is it available?

Marketing: Information on various market channels within and outside the area, list of bulk buyers, traders, marketing cooperatives, etc. Who are the customers who will purchase/buy the product or service?

Financial aspects: Total fixed and working capital needed for the business. How much is the total cost of the business? What are the financial sources that can be accessed?

Format of a business plan

1. Basic information

Vision and mission

• What is the objective of forming the cooperative?

• What would the group like to achieve by coming together?

2. Details about business i.e. product

Type of business (tick as applicable)

• What product /service is the business going to provide?

Provide details in the table below:

• What are the advantages of the product (cheaper, better quality, unique feature, life span, etc.)?

• Does the product require any government approval or need any industry standards?

3. Reasons for selecting the activity

• Why you have selected this product or service?

• Is it based on your skills and experience or market demand; is there any other special reason for selecting this product or service?

4. Raw material

Provide details in table below

Where do you obtain the above and from whom?

5. Production

What is the manufacturing cycle for each product? The entire process from the initial to the final stage must be described here. Note that if the unit makes more than one product, each must be documented individually.

How much time is required to complete the production process and put the product/s into the market?

6. Personnel (division of responsibilities)

Do you need to employ people? If yes, what type of skills do you expect the employees to have?

How will you recruit these personnel?

How much do you expect to spend on their salaries?

Details about the employees:

7. Technology and equipment

What equipment do you need? How much does it cost?

8. Marketing

Product

• Who will be your customers? Clearly define your market in terms of territory and customers.

• Why will they buy your products?

• What type of quality measures do you intend to follow?

• What type of packaging will you use?

Place (manufacturing and retail outlets)

• Where will you locate your manufacturing unit and why?

• Where will you locate your retail unit and why?

• What expenses do you expect to incur on rental/purchase of these outlets?

Price

• What are the retail and wholesale sales prices per unit?

• Will customers be willing to pay the price that you have fixed? What do the competitors charge for similar products?

• Have the members been consulted for end-price determination?

• What will be the minimum order size and credit terms offered?

Promotion

• How will you promote and distribute the product? What do you expect the promotional costs to be?

• Who are your competitors? Where are they located?

• What are their size and market potential? In which geographical regions are they successful currently?

• What are the strengths and weaknesses of your competitors?

9. Financial aspects

A. Investment needs

What will be your financial needs? (Monthly/Yearly)

Fixed investment

• Equipment/machinery
• Land and building

Working capital

• Raw material
• Product/manufacturing cost
• Administrative costs

Total investment

B. Source of funds

• Loan
• Group investment
• Accumulated group savings
• Grant
• Any other
• Total

C. Sales

What is your forecast of total sales?

Details about sales

D. Financial statements

Profit and loss accounts as on (date)

Profitability

Sales: (monthly/yearly)
Total costs (take from profit and loss accounts)
Gross profit = total sales - total costs

Balance sheet

What will be your balance sheet at the beginning of the business and the day of the final account-closing year (1-year)?

Starting balance sheet

Final balance sheet

Cash flow

What you have learnt in this module

Business planning is the most important tool enabling the group to make a business successful. It is an aid to ensure that no aspect is neglected and the business will make profits.

The business plan must start with a statement of the cooperative's objectives and vision.

Other elements of the plan include information related to basic, technical, market, financial and personnel sectors, as well as projections for the future.

Make a Business Plan before starting a business and revise it at least once in six months, or at least once a year.