entrepreneurship development training for gcom (oil & gas soft skills ltd, lagos nigeria)

Graduate Certificate in Oil and Gas

Management

Basic Entrepreneurship

Daniel Chinagozi PalmNet Consult Ltd

[email protected] 08030907949

mailto:[email protected]

Outline

©PalmNet Consult Ltd 2010 2

Introduction

Business Plan - Definition, Uses and Benefits

Outline of a typical Business Plan

Qualities of a good Business Plan

Questions and Answers

Course Objective

• To define the core ingredients for planning, establishing and sustaining a successful business venture


Entrepreneurship - Definition

• The practice of starting new organizations or revitalizing mature organizations, particularly new businesses generally in response to identified opportunities.

• Entrepreneurship is often a difficult undertaking, as a vast majority of new businesses fail.


Business Venturing - Definition

• Venture: a risky or daring journey or undertaking OR • A business enterprise involving considerable risk

• Business Venturing: a pursuit of a business enterprise after a

careful assessment of the Opportunities and Risks involved in that particular business OR

• A balance between the reward of success and the risk of failure – For some people, it is a specific level of owner income. – For others, it is the joy of doing something they love regardless of the

amount of money they can take from earnings. – For long-term success, the business must generate enough sales to

pay all its expenses and provide an adequate reward to the owner. – It should produce an adequate return on your investment of time and

money relative to the amount of risk involved. Otherwise, you may be better off doing something else.


Checklist For Starting a Business

• Step 1: Examine your motivation for business ownership Your Personal Objectives

– Have you defined your personal needs and your financial objectives?

– Why do you think you will be happy as a business owner?

– Are you mainly interested in money, power, or flexibility?

– Have you examined your family needs?

Your Talents

– Do you have special skills or education in a particular industry?

– How will these talents help you in the development and operation of your own business?

– Do you like to sell?

– Can you sell? You will be required to sell yourself, your company, and your products and services.

Your Personality Traits

– Are you an authoritarian or a team player?

– How will this affect your relationship with employees, customers, and suppliers?

– Can you handle the stress of time deadlines from customers?

– Can you live with yourself if you have to fire an employee?

– Are you willing to risk everything you own? Will you be able to live with the fear of failure?

– Will your family?



• Step 2: Choose a business suitable for you – A question often asked is “What kind of business should I start?”

• No one can answer this question for you. Businesses of all types are both successful and unsuccessful. A business generally succeeds or fails based on: – the customer market,

– the skills of the owner(s) and workers, and

– the quality of the products, not because of the type of business.

Personal Areas to Consider When Choosing Your Business

– Your experience

– Your talents

– Your interests



• Step 3: Evaluate the feasibility of your chosen business

• A common mistake made by many people is to blindly begin a business without evaluating whether it is feasible. A feasibility evaluation will allow you to make a more informed “go” or “no go” decision

• A sampling of topics that should be honestly appraised includes: – Do you have enough money to start your business without going into debt?

– If you need to borrow money, do you have some cash and own other pledgible assets?

– Are you willing to risk these assets to borrow money?

– If not, where are you going to get your money?

– Can the business generate enough cash to pay its expenses as well as your desired level of owner profit?

– Are the rewards from the business, both monetary and personal, worth the effort and investment you will make?

– Are your management skills adequate to oversee and develop the business operation?

– Is there really a demand for your product or service?

– Have you researched market demand or have you just assumed that people need or want your product or service?

– What is the worst thing that could happen if you go into business for yourself?

– Are you capable and willing to deal with the worst possibility if it occurs?



• Step 4: Consider start-up requirements and common pitfalls

• Many Start-Up Requirements Are Ahead of You – Learn about the legal forms of organization you may choose and what steps you

must take to establish a legal business entity.

– Learn which permits, licenses, rules and regulations are applicable to your proposed business.

– Determine the types of records you will have to keep for tax purposes and for management and control.

– Consider your professional needs, such as legal, accounting and tax, insurance, and banking.



• Step 5: Develop your business plan


Some of the Common Pitfalls to Avoid:

• Blind optimism

• Not separating Management from ownership

• Thinking others will do your work for you

• Entering into verbal partnership agreements

• Paying licenses and fees before you have adequate funds to start the business

• Entering into contracts before securing funds to open the business.

• Thinking it will cost less and take less time to get into business than it actually will.


Business Plan - Definition

• A Business Plan is a scheme for accomplishing a business

purpose. It articulates the business objectives as well as the

strategies for achieving them.


Business Plan - Uses

• Define a new business

• Define objectives and strategies to achieve those objectives.

• For periodic review of an on-going business

• Support fund raising application (loan and equity)

• For buy-in by stakeholders

• Set a sale value for a business

• Justify a new product line, promotion or expansion

• For managing a business


Business Plan - Benefits

• The business plan quantifies goals and objectives, which provide measurable benchmarks for comparing forecasts with actual results

• Serves as a communication tool for outside financing as well as an operational tool for guiding the business towards success

• The time, effort, research and discipline needed to develop a business plan forces the entrepreneur to view the venture critically and objectively

• The entrepreneur in the course of developing the business plan will examine operating strategies and expected results


Typical Business Plan Outline

1. Executive Summary 2 The Company/ Business Profile 3 The Market/ Industry 4 Strategies 5 Management structure 6 Financials 7 Investment considerations 8 Implementation plan


• The executive summary is a 2-3 page summary for people too busy to be bothered with the full text of the business plan

• Typically written after the full business plan has been done

• It must cover the following areas at a minimum (say one paragraph each):

– Statement of purpose -- The objectives of the plan... (i.e., to raise money, act as a policy guide, etc.)

– Company background – The company's product or service – Strategy overview -- Why the product or service is unique or why market will buy – The market potential -- Research findings – Financial projections for at least 3 years into the future – The qualifications of the management team – Finance requirements – How much do you need and how you plan on spending

raised capital – State in the summary why your business will succeed. (also possibly mission

statement)


The Executive Summary

• This segment of the business plan will x-ray the Business’ status quo for existing business or Business concept for new business

• The information for this segment of the work will be from interviews with the client, review of their reports, discussions with stakeholders especially customers

• These will include at a minimum the following information:

– Explain the legal structure – Company, Partnership, subsidiary, Holding company etc

– Description of the business concept – Description of current business activities – Analysis of current financial statements with summary – Description of ownership – Description of Management structure and profiles of key managers – Review of any licenses, contracts, franchises or patents with

description of key conditions and terms


The Company/ Business Profile

• This segment of the business plan will review the market conditions the Company will be facing

• Sources for this information will essentially be secondary market information, primary market information (DIY or contracted), Interviews with client, competitors or customers/suppliers and to a lesser extent personal experience

• This should cover the following at the minimum:

– Market size and growth projections – Product life cycle – Market seasonality or variation patterns – Current market trends – The competitors’ profile – Industry value chain – Market segmentation with buying behaviors and value

expectations – Geographic, demographic, income class, behavior patterns, target customers and customer needs


The Market / Industry

• This segment of the business plan will seek to examine the Company’s characterization

• These will include:

– Corporate Definition

– Corporate Vision

– Mission

– Corporate Goals and Objects

• This information will generally be gathered through a brainstorming process, which will involve at a minimum the promoter and the PalmNet Consults Business Development service team


The Strategy – Corporate strategy

• This segment of the business plan will seek to examine the Company’s strategy for out performing its competitors in the market place

• These have been extensively studied by Michael Porter and summarized as:

– Differentiation

– Cost leader

– Focus

• This information will generally be gathered through a brainstorming process,

which will involve at a minimum the promoter and an independent facilitator or consultant


The Strategy – Competitive Strategy



Competitive Strategy

Required Skills & Resources

Organizational Elements

Associated Risks

Overall Cost Leadership

Sustained capital investment and access to capital

Process engineering skills

Intensive supervision of labor

Products designed for ease of manufacture

Low-cost distribution system

Tight cost control

Frequent, detailed reports

Structured organization and responsibilities

Incentives based on meeting strict quantitative targets

Technological change that nullifies past investments or learning

Low-cost learning by industry newcomers or followers through imitation, or through their ability to invest in state-of-the-art facilities

Inability to see required product or marketing change because of the attention placed on cost

Inflation in costs that narrow the firm’s ability to maintain enough of a price differential to offset competitors’ brand images or other approaches to differentiation






Associated Risks

Differentiation Strong marketing abilities

Product engineering

Creative flair

Strong capability in basic research

Corporate reputation for quality or technological leadership

Long tradition in the industry or unique combination of skills drawn from other businesses

Strong cooperation from channels

Strong coordination among functions in R&D, product development, and marketing

Subjective measurement and incentives instead of quantitative measures

Amenities to attract highly skilled labor, scientists, or creative people

The cost differential between low-cost competitors and the differentiated firm becomes too great for differentiation to hold brand loyalty. Buyers thus sacrifice some of the features, services, or image possessed by the differentiated firm for large cost savings.

Buyers’ need for the differentiating factor falls. This can occur as buyers become more sophisticated.

Imitation narrows perceived differentiation, a common occurrence as industries mature.






Associated Risks

Focus Combination of the above policies directed at the particular strategic target

Combination of the above policies directed at the particular strategic target

The cost differential between broad-range competitors and the focused firm widens to eliminate the cost advantages of serving a narrow target or to offset the differentiation achieved by focus.

The differences in desired products or services between the strategic target and the market as a whole narrows.

Competitors find submarkets within the strategic target and outfocus the focuser.

• This segment of the business plan will seek to examine the Company’s marketing strategy

• These will include:

– Position i.e. Leader Vs follower, Differentiation Vs Cost Leader, innovator Vs Adaptor, Customer Vs Product, International Vs Domestic, Govt. Vs Private Sector

– Product – Price – Place/distribution

• This information will generally be gathered through a brainstorming process, which

will involve at a minimum the promoter and an independent facilitator or consultant


The Strategy – Marketing strategy

• This segment of the business plan will seek to examine the Company’s strategy for optimizing its production activities – Mainly for manufacturing outfits

• This aspect should cover the following at a minimum:

– No. and nature of the production facilities – Location of the facilities and why – Sources of raw materials – Envisaged capacity utilization and number of shifts – Technical details of the facilities and arrangements for

maintenance • This information will generally be gathered through a brainstorming process, which will

involve at a minimum the promoter and an independent facilitator or consultant

• as well as secondary research on sources of machines etc.


The Strategy – Production strategy

• This segment of the business plan will seek to examine the Company’s strategy for attracting, developing and retaining talent

• This information will generally be gathered through a brainstorming process, which will involve at a minimum the promoter and an independent facilitator or consultant

Note that all functional strategies need to be consistent with the corporate

and competitive strategies highlighted previously etc.


The Strategy – Human Capital strategy

• The Management structure will seek to convey the character of the management team and why they will make a success of the business

• This will include information such as:

– Names of key managers and their profiles, highlighting relevant experience

– Key terms of management services agreements if any

– Technical partners if any and their profiles including years of experience in similar ventures

– Key terms of technical services agreements

• This information may be sourced from discussions with the promoter or secondary research


The Management Structure

• This segment of the business plan reviews the economics or viability of the project

• This will include information such as:

– How much is required and envisaged sources, and when – Use of proceeds – Projected income statements – Projected Balance sheets – Projected Cash flow statements – Projections should cover a minimum three years but frequently up to five

• This information will generally draw upon the following information sources – Discussions with the Promoter – Environmental factors e.g. exchange rate, inflation etc. – Basic understanding of accounting – Reasonable assumptions – Company’s corporate and functional Strategy


The Financial Analysis

• This segment of the business plan reviews the key features of the business plan of interest to an investor

• This will include information such as: – SWOT Analysis

– Business Risk analysis

– Investment rationale – why the deal will work

• This information will generally draw upon the following information sources – Contents of the business plan


Investment Considerations


Investment Considerations – SWOT Analysis

•Strengths

•Internal

•Weaknesses

•Internal

•Opportunities

•External

•Threats

•External

SWOT

• A summary of the time lines for business implementation


Implementation Plans

What makes a Good Business Plan?


Simple

Specific

Realistic

Complete

RESULTS

ACTIONS PLAN

FOLLOW UP

Keys to a Good Business Plan

• Use the business plan to set clear and measurable goals, responsibilities and

deadlines

• A good business plan assigns tasks to people or departments and sets

milestones and deadlines

• A practical and realistic business plan includes 10 parts implementation for

every one part strategy

• As part of the implementation of a business plan, it should provide a forum

for regular review


Conclusion

• It is not an academic exercise

• Business plans are not just for starting a new business or applying for a loan, but also vital for running a business

• Business Plan has a lot of uses

• The more realistic the Business Plan, the better it is

• The more rigorous effort is put into its preparation, the easier it is to achieve the objectives of the business


entrepreneurship development training for gcom (oil & gas soft skills ltd, lagos nigeria)

Small Business & Entrepreneurship