Free basic business planning advice for South Africans
This is a very important document for the success of your business venture. It must be between 200-300 words. It serves both internal and external purposes. Internally, it forces you to commit to paper and clarify your realistic vision for the business and the interim goals or milestones you wish to achieve. It is also of great value when you are looking to expand your business for the future. Externally, in dealing with banks for financing your business, they will need to see a clear and well thought out plan, particularly the financial forecast, before giving you the loan.
A business plan is a statement of:
• The objectives of the business.
• How these objectives will be achieved.
• The resources required to achieve them, and their costs.
• The dates when the milestones will be reached.
• How the business' products or services will be marketed.
• The expected income and return on investment.
The components of a business plan are:
> A cover page and table of contents.
> An executive summary of your business.
> A profile of the business- detailed description of the proposed business.
> A marketing strategy- industry analysis- market analysis.
> The business management structure and growth.
> A production plan.
> A detailed financial plan- financial statements and projections.
> Reference and supporting documents.
We will now look at each of these components in more detail:
1. Cover page and table of contents.
• The cover page must be neat and attractive.
• The name and logo of the business must be clearly displayed.
• The table of contents must be neat and accurate.
2. The executive summary of your business.
• This is a preview of the entire business plan, summarising the highlights of each section.
• Though it is the first section of the business plan, it is advisable to make it the last section you write.
• It is the first impression of your business a potential funder gets, thus it is important that it gets them excited about your business opportunity.
• It must be no more than 2-3 pages and must briefly describe the business, the product or service, your unique opportunity and the investment you are seeking. It is very important to use clear and concise language and make it clear and direct, not abstract and conceptual.
• You must state the problem your idea is going to solve and how.
• Provide basic market segmentation, size, growth and what is driving it.
• Explain why you and your team are the right people to drive the business to success, special skills or experience.
• The summary of your financial projections should show how your income will successfully make a return on capital invested.
• List all the main points in the order they appear in the business plan.
• Sell your business strategy in a convincing, exciting and evidence based manner, because if it is not believable you are labouring in vain.
3. Profile of the business.
The business profile gives a general description of the business. It includes the following:
• The mission statement of the business.
• The description of what the business is all about, including drawings and photos for illustration. This should give the reader a very good idea of what it is all about, and show your passion to make it a success.
• The form of business it is, whether sole trader, partnership or company. Its important to separate your personal and business finances.
• The type of business, whether manufacturing, retail, service or contracting. Whether it is a new business, takeover, expansion or franchise as well.
• The product or service plan.
What makes it special, product life cycle and what is your competitive edge over other similar providers. Whether the industry is stable, growing or saturated with competitors. How big the market is and if there is space for new entrants like yourself.
• The short (6-12 months), medium (12-24 months) and long term (2-5 years) goals and the strategies to achieve them.
• The legal requirements to operate the business, eg company registration, tax compliance, permits and insurance.
• The factors that will make the business succeed, eg the idea and why it is good, your SWOT analysis, your team and why you are the perfect person to make it a success.
4. Marketing strategy/ plan.
The purpose of a marketing plan is to clearly outline your marketing strategy, showing who will be your customers, what type of competition you will face and how you will get an edge over them. It does not have to be long or complex, but should contain enough information to establish, direct and coordinate your marketing efforts. It should contain:
• Industry analysis.
> A summary of the industry in which the business will compete, taking the following into account:
- Current trends and developments in the industry.
- Important players in the industry.
- How the industry is segmented.
- Problems the industry might be experiencing.
- National or global events influencing the industry.
- How legislation affects the industry.
• Market analysis.
> Describe the existing market and its potential for growth.
> A detailed analysis of the size, trends and seasonality shown by the market.
> The business' expected market share with the analysis of the time, resources and actions required to achieve the desired market share.
> Identify and list potential customers.
> A detailed analysis of competitors, the price and quality of their products, services and delivery.
> Highlight and discuss your competitive advantage.
Counter - Actions
5. The business management structure/ plan.
The management plan describes your management team and staff and what valuable skills they contribute to the success of the business. Also the director(s) and owner(s) and the employment policies of the business. It can be broken down into:
• Ownership structure.
Here you describe the legal form of ownership, explaining who owns what percentage in the business.
• Internal management team.
Here you describe the business management categories, who is responsible for them and profile that person's skills.
Here you state the number, status (part-time or full-time), type (office or shopfloor), salaries and wages, hours of operation, recruitment methods and responsibilities of the staff that will assist you in making the business successful.
• Policies and procedures.
Here you state how your business will function on a daily, weekly and monthly basis. These need to be fair and realistic and more importantly, comply with labour legislation. You need to state employee work hours, number of people per task team, assessment of performance, training and development, as well as remuneration and benefits.
You must illustrate all this by drawing an organogram, with you at the top and the entire team in their appropriate positions, to the lowest grade.
6. Operational plan.
The operational plan states how you are going to get your product or service to the market.
• Facilities and location.
> The location in terms of physical address.
> Access to roads, communication networks and customers.
> Do you own the premises or do you rent or lease?
> Are there possibilities for expansion?
• Equipment and other fixed assets.
> What equipment is required?
> What does it do?
> How does it do it, how do the pieces function together?
> How much can be produced?
> Will it be purchased or lease it?
> Why and from whom?
> Include manufacturing equipment, vehicles, computers and office equipment.
> Who are your major suppliers?
> Are there alternatives?
> What are the advantages of buying from these suppliers?
> List any other contractors, vendors and consultants willing to invest in the development of your business. Describe their contribution.
• Human resources.
> Give a description of the skills and experience of team members covering key areas of technology and product/service development, production, sales, marketing, finance and administration.
> Describe the position and specific functions and responsibilities of each member.
> Formulate remuneration, incentives, share options and conditions of employment of team members.
> List details of auditors, attorneys, bankers and professional advisors.
• Inventory control.
> Indicate methods of adequate stock/inventory control.
> Consider what would happen if various events occurred which would affect your business and outline the ways in which those risks would be mitigated or overcome.
• Distribution and delivery plan.
> State how you intend to get your product/service out to the market
• Legal and regulatory environment.
> Give details of any licences, copyrights, trademarks and patents registered or in the process of being registered.
> Provide proof of compliance with tax and labour legislation, attach copies where applicable.
> Provide details of duties and tariffs to which input or products are subject, if the business is a regular importer or exporter.
7. Financial plan.
Though it is at the end of the business plan, it is what determines the viability of your business idea. It specifies the needs and contemplated sources of financing and presents projections of income, costs and profits. It consists of:
• Start up costs.
> Assets required to start your business.
These include land and buildings, computers, office equipment, production equipment, machinery, franchise fees, vehicles, etc.
> Once off start up operating costs.
These include deposits for rent, starting inventory, initial advertising, business licences, professional and legal fees, cash on hand, etc.
• Cash flow statement for 12 months.
This shows the flow of funds or cash in the business. Here you state your monthly projected revenue, expenses and profits. It is in the form of a monthly income statement projection for the first 12 months of operations.
• Projected income statement for 3-5 years forward.
> Projected revenues.
This is estimated by working out your unit price multiplied by the estimated production capacity per month. It is usual that this number starts small and grows as you increase your market share.
> Cost of sales and expenses.
This includes all the costs incurred in producing the income. From the costs of raw materials, to repayment of loans, rent, salaries, telephone, fuel, etc.
> Gross profit and net profit.
Gross profit is the revenue minus only the costs of raw materials employed in producing income. Net profit is the gross profit minus all the other expenses involved in running the business for the period.
• Sources of financing.
This is a statement of the proposed sources of funding. You could use your own funds, loans or any combination. For instance you could use loan funding for assets, an overdraft and your savings for operating costs or selling a stake in the business to an investor.
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8. Supporting documents.
These should include:
• Promotional literature, product/service brochures, market reseach, trade and industry publications.
• Registration documents.
• Contracts, orders and letters of intent.
• Memoranda of agreement, lease, franchise, agency or distribution agreements.
• Documents relating to licences, copyright, trademarks and patents.
• Detailed personal balance sheet of owner or bank statement.
• Copies of identity documents and marriage certificates of owners.
• Schedules of life insurance policies for owners.
• Drawings, work flow charts, plans, factory layouts, maps, etc.
• A list of references regarding creditworthiness, product and service quality, skills, abilities and integrity of the owners.