ESTABLISHING A BUSINESS

BUSINESS PLAN
A business plan is a written summary of what the business intends to do in the future, how it
plans to do it, and what management will do to ensure the success of the business. The plan
focuses on the business’s operational activities, financial requirements, projected profits,
marketing opportunities and strategies and how the business will be structured.
It suggests who will buy the product or service and why. It provides financial forecasts
demonstrating overall viability, indicates the finance available and explains the financial
requirements. It is mainly prepared by new businesses or by ones making major changes.

Purpose or reasons to have a business plan

1. To attract investors – a formal business plan is the basis for financing proposals. The
plan answers investors’ questions such as is there a need for this product/service
2. To determine the owner financial needs - the process of creating the business plan
will help the entrepreneur to determine how much capital is needed and how it will be
used.
3. To judge the success of the business – a formal business plan will allow the
entrepreneur to compare actual operational results versus the business itself. In this
way, it allows her/him to clearly see whether he/she has achieved his/her strategic,
financial and operational goals, and why he/she has or has not.
4. To better understand the competition - creating a business plan for the owner to
analyze the competition and to determine whether he or she has a competitive
advantage
5. To document marketing plan - a formal business plan will help her to answer the
following questions. How you are going to reach your customers? How will you
retain them? What is your advertising budget? What price will you charge?

Benefits of a Plan
- Ensures that careful research is conducted into the feasibility of the business.
- Anticipates needs and problems which can be planned for in advance.
- Provides a written document that can be used when requesting financing.

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Features of a Business Plan

Executive Summary
The Executive Summary is a synopsis of the full business plan. It presents the salient points of
the plan.  It contains information on the purpose of the business, its methods of operation and
future expectations.

History of the business

This section gives full details on previous operations of a business. For a new business it will
explain where the idea came from and the reasons for starting the business.

Mission Statement

The Mission Statement gives the overall goal of a business as well as its values. It serves as a
guide to the operation of the business.  For example: providing the highest quality goods and
services.

Business goals and objectives

The firms’ short-term, medium-term and long-term goals and the time in which these are to be
achieved is outlined in this section.

Organization
The business must state the ownership structure and give details of the management team.

SWOT Analysis
Looks at the strength and weaknesses of the business
E.g. Strengths – strategic location, years of experience

Weakness – Loans at affordable interest rates,

Marketing Plan
● Product /Service Description
Describe clearly the product or service that you will be offering.
● Market Analysis
Describe your target market and your competitors.
● Marketing Strategy
Explain the various promotional, pricing and distribution strategies.
● Sales Forecast
What amount of sales the business expects to make on a monthly basis.

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Operational Plan
Explain how the business will function on a day-to-day basis.
● Procurement of raw materials, the use of technology and operating methods.

● Operating costs
E.g. fixed Costs (rent, insurance and salary) and variable costs (utilities and wages)

Financial Plan
● Start –up Cost
The total amount needed to start the new business, giving a detailed description of what
the money will be used for.

● Projected Cash Flow

An estimate of how much you expect to earn periodically once you start operating.

● Acquisition of Funds
Information on how funds will be obtained e.g. personal savings, borrowing from friends
and family, borrowing from financial institutions or by selling shares.

Purpose of Feasibility Study

This is an analysis of the viability of a business idea, and an examination of the different aspects
of operating a business. It will show whether a business venture is worthwhile.
It will analyse:
- Market demand
- Target market
- Profitability
- Production methods
- Operating expenses
- Distribution channels
- Competition
- Promotional requirements
- Cash flow
- Resources required
- Any special legal requirements

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GOVERNMENT REGULATIONS FOR THE ESTABLISHMET AND CONDUCT OF

BUSINESSES

Regulations are the legal rules or standards that you must comply with locally, nationally or
internationally. They are used to ensure businesses that:
● Businesses do not produce harmful goods
● Mislead customers
● They protect investors from being exploited
● They protect employees from being exploited
● They prevent damage to the natural environment
Government regulate many areas of business conduct, including:
● Opening hours
● Animal welfare
● Advertising, product safety and labelling
● Health and safety in the workplace
● The collection and payment of taxes
● The [publication of business accounts
● The disposal of waste and other pollutants
● Employment contracts
● Planning and building requirements
● Business licences and trading standards
In Jamaica, there is the Municipal Corporation (Parish Council) which gives specific guidelines
for the establishment of certain types of business in town or city centres. There is also the Tax
Administration Department where persons in the retail trade can apply for a licence to set up
business.
Consumers should be protected from situations such as:
● inferior products
● over-pricing
● exchange or return of goods
● fair trading
The Fair Trading Commission, the Bureau of Standards and Consumer Affairs Commission are
agencies established by the government to handle or conduct issues on the conduct of businesses
locally.

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Ethical and Legal Issues

Business owners are required to obey all legislation concerning the operations of a business.
These include, paying taxes, business registration, obtaining licenses when required etc. Business
owners should also operate their business based on integrity. This involves:

- Environmental awareness – reducing pollution and harmful effluents in the rivers and seas.

- Avoiding tied selling (marrying of goods)

- Misleading advertising (untruths about goods advertised)

- Untrue sale price – For example, writing the word sale on items for which the price remains the
same.

- The use of market dominance to squeeze firms out of the industry- For example large firms
may drop the price of their goods so low that small firms are unable to compete with them.

Consequences of Unethical and Illegal Practices

Illegal business practices will result in legal consequence for business. This may include large
fines the loss of the business.  Legislation also protects consumers, competitors and society from
unethical practices of a business.

Ethical and Legal Ethical and Legal Description Consequences

Issues practices
Advertising Misleading Honest and realistic Cause citizens to
Advertising advertisements waste a purchase
Taxation Withholding tax Mandatory Tax avoidance

Environmental Issues Unethical disposal of Law mandates Pollution

waste protection of
environment
Money (gained Money laundering- Illegal business Too much money
legally vs illegally) use of illegal money activity circulating.
in legitimate business
Distortion of National
Income

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If businesses fail to comply with government’s regulations it may result in one or a combination
of the following.
● Fines
● Damage to the business’ reputation which would result in a loss of sales
● Compensation claims from customers, for example, injury caused by unsafe product or
illness due to poor food hygiene
● Withdrawal of the business’s licence, which would mean it would stop trading
● Imprisonment of the owners if they were found guilty of such crimes as criminal neglect
or fraud.
Factors which influence a business location
1. Geographical Setting - The choice of the area may depend on the type of business or
product and its position in relation to transport facilities and other infrastructure and
proximity to customers.

2. Availability of Raw Materials and Supplies- Businesses locate near to sources of raw
materials or key suppliers especially if the materials they need are perishable, heavy or
bulky and needed frequently for processing.

3. Access to Roads, Ports and Other Infrastructure - Safe, efficient and reliable
transportation is vital. Employees need to get to and from their places of employment
easily. Businesses are also interested in reaching as many customers over a wide area in
order to deliver goods in reasonable time frames.

Proper infrastructure is needed, and so buildings, roads, railways and other types of
infrastructure will influence the choice of location.

4. Access to Power and Water Supplies – many businesses require a reliable supply of
power and water, as their equipment, machinery and factory plants highly depend on this
to drive their business operations. They need locations with access to the national
electricity grid and network of pipelines supplying water.
5. Access to Telecommunications – Communicating with suppliers and customers is
important when operating a business. Businesses should consider setting up at a location
where there is access to the various telecommunication systems to facilitate smooth
contact with employees, suppliers and customers.

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6. Access to supply of suitable labour – If the production process is labour intensive,

setting up in a densely populated area or area of high unemployment may be more
suitable. Another consideration is the market wage rate, as areas with low wage rates will
be more effective. On the other hand, if the business requires more specialised skills and
more managerial staff, setting up near to commercial areas where there are universities
and colleges could be more beneficial.

7. Access to health facilities – Fast, free or low-cost access to modern healthcare facilities
and providers may be consideration for some businesses (especially those that use
potentially dangerous equipment, hazarduous materials or are engaged in high-risk
activities such as bridge building or construction of sky scrapers in major cities). If
workers are injured or exposed to toxic substances, they will need medical attention. The
business will need to pay close attention to these situations when choosing a suitable
location.

8. Government assistance and regulations – a government may offer tax incentives, grants
or subsidies to business organisations to locate in areas of high unemployment. These
will reduce the cost of business activity in these areas, making them more attractive to
new or expanding businesses. For example, in some rural areas in Jamaica there is very
little business activity and there few employment opportunities for local communities.
The government may offer grant funding to set up farming, mining, recycling or
agro-processing facilities to stimulate employment.

NB
Grants are sums of money that do not have to be repaid but are identified to be used for specific
purposes.
Subsidies – are direct contributions such as tax breaks and other special cash assistance that
governments provide to offset operating costs over a relatively long period of time.