THE FOUR “Ws+H” OF A GOOD BUSINESS PLAN by Matthew Ujah-Peter

  “How many of you intending to build a tower, do not first sit down and cost it ?”  asks the Holy Book rhetorically. The rhetorical nature of that question implies that every project requires planning. And planning will reveal costs. Remove the cost factor from planning, planning loses meaning. And costs are diverse in kinds, values and dimensions. Determining the various costs of every aspect and harmonizing or aggregating the diversity together to a single sum is often where the real work is.

Apart from just estimating and preparing pro forma invoices or quotations, I have been able to prepare quite a few bills of quantity for housing estates. Those bills of quantity were not just for one company to fill. Other aspects of the entire building(s) such as windows, doors, sanitary wares, bricks and civil works, electrical, plumbing, tiling etc, were included for other companies that specialize in them, to fill. When the bill is completely filled by each company involved the total cost of the building emerged. This is then multiplied by the total unit to be built. That is when you can say the estate cost so and so much to build.

Thus all costs are converted into monetary cost and then harmonized into a single sum of money. This is what business planning helps to achieve. Business planning is like drawing a building plan then estimating the costs of each aspect (materials and labours to be used) and finally aggregating the various costs. This enable you determine how much it will cost you to get your building up and completed.

You must have answers, as provided below, to the questions (the 4Ws +H) what, who, when, why and how to be able to fully appreciate the power of a business plan.

 

1.      WHAT IS A BUSINESS PLAN FOR?

A business plan is strategic business document which: 

·     Serves as an organization/business road map or compass giving direction and phase development.

·     Helps communicate exciting prospects and growth potentials of your business idea(s) to a third party.

·       Gives an organized structure to your business/idea(s).

·      Shows the broad and overview perspective of your business and how it should be run.

·     Provides specific information about the business to potential investors and financial institutions.

In a nutshell, a business plan clearly describes the goal and objective of an existing or proposed business, showing its current status and vision of the future. It projects future opportunities and outlines how and from where the funds (needed) will come and maps the marketing, organizational, operational and financial, strategies (sub-plans) that will help achieve the overall goal. It must be noted that your business plan is your intellectual property and therefore must be guarded as one, legally and otherwise.

Note that: you can and should get a copyright for your business plan but where that cannot yet be done you can e-mail it to yourself to show a date of publication so that in a situation of legal actions the date it was e-mailed will serve as an exhibit that the business idea was first conceived and published by you.

 

 

2.      WHO IS A BUSINESS PLAN FOR? (WHO NEEDS THE BUSINESS PLAN)?

 

·    The entrepreneur/business owner himself: that is, you. It provides you focus, order, discipline and structure which help you run your business professionally. A well written business plan provides workable systems. With a workable system the business will have a soul and life of its own separate from yours. Without it your weakness becomes the weakness of the business. The system, though operated by you and your staffs, in reality controls both you and the staff.

 ·   Partners: should you wish or decide to have partners now or in the future, they will be able to see clearly what your vision is for the business so they can run with it and with you.

·   The banks and other financial institutions: these may be interested in providing facilities but surely will need to know where the venture is headed.

 ·    Venture capitalists: these are business men and women who are looking for business they can help invest in with a view to recouping profits.

·     Angel investors: these are wealthy individuals who may want to help invest in your business with or without a desire for personal gains and must be convinced that you are headed in the right direction.

3.      WHEN DO YOU PREPARE A BUSINESS PLAN?

 

·    During, at or before start-up stage: having your business plan ready and handy as a start-up is a smart thing to do. 

 

·    At transition point of your career: that is, at the time you are thinking of either changing your career from paid employment to self-employment or combining entrepreneurship with your job.

 

·  New product development stage: a thriving business enterprise may wish to introduce a new product line into the existing one(s). A business plan should be done for this planned move.

 

·     When entering into a new market: this could include when opening a new branch in a different market environment.

 

·      During time of expansion: the above two situations could apply here.

 

·    At the time of strategic re-branding, re-engineering, realignment or redirection of business and its operations: this is like starting over (more or less), therefore it need business plan.

 

 

4.      WHY BUSINESS PLAN? (FUNCTIONS AND MERITS).

 

·        It shows the exciting prospects and potentials for grow the of your business

·        It projects future opportunities for your business.

·        It helps attracts capitals, investors and other resources.

·  It shows potential investor (venture capitalists, angel investors and financial institutions) that you know where you are going and therefore can compel them to go with you.

·        It helps you properly define your business and also focus on your objectives per time.

·        It identifies customers. That is, it identifies markets.

·        It maps out marketing and sales strategies.

·        It maps out operational processes.

·        It maps out management procedures.

·        It helps identify costs. That is, it projects your financial requirements.

·        It forecasts revenues and expenditures

·        It shows future ROI and profitability of your idea(s).to

 

5.      HOW DO YOU DO A BUSINESS PLAN?

Next week in my next post I will be discussing how you can prepare a good business plan following the right steps. See you then.

 

HOW TO LEGALLY PROTECT YOUR BUSINESS IDEA IN NIGERIA - Matthew Ujah-Peter

After a product, service or business idea is discovered and designed, protective hedge(s) must be built around it. There are numerous legal requirements that an idea or a business organisation needs to be legally shielded. Meeting legal requirements gives your business clout, power, rights, identity, official recognition (internationally and/or nationally), trustworthiness, standardization, protection etc. 

Legal requirements are demanded by government regulatory bodies firstly, for the business; to make it a legal entity, secondly, to make it a corporate citizen and thirdly, for the products / services; to give it benchmark, control and standardization. Whether your products / services are regular, innovated, invented, licensed or otherwise, there are requirements to be met to give it protection and recognition. Below are the various legal requirements you must consider meeting before operating at full scale for the safety and general good of your business:

 

1.      Business Name Registration: the Corporate Affairs Commission (CAC) is the body charged with the task of registering micro and small businesses as ventures or enterprise. It is the business name that is registered and your name(s) or any other name(s), word(s) or formed word(s) that is not yet registered with CAC can be used to form (part(s) of the name. A business name number (BN) is usually assigned to that business name. Today such name can be verified on the website of the commission to authenticate if it is a registered business or not. However, a registered business is not limited in its liabilities. 

 

    The owner bears the legal and financial burdens of such enterprise. The owner pays personal income tax. In other words it is the owner that pays tax and not the business. Also if the business is sued, it is the owner who is sued. However, a registered business name gives the business power to carry out contracts with government, corporate bodies and individuals in a legally.   

2.      Incorporation: the Corporate Affairs Commission (CAC) is the body in charge of incorporating a business in Nigeria. An incorporated business is a corporate entity and a corporate citizen which can be owned by 2 to 50 people who own various share values in it. The shares are known as private shares (or equity). It is a far more advantageous form of business since it can sue and be sued. The owner(s) are neither the ones sued nor do the losses or liabilities of the company extend beyond their shares in the company. The only loss the owners / private shareholders incur in the case of crisis or problems is their shares in the business which is their major stakes in it. There are certain businesses that registered business ventures cannot do but which an incorporated business can do, an example is export business. 

 

3.   Trademark: the Ministry of Trade and Industry is the body saddled with the task of trade marking or registering business logo or product / service name as a trademark in Nigeria. This is usually an exclusive right to use the name you gave to your product / service. It is also an exclusive right granted you to use the logo you designed for your company, product or service. No other person, business or organisation can use such name or logo to trade without your permission. You or your company is legally empowered to sue anyone who uses your trademarked name or logo without permission or license. It is only a registered organisation, business or company that can obtain trademarks. Therefore, you must either register or incorporate your business first. 

 

4.   Patent Right: if you invent the product you are building the business on or around, it is advisable to patent it at the Patent Office. This aspect is not very well-known and used in this country presently. However, Nigeria has a functioning patent office or registry that is presently giving patent rights to inventors and innovators as at today. Not many entrepreneurs and creative individuals are aware that their inventions can be patented so that no other person or firm can produce or reproduce what they invented without license or permission from them. This gives them an exclusive right to be the ones producing such products for as long as 20 years from date of filing for the patent. Patent right covers both novel (new) inventions and improvement on old inventions. However abstract ideas cannot be patented. 

 

5.    Copy Right: a copyright is the exclusive right you have over a works such as books, music, movie/film, online photos etc you have created. Copy right is the right to use your property which can be intellectual or otherwise. Any one that must use such property must obtain permission or license from you. The permission or license can be granted if the user satisfies your requirements which may include payment of an agreed amount as royalty. whether it is book (e-books included) you have written or writing, songs, music, movie, videos or film you are producing etc. or other intellectual properties such as games, pictures, paintings, artworks, innovative designs, software, apps, or even business plan etc, you need to copyright it. 

     

     The National Copy Right Commission is the government regulatory body that is charged with this. Before embarking on mass production or producing in commercial quantities, it is wise to obtain a copy right because once it gets to public domain intellectual properties are easier to be stolen or pirated than most other product. In most cases this right obtains when the work is already stored, published, transmitted or fixed in or through a medium such as in an electronic system or in a publication. Consult intellectual property lawyers for clearer insights.

 

6.    Royalty Right:  royalty is usually certain agreed payment made to you for the use of your trade mark, patents or copyright. Royal can be perpetual or based on ine-time use. The right to collect such payment is called royalty right. Royalty rights can be for music, books, movies, films, videos, arts, TV/radio shows/contents, software etc. Remember also that the payment you make to government agency to in order to be permitted to do certain business can be called royalty.

 

7.      Franchise: a franchise is the right to trade with or do business under the name, brand and / or the logo of another organisation. Certain companies called franchisors permits other companies or individuals called franchisees to trade or carry out businesses under their name and logo. 

 

8.      License: a license is simply a right or permission granted by the owner of an asset or property to use the property. When permission is given to you or by you for the use of a trademark, copyright, franchise or patent that is license. License is also an official permission to practice certain profession or carry out certain business.

 

9.  Product Standardization: the Standard Organization of Nigeria (SON) is the body that regulates product manufactured within or imported into Nigeria. The body ensures that every product manufactured or brought into this country from other countries meet the stipulated standards.  They ensure that manufacturers and importers do not put substandard products in the public domain or in the market. If you are going into manufacturing you should ensure you study their requirements and meet them before going into business or at least you begin studying them while you are starting the business so you can eventually meet the standards as you grow. Once your business reaches certain level this body may come after you to inspect your products and factory. Failure to meet standards may result in dire consequences.

 

10. Food and Drug Standardization and Approval: while other products are very important for safety and well-being of consumers, foods and drugs are much more important. These are the most urgent and most important needs and if not ethically merchandised can lead to colossal damage to lives. Hence a special regulatory body called National Agency for Food and Drug Administration and Control (NAFDAC) was set up to regulate the production and supply of foods and drugs into the market. NAFDAC is perhaps the most widely known regulatory body today in Nigeria. Once you begin to think about processing, producing and packaging food to sell you must also put NAFDAC’s requirements and approval in the picture.

 

11. ISBN and ISSN: these stand for International Standard Book Number and International Serial Number, respectively. Both are issued by the National Library Commission to publishing companies that apply for them. ISBN is issued on a book, while ISSN is issued on books that are in series or periodicals such as newsletters, newspapers, magazines etc (both print and electronic editions). If you are publishing a book, series or periodicals you should have a fair knowledge of this. If you are going into self-publishing you must liaise with a registered publishing company or publishing business to be able to obtain both ISBN and ISSN as the commission will not issue them to individuals.

Though there are many such materials without ISBN or ISSN, these numbers give you legal protection and recognition. For example a book with ISBN and a magazine with ISSN will be usually required to have copies at the public library since they are listed in the National Library Catalog. However, if you leave the publishing entirely to a publishing house/company they will know what to do since this is an integral part of their works.

STAGES OF GROWING A SMALL BUSINESS - by Matthew Ujah-Peter

These four stages can be likened to an airplane’s flight stages. The preparation stage, the take-off -stage, the cruising stage, the preparation-for-landing stage and the landing stage and each stage is locked almost seamlessly into the preceding and the subsequent stages.

1.      The Ideation and Planning Stage: This is the preparation stage. At this point you have not started the business yet. But you are either thinking about whether or not to do business or you are thinking about what kind of business to do. The business is either not yet formed as an idea or it is just getting formed gradually. It is also the stage when the business idea is just formed and fresh in your mind. It is not yet tested nor tried to determine its viability.

 

You are probably very excited about the idea or not very sure about its viability. However it may have become a very dominant thought in your mind. This is also the stage when you have a burden in your heart. You are frustrated about a problem which is either personal or general. There is just this burden to proffer solution to that private frustration which you know others may also be suffering or there is just this nagging thought to provide solution to a known public problem which you know others will be glad and willing to pay you for.

 

In a nutshell, the ideation and planning stage is that stage where a business idea is just forming and the effects on you is like the symptoms of early pregnancy in a woman. Some women who get pregnant will start developing all sorts of symptoms and discomforts without knowing what the cause is. So too is when business idea begins to form in people. They often don’t know why they feel the ways they feel about the problem on ground. The fact that you are too concerned about a problem more than other people are is a sign that you may have to do something about it.

 

However, many people do not get to do something about such thing because they are busy with other employments until such occupation or employment is threatened or removed from them. Others may not have any excuse. They are simply not hungry enough to think of starting a business. Hunger here include spiritual, emotional or physical. It may be the psychological or physiological hunger that makes people realize the need to start a business enterprise is not yet strong in such person. Once they need is realized the idea will always start developing or forming or in some cases, given attention to. At this stage, a rough business plan should go down on paper. 

 

2.      The Trading (or Trader’s) Stage (the practical school of business): this is the take-off stage. Trading is (usually) a process of buying and selling. Trading is the stage in an entrepreneur’s life when he or she sells his or her ideas, first and foremost, solicits supports, communicate his/her ideas, markets and sells his skills, talents, products  or services; seeks helps, supports and patronage. He trades ideas, talents, skills, experience and expertise for resources so as to further his business ventures.

 

Care must be taken here not to turn into a full-time hustler. This period is that period when, even though you do not want to be seen as a hustler, you will do some form of hustling. Trading stage of entrepreneurship is a schooling stage when you learn from all business stake-holders in the value chain. But keep working on your business plan and keep improving on it at this crucial stage. The trading stage is like an airplane’s take off stage great deal of force and momentum is required.

 

A trader is one who often does business at retail scale. He buys from the producer or manufacturer or distributor or whole seller in large or small quantity and resells to a final consumer. Often he buys from other bigger traders or distributors who are not themselves producers. Trading is a form of business that schools you as an entrepreneur on varieties of issues and matters in business adventures. You learn from the producers and get to understand their pains and gains.

 

You learn from the wholesalers or distributors and get to understand their challenges and advantages. You also, but more importantly, learn from the final consumers or end-users. You get to learn a whole lot about their tastes, preferences, emotions etc. The lesson here is, no matter how much fund or capital you have for the business you do not just put everything into the business at once. Enroll in the school of trading first, even if it is just for six months. Trading helps you do necessary due diligence and feasibility studies before going full scale. Put a small amount of the capital into small scale trading first. 

 

For example, if you plan to go into bakery business and you already have all the capital to acquire state-of-the-art equipment. Before building your factory and buying those machine, why not go into buying and selling first. Either go to bakeries that are already in the business and buy wholesales and supply retail shops and kiosk or buy from whole sellers and sell as a retailer. Either way you will learn so much and avoid a lot of costly mistakes before going into production. By so doing you are learning from all sides and sections of the industry, market and business.

 

The trading stage will help you learn practical street smartness, negotiation skills, local markets and their emotions and behaviours that would as well bring you closer to feeling their pulse, purse and pain. You will learn street language, "street PR" techniques, marketing and selling skills in ways that will astound and out-stand you. You will gain network and relationship skills that will endear you to the market. You would have located, created and connected the important links before going full scale either as a manufacturer or as a distributor. Do not be in a haste to be big. Think big, start small!

 

3.      Business Structure (The Building Stage): this is the cruising stage. Continue with developing and writing your business plan – a more improved and better refined business plan. With the skills and experience gathered from the trading stage your business plan (which you must have being working on) will by now be more fine-tuned. A business plan will give definition and dimension to your business. Definition means definite goal.

 

Dimension means measurable quantity. With a well-written business plan these and many other valuable features will become prominent and observable in your business idea. Building a business means putting methods, models, processes, procedures, policies, people, structures and systems into the business.

 

Building business means designing a business to operate as an entity or better still, as a system. This means the business must exist separately from its founder or owner and designed and wired to be operated as a machine would be operated. No business enterprise can effectively and efficiently be managed without a good system and structure with models and processes. (See Part Two, Section 2). 

Without a good business systems and structure, it is difficult to define and delineate or mark-out what jobs need to be carried out at what time and by whom. In such setting, anything goes. And that cannot be said to be an organized business. Even if the owner understands all aspects of the business, he cannot always do all or even know all, especially as the business grows and its demands increase.

A business that will truly grow as a business ought to must not be built around its owner, or any other person for that matter. The owner sure will have the major control and prominent position. But there must be places for others to work in the business organisation, hence there must be system and structure to accommodate others.

It must be emphasized that the building stage of a business is not necessarily the start-up stage, even though that is the primary building stage.  Building continues all through the life cycle of the business. Building continues more intensely at the cruising stage. The fact that the business is cruising, that is making steady progress, is not the reason why the owner should relax about building it.

 

As the business grows so grow the rooms for improvement. This is the stage where you must design your management/operational systems and structures by creating the various departments of the business, put legal hedges around your ideas through trade marking, patenting, meeting regulations, obtaining licenses and other relevant legal documentations etc.

4.      Business growth and ownership stage: the preparation-for-landing stage. Preparation for landing does not mean preparation to stop or end the business. Rather, it is a preparation to take the business to its next phase. Usually this phase may mean adding new line of products / services, realignment with or entering into new market(s) / new trend, re-branding, integration (backward or forward).

In a nutshell, this stage is that stage where the business must assume or take on newer responsibility(s) without which the demise or stagnation of the business is imminent. Business ownership stage is the stage where the founder will have to take better ownership or the responsibility of steering the business into unknown territory and be ready to take the blame or the credit for failure or success. Sometimes it is a case of a merger with other company(s), or acquisition by another business. Since our concern is with MSMEs we may not have to be concerned with merger and acquisition. But MSMEs also face similar things. It may even mean selling or franchising the business.

A bigger organisation may take interest in your business and may want to buy it or buy a big chunk of its shares etc. Most small business owners do not always want to sell their business or major shares. This is understandable. Entrepreneurs are so proud and so fond of their small business and its little beginning that they would say they will never sell it.

As an entrepreneur however, never say never. You may need to sell the business or its major shares in order to raise fund. That business is surely not going to be the only idea for money making that will ever hatch your mind. If the need be, sell more shares of the business and get the money to grow the business to the desired level or for other exciting ventures

The sole aim of this stage is business growth. The business must grow in this stage. This stage comes usually at the first two fives years of the business. It is said that most business enterprises die in their fifth year. And those that survive the fifth year hardly survive the tenth year. The demise of business enterprises at these two five years’ end is due largely to failures to take crucial decisions for the business to grow or the result of taking the wrong decision for the sake of growing the business.

5.      Investment Stage: This stage occurs simultaneously with or as a consequence of stage four above. Both the enterprise and the entrepreneur should begin to invest in other assets, businesses and opportunities such as real estate, shares, bonds etc. Business is more than expansion in size and income. It must expand in assets and investments too. It should, if needs be, acquire even other businesses and grow them. It should have affiliates or subsidiaries. Where necessary, joint-ventures and partnership may be considered with other viable businesses. The business can obtain license to produce or market certain foreign products.

 

 In conclusion, we see that at ideation and planning stage you are working for your business. At trading stage you are working in your business. At the building stage you are working on your business. At the business owners’ stage you are working with your business. At investment stage your business is working for you.

NB: Before any or other similar decisions described in numbers 4 and 5 above are taken there should be extensive analysis and experts’ advice.