DEVELOPING A BUSINESS PLAN
THE FUTURE IS IN YOUR HANDS
UNDERSTANDING YOUR VISION:
In our last blog we touched on how you convert your dream into a vision, some of the topics we touched on included the following:
A Vision with a Goal map creates the ever-needed confidence, start a vision board, this will guide your progress and remind you daily of the goal you are aiming for. A Vision helps you identify yourself; it becomes your source of motivation. A vision should be clear and simple, on other words, it needs to be an elevator pitch. (If you met your long-awaited prospective investor in a lift/elevator from ground floor to the third floor, how would you sell your business in 2 minutes?)
Vision VS Business Plan
(What?) (what, who, where, when, how)
You need to have Clarity over Certainty:
WHAT is critical and non-negotiable, it is closely glued to WHY is it critical, even if the WHERE, WHEN, WHO changes. The WHAT and WHY is what will guide your Vision.
In this Blog our focus will be on creating a Business Plan
TO BE ABLE TO DEVELOP A BUSINESS PLAN YOU NEED TO UNDERSTAND THE BELOW:
- Describe the product or service to be offered
- Describe in full the product or services offered by the business, the innovative features of these products and services, and the competitive edge they afford the business over rivals in the market.
- Describe the location, premises and, where applicable, production facilities.
- Describe production processes and capacity, identifying any existing constraints and possible problem areas.
- Include a detailed analysis of the process of installing and commissioning any new technologies and production processes.
- Details of suppliers and sub-contractors, and any contractual arrangements governing the supply of key inputs. Elaborate on the business’s strengths, past problems and weaknesses, and critical success factors.
You need this document for the investor to gain a thorough understanding of your business, your business goals and objectives, your existing or proposed business, and your financing requirements (including the business loan amount).
Specific attention should be given to four key areas: the business itself, the management of the business (the business owners involved), the market in which the business operates, the financial management, and planning – the risks and rewards associated with the total investment in the business.
Although we are providing a guide to writing a business plan, business circumstances vary considerably and you will need to tailor your business plan depending on the type of business you intend operating in — e.g. technology, manufacturing, service, or retail. But, the basics remain the same.
A BUSINESS PLAN SHOULD HAVE:
- A cover or title page
- Executive summary
- Business overview
3.1. Business profile
3.2. The product or service
4.1. The business owners
4.2 The management structure
4.3. Franchise information (where applicable)
- The Market
5.1. Industry analysis
5.2. Market analysis
- Sales and marketing strategy
- Financial statements and projections
- Legal and regulatory environment
- SWOT analysis and risk/reward assessment
- Appendices and supporting documentation
THE EXECUTIVE SUMMARY
The executive summary is the most vital part of the business plan — it has to sell your strategy for success to the investor. (Elevator Pitch) The summary is an overview of the entire plan and must contain the highlights of the business plan and summaries of each section. Therefore, although it is at the beginning of the document, it is usually written last to capture the essence of the plan. The summary stands alone and should not refer to other parts of your document.
BUSINESS OVERVIEW: (BUSINESS PROFILE)
Write a business profile, including the following: Information on the background and history of the business; Indicate the business form (proprietorship, close corporation, company); Is it a new business, take over, expansion, franchise? The mission, and the company’s long and short term objectives in terms of business growth and development, as well possible exit strategies (for example: buy out investors, etc.).
COMPANY MANAGEMENT: THE BUSINESS OWNERS
Include a description of the skills and experience of the business owner(s) covering the key areas of technology and product development, production, sales, marketing, finance and administration; Describe the position and the specific functions and responsibilities of each business owner and/ or manager; Attach a detailed curriculum vitae of each business owner; Indicate the financial contribution of each business owner to the business, and the current shareholding structure.
COMPANY MANAGEMENT: THE MANAGEMENT STRUCTURE OF THE BUSINESS
Show company ownership structure, business units, and subsidiaries where applicable; Attach an organisation chart showing the functions and responsibilities of directors, key management, and staff; Formulate remuneration, incentives, share options, and conditions of employment of key management and directors.
Analysis of any deficiencies in management and how these positions are to be filled; Comment on current and future employment levels, labour relations, and union membership; Include details of systems to be implemented: information technology, accounting, administration, management information, and stock control systems; Include details of auditors, attorneys, bankers, and professional advisers.
MARKET ANALYSIS: INDUSTRY ANALYSIS
Summarise the industry in which you will compete. Find most of the facts from government statistics and trade organisations. Describe the existing market and its potential for growth;
Include a detailed analysis of the size and maturity of the market, trends and seasonality exhibited by the market, and the business’ current and expected market share together with an analysis of the time, resources, and actions required to achieve this desired market share;
List existing and potential customers, supported by letters of intent, orders on hand, contracts, where applicable.
Include a detailed analysis of competitors, the price and quality of their products, service and delivery, and their expected reaction to your activities.
Highlight and discuss your competitive advantage.
Discuss topics such as:
- Current trends and developments in the industry;
- Large and important players in the industry;
- How the industry is segmented;
- Problems the industry might be experiencing;
- National or global events influencing the industry;
- National and global growth forecasts;
- How legislation affects the industry (for example, how the law limiting smoking in a restaurant affects the industry).
SALES AND MARKETING STRATEGY:
Elaborate on current and planned sales and marketing strategies Elaborate on planned promotional activities (E.G. Advertising, exhibitions, promotions, public relations etc.) Include a detailed motivation and substantiation of sales projections (in monitory and physical terms) with comprehensive lead times for sales and break even point (include milestones) Elaborate on your pricing strategy and how it compares to your competitors If it’s a franchise include full franchise marketing strategy from franchisor.
FINANCIAL STATEMENTS AND PROJECTIONS:
Include only a summary of the financial statements and projections in the body of the business plan — attach a detailed analysis as an appendix. Include operating budgets, cash flow projections, income statements and pro- forma balance sheets for at least three years (recommended: five years). Provide monthly projected figures for the first and second year, quarterly figures for years three and four and annual projections thereafter.
Include only a summary of the financial statements and projections in the body of the business plan — attach a detailed analysis as an appendix. Include operating budgets, cash flow projections, income statements and pro- forma balance sheets for at least three years (recommended: five years).
Provide monthly projected figures for the first and second year, quarterly figures for years three and four and annual projections thereafter. Ensure that your financial projections agree with any other statements in the business plan, formulate and motivate your capital requirements. (Be realistic)
LEGAL & REGULATORY ENVIRONMENT:
Details of any licences, copyrights, trademarks and patents registered (or in the process of being registered); Details of any legislation and regulations governing the industry, product and production processes.
Proof of compliance with tax and labour legislation (VAT, PAYE, RSC, UIF, COIDA, Employment Equity Act, Skills Development Act, etc.) where applicable; Details of duties and tariffs to which inputs or products are subject if the business is a regular importer or exporter.
SWOT ANALYSIS & REWARD/RISK ASSESSMENT:
Discuss definite and possible strengths, weaknesses, opportunities, and threats; Give an honest assessment of the risks faced by the business, business owner(s), and investors in relation to the potential for growth, profitability, and capital appreciation; Discuss strategies that can be implemented to address the risk factors highlighted.
APPENDICES & SUPPORTING DOCUMENTS:
The following supporting documentation, should be included where applicable:
- Newspaper clippings, promotional literature, product brochures, market research, trade and industry publications;
- Partnership, association or shareholders’ agreements;
- Offers to purchase, purchase and sale agreements;
- Contracts, orders, letters of intent;
- Memoranda of understanding, lease, franchise, agency, or distribution agreements;
- Documentation relating to licences, copyrights, trademarks and patents;
- Quotations or pro-forma invoices for capital items to be purchased;
- Detailed personal balance sheets of the business owner(s);
- Copies of identity documents and marriage certificates of the business owner(s);
- Schedules of life assurance and endowment policies of the business owner(s);
- Copies of company or close corporation certificates and registration documents;
- Drawings, work-flow charts, plans, factory layouts, maps, etc.;
- A list of persons who can provide references regarding creditworthiness, product and service quality, and the skills, abilities and integrity of the business owner(s).
By: Nandi Marubelela
A Fellow Entrepreneur