Establishing a Business

Steps in Establishing a Business 6. Operate Business 5. Acquire Funds 4. Create a Business Plan 3. Identifying Resources 2. Research 1. Conceptualization

RESEARCH Primary research refers to collecting data that does not exist. Secondary research refers to collecting data that already exist.

Establishing a Business For a business to be successful there must be enough people who want to buy your product or service. You also need to ensure your product or service is accessible to the people who may want to buy it. It has to be available in the right places in the right quantities and presented in a way that will be attractive to your customer. The people you are aiming your product at are your “target market” or “market segment”.

RESEARCH QUESTIONS 1. Why would you choose this product/service? 2. How would describe most people who buy this product/service? 3. Where would you look to find this product/service? 4. What would you expect to pay for this product/service? 5. How often would you buy this product?

Is your business idea workable? Hi I am Bill

Feasibility Study It is research done to ascertain the viability/feasibility of a business idea or any other venture. It assesses the business idea in terms of its operational costs, expected revenue flows, level of competition etc.

Types of Feasibility Study Technical Feasibility Is the product or service that you propose to offer technically viable? Market Feasibility Can the product or service be sold in sufficient volume at a sustainable price? Is there a market for what you are proposing to offer? Commercial Feasibility Is your product or service commercially viable? Can you sell your product or service in sufficient volume to generate a profit? What are the major risks you will have to accept if you go ahead with your business? How do you propose to lessen the risks? Overall Risk

After the Feasibility Study If the feasibility study shows that your business in workable, only then the Business Plan should be prepared.

Group Activity Generate your research questions

THE BUSINESS PLAN

Planning Planning is defined as a “decision making process by which an organizations decides what is wants to achieve, how it intends to achieve it and in what manner”. G.A. Cole.

Why is planning for the operation of your business important? Hi I am Bill

Importance of Planning provides a guideline for direction forces managers to look ahead and anticipate possible changes helps avoid mistakes and waste helps set a the standard for control purposes

Levels of Planning Short-term plan – for day-to-day activities; may be for each day, week or month (Operational level) Medium-term – these E.g. whether to use sales promotion for a product (Tactical)are set at a department level and may cover a period of over 1 year. Long-term – major decisions and long range plans for the organization. Decisions include: introducing a new product, purchase other companies and expansion. This requires analysis and research

The FIVE parts of Business Plan 2. The Operational/Production Plan 1. Executive Summary 3. The Marketing Plan 4. The Financial Plan 5. The Organization and Management Plan

The Operational/Production Plan Type of Production includes Primary, Secondary and Tertiary. Go to page 124 in your text for more information. Levels of production – subsistence, domestic, surplus or export Quality Control - maintaining standards in manufactured products.

The Marketing Strategy Pricing Strategy - Pricing at a Premium – Set price above competitors - Pricing for Market Penetration – set low prices to attract customers Bundle Pricing - selling multiple products at a reasonable cost

The Financial Plan Sources of Capital Personal Savings or Past Earnings Funds from Partners or other investors Loans from Bank or other financial institutions Government grants Credit transactions

The Financial Plan Collateral refers to money or property that is pledged as security (or guarantee) for repayment of a loan.

Question If you borrow $ 2000.00 from your friend, give one example of a collateral you would use as security.

Secondary research gathers information that was already prepared. TRUE FALSE

Strategic plans are created after the tactical plans have been created. TRUE FALSE

The feasibility study is an analysis of whether the business ideas can be a success. TRUE FALSE

Details on branding will be found in the production plan. TRUE FALSE

The business plan does not guarantee the success of the business. TRUE FALSE

What is collateral? Collateral is money or property that is pledged as security (or a guarantee) for repayment of a loan.

Examples of Collateral

General Procedures for conducting a business Decide on the type of business (Sole trader, Partnership, Cooperative, Public or Private Limited Company Register with the Office of the Registrar of Companies Provide necessary documentation along with a fee to the Registrar Register with the General Consumption Tax Office Register with the National Insurance Scheme

Reasons for registering a business: Getting Loans or finding investors, Protect your assets Professionalism, Contribute to economic development

QUESTION Carla graduated from high school and realized that she did not want to depend on another person to per her wages. She decided to grow hens that would lay eggs. She made this decision when she realized that the local shop was always running out of eggs and could not meet the demand. She visited a neighbouring community and observed how another entrepreneur operated a similar business. Carla made careful plans and borrowed money from her parents. She found a carpenter who built the henhouse and she purchased all the necessary raw material. When she bought the baby her baby chickens, she stayed up late for many nights to ensure that no harm came to them. She waited patiently for many weeks before the hens matured and started laying eggs. With the profits that she made, Carla could repay her loan and expand her operations.

QUESTION Refer to Carla’s story Carla decides that she wants to share the responsibilities with another person who would also contribute capital. What would be the most suitable business type for Carla? Carla needs to borrow more money but her parents cannot lend her money. Explain what is collateral’ and how it would help Carla. Why must Carla register her business?

Creating a Visual Business Plan