So you're ready to take that great idea that you've had for a while and turn it into a profitable venture. To achieve that, you'll need to know how you are going to develop your business, when you are going to do it, who's going to be involved and how you will manage the finances.
The process of building your plan will focus your mind on how your new business will need to operate to give it the best chance of success.
This BizConnect guide will assist you in preparing a high-quality business plan that will help you get your start-up on the go.
Writing a business plan can be one of the most difficult tasks for the entrepreneur. In its simplest form a business plan defines where you want your business to be within a certain period of time (usually 12 months to five years) and how you plan on getting there. It's as important for starting a business as architectural plans are for constructing a building.
It is a chance to refine strategies and "make mistakes on paper" rather than in the real world, by examining the company from all perspectives, such as marketing, finance, and operations. It's a vital document to have if you are going to approach potential investors and funders. Once completed, a business plan will make you feel more confident about your ability to set up and operate the business.
The business plan is best written by the founder/s, but you may need professional help from an accountant or other business adviser who can provide assistance and guidance in the preparation of your business plan. However, do not let someone write the entire plan on your behalf as you must maintain control over it and have the ability to understand it.
The purpose of a business plan
Drawing up a business plan will help you to identify your strengths and weaknesses, key areas where you need to develop expertise and the financial risk involved in setting up the business.
It represents the dynamic process of planning and reviewing the business strategy over time, and it should be continually updated.
An entrepreneur who is launching a new business will write a business plan with the aim of attracting start-up financing, both capital investment and loans. Attracting an investor, whether it's a venture capitalist or angel investor, is no simple task. It takes time and patience. You can attract investors for your start-up with preparation, planning, strategy and proper research, all of which will shine through in the business plan.
Even if you're starting a business without outside investors and you're funding it all yourself that does not mean you don't need a business plan. In fact, if you want to minimise uncertainty and maximise your chance of success a business plan is essential. You can use it to focus on the elements of the business that are going to help you build and grow it, providing you with a blueprint.
Often start-up entrepreneurs make the mistake of trading from their personal bank account. This makes it harder to differentiate between your personal expenses and business expenses. It also doesn’t allow you to build up a credit risk profile for your business, which is an important factor should you ever want to approach a bank for financing. Rather, start trading as a business from the get-go by opening up a Business Current Account.
c) Existing businesses
Growing or expanding an existing business requires careful planning. Owners of existing businesses have overcome many hurdles in the pre-planning and start-up stage. But they continue to face a variety of challenges. Business owners must effectively use limited resources to improve their position in the market while continuing to manage the critical aspects of their operations. To achieve long-term success, business owners must lay the foundation for future growth in the business plan.
A typical business plan runs 15 to 20 pages, but much will depend on the nature of your business. If you have a simple concept, you may be able to express it in a few pages. If you're proposing a completely new kind of business you may have to provide a more in-depth explanation.
The purpose of your plan will also determine its length. If you want to use it to seek millions of rands in seed capital to start a risky venture, you may have to do a lot of explaining.
Contents of a business plan
Business plans generally include the following sections:
- Table of contents: The main headings of the business plan and their page numbers. Complete this section last to ensure the numbers are correct.
- Executive summary: The major points of your business plan in two pages or less.
- Company overview: Your mission, vision, values, products, unique attributes, and the business opportunity or gap in the market that you plan to take advantage of.
- Business environment: An analysis of your industry, your marketplace, your customers, your competition, and how you measure up against them. This will be based on the research you conducted prior to writing the business plan. Discuss why this gap exists, how you identified it and how you will fill it.
When writing about the industry, provide information about barriers to entry and how easy or difficult it is for future competitors to enter the same market and offer the same product or service as you do. Describe customers, list suppliers, name competitors and state the total size of the market, what percentage of the market share you will have, and major trends.
- Company description: This is where you give an overview of the company and its business. Include the company's name, mission statement, goals and objectives, and strengths. Talk about the capabilities that give you a unique advantage over your competitors - including your management, technology, operations, distribution, service, finances and marketing. If you have a registered company name, trademarks, patents, BEE credentials and a VAT number include those details here.
- Company Strategy: Your roadmap to the future (including how you'll seize opportunities and avoid threats), your growth plans, your promotional strategy and even your exit strategy.
- Business model: Your business model must include information on what your company offers, what makes your offering unique, who you will sell to and how you will make your money. Consider the source of revenue, the major costs incurred in generating revenue, the profitability of the business, the investment required to get the business up and running and the critical success factors.
- Strategy: How will your business compete in its specific market? Explain the strategic choices you have made including the focus of the business, how you will create a unique value proposition, what is distinctive about your business and what value there is for customers.
- Management team: Provide a breakdown of the people in the business. Include founders and their qualifications and experience, a description of who will manage the business, and an organisational chart.
- Marketing plan: The marketing plan should include important marketing decisions about the product or service and its value, as well as a detailed description of the target market, the product or service's positioning, the pricing strategy, the sales and distribution channels and the promotion strategy.
- Operations plan: Here you must explain the daily operation of your business. It should include the business's operating cycle, where the skills and materials will be sourced from, if anything is to be outsourced and how you will manage those relationships, and the payment cycle.
- Financial review: This is the state of your finances, including your income statement, balance sheet, cash flow statement, profit projection, and budget. The financial plan is an overview of your business's financial future. You should back up the main features of the financial plan with accurate financial projections.
Include start-up expenses and capitalisation, a 12-month profit and loss projection, a 12-month cash-flow projection, a projected balance sheet at start-up and at the end of years one, and three, and a break-even calculation.
- Action plan & timeline: Steps you'll take to implement your business plan to meet your goals and objectives.
- Appendix: Here you can attach supporting documents like brochures and advertising, industry studies, blueprints and plans, maps and photos of locations, articles, lists of equipment, contracts, letters of support from future customers, market research studies, and detailed financial calculations and projections.
Making an impression
Nothing highlights sloppiness more than a business plan with spelling and grammar errors. Once you have completed your plan, have someone read it and copy edit the document to ensure there are no language mistakes.
Writing the Executive Summary
The executive summary is a synopsis of your full business plan and contains all the highlights of each section. It should briefly describe the company, provide details about management and their strengths, the business objectives and why it will be successful. If the business needs external funding, specify how much is needed and how it will be repaid.
Even though the topic appears first in the printed document, the executive summary is written last. View the summary as the gateway to the rest of the plan. Get it right or your target readers - funders, partners, suppliers - will not go any further.
The first paragraph of the executive summary should generally include:
- Business name
- Business location
- What product or service you sell
- Purpose of the plan
Another paragraph should highlight important points, such as projected sales and profits, unit sales, profitability and keys to success.
Never waste words in a summary. It should not exceed two pages in length. Emphasise the main points of your plan and keep it brief. You are luring them in to read more of the plan, not explaining every detail.