BUSINESS PLAN
A business plan is an official written document that sets out key aspects of a business idea and how
it will be developed.
Purpose of a Business Plan
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Helps in securing financial support from lenders, such as commercial banks or investors, by
providing comprehensive research and justification for the business idea.
Serves as a strategic roadmap, enabling the organization to stay focused on its goals and
objectives.
Assists in assessing potential risks and opportunities associated with the business venture.
Potential investors, such as shareholders, would want to see a business plan to make sure their
investment is safe and to assess the potential for a financial return on their investment.
Elements of Business Plan
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Outline of the owners, their backgrounds and business experience
Overview of the business idea and its product portfolio
Outline of how the business and/or its product is to be promoted.
Estimate of the sales of the business (sales forecasting)
The financial section that is likely to include a cash-flow forecast, a profit forecast and a
statement of what the business owns and owes.
Details of the human resource requirements of the business.
Advantages of Business Plans
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A business plan helps identify the strengths and weaknesses of a proposal.
Carefully planned business strategies increase the likelihood of entrepreneurial success.
A well-developed business plan reassures investors and financiers, making it easier to secure
external funding.
Business plans serve various functions, such as securing financing and measuring business
performance.
It communicates the strategic plan and direction to all employees in the organization.
Key Terms
Business plan refers to the document that sets out a business idea or proposition, including the objectives,
resources (marketing, operations, personnel, and finance) and corporate strategies.
An executive summary is a synopsis or abstract of the information provided in the main section of a
business plan, highlighting the key points and conclusions.
Case Studies
Denis Sagide is a recent graduate of Business Management. He intends to open a bakery business on the
outskirts of Nairobi, Kenya. He plans to establish the business as a sole trader, being aware of the risks
this carries, as well as the potential benefits. He has found suitable premises and feels confident about
being able to recruit suitable people to work at the bakery. Denis Sagide has produced a detailed business
plan for DS Bakery in his attempt to secure external finance to help him to start the business.
(a) Define the term business plan. [2 marks]
(b) State two key elements of a business plan. [2 marks]
(c) Explain two reasons why DS Bakery might benefit from the use of business plans. [4 marks]
(d) Explain why a bank might be interested in a firm's business plan. [2 marks]