Why Every Entrepreneur Needs a Business Plan in Nigeria?

admin

By: Site Engineer, Staff

full bio

Find Time to Plan Your Business

The entrepreneur is regularly described as a goal and action-oriented individual. He knows where he is going and why. All his activities and energies are focused and directed at achieving specific goals.

To be goal and role-oriented, studies suggest that there is a plan – a decision as to where the entrepreneur wants to go and how he wants to get there. A business plan serves this purpose for the entrepreneur.

A business plan is a game plan, a road map that describes the path that the business will follow in moving from its present position to where it wants to be. It is a written document that guides the creation of a new venture or the transformation of an existing one from its present state to the desired state.

As any traveler will appreciate, a road map will not indicate what portion of the road is being reconstructed or where there are bumps. As you travel along the road, you may need to make diversions and take appropriate decisions as the conditions of the road dictate.

But you have the road map and whatever decisions you take, you will still use it if you must get to your destination. A business plan is to the entrepreneur what the road map is to the traveler.

As indicated the process of preparing a business plan enables the entrepreneur to have a deeper understanding of the business, the environment in which the business will operate the opportunities available to it as well as the strengths and weaknesses of the business.

If this process of preparing the business plan is undertaken in collaboration with the key personnel in the business, the entire management team has the opportunity of having a shared idea of what the business is all about the goals it wants to achieve, and how they are to be accomplished. This process helps the management team to acquire a team spirit and the involvement of all concerned.

However, the entrepreneur may not possess most of the skills needed to prepare a workable business plan. The skills may also not be available within the firm. In this circumstance, the entrepreneur needs assistance advice and guidance from a technical expert on the choice of technology-production process and other inputs; an accountant on financing and financial strategy, a marketing person on market analysis, demand forecasting and marketing strategy.

Nevertheless, the entrepreneur plays a key role in the planning process, coordinating and making critical decisions. Where the entrepreneur does not play this role, he is more likely to put the business plan aside as soon as it is completed.

Why the Entrepreneur Needs a Business Plan?

Some entrepreneurs even believe that preparing a business plan is unnecessary, a waste of time and an expensive exercise.

Many small businesses do not have documented business plans. They find that most of their time is consumed attempting to solve the day-to-day problems which threaten their very existence. They have no time to look ahead.

In any case, most can point to very successful entrepreneurs who did not have business plans at the early stages of the growth of the business or even after they had expanded to a considerable size. What exists in these small businesses is simple, intuitive, non-formal planning. While this level of planning may be adequate for very simple micro-enterprises, a written business plan is a necessity for small, medium and large-scale enterprises.

A written business plan has many benefits.

  • It enables the entrepreneur to have a clear focus and direction. The process of setting objectives of the business is an opportunity for the entrepreneur to choose the direction in which he wants the business to go.
  • It is also an opportunity to have a clearer understanding of the business and what is needed to achieve the stated objectives.
  • A written business plan is an important communication tool for the key staff of the enterprise about the aims and objectives of the entrepreneur.
  • The process of writing a business plan provides the opportunity, perhaps for the first time, for the entrepreneur to check through all the activities of the business. The result of this is a better understanding of the market, customers, competitors, distributors, suppliers, etc and the resources that are needed.

Small businesses have limited resources and capabilities. They, therefore, have to allocate and utilize limited resources more carefully. They try to afford waste or major mistakes. A business plan is, therefore, a necessity making it possible to allocate and utilize resources more efficiently.

A business plan is of very importance when the entrepreneur is seeking external funds from either investors or financial institutions. If the entrepreneur knows what he needs and when it is easier to get a loan from the bank or the support of investors.

It is unlikely that an entrepreneur who does not have a business plan will be able to get the needed support of investors and financial institutions.

A business plan is needed for control purposes. Having established the direction and objectives of the business, the entrepreneur is in a better position to determine how well he is doing, to anticipate and analyses future developments that might jeopardize the achievement of the objectives and to take appropriate decisions to stay on course.

There is some evidence from the literature that businesses that plan seem to grow faster and perform better than those which do not. However, for a business plan to yield these benefits, it must be simple and clear enough for the entrepreneur to use; it must be flexible, realistic and achievable.

Since the plan is meant to guide the entrepreneur in making future decisions, searching questions should be asked and answered in preparing it. In particular, the entrepreneur should carefully incorporate in the plan what he would do if the best or the worst situation occurs in implementing the plan.

A major pitfall of planning for the small business is to have a sophisticated plan which cannot be understood or used by the entrepreneur.

What Should the Business Plan Contain?

There is no hard and fast rule as to what a business plan should contain. The format that is adopted depends on the type of business and the audience the entrepreneur has in mind in preparing it.

Some financial institutions or support organizations have their formats that prospective customers are expected to adopt.

Generally, however, a business plan should provide information and analysis on:

(a) The current situation of the businesses:

  • The nature of the business
  • The identity of the business.
  • The key personnel/management team

(b) The direction in which the entrepreneur wants the business to go in the future:

  • The goals and objectives of the business.
  • Analysis of future developments in the environment of the business which constitute opportunities or threats to the business.

(c) The activities that need to be carried out to achieve the set objectives:

  • Financial plan
  • Implementation schedule
  • Risk analysis
  • Fashioning out a production/operations plan
  • Marketing plan
  • Organizational and human resources plan

A business plan is useful only if the different components of it are integrated into a single piece of work. The components are interrelated and the repression must not be created that one component can be written without reference to the others.

In writing one part of the business plan therefore, effort must be made to draw upon the decisions that have been made concerning the other parts.

The key issues which a business plan should address are:

  1. An analysis of the present situation of the enterprise;
  2. An analysis of the direction in which the entrepreneur wants the business to go in the future; and
  3. A description of the activities that need to be carried out to achieve the set objectives.

Conclusion

Why not all entrepreneurs spare time and energy to prepare business plans, there is evidence that those who do perform better and grow faster than those entrepreneurs who do not. By preparing business plans, entrepreneurs can allocate and utilize their limited resources more efficiently, to obtain resources from external investors and to control their operations more effectively.

Entrepreneurs are goal and action-oriented. A business plan enables the entrepreneur to have a clear focus and direction. It enables them to have a deeper understanding of the business, its environment, and the opportunities as well as the threats facing the business.

 

Don’t forget to share this post!

share:
Whatsapp Share Icon