BUSINESS PLAN
By Sagheer Ahmed
Islam encourages work in general, and trade and commerce in particular. The Quran states: ‘God has made business lawful for you’ (Quran 2:275), and
Prophet Mohammad says: ‘Nine tenths of sustenance is in commerce’. Prophet Mohammad was himself engaged in commerce before prophet-hood. He
was a successful businessman known for integrity and he bore the title, ‘the trustworthy’ (Kattih n.d.).
Islamic business practices and perspectives represent an alternative to the way business is conducted today. Islam requires that traders, both
Organizations and individuals, achieve a balance between commercialism and humanitarianism, and between profit and social responsibility. Not only
does this approach to business conduct provide a solution to the problems of profiteering, customer exploitation, irresponsible corporate governance and
environment destruction, it seeks to promote positive aspects of business such as honest conduct, reasonable profit, fair competition, high standard of service
culture, business partnership, cooperation, minimum wage for employees and basic consumerism principles such as the right of buyers to return purchased
goods (Yusoff 2002).
In general, all Muslim practices and acts are classified under the following categories.
- Halal, or permissible. It has three levels:
o Wajib, or duty; obligatory acts. Failure to perform them is a sin. Duty can be described as the Core Halal, without which a firm can’t be seen as Shariah-compliant. Implications: firms must perform Wajib. Examples include being honest and transparent.
o Mandoob, or likeable; preferable but not obligatory. Not performing Mandoob is not a sin. Likeable can be described as the Supplementary Halal. Implications: do if possible. Examples include being helpful and going the extra mile.
o Makrooh, or despised; not preferable, discouraged by religion and usually seen as a last resort. Engaging in Makrooh doesn’t result in a sin unless it leads to one. The most obvious example of Makrooh in Islam is divorce! Although it is ShariahIslamic compliant, it represents the border between compliance and
non-compliance. It is loathed by society. Implications: avoid if possible.
- Mushtabeh, or doubted; acts that a Muslim should refrain from because they might be Haram themselves or they might lead to Haram. Businesses should refrain as much as they can from engaging in doubted activities for the fear of being perceived to be unscrupulous by Muslim consumers. Firms engaging in these activities risk a Fatwa being issued against them.
- Haram, or not permissible; all acts condemned explicitly or implicitly by the Islamic religion. Engaging in them or in activities
leading to them is a sin.
- Market re-search………………………….why?
- Market re-search……………………………what?
- Market re-search…………………………..How?
- Title or name …with respect to name, with respect to business, with respect to location, with respect to era.
- Motto…with respect to business.
- Dimensions
- Competitor
- Mission Statement.
- Vision Statement.
- Location……with respect to positive and negative aspects.
- Team…………..with portfolio.
- Finance……..Fix and Running.
- Finance Management……with feasibility report in the form of chart.
- Business Formula.
- Business Flow…with the help of flow chart.
- Mathematical Model of Production…with cost estimation method.
- Promotion Strategy ……..with Probability or regression model.
- Risk factor…with your weak points (S (strengths) W (weaknesses) O (opportunities) T (threats) Analysis).
- Role of Technology.
- Growth Graph.
- Break Even.
- Business related Dua…Istikhara, Nawafal and dua of starting,dua for bad nazar,dua of success,dua for burkat in rizk.
- Business related Sharia Points.
Business people should try to conduct their business dealings with practicing Muslims whenever possible. This is so for the following reasons:
- 1. Practicing people seek ‘blessing’ before ‘profit’.
- 2. You are less likely to be cheated. Prophet Mohammad says: ‘He who cheats is not of us [the Muslims].’
- 3. You are more likely to get a better deal. Prophet Mohammad says: ‘May Allah have mercy on those who are easy when they sell, easy
when they buy … God loves kindness when you deal with any matter.’
- 4. In case of dispute you are likely to get off with less harm. Prophet Mohammad says: ‘May Allah have mercy on those who are easy
when they judge, easy when they sue.’
- You are more likely to be treated better. Muslim scholars accept the rule that ‘Religion is treatment’ which means that how people deals
with all others, how they conduct their affairs, how they performs their duties and so on are what makes people religious.
- 6. If you receive a present from Muslims or if they invite you to a meal or a social activity, nothing will be expected in return. Bribery
is totally forbidden in Islam and therefore practicing Muslims will neither give it nor take it.Practising Muslims are those who strive to comply with the teachings of Islam, such as perform the Muslim daily five prayers, fast the month of Ramadan, give a yearly charity of 2.5 per cent from their wealth and perform pilgrimage to Mecca once in their life time.
How to identify practicing Muslims? Look for the following:
- 1. Long well-maintained beards.
- 2. If you are dealing with Arabs from the Arabian Peninsula, the long white dress men wear will not touch the ground since men are
forbidden from wearing very long dresses, it is considered a sign of pride. Pride is for Allah alone. Prophet Mohammad says: ‘Shall
not enter paradise anyone who has an atom of pride in his heart.’
- 3. Oil-based essences instead of alcohol-based perfumes.
- 4. The words Allah (God), Ma Sha Alla (what Allah had willed) and In Sha Alla (if Allah wills) are repeated very often during greetings
and conversations. Even if you don’t understand the language of the people you are dealing with, train your ear to recognize these
words because they are good indicators of religious commitment. It doesn’t matter that these words are in Arabic, Muslims all over the
world use Arabic as their language of religion.
- Practicing older Asian and South Asian Muslims in general dye their long beards red or ginger.
- 6. Don’t confuse the short beard of an older man that has been dyed black with a long beard indicating religious commitment; the
former indicates longing for a long-gone youth!
- During meetings, practicing Muslims will take breaks to perform their prescribed five daily prayers. They are very strict about performing these prayers at the exact prescribed time (dawn, noon, afternoon, sunset, early night) and they are unforgiving about the timing. A prayer break will be taken no matter how important the issue being discussed or the stage of the discussions.
Glossary:
Business: An organization or economic system where goods and services are exchanged for one another or for money.
Plan : Written account of intended future course of action (scheme) aimed at achieving specific goal(s) or objective(s) within a specific timeframe. It explains in detail what needs to be done, when, how, and by whom, and often includes best case, expected case, and worst case scenarios.
Business Plan: Set of documents prepared by a firm’s management to summarize its operational and financial objectives for the near future (usually one to three years) and to show how they will be achieved. It serves as a blueprint to guide the firm’s policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge. When prepared for external audience (lenders,prospective investors) it details the past, present, and forecasted performance of the firm. And usually also contains pro-forma balance sheet, income statement, and cash flow statement, to illustrate how the financing being sought will affect the firm’s financial position.
Mission Statement: A written declaration of an organization’s core purpose and focus that normally remains unchanged over time. Properly crafted mission statements (i) serve as filters to separate what is important from what is not, (ii) clearly state which markets will be served and how, and (iii) communicate a sense of intended direction to the entire organization.
Vision Statement : An aspirational description of what an organization would like to achieve or accomplish in the mid-term or long-term future. It is intended to serves as a clear guide for choosing current and future courses of action.
Production : The processes and methods used to transform tangible inputs (raw materials, semi-finished goods, subassemblies) and intangible inputs (ideas, information, knowledge) into goods or services. Resources are used in this process to create an output that is suitable for use or has exchange value.
Factors of production: Resources required for generation of goods or services, generally classified into four major groups:
- Land(including all natural resources),
- Labor(including all human resources),
- Capital(including all man-made resources), and
- Enterprise (which brings all the previous resources together for production).
Good Will: Assumed value of the attractive force that generates sales revenue in a business, and adds value to its assets. Goodwill is an intangible but saleable asset, almost indestructible except by indiscretion. It is built painstakingly over the years generally with (i) heavy and continuous expenditure in promotion, (ii) creation and maintenance of durable customer and supplier relationships, (iii)high quality of goods and services, and (iv) high quality and conduct of management and employees. Goodwill includes the worth of corporate identity, and is enhanced by corporate image and a proper location. Its value is not recognized in account books but is realized when the business is sold, and is reflected in the firm’s selling price by the amount in…
Profit : The surplus remaining after total costs are deducted from total revenue, and the basis on which tax is computed and dividend is paid. It is the best known measure of success in an enterprise.
Profit is reflected in reduction in liabilities, increase in assets, and/or increase in owners’ equity. It furnishes resources for investing in future operations, and its absence may result in the extinction of a company. As an indicator of comparative performance, however, it is less valuable than return on investment (ROI). Also called earnings, gain, or income.
Depreciation : Accounting: The gradual conversion of the cost of a tangible capital asset or fixed asset into an operational expense (called depreciation expense) over the asset’s estimated useful life.
The objectives of computing depreciation are to (i) reflect reduction in the book value of the asset due to obsolescence or wear and tear, (ii) spread a large expenditure (purchase price of the asset) proportionately over a fixed period to match revenue received from it, and (iii) reduce the taxable income by charging the amount of depreciation against the company’s total income. In effect, charging of depreciation means the recovery of invested capital, by gradual sale of the asset over the years during which output or services are received from it. Depreciation is computed at the end of an accounting period (usually a year), using a method best suited to the particular asset. When applied to intangible assets, the preferred term is amortization.
Investment: 1. Money committed or property acquired for future income.
- 2. Two main classes of investment are (i)Fixed income investmentsuch as bonds, fixed deposits, preference shares, and (ii) Variable income investment such as business ownership (equities), or property ownership. In economics, investment means creation of capital or goods capable of producing other goods or services. Expenditure on education and health is recognized as an investment in human capital, and research and development in intellectual capital. Return on investment (ROI) is a key measure of an organization’s performance.
Capital : Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.
Break-even analysis : A calculation of the approximate sales volume required to just cover costs, below which production would be unprofitable and above which it would be profitable. Break-even analysis focuses on the relationship between fixed cost, variable cost, and profit.
Risk analysis : Corporate: As a component of risk management, it consists of (i) Identification of possible negative external and internal conditions, events, or situations, (ii) Determination of cause-and-effect (causal) relationships between probable happenings, their magnitude, and likely outcomes, (iii) Evaluation of various outcomes under different assumptions, and under different probabilities that each outcome will take place, (iv) Application of qualitative and quantitative techniques to reduce uncertainty of the outcomes and associated costs, liabilities, or losses.
Business growth: The process of improving some measure of an enterprise’s success. Business growth can be achieved either by boosting the top line or revenue of the business with greater product sales or service income, or by increasing the bottom line or profitability of the operation by minimizing costs.
Profit/loss graph: A graphical representation that indicates the potential profit or loss of an investment at a given time (usually at the expiration of the option) and at various stock prices, in order to inform business decisions on such investment. It is also known as a “risk graph” and it allows investors to devise countermeasures if and where high risk is involved.
Break-even graph: Line graph used in breakeven analysis to estimate when the total sales revenue will equal total costs; the point where loss will end and profit will begin to accumulate. Usually, the numbers of units are plotted on horizontal (‘X’) axis and total sales dollars on vertical (‘Y’) axis. Point where the two lines or curves intersect is called the breakeven-point.it is also called breakeven chart.
Negotiation : Bargaining (give and take) process between two or more parties(each with its own aims, needs, and viewpoints) seeking to discover a common ground and reach an agreement to settle a matter of mutual concern or resolve a conflict.
Feedback: Process in which the effect or output of an action is ‘returned’ (fed-back) to modify the next action. Feedback is essential to the working and survival of all regulatory mechanisms found throughout living and non-living nature, and in man-made systems such as education system and economy. As a two-way flow, feedback is inherent to all interactions, whether human-to-human, human-to-machine, or machine-to-machine. In an organizational context, feedback is the information sent to an entity (individual or a group) about its prior behavior so that the entity may adjust its current and future behavior to achieve the desired result. Feedback occurs when an environment reacts to an action or behavior.
Performance: The accomplishment of a given task measured against preset known standards of accuracy, completeness, cost, and speed. In a contract, performance is deemed to be the fulfillment of an obligation, in a manner that releases the performer from all liabilities under the contract.
Credit: An entry on the right-hand side of an account record in double entry bookkeeping. It has the effect of decreasing an asset or expense account, or of increasing a capital, liability, or revenue account.
PEST:A type of situation analysis in which political-legal (government stability, spending, taxation), economic (inflation, interest rates, unemployment), socio-cultural (demographics, education, income distribution), and technological (knowledge generation, conversion of discoveries into products, rates of obsolescence) factors are examined to chart an organization’s long-term plans.
SWOT: Situation analysis in which internal strengths and weaknesses of an organization, and external opportunities and threats faced by it are closely examined to chart a strategy. SWOT stands for strengths, weaknesses, opportunities, and threats.
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