WRITING A GOOD BUSINESS PLAN

Part 1

Most start up businesses need a good business plan;
and most new venture entrepreneurs resort to having
an expert on board to help them write a realistic and
exciting business plan.
We have done a little bit of research on this subject
matter and can offer a little bit of advise on how you,
the new venture entrepreneur can write a good
business plan or improve on the one you have. It is a
wide subject and most graduate and undergraduate
schools in Kenya and indeed in the world devote
entire courses to the subject; we shall only highlight
key research areas.
What’s wrong with most business plans? The answer is
relatively straightforward. Most waste too much ink on
numbers and devote too little to the information that
really matters to intelligent investors. As every
seasoned investor knows, financial projections for a
new company—especially detailed, month-by-month
projections that stretch out for more than a year—are
an act of imagination. An entrepreneurial venture
faces far too many unknowns to predict revenues, let
alone profits. Moreover, few if any entrepreneurs
correctly anticipate how much capital and time will be
required to accomplish their objectives. Typically, they
are wildly optimistic, padding their projections.
Investors know about the padding effect and
therefore discount the figures in business plans. These
maneuvers create a vicious circle of inaccuracy that
benefits no one.
Don’t misunderstand: business plans should include
some numbers. But those numbers should appear
mainly in the form of a business model that shows the
entrepreneurial team has thought through the key
drivers of the venture’s success or failure. In
manufacturing, such a driver might be the yield on a
production process; in magazine publishing, the
anticipated renewal rate; or in software, the impact
of using various distribution channels. The model
should also address the break-even issue: At what
level of sales does the business begin to make a profit?
And even more important, When does cash flow turn
positive? Without a doubt, these questions deserve a
few pages in any business plan. Near the back.
If you want to speak the language of investors—and
also make sure you have asked yourself the right
questions before setting out on the most daunting
journey of a businessperson’s career, we have
researched a few recommendations that discuss the
the framework that systematically assesses the four
interdependent factors critical to every new venture
and shall continue this discussion with Part 2.
Until then, we are open for business and we are here
to partner with you on your journey to create a
successful business.

Part2:
This part of  exciting
and workable business plan and, we would like
to continue on to discuss the framework which will
systematically assesses the four interdependent
factors critical to every new venture:
1. The People. The men and women starting and
running the venture, as well as the outside parties
providing key services or important resources for it,
such as its lawyers, accountants, and suppliers.
2. The Opportunity. A profile of the business itself—
what it will sell and to whom, whether the business can
grow and how fast, what its economics are, who and
what stand in the way of success.
3. The Context. The big picture—the regulatory
environment, interest rates, demographic trends,
inflation, and the like—basically, factors that
inevitably change but cannot be controlled by the
entrepreneur.
4. Risk and Reward. An assessment of everything that
can go wrong and right, and a discussion of how the
entrepreneurial team can respond.
The assumption behind the framework is that great
businesses have attributes that are easy to identify but
hard to assemble.
They have an experienced, energetic managerial team
from the top to the bottom. The team’s members have
skills and experiences directly relevant to the
opportunity they are pursuing. Ideally, but not
necessarily, they will have worked successfully together
in the past.
The opportunity has an attractive, sustainable business
model; it is possible to create a competitive edge and
defend it. Many options exist for expanding the scale
and scope of the business, and these options are
unique to the enterprise and its team. Value can be
extracted from the business in a number of ways
either through a positive harvest event—a sale—or by
scaling down or liquidating.
The context is favorable with respect to both the
regulatory and the macro-economic environments.
Risk is understood, and the team has considered ways
to mitigate the impact of difficult events. In short,
great businesses have the four parts of the framework
completely covered.
If only reality were so neat...!
We shall continue on to break down the four
components further to help you, the budding
entrepreneur, think through each and ensure that you
have adequately covered them.
Leonard Otieno Foundation