THE TECHNICAL UNIVERSITY OF KENYA

P.O.BOX 52428, -00200 NAIROBI

COURSE OUTLINE: BUSINESS PLANNING PROJECT

Main Objective

The main objective of this unit is to equip the Learner with knowledge, skills and attitudes that
will enable him/her prepare a specific business plan which becomes a roadmap to follow in
starting and managing a successful business.

Expected learning outcome(s) /competence(s)

By the end of this unit the learner should have the ability to prepare a specific business plan
which becomes a roadmap to follow in starting and managing a successful business enterprise.

Specific Objectives:

To critically give an overview of the proposed/ongoing business demonstrating viability

To demonstrate an understanding of the market, ability to penetrate, obtain a niche, maintain a

market share and achieve the stated market objectives by availing the product(s) or service(s) to
the end user.

To explicitly elaborate the current and future workforce of the business highlighting duties,
experiences and qualifications.

To demonstrate how you will produce your product(s) service(s) in a cost-efficient way and make
ready for the market.

To demonstrate practical financial need and possible source.

CONTENT

• Introduction to Business Planning

• Definition of Business Plan
• Components of Business Plan
• Importance of a Business Plan

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 • Qualities of a good Business Plan

Appendices

Reference
K-map Business planning module
Business plan module guide – by Dr. Wambui King’ong’o

Lecturer: Dr. Wambui King’ong’o (J16 – 1st door on the right)

Email: [email protected]

INTRODUCTION TO BUSINESS PLANNING

A business plan is a document that demonstrates that your business can sell enough of its
products or services so as to make a satisfactory profit and be attractive to potential lenders. It
is therefore a selling document. A business plan can help you get where you are going. It is a
roadmap you can follow to start and manage a successful business. It is thus a managing tool.

An effective business plan should be written by the entrepreneur. It comes from your
experiences, your goals, your thoughts, your vision, your philosophies and your research into the
opportunity you hope to pursue. A business plan is a blueprint of your company presented in a
logical manner. It is a strategic plan of your proposed company.

A business plan has eleven main components including: Cover page, declaration, Table of
contents, Executive summary, Business description, Marketing plan, Organizational and
management plan, Operational and production plan, Financial plan, Potential risks and measures
to overcome and Appendices.

COMPONENTS AND FORMAT OF BUSINESS PLAN WRITING

• Cover page; Name of business, Business physical address, Title of document, Presenter,
Presented to who and Series
• Declaration
• Dedication
• Acknowledgement
• Table of contents
• Executive summary; summary of all chapters below (in one paragraph).

Chapter I: Business description: Business Sponsor(s)Business Name, Business Name, Form of

Business Legal Ownership, Type of Business, Product(s)/ Service(s), Justification of Business
Opportunity, Industry, Business Goals, Entry and Growth Strategy.

Chapter II: Marketing Plan: market/ customers, market share, competitors, method of
promotion, pricing strategy, sales tactics, distribution strategy

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Chapter III: Organizational/ Management Plan: Business manager, other personal’s (duties
experience and qualifications), recruitment, training and promotion, remuneration and
incentives, licenses, permits and By-laws, support services.

Chapter IV: Operational/ production plan: Production and operational facilities, production and
operational strategy, production and operational process, regulations affecting operation.

Chapter V: Financial Plan: Pre-Operational Costs, working capital, projected cash flow
statement, pro-forma income statement, pro-forma balance sheet, calculating break-even point,
profitability ratios, desired financing proposed capitalization

1.0 CHAPTER ONE: BUSINESS DESCRIPTION

This chapter gives a detailed description on the background information about the business. Each
sub-topic provides vital information about the proposed business. Use continuous prose
(complete sentences, in full paragraphs to give a description about your business). The points
raised in this handout are intended to assist in organizing your thoughts and ideas in a coherent
manner. They are not to be treated as dis-jointed pieces but one continuous report, broken into
various subheadings.

1.1. BUSINESS SPONSORS

Provide brief background information about the owner(s) of the business in relation to the
education, skills and experience relevant to the operation of the business chosen.

1.2. BUSIENSS NAME

Identify a suitable name for your business, which is relevant, easy to remember and appealing to
customers. Explain why you have chosen the name.

1.3. BUSINESS LOCATION AND ADDRESS

Describe your business physical address, by giving the name of the city/town/street/avenue,
building, and floor and room numbers. In cases where these do not exist, identify your business
location in relation to a significant trade marking the area e.g., hospital, petrol station, police
station, Post office, school, church etc. Provide also a postal address for your business including
a telephone number where possible. Explain the reasons why you have chosen this location. You
may illustrate your business location on a map.

1.4. FORM OF BUSINESS LEGAL OWNERSHIP

Indicate how the business is to be owned e.g., sole- proprietorship, partnership or private limited
company. Show the role the owner(s) will play in the business operation. In case of partnership
develop a partnership agreement.

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1.5. TYPE OF BUSINESS

Level of business growth

1.6. PRODUCT/SERVICES

Describe the product(s) to be offered by the business in detail, giving the physical features of the
product such as various types, color, size, quantities, shapes etc. Explain the competitive edge
your product have over those of your competitors which will justify why your customers will buy
from you but not from them. In case of services describe the quality, promptness, types of
services to be offered etc. Show the competitive edge of your services.

1.7. JUSTIFICATION OF BUSINESS OPPORTUNITY

Give at least 5 good reasons why you decided on this particular business opportunity/ idea.

1.8. INDUSTRY

Industry is a cluster of businesses producing the similar kinds of product/ services and serving
similar market segment to solve similar customer needs. Identify the industry your business falls
under. Describe this industry in detail in regard to size, business trends, technology, current and
past performance and projected future performance of the industry. (Note information on all
industries in the country is available from economic publications – do your research)

1.9. BUSINESS GOALS

State your business goals in the short, medium and long term. Your business goals must be
specific, measurable, achievable, and realistic and time phased (SMART).

1.10. ENTRY AND GROWTH STRATEGY

This provides your plans / tactics formulated to enable you gain entry and acceptance into the
market as a new business. Show how you will attract and retain customers.

Growth strategy shows your expansion plans. Outline the steps to be taken in expanding your
business showing the time frame within which these plans will be implemented.

2.0 CHAPTER TWO: MARKETING PLAN

2.1 CUSTOMERS

Describe your potential customers in detail, in terms of who they are, where they live/located,
their occupation and their income levels (individual customers). Describe other categories of
customer’s e.g., commercial, institutional and government. Describe in detail their needs in
relation to the product(s) or services(s) you intend to offer in terms of quantities, frequency of
purchase, method of payment, terms of sales etc.

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2.2 MARKET SHARE

Describe the market area and size you intend to operate in. Estimate a market share (percentage)
in relation to your competitors that you intend to capture and retain as your market share. You
may illustrate this using a pie chart, graph etc.

2.3 COMPETITORS

Identify your business competitors by name. Where are they located in relation to your business?
Describe each of your competitors in detail in relation to:

• Methods of operation/production (technology)

• Capital outlay (invested)
• Market share
• Quality of products/ services
• Variety of products/ services
• Pricing techniques
• Distribution strategies and any other competitive areas
Show your competitive edge/advantage over your competitors. Show how you plan to cope with
competition.

2.4 METHOD OF PROMOTION

Describe how you plan to create awareness for your product/ services. Describe methods of
Sales promotion, Publicity, Personal selling and Advertising. Show how these methods of
promotion will be used to increase sales. Identify suitable times when promotions will be carried
out in your business. Estimate costs in promotions.

2.5 PRICING STRATEGY

Describe the factors to be considered when setting prices for your products/services. Describe
the various pricing techniques you will apply in order to appeal to your potential customers.
Show the terms of sale and mode(s) of payment to be used.
2.6 SALES TACTICS
Describe your selling methods- Direct or Indirect. Describe your customer’s service strategies.
Describe your public relations strategies and after sales services to be offered to your potential
customers.
2.7 DISTRIBUTION STRATEGY
Describe the channels of distribution to be used, to enable product/ service flow from your
business to be accessible to your final consumers. Identify possible problems to be encountered
in distribution endeavor and possible solutions you are likely to apply. Estimate distribution costs
per month and lay down strategies to minimize this cost and achieve efficiency.

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3.0 CHAPTER THREE: ORGANISATION AND MANAGEMENT PLAN
3.1 BUSINESS MANAGER
• Describe in detail the qualification and duties and experience of the business manager.
• Describe in detail, your organization structure, showing clearly the lines of authority and
responsibility, supervision, accountability etc.
• Show you organization chart.

3.2 OTHER PERSONNEL

Show all the employees you plan to work with their titles, duties and qualifications, experience
and any special skills or qualities required.

3.3 RECRUITMENT, TRAINING AND PROMOTION

• Show your source of recruitment, the procedure to be followed in selection of qualified
personnel.
• Show how you plan to determine the training needs of your employees, how they will be
trained when and who pays for the training.
• As each employee expects some form of promotion, show how you will go about this
exercise. Who qualifies for promotion? When and how will you promote your
employees?

3.4 REMUNERATION AND INCENTIVES

Every employee deserves to be paid and paid well for the job they do. Your employees will have
to be paid a salary and some may have to enjoy certain allowances. Show how you plan to
compensate your employees. Use the format below.
Serial Job Title Basic Salary Allowance Total Total Annual
Number (Kshs) (Specific) Monthly Salary
(Kshs.) Salary
1
2
3
4
5
6
7
Total

Incentives represent the extras, over and above the salary and allowances. Incentives can be
both financial e.g., bonuses or non-financial e.g., good working conditions etc.
• What financial incentives do you plan to give to your employees?
• What non-financial incentives to you plan to give to your employees?

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3.5 LICENSES, PERMITS AND BY-LAWS
For a business to operate, it has to obtain certain licenses and permits from the relevant
authorities. These documents vary from one business to another. You should do some research
and find out.
• What kind of licenses you will need to operate your business? And where you will obtain
them from, for how much, and how often?
• What special permits must you obtain from government authorities to allow you to
operate your business? (If any) Where will it be obtained from? For how much and how
frequently will you need to renew it?
• Are there any special County council or National by-laws you have to adhere to? Give
details of what is expected of you.

3.6 SUPPORT SERVICES

They represent all the necessary services that can enhance the success and efficiency of the
business, yet they are not required continually. They can therefore be outsourced at regular
intervals, depending on when they are required. Examples include financial management
consultancy, legal services, banking services, insurance, technical services, environmental
management etc. Identify the support services you will need for your kind of business and for
each of them show the source i.e., the specific provider, the exact services that will be offered,
how often and in some cases for how much? NB: Be specific in the firm or organization.

4.0 CHAPTER FOUR: PRODUCTION/OPERATIONAL PLAN

This chapter is key to the success of the business. Just like marketing and finance, operations or
the production function of the business is very important. It is the technical part that takes care
of the aspects of the business that result in the final product or service for the customer. How
this is achieved must be planned for carefully, to ensure that the output is acceptable and of good
quality that customers will be willing to spend their money on.

4.1 PRODUCTION/ OPERATIONAL FACILITIES & CAPACITY

To be able to process products and services a business needs to carefully identify the facilities to
be used for that. These include the machines, tools and equipment that may be required for
operations. Other facilities include furniture and fittings, necessary for smooth operations. The
entrepreneurs also identify other facilities such as transport vehicles that may be hired from time
to time or other sophisticated equipment that cannot be afforded during the start-up phase of
the business.
• Give a brief description of your requirement in terms of the resources it requires for
production.
• Format those requirements in the following:

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 Facility
Machines/tools/equipment No. Capacity Cost Total cost
required per Supplier/source
unit

Total xxxxxxxxx
Furniture & fittings

Total xxxxxxxxx
Total xxxxxxxx

• Describe your business premises giving details of the room/hall/yard etc., how it will be
partitioned, what task will be carried out where etc. Follow up with a drawing (sketch) to
illustrate the layout of your premises.
• Provide any other relevant information on production facilities that may be unique to
your type of business.

4.2 PRODUCTION / OPERATIONAL STRATEGY

Production planning and control is important if the operation of your business is to be carried
out effectively and efficiently. In this portion, you describe how your business operations will be
organized, costs involved and techniques for ensuring efficiency.
• Describe in detail, how your business operations/ production activities will be supervised.
Who will do the supervision? What measures will you put in place to ensure that costs
are minimized, wastage of resources eliminated, production or operations are optimized,
and resource utilization is used efficiently?
• Provide details of the costs involved in the operations.

Cost of materials per month

Item Amount(kshs)

Total costs

Cost of labour per month

Item Amount(kshs.)

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 Total costs

Overhead Costs
Overheads are expenses that the business pays on a monthly basis, or otherwise, expenses
incurred as operational costs mostly for the amenities, energy and other utilities that support
the efficient running of the business. These may include; electricity, water, telephone, insurance
premiums, transport, postage etc. Show what overhead costs your business will incur. Follow
the format below;
Item Amount(kshs)

Total costs

Total Costs of Production per Month

This takes into account the costs for material, labour and overheads. This gives the total cost of
production/operations that the business will incur every month.
Item Amount(kshs)
Cost of materials
Cost of labour
Overhead costs
Total costs

4.3 PRODUCTION / OPERATIONAL PROCESS

The production process describes the procedure to be followed in ensuring that the product or
the service gets to the final customer. Give a detailed step-by-step process of your operations
right from the time the customers make an order to the point where the customer pays for the
product and leaves.

Note: Do not just list the steps. Give details of exactly what happens in each stage.

4.4 REGULATIONS AFFECTING OPERATION

Production or operations of any business are affected and regulated by certain government laws
and regulations. These may be varied ranging from taxation laws, factory act etc. find out which
government regulations are likely to affect your operation. Show how you plan to adhere or
fulfill the requirements.

5.0 CHAPTER FIVE: FINANCIAL PLAN

5.1. PRE-OPERATIONAL COSTS
Item costs
Business registration

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 Trading licenses and permits
Rent + rent deposit
Insurance policy
Machines, equipment and tools
Stock
Installation of electricity
Water installation
Telephone installation
Internet installation
Total cost

5.2. WORKING CAPITAL

Draw up the capital (expenses) you will require to sustain your business.
Item Amount

Total Working Capital

5.3. PROJECTED CASH FLOW STATEMENT

Item Jan Feb Mar April May June July Aug Sept Oct Nov Dec Totals
Cash inflow
/receipts
Opening balance
Cash sales
Other cash
inflows
Total cash inflow
Cash outflow
Cash purchases
Payment to
creditors
Wages/salaries
Rent
Water
Telephone
Electricity
Transport
Stationery
Loan repayment
Interest
Repairs
Advertising

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 Taxes
Other cash
outflow
Total cash
outflow
Net cash
Cumulative cash
flow

5.4. PRO-FORMA INCOME STATEMENT (Profit & Loss Account)

Pro-forma income statement for the year ending……….
Item Year 1 Year 2 Year 3
Sales
Less cost of goods
sold/purchases
Gross profit
Less Expenses
Wages
Rent
Water
Telephone
Electricity
Advertising
Stationery
Postage
Transport
Depreciation
Loan repayment
Interest
Repairs
Total profit before
tax
Tax
Net profit after tax

5.5. PRO-FORMA BALANCE SHEET

Assets At start End of year 1 End of year 2
Current assets
Cash
Debtors
Stock of finished goods
Stock of raw material
Work in progress
Total current assets

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 Fixed assets
Machines and equipment
(costs)
Depreciation
Vehicles (cost)
Furniture and fittings
(cost)
Depreciation
Other fixed assets (cost)
Depreciation
Total fixed assets
Total assets

Liabilities
Current liabilities
Creditors
Short-term loans
Bank overdraft
Total current liabilities
Long-term liabilities
Bank loan
Owners’ equity
Net profit (retained)
Total liabilities & equity

5.6. CALCULATING BREAK-EVEN ANALYSIS

Total contribution margin = sales – total variable costs
List total variable costs table from cash flow (total variable costs =kshs.)
Sales – total variable costs = kshs. (Total contribution margin)

Calculate the contribution margin percentage

Contribution margin percentage = contribution margin x 100 / sales
Determine the total fixed costs i.e., Operating expenses for year 1
List all fixed costs table from cash flow (Total fixed costs = kshs)
Calculate the break-even level of sales in shillings.
Break-even level =kshs
Break-even level = fixed costs /contribution margin percentage = kshs
Break-even (level of production at B.E.P) = Contribution margin/fixed costs=kshs.

5.7. PROFITABILITY RATIOS

Gross profit ratio = Gross profit x 100
Sales
Net profit ratio = Net profit before tax x 100 /sales

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 Net profit before tax x 100
Sales

Return on equity = Net profit after tax x 100

Owner’s equity

Return on Investment = Net profit after tax x 100 /total investment

Net profit after tax x 100
Total investment

5.8. DESIRED FINANCING

Item Amount (kshs)
Pre-operational costs
Working capital
Fixed Assets
Contingencies
Total desired (start-up) financing

5.9. PROPOSED CAPITALIZATION

Source Amount(kshs)
Personal savings
Friends/ relatives contribution
Bank loan
Total Investment

6.0. POTENTIAL RISKS AND MEASURES TO MITIGATE (a page)

APPENDICES

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