Somalilandsun – In our two previous articles, we looked at the concept of entrepreneurship in – ‘Don’t look for a Job Create One” and Business Idea Generation and Feasibility Analysis in – “Are You an Entrepreneur?” We will presently take a look at what is a – Business Plan and what is its format and contents. This will be divided into two parts. Part 1 will look at Business Plan: Definition, Purpose, Format, Executive Summary, Company Description, Market and Market Strategy; and part 2 will look at: Operations, Project Requirements, Financial Statements, and Appendices and Exhibits.
One major cause of small business failure is lack of planning. Winston Churchill once famously said “Failing to plan is planning to fail!” This means that: if you don’t plan and don’t know where you are going in your life or project, you may end up in a wrong place or somewhere you don’t want to be. A business plan is a road map for success. It helps eliminate unknowns and misunderstandings that can arise if you don’t take the time to put your thoughts, plans and research on paper.
A business plan is a written summary of your business and describes what you wish to achieve by being in business and how you intend to organize your resources to meet these goals.
The plan will:
• Highlight your management and organizational skills
• Outline the business’ availability and use of funds
• Discuss management and personnel or staff
• Describe products or services
• Articulate the market strategy
• Highlight the past (if there is one), present and future of the business
Whether you are already operating or just starting a small business, a well written business plan can help you get to where you want to go, effectively and efficiently.
Purposes of the Business Plan
• Forces you to think through your business idea
• Helps you judge and evaluate a business idea so there is less risk – there is less risk with the more you know
• Shows where you need help or more information
• Organizes and presents information about your business so you can progress logically and stay on track
• Increases your self confidence
• Lessens the risk of oversights and errors
• Organizes ideas so you can communicate them to others
• Increases chances of business success once established
• Reminds you of good ideas and ways to save time or money, especially important as you get busier
• Helps you obtain necessary financing
Some Tips for Writing a Business Plan
1. Make sure and do the research for your plan before you start writing the plan!! Do the plan in a logical order.
2. Written words are communication tools. Writing is easy for some people and harder for others. Learning to write takes practice, so be patient. Start writing your business plan in draft form. Even if you hire a consultant to prepare your plan, you should work closely with that person so you know your business inside and out. It is you that will be running and responsible for the business, not your consultant. Remember that your business plan is a marketing tool, if it doesn’t look professional, you don’t look professional.
3. All businesses are different. Some plans may be short and simple and others can be very complex and take considerably longer to write. You should shape your plan according to your business and the purpose of the plan. The plan should be as detailed as possible, but you should be comfortable with it. Remember that it should be adaptable and flexible.
4. If you are planning on getting financial assistance from a specific lender, use the format that they provide. Most lending institutions will have their own business planning formats. The information that will be included will be the same; it may just be organized in a different manner.
5. Write a draft copy of your plan and get someone to review it. You can take your business plan to a business consultant who will review it and provide feedback.
Presenting the Plan
How the business plan is presented and looks will influence its effectiveness. Presentation of the plan includes a clean and complete typed or printed copy with smooth pages, in correct order, with covers, a title page and a table of contents inside the front cover. Your plan should convey your business image and display professionalism.
You need to be familiar with the plan because it is you that will need to meet with and discuss it with business contacts and lenders. You can depend on it to help you present the necessary information about your business in a clear, logical manner helping you be more confident. You have a written plan to help you.
Updating the Contents
Writing the business plan is not the end of the process. For you to get as much use out of the plan as possible, you should work with it and revise it regularly. The recommendation is about once a year. Managing and operating a business will be much easier and successful with the plan.
Business Plan Outline
There are many business plan models out there, but all try to capture the same information. The basic format of a business plan includes:
• Table of Contents
• Executive Summary
• The Company
• The Market
• The Market Strategy
• Project Requirements
• Financial Statements
• Appendices and Exhibits
Your executive summary should be capturing, concise and should provide an accurate description of your project. This summary should be short (one to three pages). A well-written summary should encourage the reader to want to read more.
Your executive summary should include the following:
• The purpose of the plan – Is it to attract investors or to capture the interest of financial sources?
• Describe the type of business. Is it a retail, service or manufacturing business? If there is a history for this business, briefly describe it.
• What is the status of the business? Is it a new business start-up or an expansion?
• How is the business formed? Is it a sole proprietorship, partnership or corporation?
• What product are you selling or service are you offering? Who are your customers?
• Describe the market need that you are satisfying, methods that you are using to satisfy those needs and who are the individuals or businesses with those needs.
• Why is the business going to be profitable? What are your distinct competencies? What does your company do that makes you competitive?
• Include a brief financial summary if the company has a history or a brief prospective financial summary.
• Summarize the project details. It is here that you overview what the cost is and whether you are seeking financing, including the amount.
NB: Write the executive summary last, so you can include relevant information to meet your reader’s requirements and highlight your operative and financial goals as defined in the body of the plan. You will be able to ‘cut or copy and paste’ from the rest of the document to answer these questions.
• Include the contact information for your business. If you do not have a business address yet, include your personal address or contact information.
• What is the nature of your business? What are the market place needs and how will you be satisfying them?
• What are your distinct competencies? These describe why your customers should come to you rather than the competition.
• What are your competitive advantages and disadvantages?
Describe the Market
The topics that are discussed in this part of the business plan include the conditions of the industry, your competition and your customers (also known as the 3 C’s). By carefully researching this information, you will have a good understanding of the environment in which you will be operating. A good market analysis will help you complete accurate financial projections.
Conditions of the Industry
• What is the industry or business sector that you are in? Describe it.
• What are the conditions of this industry?
• What is the state of your industry? Is it growing, stable or declining? What are the trends in this industry?
• What is the size of the industry? You must support this figure with market research information including data and statistics. This size can be determined in dollar amounts or numbers.
• What is the market growth potential? You should support this with factual data. Look at local, national and international markets.
• Are there barriers to entry? If there are, what are they? Barriers could include patents or trademarks, cost, technology, customer or brand loyalty, personnel or time.
It is important to take a close look at your competitors. Everyone has competition; don’t underestimate them! It will be very valuable for you to keep up on who your competitors are and what they are doing. It encourages you to be proactive rather than reactive.
NB: Think of your competition from the customer’s perspective, and not as a business owner. There might not be another business out there like yours, you might be unique, but you are still competing for the cash.
Complete a SWOT analysis on your competition and your business.
SWOT represents Strengths, Weaknesses, Opportunities and Threats.
You should evaluate your competitors’ strengths and weaknesses on the following:
• Ability to satisfy customers’ needs
• Company’s track record and reputation
• Product quality
• Customer service
• Unique product or service offering
• New or specialized technology
Once you take a closer look at your business and competition, you may have a different list. You should also complete a SWOT analysis on yourself using the same criteria that you used on your competitors. It is useful to know what is important to the customer and complete the evaluations using these criteria:
• What are your competitive advantages? What are the things that you do better than the competition?
• You should build on your strengths, take advantage of opportunities, minimize internal weaknesses and reduce exposure to external threats.
• What are the key success factors in your business? You should be aware of what it takes to succeed in this business and prove that you possess these characteristics.
• How will you position yourself compared to your competitors? For example, will you be offering high or low quality or high or low price.
NB: In your draft plan, use a fresh piece of paper with each competitor’s name at the top, followed by their SWOT analysis. Summarize your results in the final business plan, and put your full page(s) of notes in your appendices.
Customers are the source of your cash flow. If you don’t know enough about your customers, you will run into problems in the future. Take extra time to work on this section, and be sure to pay close attention to your customers’ wants and needs once you start up.
• Who are your customers? Consider age, gender, marital status, income, background, location, occupation, lifestyle, values, family life, education etc.
• What do your customers want? What are the features and benefits that they want from you or your product?
• When do your customers buy? Is it daily, weekly, monthly, seasonally or occasionally? Are there any seasonal or cyclical trends?
• How do your customers buy? Do they shop around for the best price, buy using cash or credit, do they read and listen to advertising?
• Why do your customers buy? Is it for investment or status reasons, for pride of ownership, fashion or is a basic, impulse or luxury item?
• Where are your customers located? How big is your target market? Consider:
• The number of potential customers
• Annual purchases of products or services
• Geographical area
• Anticipated market growth
• What are your market share projections? How much of the ‘market pie’ are you planning on capturing?
• What are the consumer/customer trends? Who is the decision maker?
NB: You can never gather enough information about your customers. It’s important as a business owner to keep your finger on this important aspect!
The Marketing Strategy includes the six P’s and Distribution – Price, Product, Place, Promotion, Packaging and Positioning. Make sure that your marketing strategy makes sense and flows from the information that you gathered in the market analysis.
• What is the product? What are you selling? What is it used for?
• What are the unique or innovative features? What variety and quality of products and services should I offer?
• Are these consistent with my image?
• Are these consistent with my consumer preferences?
• Where will you be located? Where will you be selling?
• Is your location important to your customers?
• Is your location consistent with your image?
• Does your location provide exposure, convenience and professionalism?
Pricing & Mark-up Strategy
• What is your pricing strategy?
• How do you plan on pricing, yet remain competitive?
• Are you going to offer discounts and if so what is your discount structure?
• How are you selling your product or service? How are you advertising?
• What are your promotional objectives?
• How much will these promotional activities cost?
• What is the timing of these promotional activities?
• What message do you want your packaging to convey?
• Packaging is a marketing tool; consider it carefully!
• Consider the image you would like to portray.
• Why will customers come or go to your business rather than the competition?
• How will you get your product and/or service to the market?
NB: The information you provide here will flow from the market research you’ve done in the previous sections.
The author Imran Jumah is a Lecturer, at ADMAS University College – Hargeisa…
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