One of the most important (and often forgotten about) documents that you will need to start a new business is a solid business plan. It is also serves as a guide in any stage of a business.
A business plan is not only required when you need funding – it is one of the cornerstones of any business. Let’s get back to the basics.
What exactly is the purpose of a Business Plan?
A business plan is what will guide you through each phase of your journey, a ‘roadmap’ as such to help you to start up and manage your business. It does not only deal with the financial aspects of your business, but also with the structure. It’s a way to ‘think’ through all that you need from staffing to procurement, sales and of course distribution of your product or service.
Depending upon the amount of detail, your plan can take you hours and be literally a ‘one pager’ or can take you weeks (if not months) to prepare . This is usually dependent upon what you need the business plan for.
Most business plans follow the “Traditional” route and these are generally the more detailed and structured ones, the one typically that you would submit to the bank for a loan. Due to the amount of detail that is required, these require more work and research upfront.
What is required?
Most traditional business plans have a set kind of structure, but depending on your needs, it is not necessary to follow the structure step by step, but rather focus on sections that are most relevant to your business and your needs. There are usually around 9 points that need attention. These are (but not limited to):-
1. Executive Summary
What is your company, what does it do and why will it be successful? Include things like your Mission Statement as well as your product or service. This is where you give some information on the leadership team, your employees and the problems that you company will solve and your plans for growth.
2. Company description
Here you need to provide detailed information about your company and need to be quite specific in terms of your target market. I would suggest that you actually produce a list of some of the consumers, businesses or organizations that your company plans to assist.
Details of the competitive advantages that will make your business a success should be itemized here as well as any experts you may have on your team. Don’t forget to mention the location of your store or office. This is also the place where you have the most bragging rights. to boast about your strengths and that of your team.
3. Market analysis
This is where you will need to provide absolute clarity on who your target market is. Saying something like “everyone needs this” is not going to cut it. You will need a thorough understanding of the industry, how it operates and exactly who your target market is. Your research will highlight what your competitors are doing and what their strengths are, and of course you will need to show how you can do it differently and better. When you are doing your research, don’t forget to specifically look for ‘trends and themes’ and how you will embrace these or alternatively how you will negotiate the ‘mine field,’ as you navigate them.
4. Organisation and management
Detail your organizational, administrative and management talent. The legal structure of your business needs to be documented here, i.e. CC or (Pty) Ltd, Partnership etc.
You need to outline how your infrastructure will work. I have found the easiest way to do this is by means of an Organisational Chart as this will help you to lay out who will be in charge of what, how the work will flow, and it will also give you the opportunity to highlight any exceptional or unique skills that you team may have. It is also an opportunity for you to include the CV’s or resumes of key members of your team, where appropriate.
5. Service or product Line
This is where you itemise the products or services that you will be selling. There is a huge opportunity here to highlight how your particular service or product will impact or make a positive difference to your client.
Details of the ‘lifecycle’ of your product or service should be inserted here. This is also where you get to share some of your Intellectual Property, and even details of filings for copyright or patents. Share some background of the research or development of your product or service here.
6. Marketing and sales
This will change and evolve as both you and the business grows and it is therefore something that needs to be looked at carefully on a regular basis.
Here is where you outline how you attract new customers as well as how you retain your current client base. This is also where you describe ‘how’ the sale actually happens. When you get to the financial side of things, this is where you will describe your financial projections. Make sure that you describe your complete marketing and sales strategies here.
If you are wanting to source finance, this is where you will explain what it is for, how you will spend it and how you will repay it. It is generally used for a 5 year plan. You need clarity on whether you want to carry the debt in your business or equity as well as the terms that you would like applied and the length of time your request will cover. Be clear, the usual “I’ll pay it back when I have funds available” will not cut it here.
Be clear on what the funds are for, i.e. purchasing of equipment, paying salaries or list the specific bills that will need to be paid until your sales start bringing in the revenue that you require. Always include your strategic future financial plans including paying off current debt or even the sale of the business.
8. Financial projections
Include your financial projections here. Remember you are trying to convince the ‘lender’ that you have a stable business and that your endeavour will be a financial success. If your business is already established, include your Annual Financial Statements for the previous year or at the very least, your Income Statements, forecasted Income Statements, Balance Sheets, Cash Flow Statements. If you want to be even more specific include your quarterly or even monthly projections. Make sure that the numbers match your requirements.
The index is where you would usually attach supporting documentation or ‘specifically requested materials’. The most common items are (but not limited) to credit histories, product pictures, letters of reference or referrals, licenses, permits or patents. Legal documents or permits etc.
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Nikki is an Internal Auditor and Business Administration Specialist who can be contacted on 083 702 8849 or
email@example.com or www.viljoenconsulting.co.za for any policies and procedures that you may require.