BAUCHI STATE UNIVERSITY GADAU

ENTREPRENEURSHIP SKILLS II

MODULE ONE

 Entrepreneurial Decision Process

 Pull factors

 Push factors

 Critical Success Factors in Entrepreneurship

 Causes of business failure

MODULE TWO

 Developing ideas and business opportunities

 Sources of business ideas

 Techniques for business idea generation

 Tasks in Developing Business Ideas

MODULE THREE

 Entrepreneurial/ business environment

 Meaning of business environment

 Features of business in environment.

 Importance of business environment to and entrepreneur

 Types of business environment

MODULE FOUR

 Feasibility studies

 Benefits of a Business Plan

 Business feasibility study outline/ format.

 Factors to consider when starting a new SME

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  Essential start-up steps

MODULE FIVE

 Development of SMEs sector in Nigeria

 Attitude and habits of the owner-managers related challenges

 Prospects of SMEs in Nigeria and other developing countries

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 MODULE ONE: ENTREPRENEURIAL DECISION PROCESS

Introduction

Entrepreneurship is the process of creating something different with value by devoting the

necessary time and effort, assuming the accompanying financial, psychic, social risks and

receiving the resulting rewards of monetary and personal satisfaction and independence.

A person decides to do something either because something in that activity lures him or he

takes it as option in lieu of something else, he is forced to do it by people or circumstances.

The factors which lure a person to become entrepreneur are called Pull factors and the

factors that compel him are called Push factors. These factors are explained below:

Pull factors: Pull factors include the following;

i. Perception of Advantages: If a person feels that he can earn better or overall gains

in terms of money. Status, security, future, etc. as an entrepreneur better than working

as an employee, he tends to turn an entrepreneur.

ii. Spotting an Opportunity: Many employees spot a business opportunity in the course

of their work and decide to exploit that opportunity rather than pass it on to their

employer. Many employees buy unsuccessful businesses at throw away prices from

their former employers and turn them around.

iii. Government Policies: Government very often formulate policies to promote certain

business activity or backward areas which offer tax concessions/holidays, cash

subsidies, cheap land, etc., which improve success and profit prospects.

iv. Motivation: From biographies or success stories.

Influenced: By Culture, Community, Family Background, Teachers, Peers, etc.

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Push Factors: Push factors include the following;

i. Job Dissatisfaction: Many people start their own venture because they feel

dissatisfied with their existing jobs/boss/work environment.

ii. Relocation: Repeated or especially unhappy relocation sometimes prompts some

people to entrepreneurship.

iii. Joblessness: This is the biggest source of micro level entrepreneurships. Many

parents help their academically poor children, who fail to find a job, to start their own

micro ventures. But success rate in such ventures is poor. The very traits responsible

for their academic failure lead to business failure.

iv. Lay off: Layoffs often lower the market value of an employee to half. Thus, if a

person is laid off and he is unable to find a suitable job for him, he might think of

starting his own business.

v. Retirement: Many retired, but physically and mentally fit people start their own

business either to supplement their pension/savings or just to keep themselves

gainfully occupied.

Critical Success Factors in Entrepreneurship

If we take a look at many successful enterprises today, we can see that there must be some

things, some inner driving forces that make success possible. Nearly all successful managers

behave alike. They take calculated risks. They understand their strategic direction and at the

same time they remain focused. Our focus in this discussion is to understand those factors

that are critical for success in entrepreneurship.

i. Existence of a good business opportunity: Since we are discussing critical success

factors in Entrepreneurship, it must also be important to stress that the objective of the

entrepreneur is to make a profit. Profits however cannot be made unless there exists a

good business opportunity which the entrepreneur has seen and wants to exploit.

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 ii. Technical competence: Technical competence ordinarily refers to the ability of the

entrepreneur to understand the business in question and also possess the relevant

knowledge and skills to engage in the business. For example, a person engaged in the

business of photography must understand the handling of cameras, films and to some

extent film processing. These are the things that contribute to successful photography.

Other examples are available.

iii. High Mental Ability: Another critical success factor is high mental ability. High

mental ability is very important for an entrepreneur to be really successful. Mental

ability refers to the capacity to understand. It enables the entrepreneur to think and

develop strategies that will lead to success in a highly competitive environment.

iv. Human Relation Skills: Possession of good human relation skills is another critical

success factor in entrepreneurship. We have deliberately chosen human relation skills

because it stands on its own as an aspect of management competence. We have

chosen the human relation aspect of management because as we said, the entrepreneur

is the factor that organizes the other factors of production. Land is a non-human factor

of production. So also is capital. But labour is a human factor of production. And it is

the ability to manage this human factor of production that leads to excellent business

performance.

Causes of Business Failure

As said earlier, we will discuss the causes of business failure so as to give potential

entrepreneur adequate information on what could lead to failure in business. This is important

because prevention is better than cure.

i. Unbalanced experience in a line of business: This is one of the major causes of

business failure. Every line of business has its own unique features. A potential

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 entrepreneur going in to business needs to have prior experience and knowledge or

someone with experience in a particular line of business for guidance.

ii. Poor managerial experience: The difference in performance between two

organizations can be traced to their different management. Good and effective

managers make a lot of difference in an organization. An organization with a good

crop of managers will obviously show superior performance than one with poor

managers. So it is very easy for us to say that poor managerial experience on the part

of the entrepreneur can lead to business failure.

iii. Lack of information about the customer: All over the world today and in every

situation, the business is woven around the customer. Successful businesses direct

their energies towards satisfying their customer. And as is said, “The customer is

king”. It therefore follows that any business that does not have sufficient information

about the customer is likely to fail. This is because the customer is likely to switch

alliance.

iv. Lack of product development: Today’s customers are always asking for new

products with new and better features or an upgraded version of existing ones. Lack

of value addition to a product can therefore make customers stop patronising a

product thereby leading to decline in sales which result to failure of business.

MODULE TWO: DEVELOPING IDEAS AND BUSINESS OPPORTUNITIES

Introduction

Essentially, entrepreneurs need ideas to start and grow their entrepreneurial ventures.

Generating ideas is an innovative and creative process. Sometimes, the most difficult aspect

of starting a business is coming up with a business idea. Even if you have a general business

idea in mind, it usually needs to go through fine-tuning processes. Fruitful ideas often occur

at points where your skill set, your hobbies and interests, and your social networks intersect.

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In other words, the best ideas for a new business are likely to come from activities and people

that you already know well.

A Good Business Idea

A business idea is a concept that can be used to make money. Usually it centres on a product

or service that can be offered for money. An idea is the first milestone in the process of

founding a business. Every successful business started as someone’s idea.

Although a business idea has the potential to make money, it has no commercial value

initially. Most business ideas exist in abstract form; usually in the mind of its creator or

investor and not all business ideas, no matter how brilliant they may seem, would end up

being profitable. To find out about an idea’s chances in the market and check its innovative

content and feasibility, you need to conduct a plausibility check. A successful business idea

must meet the following three conditions:

i. It must offer benefit to the customer by solving a problem or fulfilling a need.

Customers buy products and services for just one reason; to satisfy a need. So, if your

business idea cannot satisfy customers, it won’t be successful. Every successful

business idea must have a unique selling proposition.

ii. It must have a market that is willing to accept it. A promising business idea must offer

a product or service that would be accepted by a large market. It must also have

feasible arrangements for catering to that large market as well as unique values that

differentiates it from the competition.

iii. It must have a mechanism for making revenue. A successful business idea must show

how much money can be earned from it and how the money will be earned.

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Business opportunity

A business opportunity on the other hand is a proven concept that generates on-going income.

In other words, a business opportunity is a business idea that has been researched upon,

refined and packaged into a promising venture that is ready to launch.

While multiple business ideas may strike you on a daily basis, only few of them will be

profitable in the long run based on market research and feasibility study conducted. These

few are the real business opportunities. An opportunity is regarded as one after it has been

found to meet the following criteria:

i. It must have high gross margins.

ii. It must have the potential to reach break-even cash flow within 12 months – 36

months.

iii. The start-up capital investments must be realistic and within the range of what you

can provide.

iv. You must have the strength and ability needed to drive the business to success.

v. Your level of enthusiasm for the business must be very high.

vi. It must have the potential for residual income.

vii. It must have the potential to keep on improving with time.

viii. It must have a low level of liability risk.

Sources of Business Idea

A good business idea can be sourced through the following ways:

i. Develop ideas as an extension of an existing product (i.e. adding camera and song

features to a mobile phone).

ii. Create an improved service (fast delivery services).

iii. Market a product at a lower price (via e-commerce e.g. amazon.com).

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 iv. Add value to an existing product or service (i.e. reputable brand name or delivery

service).

v. Altering their quality or quantity.

vi. Introducing automation, simplification, convenience (i.e. smart product).

vii. Personal interests or hobbies, many people find ways to turn their hobbies into

successful businesses.

viii. Work experiences, skills, abilities, a business, related to the work you do.

ix. A familiar or unfamiliar product or service.

x. Spot the latest trends.

xi. Changing the delivery method, packaging, unit size or shape.

Techniques for Business Idea Generation

In general, entrepreneurs identify more ideas than opportunities because many ideas are

typically generated to find the best way to capitalise on an opportunity.

Several techniques can be used to stimulate and facilitate the generation of new ideas for

products, services and businesses. Figure1 presents the techniques of idea generation.

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  Brainstorming: This is a process in which a small group of people interact with very

little structure, with the goal of producing a large quantity of innovative and

imaginative ideas. The goal is to create an open, uninhibited atmosphere that allows

members of the group to freewheel ideas. Normally, the leader of the group asks the

participants to share their ideas. As group members interact, each idea sparks the

thinking of others, and the spawning of ideas becomes contagious.

 Focus Groups: These are group of individuals who provide information using a

structured format. Normally, a moderator will lead a group of people through an open,

in depth discussion. The group members will form comments in open-end in-depth

discussion for a new product area that can result in market penetration. This technique

is an excellent source for screening ideas and concept.

 Observation: A method that can be used to describe a person or group of people’s

behaviour by probing: (i) What do people/organisations buy? (ii) What do they want

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 and cannot buy? (iii) What do they buy and don't like? (iv) Where do they buy, when

and how? (v) Why do they buy? (vi) What are they buying more of? (vii) What else

might they need but cannot get?

 Surveys: This method is proposed by Zikmund (1994). This process involves the

gathering of data based on communication with a representative sample of

individuals. This research technique requires asking people who are called

respondents for information either verbally or by using written questions.

Questionnaires or interviews are utilised to collect data on the telephone or face-to-

face interview.

 Emerging Trends: The example is based on the population within your area may be

getting older and creating demand for new products and services.

 Research and Development: Research is a planned activity aimed at discovering

new knowledge, with the hope of developing new or improved products and services.

Researching new methods, skills and techniques enable entrepreneurs to enhance their

performance and ability to deliver better products and services.

 Tradeshows and association meetings: This can be an excellent way to examine the

products of many potential competitors, uncover product trends and identify potential

products.

 Other Technique: This can be achieved by reading relevant trade magazines and

browsing through trade directories. These may include local, national and foreign

publications.

Tasks in Developing Business Ideas

For a start, you could pursue the following tasks:

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 i. Identify the value proposition of your business idea: This is to identify and briefly

describe the unique value that you may be able to bring to your customers that your

competitors cannot.

ii. Discuss products/services with prospective customers: Would they buy from you,

at what price, with what frequency etc.? Why would they prefer your products to the

competitors? Find out what they really think there is a danger that people will tell you

what they think you would like to hear. Listen carefully to what is being said; watch

carefully for qualifications, hesitations etc. and don't brow beat respondents with your

ideas, you are looking for their views.

iii. Assess the market using in-depth market research: (i) how is the market

segmented (by price, location, quality, channel etc.)? (ii) What segments are you

targeting?

iv. (iii) How large are these segments (in terms of volume) and how are they changing?

(iv) What are the price make up/structures? (v) What market share might be available

to you bearing in mind your likely prices, location, breath of distribution, levels of

promotion etc.?

v. Analyse your competitor: (i) who are they and how do they operate? (ii) Are they

successful and why? (iii) How would they react to your arrival? (iv) What makes you

think that you could beat the competition? (v) At whose expense will you gain sales?

vi. Consider possible start-up strategies: (i) will you be able to work from home or

part-time? (ii) Will you seek a franchise or set up an in-store concession? (iii) Will

you start by buying in finished products for resale as a precursor to manufacturing?

(iv) Will you contract out manufacturing? (v) Will you buy an existing business or

form an alliance? (vi) Could you lease or hire equipment, premises etc. rather than

buy? (vii) How will you stimulate sales?

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 MODULE THREE: ENTREPRENEURIAL/ BUSINESS ENVIRONMENT

Introduction

The success of every business depends on adapting itself to the environment within which it

functions. For example, when there is a change in the government policies, the business has

to make the necessary changes to adapt it to the new policies. Similarly, a change in the

technology may render the existing products obsolete, as we have seen that the introduction

of computer has replaced the typewriters; the colour television has made the black and white

television out of fashion. Again a change in the fashion or customers’ taste may shift the

demand in the market for a particular product, e.g., the demand for jeans reduced the sale of

other traditional wear. All these aspects are external factors that are beyond the control of the

business. So the business units must have to adapt themselves to these changes in order to

survive and succeed in business.

Hence, it is very necessary to have a clear understanding of the concept of business

environment and the nature of its various components.

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Meaning of Business Environment

Business environment may be defined as the total surroundings, which have a direct or

indirect bearing on the functioning of business. It may also be defined as the set of external

and internal factors which are dynamic in nature and affects the business decisions of a firm.

In modern circumstances, the business operates in a turbulent environment, Internal and

external factors affect the business. Internal factors include the vision and mission as well as

employees of the organization and other internal mechanism of the organization. On the other

hand, external factors are the ones which lie beyond the control of business and impact the

organizations immensely in operations. External environment relates with the outsiders such

as the suppliers, customers, creditors, Government, etc. For a business organization to

achieve success, it is important to go hand in hand, both with internal as well as external

factors.

Features of Business Environment

Understanding environment within which the business is to operate is very important for

successful business.

Some of the features of business environment are as follows:

i. Specific and General Forces: Business environment includes both specific and

general forces. Specific forces (such as investors, customers, competitors and

suppliers) affect individual enterprises directly and immediately in their day-to-day

working. General forces (such as social, political, legal and technological conditions)

have impact on all business enterprises and thus may affect an individual firm

indirectly only.

ii. Dynamic Nature: Business environment is dynamic in nature. It keeps on changing

whether in terms of technological improvement, shifts in consumer preferences or

entry of new competition in the market.

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 iii. Uncertainty: Business environment is largely uncertain as it is very difficult to

predict future happenings, especially when environment changes are taking place too

frequently as in the case of information technology or fashion industries.

iv. Relativity: Business environment is a relative concept since it differs from country to

country and even region to region. Political conditions in the USA, for instance, differ

from those in China or Pakistan. Similarly, demand for sarees may be fairly high in

India whereas it may be almost non-existent in France.

v. Multifaceted: Business environment changes are frequent and depend on knowledge

and existence of business person. Changes may be viewed differently by different

individuals. It may be an opportunity for some or a threat for others.

Importance of Business Environment to Entrepreneur

There is a close and continuous interaction between the business and its environment. This

interaction helps in strengthening the business firm and using its resources more effectively.

As stated above, the business environment is multifaceted, uncertain, and dynamic in nature

which has a far-reaching impact on the survival and growth of the business. To be more

specific, proper understanding of various aspects of business environment helps the business

in the following ways:

i. First Mover Advantage: Early identification of opportunities helps an enterprise to

be the first to exploit them instead of losing them to competitors.

ii. Identification of Threats: Identification of possible threats helps in taking corrective

and improving measures to survive the competition. For instance; Nigerian if a firm

finds that a foreign multinational is entering the Nigerian market, it can meet the

threat by adopting measures like, by improving the quality of the product, reducing

cost of the production, engaging in aggressive advertising, and so on.

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 iii. Coping with Rapid Changes: All types of enterprises are facing increasingly

dynamic environment. In order to effectively cope with these significant changes,

firms must understand and examine the environment and develop suitable course of

action.

iv. Improving Performance: The enterprises that continuously monitor their

environment and adopt suitable business practices are the ones which not only

improve their present performance but also continue to succeed in the market for a

longer period.

v. Giving Direction for Growth: The interaction with the environment leads to opening

up new frontiers of growth for the business firms. It enables the business to identify

the areas for growth and expansion of their activities.

Types of Business Environment

There are mainly two types of business environment, internal and external. A business has

absolute control in the internal environment, whereas it has no control on the external

environment. It is therefore, required by businesses, to modify their internal environment on

the basis of pressures from external.

The internal environment has received considerable attention by firms. Internal environment

contains the owner of the business, the shareholders, the managing director, the non-

managers, employees, the customers, the infrastructure of the business organization, and the

culture of the organization. It includes 6 Ms i.e.

i. Man (Human Resource)

ii. Money (Financial Factors)

iii. Marketing Resources

iv. Machinery (Physical Assets)

v. Management Structure and Nature

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 vi. Miscellaneous Factors (Research and Development, Company Image and Brand

Equity, Value System, Competitive Advantage)

Usually, these factors are within the control of business. Business can make changes in these

factors according to the change in the functioning of enterprise.

Man (Human Resource)

The human resource is the important factor for any organization as it contributes to the

strength and weakness of any organization. The human resource in any organization must

have characteristics like skills, quality, high morale, commitment towards the work, attitude,

etc. The involvement and initiative of the people in an organization at different levels may

vary from organization to organization. The organizational culture and over all environment

have bearing on them. It is an internal factor and an organisation has absolute control on

changing this factor as per the needs of the enterprise and other forces.

Money (Financial Factors)

Factors like financial policies, financial positions and capital structure are another important

internal factor which has a substantial impact on business functioning and performance.

Financial facilities are required to start and operate the organisation. The sources of finance

are share capital, banking and other financial institutions and unorganised capital markets.

The recent changes in the Indian capital market indicate the availability of plenty of finance,

both from the financial institutions as well as from the general public. The availability of

finance coupled with various incentives attached is a facilitating internal factor.

Marketing Resources

Resources like the organization for marketing, quality of the marketing men, brand equity

and distribution network have direct impact on marketing efficiency of the company and

thereby, affecting the decision making component of the management. This, in lieu has great

impact on the internal environment of business.

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Machinery (Physical Assets)

Facilities like production capacity, technology are among the factors which influences the

competitiveness of the firm. The proper acquisition and working of the assets is indeed

essential for efficient working of the organization. An organisation invests money in plant

and machinery because it expects a positive rate of return over cost in future.

Management Structure and Nature

The structure of the organization also influences the business decisions. Being internal forces,

the organizational structure like the composition of board of directors influences the decisions

of business. The structure and style of the organization directly has an impact on the decision

making process of a firm. These needs to be appropriately managed for smooth functioning

and operations. The strategies available to an organisation are determined by its structure.

Different strategies are better suited to different environments.

Miscellaneous Factors

The other internal factors that contribute to the business environment are as follows:

Research and Development, Company Image and Brand Equity, Value System

And Competitive Advantage.

External environment

External environment is also known as general environment and remote environment.

External factors are generally more uncontrollable than micro environment factors. When the

external factors become uncontrollable, the success of company depends upon its adaptability

to the environment. This environment has a bearing on the strategies adopted by the firms and

any changes in the areas of the external environment are likely to have a far reaching impact

on their operations.

The external environment is primarily concerned with major issues and upcoming changes in

the environment.

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The acronym for the macro analysis is “STEEP.” The five areas of interest are:

i. Socio-Cultural and Demographics

ii. Technology

iii. Economic Conditions

iv. Ecology and Physical Environment

v. Political and Legal

Socio Cultural and Demographics: Societal values and lifestyles change over time, and the

most important of these; directly or indirectly leave an impact on the business environment.

The changes in culture and lifestyle may come from many sources: medical (smoking,

healthy eating, exercises); science (global warming, going ‘green’); economic (people

working longer, women in the workforce); cultural diversity (music preferences, foods, living

accommodations, medicine); and technologies (biodegradable plastic) are just a few

examples. The social environment of business includes social factors like customs, traditions,

values, beliefs, poverty, literacy, life expectancy rate etc. The social structure and the values

that a society cherishes have a considerable influence on the functioning of business firms.

Technology: Technology is understood as the systematic application of scientific or other

organised knowledge to practical tasks. Technology changes fast and to keep the pace with

the dynamics of business environment; organisation must be on its toes to adapt to the

changed technology in their system. The business in a country is greatly influenced by the

technological development. The technology adopted by the industries determines the type and

quality of goods and services produced. Technological environment influences the business

in terms of investment in technology, consistent application of technology and the effects of

technology on markets.

Economic Conditions: There is a close relationship between business and its economic

environment. It obtains all inputs from economic environment and all its output is absorbed

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here with. The state of the economy is usually in flux. The current situation (specific to the

industry) and any changes that may be forecast are important. The economy goes through a

series of fluctuations associated with general booms and recessions in economic activity. In a

boom nearly all business are benefited whereas recession is a case vice versa. Business is

influenced by economic aspects like interest rates, wage rates etc.

Ecology and Physical Environment: The ecology and physical environment plays a large

part in many businesses – especially for those which carry out production and manufacturing

activities. In fact, business are affected on daily basis due to environmental and ecological

changes. For example, the impact of climate change must be considered: water and fuel costs

could change dramatically, if the world warms by only a couple of degrees. The natural

environment includes geographical and ecological factors that influence the business

operations. These factors include the availability of natural resources, weather and climatic

condition, location aspect, topographical factors, etc.

Political and Legal: Political environment refers to three political institutions viz.

legislature, executive and the judiciary in shaping, directing, developing and controlling

business activities. The political environment of a country is influenced by the political

organisations such as philosophy of political parties, ideology of government or party in

power, nature and extent of bureaucracy influence of primary groups. The political

environment of the country influences the business to a great extent. The political

environment includes the political system, the government policies and their attitude towards

the business community. All these aspects have a bearing on the strategies adopted by the

business firms. The stability of the government also influences business and related activities

to a great extent.

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 MODULE FOUR: FEASIBILITY STUDY AND BUSINESS PLAN

Introduction

The Meaning of a Business Plan Scarborough (2014) defines a business plan as a written

summary of an entrepreneur’s proposed business venture, its operational and financial details,

its marketing opportunities and strategy, and its managers’ skills and abilities. There is no

substitute for a well prepared business plan, and there are no shortcuts to creating one. The

business plan becomes a road map that the entrepreneur will follow in building a successful

business.

Benefits of a Business Plan

Kuratko (2014) identified the following benefits of drawing up a successful business plan for

both the entrepreneur and the financial institutions:

i. It forces the entrepreneur to analyse all aspects of the venture and to prepare an

effective strategy to deal with the uncertainties that may arise.

ii. The time, effort, research, and discipline needed to put together a formal business plan

force the entrepreneur to view the business critically and objectively.

iii. The business plan quantifies objectives, providing measurable benchmarks for

comparing forecasts with actual results.

iv. The completed business plan provides the entrepreneur with a communication tool for

outside financial institutions as well as an operational tool for guiding the business

toward success.

v. The business plan provides the details of the market potential and plans for securing a

share of that market.

Contents of a Typical Business Plan

There is no rigid rule as to what a business plan should contain. The type of business and the

audience the entrepreneur has in mind in preparing it may determine the business plan format

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that is adopted. Generally, Mason and Sanyot (2012) identified 9 (nine) items to be included

in the contents of a typical business plan. They are:

i. Executive Summary: This is the opening chapter of the plan. It usually contains one

to three pages in length and highlights all the key points of the plan in a way that

captivates the reader’s interest. It is the unique value proposition and business model

that really matters.

ii. Company Description: This short section describes the company’s business, location

and site, strategy, structure and form of organization. It provides a summary of its

goals and plans for the next five years as well as the company’s capabilities.

iii. Products and Services: This explains what products or services the company will

sell; it also discusses why customers will want the products or services, what

problems the product or service will solve and what benefits they will deliver, and

how much customers are likely to pay for them.

iv. Market Analysis: This section discusses the need or demand for the product, who the

target customers will be, and why the customers will buy the product. This section

also includes a discussion of the company’s competitors or potential competitors, and

why the product or service will have a competitive advantage over similar offerings

from competitors. It also addresses the barriers to entry in this market that may

prevent the entry of new competitors, such as high capital costs, difficulty in reaching

customers or persuading them to switch loyalties, hard-to-get employee skills etc.

v. Proprietary Position: This section discusses whether the business enterprise will rely

on patents or licenses to patents, this section tells us how these patents will contribute

to the company’s competitive position and assesses whether other patents (i.e.

competitors or otherwise) might limit the company’s ability to market its products. If

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 similar products don’t already exist, it discusses the alternative means by which

customers are likely to meet the needs the product addresses.

vi. Marketing and Sales Plan: This section discusses product, pricing, promotion and

positioning strategy as well as how the company plans to attract, retain and maintain

customer’s loyalty.

vii. Management Team: Investors consider the management team as the most crucial

asset that will determine the company’s growth and help respond to the dynamic

nature of the environment. It is on this premise that this section describes the

members of the management team in terms of their names, qualifications, age,

experience and position of members of the management team including the

entrepreneur. The purpose of this is to highlight the competencies and skills available

to the company to execute its programmes.

viii. Operations Plan: This section describes the day-to-day operation of the business,

highlighting how the key assets (tools, processes and labour) will be utilize to produce

and deliver the products and services. This section includes the location and site of the

business.

ix. Finance: This section identifies the capital that will be required to build the business

and how it will be used. It includes forecasting of revenues and expenditure that show

investors how they will get their money back and what return they can expect on their

investment.

Differences between Feasibility Study and a Business Plan

Though the process involved in developing a feasibility report and a business plan are

similar, here are some basic difference between conducting feasibility study and writing a

business plan:

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 i. Feasibility study is carried out with the aim of finding out the workability and

profitability of a business venture. Before anything is invested in a new business

venture, a feasibility study is carried out to know if the business venture is worth the

time, effort and resources. On the other hand, a business plan is developed only after

it has been established that a business opportunity exists and the venture is about to

commence. This simply means that a business plan is prepared after a feasibility study

has been conducted.

ii. Feasibility report is filled with calculations, analysis and estimated projections of a

business opportunity. While a business plan is made up of mostly tactics and

strategies to be implemented in other to start and grow the business.

iii. Feasibility study is all about business idea viability while a business plan deals with

business growth plan and sustainability.

iv. Feasibility study report reveals the profit potential of a business idea or opportunity to

the entrepreneur, while a business plan helps the entrepreneur raise the needed start-

up capital from investors.

Factors to Consider When Starting a New SME

i. Knowledge of the Business Type

ii. Passion for the Business Type

iii. The Nature of the Target Market: Competitors Profit in the business

iv. The Nature of the Business Locations

v. The General Economic Condition

vi. The Sources and Adequacy of capital

vii. Allocation of Time between the Business and Personal Issues

viii. Breeding of Billionaire by the Sector

Essential Start-up Steps

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It is difficult to say or determine a specific number of steps, that every must follow while

establishing a new business. The actual steps may vary from one person, time, place or sector

to another. This cannot stop the academic exercise of giving guide on some of the steps to

consider (Beesley, 2016).

Example of a Small Business Plan

Ibrahim Aliyu Poultry Farm

Unguwar Arewa Disina

Shira LGA

Bauchi State

+2348038433614

ibrahimaliyu93@yahoo.com

Executive Summary

Ibrahim Aliyu Poultry Farm is a business of rearing of poultry for both meet and egg

production. The business will have 200 layers and 200 broilers making a total of 400 birds,

through profit ploughing back from the sales of eggs of layers and matured broilers, the

population of the farm is estimated to increase to 800 during the first year. In the production

the first year, the farm is estimated to generate an average of N220, 000 in revenue and about

N80, 000 as gross profit after deduction of cost of feed on monthly basis. Spent layers would

be sold at the end of one year of lay and utilized in the purchase of replacement birds. Annual

revenue could be up to 5 million naira and profit grossly could be up to N900, 000 in the first

year.

Introduction

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The products of the business are basically mature chickens and egg. It belongs to the

agricultural industry under the rearing of animal subsector. This sector in Nigeria, especially

Bauchi, Jigawa and Kano area, is at start-up stage. There is no serious competition because

the supply of the product is below its demand. This business is situated at Disina where no

equal business is operating around the area and there are urban areas such as Azare, Bauchi,

Dutse and Kano around with a lot of restaurants and large number of chicken and egg buyers.

Right now, the demand for egg and broiler meat remains overwhelmingly high.

Vision: To be one of the multinational poultry egg and meat providers

Mission: To produce nutritious eggs and meet, generate employment, and create wealth for

investor.

Value: Poultry Production for customer satisfaction and wealth creation.

Methodology

Ibrahim Aliyu Poultry Farm plans to participate in chicken and egg production. For the

layers, the business entails keeping of chicken from (Day old to) 14 weeks when the growers

will be transferred to cages. The caged birds at the age of 19 – 22 weeks start to lay eggs.

The eggs are packed in crates of 30 packs, taken to customers. The laying birds by the age of

60 to 75 weeks of laying, are sold out as spent layers for meat. The broilers are to be kept for

a maximum of 6 weeks.

Critical Success factors of the business

A. Finance: Fund must be available as when needed according to plan to avoid creating

stress factors which would cost so much in revenue loss

B. Expertise: The poultry industry is knowledge based home employment of expertise is

imperative. Consultancy is paramount. Training and retraining of staff is important no

matter how small the level and acquisition of knowledge of modern trend is a factor to

growth.

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C. Housing: Proper ventilation and spacing is a critical success factor. The house will be

positioned to give the birds’ maximum ventilation and reduce heat.

D. Biosecurity: Disease entrance and spread are as a result of any form of breach in

biosecurity in term of foot bath, car bath and prohibition of unauthorized persons.

E. Water: Watering and water source is of great importance. Foul water source or water

getting contaminated in poultry house signifies that the farm will fail. Water will be managed

to ensure that clear and clean water is available for bird ad libitum.

F. Nutrient: Most farm fail because they wanted to reduce cost of feed by compounding,

farms should only venture into self-compounding on ground with available experiment. All

nutrients will be readily available in the market to prevent malnutrition.

G. Sales: Egg and meet produced must be sold. Proper marketing with vigorous

advertisement will ensure the product is made available to the target market.

H. Management: Shrinkages, indulgence, misappropriation is few of the several epidemic

that constantly plaque poultry farms in Nigeria. Workers steal eggs, birds, feed, money and

even drugs if they are not properly monitored. Sales agents and drivers could sell at different

prices and report differently. Effective management of this ends are critical factor.

Structure of the Business

Attendants are to be at the farm latest 6.30am for the sake of emergency such as insect attack,

late feeding, brooding and security. Mix disinfectant and pour at the entrances. Change into

work cloth and foot wears. Soak their legs with the disinfectant as well as wash hand with

same. Each nest is observed for discomfort birds sick or dead. Such animals are then culled

and recorded. Water is checked each tip is tested to ensure normal flow. Blocked tips are

cleaned or replaced. Feed (already measured) is given to the birds by evenly pouring them

into the trough. Eggs are packed from the cage using basket or directly into the crates. The

eggs now packed in crates, are taken to the store room for buyers and distribution.

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First Round

Cost for Start-up with 400 birds.

Land 2 plots 100,000

Poultry house (12m*6m) x2 100,000

Borehole 150,000

Chicks 400@ N200 80,000

2 units of Battery cages 90,000

Feed – 2/3 bag@7000 per day 17 weeks 555,000

Feed during laying 1 bag@7000/ day 53 weeks 2,597,000

Point of lay birds 57,000

2 workers @ 20000/month for 16 months 640,000

TOTAL = 4,389,000

Revenue

Number of starting chicks 400

less mortality (@ rate of 10%) 40 = 360

Number of crates per day 360/36 = 10

Income from egg 10 @ N1200 for 53 wks (371 days) 4,452,000

Income from meat 360@ N1200 432,000

Total revenue 4,884,000

Profit 4,884,000 – 4,389,000 495,000

50% of the profit will be ploughed back into the business = 247,500

Second Round

Cost (no cost of fixed assets required) Assuming prices remain constant

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Chicks 430@ N200 86,000

Feed – 3/4 bag@7000 per day 17 weeks 624,750

Feed during laying 1 bag@7000/ day 53 weeks 2,856,700

2 workers @ 20000/month for 16 months 640,000

Total cost 4,217,450

Revenue

Number of starting chicks 430

less mortality (@ rate of 10%) 43 = 387

Number of crates per day 387/36 = 10

Income from egg 10 @ N1200 for 53 wks (371 days) 4,785,900

Income from meat 387@ N1200 464,400

Total revenue 5,250,300

Profit 5,250,300– 4,217,450 1,032,850

50% of the profit will be ploughed back into the business = N516,425

Third Round

Cost (no cost of fixed assets required) Assuming prices remain constant

Chicks 450@ N200 90,000

Feed – 4/5 bag@7000 per day 17 weeks 666,400

Feed during laying 1.2 bag@7000/ day 53 weeks 3,116,400

2 workers @ 20000/month for 16 months 640,000

Total cost 4,512,800

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Revenue

Number of starting chicks 450

less mortality (@ rate of 10%) 45 = 405

Number of crates per day 405/36 = 11.25

Income from egg 11.25 @ N1200 for 53 wks (371 days) 5,008,500

Income from meat 405@ N1200 486,000

Total revenue 5,494,500

Profit 5,494,500– 4,512,800 981,700

Note: This is just an example, a real business plan must consider inflationary trend and allow

at least 2-3 % of total cost as miscellaneous expenses

Conclusion

This business will be an exemplary that will start from nowhere to somewhere. As it is

starting as a local one, it will go international by developing and executing programs and

strategies that will place it well in the market. Contribution to National and local economy.

The poultry will provide employment in the first year for at least two persons. By the fourth

year the increased capacity it will enable employing more persons. Contractors and suppliers

should also benefit. The investors will find a means of expressing their entrepreneurial skill.

The manure will be sold to nearby farmers. Egg and meat marketers, maize or feed suppliers,

transporters, spent birds marketers etc shall all be affected positively. The impact on the

economy will be positive.

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 MODULE FIVE: SMEs IN NIGERIA

Introduction

SMEs in Nigeria operate in different sectors of the economy: They consist mainly of those

engaged in the distributive trade which constitute about 50% of the SMEs, 10% are in

manufacturing, 30% in agriculture and 10% in services (Olutunla & Obamuyi, 2008).

In Nigeria, SMEs’ contribution to the economy is of notable significance as 70% of the

country’s employment is generated by SMEs (Aina, 2007). Odeyemi (2003) further states

that SMEs account for over 50% of the Nigeria’s Gross Domestic Product (GDP). According

to Banji Oyelaran-Oyeyinka:

i. Studies by the IFC show that approx. 96% of Nigerian businesses are SMEs compared

to 53% in the US and 65% in Europe

ii. SMEs represent about 90% of the manufacturing/ industrial sector in terms of number

of enterprises,

Development of SMEs Sector in Nigeria

Successive administrations in Nigeria have formulated and implemented different strategies

to create enabling environment for SMEs formation and growth. Prior to 1970-1975 National

Development Plan, the Nigerian development plans and their strategies were directed towards

supporting Large Scale Enterprises (LSEs) (Osamwonyi & Tafamel, 2010). But by 1970s the

policy makers’ attitude to SMEs began to improve and in subsequent development plans they

have been very specific on the importance of the SMEs sub-sector to the over-all economy

(Nwankwo, Ewuim, & Asoya, 2012). Since then, they have been given increasing policy

attention probably because of the growing disappointment with the results from LSEs in

provision of employment and economic development (Mambula, 2002). Another reason that

might account for that was the realization of the potentials of SMEs in terms of positive

contributions to economic development in many countries.

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The first move was the setting up of the thirteen industrial centers (IDC) during the 1970 –

1975National Development Plan which aimed at providing extension services to SMEs

(Arogundade, 2011). This was followed by the establishment of financial institutions to

provide credits for SMEs. Banks such as Nigeria Industrial Development Bank (NIDB),

Nigeria Bank for Commerce and Industry (NBCI), Nigeria Agricultural and Cooperative

Bank (NACB), People’s Bank, Community Banks etc, were established for that purpose

(Nelson & Johnson, 1997). Some other programs aimed at supporting SMEs were: The

World Bank Assisted SME Scheme, National Economic Reconstruction Fund(NERFUND),

The Export Stimulation Loan Scheme (ESL), The Rediscounting and Refinancing

Facility(RRF), The National Directorate of Employment (NDE), Fadama Program and

Poverty Alleviation Program/National Poverty Eradication Program (NAPEP) Small and

Medium Industries Equity Investment Scheme (SMIEIS) and SMEDAN (Ehinomen &

Adeleke, 2012; Olugbenga, 2012).

Attitude and Habits of the Owner-managers Related Challenges

Managing Using Rule of Thumb: SMEs in Nigeria do not apply management technics in

running their businesses. A research by Lukman and Ayeyemi revealed that, SME owner-

managers in Nigeria simply manage situation to make profit amidst huge economic

deficiencies. Managing situation here should not be misconstrued as contingency

approach to management because even the owner-manager cannot tell you how he makes

the profit as he solely rely on chance while a contingency manager rely on parameters of

the situation to apply an appropriate management technic out of different techniques he

has.

Inability to Maintain Proper Accounts: this also leads to a problem of inability to properly

identify, assess and plan the management of their business performance and risk.

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 Under-estimating the Importance of Insurance Cover/Policy: the attitude of Nigerian

SME owner-managers towards providing insurance cover to their businesses is very poor.

An empirical study by Luper, I., & Kwanum, I. M. (2012) discovered that, about 84% of

SMEs in Nigeria do not cover their business against risk.

Prospects of SMEs in Nigeria and Other Developing Countries

i. The doomed market of crude oil: crude oil has for long provided Nigeria and the likes

with all the fund they needed to execute both important and trivial projects, thereby,

making the officials to consider other sources of income to the government and its

populace such as SMEs as wastage of time. Now, that oil is discovered in most if not

all the customer countries and the advances in the discovery of non-oil sources of

energy have made crude oil price to have made a sharp and indefinite drop at world

market. This has now forced the attention of government officials of such countries

like Nigeria to other sources and paramount of them industrialization through SMEs.

ii. Inability of salary to sustain both government and private organization workers: Lack

of capital is at the centre to the problem of evolution and growth of SMEs in the

developing countries and worker are considered to have steady flow of income, with

part of it consume and a part saved. Ever before, workers with the intention of

pursuing business career do make a constantly increasing investment. Now that

inflation has degraded the real income of every salary earner and there is no assurance

that the salary would be every month, it seems every salary earner has developed his

mind to have one business venture or the other. This will go a long way in increasing

the number of talent that will establish and sustain SMEs.

iii. Increased awareness on the importance of being self-employed: During the 1990s

backward people were very contented with being employed as workers for

government and companies in Nigeria and other developing countries, but with the

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 recent impact of globalization people have come to realize that you cannot be a

millionaire by being an employee. This has also coupled with the slogans of freedom,

that most people by their nature, want to free and independent to make self-

employment very attractive.

iv. Increased rate of unemployment: Also the fact that government and the few private

companies in developing countries cannot provide employment all the graduate of

universities, polytechnics and colleges of education, talk less of other non-formal

education graduate has forced every individual to on his own look for an alternative.

This is also making more number of talents to embark on business development.

v. Increase in population: As increase in population always associated with market

expansion, Nigerian markets and the likes are providing gaps for zealous

entrepreneurs to come in. this is also one of greatest promise that, SMEs section will

experience expansion in Nigeria and other developing countries.

vi. Training and Education: The inclusion of entrepreneurial education in the both lower

and upper levels of Nigerian education system and the return of Nigerian students

from abroad are providing SMEs sector with unprecedented talent of running

business. At home all professional courses are being thought how to establish and run

businesses relevant to their field and Nigerians studied abroad have seen how nothing

of Nigeria is being valued by a more developed society. Thus, coming back home and

venturing into those areas of SMEs.

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