How to Write a Business Plan in Nigeria
How to Write a Business Plan in Nigeria – In a time and century when the government can do little or not much to help everyone in any country or engage in a massive social program for citizens, starting a business or being an entrepreneur seems to be the new path for most people. Small and medium scale enterprises are springing up daily, some don’t last for long and while others keep growing as much as they can.
Also Read: Business Plan Writers in Nigeria
Whether it is a small scale business or a multinational, it has been proven that in starting a business, one must carry out a lot of planning, capacity building and explore ways on how to maximize the opportunity of a business idea. The “working together” of these administrative tasks result in the formation of a business plan.
A business plan therefore, is a roadmap, document, strategy paper that is created for business success. It most times details the first 3-5 years of the company and how they intend to achieve success. Though it is a popular document that most people desire to have, a business plan is not necessarily needed to start a business, neither is it a guarantee for success of your business; however, it is advisable to have something that details or brings to light and the understanding of others on what you intend to do.
Among other things, a business plan requires you to research the business area and the requirements of doing such business. Generally speaking, a business plan should contain the following broad areas;
- Executive Summary
- Company Description
- Market Analysis
- Organization and Management
- Service or Product Line
- Marketing and Sales
- Funding Request
- Financial Projections
Who Needs Business Plan?
A business plan is particularly required for ventures that are to be created or created for profits i.e. businesses. So, the following categories of people will need a business plan at some point.
- Start-ups; entrepreneurs with ideas who wish to start a business.
- Young companies; businesses that are already in existence and are looking to change things in their organizations.
- Contractors and contract seekers.
- Students and Idea generators seeking grants and funds to start their businesses.
Purposes of Writing a Business Plan
Different individuals and organizations have various reasons for writing a business and one major reason for the different is the use to which they want to put the business plan.
- Idea development and Start-up Planning: Ideas are the seeds of businesses and how organizations were developed. An idea will be of no use if it is not developed and the implementation is carried out as well. A basic way developing an idea is by creating a business plan. This means transferring the flashes of thoughts into paper. There is a saying that the faintest of writings last longer than the sharpest of memories. The ideas one has in their heads are vague in nature and it is in putting them to paper that you start to develop them and also get more ideas.
- For Research Purposes: For people going into a new area of business, they will need to research the area of business and definitely come up with a document which one can call a business plan. The composition of a business plan shows that a level of research is required especially when it comes to market, sales and financial projections. The product aspect requires that one must have idea of what he/she wants to produce before thinking of venturing into business.
- Business Evaluation, Expansion and Reorganization: In the lifetime of a particular business, they need to evaluate their existence, products, strategies and business models. This cannot be done by simply having board meetings with people sharing ideas. It will require preparing a document or a fresh business plan that will detail the new business model they need to invest in. If an organization needs to re-strategize or expand their scope of business, then there is need to have a working document to follow through with it.
- For Grants and Fund Raising: The key challenge of start-ups and most businesses has always been on raising funds for their organizations. On the other hand, investors and venture capitalists don’t just give out monies without knowing that there will be a return or yield after some years. So, individuals and corporate organizations (including investment banks) who desires to help small and media scale enterprises, ask for business plans or a proposal that will qualify one for their funding. In this situation, the business plan must go a long way to convince the investors that the business is viable, feasible, can make profit, scalable, can be sustained and will also add sustained value. Your strong convincing points (to get funding) will be detailed out in your business plan.
Writing a Business Plan
Before delving into what it takes to write a business plan, let make some things clear;
- A business plan is better written by professionals who specialize in it and this can be found amongst freelancers and business writers or consulting firms.
- A vague idea of a business is not enough to produce a workable business plan. One needs to be aware of geographical implications of starting a business. That a business works in the Caribbean does not mean it will work in Nigeria; the two countries differ on so many fronts.
- A detailed research is required on the business. You must understand the sector you desire to go into.
Compositions of a business plan
They have been listed earlier, so in this section I will discuss in detail what they involve and why they are important for your document.
Executive Summary: This can be described as the brief of your entire document and what one should expect to see in your business and the full document. It is considered the most important especially for those seeking funding. It will give the investor a brief idea of whether your business idea can work or not.
It is advised to write it last after the whole document is written but it is the first part to include in the document. The following should be including in your Executive Summary:
The Mission Statement: Explains what your business is about and should include many sentences but be limited to a paragraph.
Company Information: Covers a short detail of company, founding date, and name of founders, their roles, employees and business location.
Highlight of growth: gives examples of your growth as a company; market and financial highlights should be included too.
Products/Services: a brief of your products and services you offer.
Financial Information: for businesses seeking funding, you will include your current bank and investors.
Future Plans: give an explanation of where you want to take your company in the future.
For start-ups and new businesses, you will not have the information that an established company has, so it is better to detail some background information about yourself, your ideas, products and services. You will have to prove that you have carried a thorough research of the market and sector, with strong points that you can succeed in it.
The Executive Summary will determine whether one will want to continue reading your business plan, so every word must count. As much as possible, it is advisable to include the above information all in one page.
Company Description: This explains and gives a review of the different components of your business. It gives them an idea of your business goal and proposition.
What to include;
- The nature of your business and the market needs you are trying to meet.
- You will also explain how your products intend to meet this need.
- A list of the consumers, businesses and organizations that your company serves or intends to.
- Identify your competitive advantage as a business such as location, personnel, operations and bringing value to customers.
Market Analysis: This is where the research you carried out will be important. This section needs to prove that you have a market and industry knowledge of the business with other findings and conclusions.
What to Include
- Description of Industry and Outlook: you will need to describe the industry you are going into and this will include; size, historic growth, trends and characteristics (lifecycle stage, projected growth, etc). You will also identify the major customer groups in the industry.
- Information about target market: There is need to narrow your market size. Many businesses make the mistake of trying to appeal to too many targets markets. You will need to discover the following; what are the critical needs of your customers? Are those needs being met? What are their demographics and where they are located? Are there seasonal and periodic purchases that will affect your business?
- Size of the Primary Target Market: In this you will need to include then size of your potential market and their annual purchases that they offer to the industry. You will also find out the forecasted growth of the market.
- Your potential market share: What percentage of the market do you think you can obtain from a particular location and area? You will need to explain the reason behind your calculations.
- Competitive Analysis: This analysis should identify your competition based on product, service and market segment and this will include; market share, strengths and weaknesses, how important is your market to your competitors, are there barriers that can hinder you, what is your window of opportunity to enter, are there indirect or secondary competitors that might impact your success, what barriers are there for the market (e.g. evolving technology, high investment costs, lack of skilled personnel)?
- Regulatory Restrictions: You will need to include any customer or governmental requirements that affect your business and how you will comply. You need to identify the cost implications it will have on your operations.
Organization and Management
This describes the organizational structure of your company, details of company ownership, and profiles of your management team and the qualifications of board of directors (if any).
This also goes further to describe the responsibilities of each person and the details of each department and those responsible for it. This might seem unnecessary for one or two person organizations but they are important to know they kind of people running the business and their capability.
There is also need to detail who your board directors are, how you chose them and how you intend to keep them there. Details of their salaries are equally needed, how promotions will work, etc. You need to be convincing enough that you just don’t have names on letterheads but real staff manning activities in the company.
Product and Service
The next item to include in your business plan after the organizational structure would be to describe your product and the services you will be offering. The most important aspect of this is to convince your readers or investors on the need your product/service will be meeting to customers.
What to include;
- A description of your product; physical description and otherwise, benefits to your customers, the advantage your product has over the competition and the stage of your product’s development (whether idea or prototype).
- You will also need to detail your product’s life cycle and the factors that affect it.
- Any issues of intellectual property rights and copyrights or trade secret should be described concerning your products. Legal agreements and backing should also be revealed in your business plan.
- Research and Development activities that are being carried about your product needs to be revealed too. This should also involve results of it about your product in the future and how it affects the industry.
Marketing and Sales Management
This will go a long way to determine if you will still be in business for the next one year and beyond. Customers are the lifeblood of any business and it is through marketing and sales efforts will you be able to reach them. Marketing does not have a particular rule of thumb or strategy of adoption but it is peculiar to each business based on the evaluations and business model development. So your strategy can be unique to your business, however, there are overall marketing strategies and they include the following;
- A marketing penetration strategy; how do you intend to disrupt or enter and existing market?
- A growth strategy; this can include, training for staff, franchising and acquisitions, joint ventures, providing products to different customers and changing your distribution chain.
- Channels of distribution; original equipment manufacturers (OEMs), internal sales force, distributors and retailers.
- Communication Strategy; how do you intend to reach out to your customers; promotions, advertising, public relations, personal selling, branded materials, brochures, flyers, social media, etc.
After a proper marketing strategy, the next step should be an overall sales strategy. How do you plan to sell your product?
- Sales force strategy; internal sales agents, external ones, independent sellers, etc. What trainings are intending to give them, how do you recruit them and what about remuneration plans?
- Actual Sales Activities: It is important to break down your sales strategy into activities how you intend to carry it out. It can include, identifying potential customers, selecting the one with the highest leads to make a sale, how to contact them and the frequency of calls or emails you will send. Cost should be considered when doing all these too.
This is for businesses that are requesting funding for their businesses or any form of grants and sponsorships. The following information is to be included;
- The current financial requirement of your business.
- If there will be any future requirements, you will need to state it as well.
- How do you intend to use the money that will be given to you? Will it be for capital expenditure, working capital, debt servicing, acquisitions, expansion and more? It needs to be listed in this section.
- Any other financial issues and circumstances need to be clearly stated as well e.g. buyout of business, acquisition, debt repayment plan, selling of business, etc. Your creditors need to know this since they will be impactful on repaying your loans.
When asking for financial support, grant and funding, you need to include the amount you want in the immediate and in the future, the period it will cover, the guidelines or repayment plan that is suitable for you and the type of funding you desire (e.g. equity, debt).
The development of this segment will be possible after a careful and predictable analysis of your market with set objectives. This will help one allocate resources efficiently. These two key areas are important for you to include in your financial projection;
- Historical Financial Data: For a business that has been in operation for some years, creditors or potential investors will request to see your past financial statements as detailed as possible. Items to be included will cover income statements, expenditures, balance sheets, cash flow statements for each that you have been in existence as a business. Most times they request 3 to 5 years depending on how long your business has been operating. Some creditors can also go further to request for any collateral you might have that will be needed to insure your loan and this is regardless of your stage in business.
- Prospective Financial Data: Whether you are a start-up or an ongoing business, investors will require that you provide your financial projections for your business based on market findings and analysis. Such documents which can cover up to 5 years will include, income statements, balance sheets, cash follow statements, capital expenditure budgets, etc. You can start from a monthly projection of the first year, and then move to quarterly and to the entire year. This can then be extended to 2 or 5 years depending on request. It is also important for your projections to be consistent with what funds you are requesting; any inconsistencies might seem like not knowing your numbers or integrity issues to your creditors. A short analysis of your financial information can be an advantage especially when done with images like graphs.
This aspect is provided on a request basis but it should not form part of your business plan. The plan is a tool of communicating your ideas and business case to people so many people can see this. On the other hand, some information is not for everyone to see but on the part of creditors, they feel safer asking for such documents when they are have to make a funding decision regarding your business. These documents will be more like proof and verification for the information you have provided in the body of your business plan.
The appendix will include the following;
- Credit History (personal and business)
- Resumes of key managers.
- Product pictures.
- Letters of reference.
- Details of Market studies.
- Relevant references from magazines and book references.
- Licenses, permits, patents and copyrights,
- Legal documents.
- Lease copies
- Building permits.
- List of business consultants, including attorney and accountant.
Also copies of businesses plans should be kept and their distribution also monitored. This will help you be aware of when to update it for specific audience or purposes.
Just like in construction, it is required to have a design (except in rare cases) and plans to follow, a business that will require a lot of activities will equally need a plan (thought not always). Having a business plan and carrying out proper research about market, industry, competitions, trends helps you to have a blueprint on what you can work with. With a thorough analysis of development plan, your risk factor for business failure is reduced, predictable and also controllable.
And with a business plan at hand, you can keep track of your journey, improvements made, where you intend to go in the future and particularly and most importantly how you intend to achieve them. It is not enough to have a goal to make a millionaire naira; there must be a plan of attainment.
There is more to that saying that, “if you fail to plan, then you have also planned to fail”.
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