To succeed in any business, a viable and comprehensive plan is
a powerful tool and a roadmap to success. The business must be operated
with a clear understanding of its customers, inner strengths, competitive
environment and a vision of its future evolvement.
Various forms of “Business Plans” have been submitted
to financial institutions without concrete explanations as to the
utilization of loans or plans for the repayment of such loans.
Under these circumstances, the financial Institutions, very often,
reject the loan application. Also, many business owners do not
know what a business plan is or why they are required to prepare
one. This has caused them lots of frustrations.
Those business owners, who do know what a business plan is, usually
have problems preparing a proper one and end up paying for it to
be done. Unfortunately, most of these plans are not usually prepared
up to the standard required by investors/Financial Institutes.
This Book presents a general sequence of the events of developing
a comprehensive business plan, from the inception of an idea to
the presentation of a business plan as a process that can be learned.
Although businesses may vary concerning the products or services
they offer, there are specific elements that potential investors
or financiers look for in any business plan.
Chapter 1: What You Should Know Before Starting
This chapter gives some guidelines on what you need to understand before writing a business plan. It gives some tips on what Lenders or Investors look for and provide advice on what you should expect. Your motivation, that is, an understanding of what you want to get out of the situation can help you in putting ideas together. The answers to these questions are of interest to most of the people who will be receiving your business plan. The target audience for a business plan is one essential ingredient to its success.
Chapter 2: Why Do You Need To Write a Business Plan
Several reasons why a business plan should be written are presented in this chapter. The obvious reason people write a business plan is off course to access finance. However, what is not so obvious is that a business plan can simply help you operate your business or more your product idea or services into existence, thus you may want to prepare a business plan for that reason alone. Chapter 2 gives a brief definition of and presents six scenarios for writing a business plan.
Chapter 3: Choosing the Audience for The Business Plan
The selection of an audience for a business plan is one key to its success. By selecting the correct audience, you will receive the appropriate assistance on time to push to push your firm or product forward Therefore, a number of audiences for a business plan above and beyond the traditional professional investors are identified. Here the types of people or institutions that you can approach for help in trying to make your business or product idea a success are discussed. By selecting the proper audience you will receive the assistance to push your business or product forward.
Many business owners (especially SMEs) assume that financial institutions are completely ethical and above reproach. You are completely wrong if you make such an assumption. In this chapter, the issue of confidentiality, or lack of it is discussed.
Chapter 4: Assessing Basic Requirements for the Business Plan
Many people believe that if you have a business idea and can present it that it should be funded, not so. After the initial information gathering, you have to assess the basic ingredients needed to develop a business plan. In this chapter, Assessing basic requirements, a set of guidelines for deciding if a business plan should be written is presented. Information on the market, available skills, management teams and potential audiences for the plan are analyzed to determine if enough materials are available to justify writing the business plan. This self-assessment can be used to spot missing elements in the plan to be written and can save the business owners or potential entrepreneur's time, energy and possible disappointment. When the initial data gathering is done, it is time to assess the basic ingredients needed for developing a business plan. This chapter presents a set of guidelines for determining whether a business plan should be written.
Chapter 5: Putting the Business Plan Together
Often the business plan is the first encounter that any prospective Investor or Financier has with the business owner, product idea or service represented inside the covers. In this chapter, the importance of the physical form of the plan and the first impression it makes is discussed. Completeness of contents, clarity of writing, accuracy, neatness, spelling and grammar all count. They are your audience's first impression and first impressions are hard to change.
Chapter 6: Presenting the Business Plan
When presenting a business plan your main intention is to attract the attention of your audience, some of whom are very busy. In many instances, the potential financier or Investor has established barriers to exclude casual contacts. The presentation of the business plan, starting from attracting the audiences' attention initially to having the plan read with interest is discussed in this chapter. This is sometimes a very difficult task to perform.
Chapter 7: Components of a Business PlanThis chapter presents a comprehensive outline of a business plan with modifications that might be useful for each of the chosen audiences. The important point to keep in mind is that you must tailor the business plan to suit the information needs and priories of the audiences chosen. This and the subsequent 3 chapters (8-10) describe in detail the component of a business plan. Note that you must tailor the business plan to suit the information needs and priorities of the chosen audience.
Chapter 8: Defining the Product or Service Many good product or service ideas have been created for what have turned out to be a disappointingly small number of customers. Therefore it is important to have a clear comprehensive product or service definition. This chapter takes you through the process of defining your product or service. Financiers pay close attention to this section of the business plan.
Chapter 9: Market, Competition and Marketing Strategy
The market is one of the most critical parts of a business plan and it is usually closely scrutinized by Lenders or Investors. SMEs usually overestimate their potential market size, market share and under estimate competition. Their market strategy and marketing plan is usually weak. The questions of market, market size, competition and marketing strategy (including pricing) are discussed in this chapter.
Chapter 10: Operation Plan and Production,
Proper analysis of the operational (sales) and production plans are very important as they tell the story of the business [situation and projected]. In the case of expansion, operational plan analysis gives information on historical sales figures and which builds up to the projections; this projections would also include projection of the Sales and marketing staff and marketing and promotion costs. The production plan outlines the total capacity of all existing machineries [in the case of manufacturing business], the usage level (out put) which should compare with the historical sales information previously presented. This analysis will clearly show the need for the proposed [when linked to the sales projection in the operational plan section] additional equipment if the expansion is to be undertaken. The cost of such equipments with quotations should be shown. This chapter describes the how to for the two components of a business plan. The proper analysis (or lack of it) which determines the viability of the business.
Chapter 11: Human Resource, Business Systems and Management Organization, Remunerations, Shareholders, Board of Directors and Committees
Human Resources analysis is another important component of a business plan. A human resource audit is important to determine existing skills and those skills to out source or recruit. Business systems and management explains how the business is being or will be operated. Analysis of remuneration is necessary to determine the financial implication this would have on the business. In addition, this chapter explains the need to provide information on shareholders, board of directors and committees; this includes brief references to the Acts governing Private Companies and Close Corporations (the Companies Acts of 1973 and Close Corporations Act of 1984).
Chapter 12: Financials
This is a very critical component of a business plan. This section is usually very carefully scrutinized by Financiers or Investors; it determines if the business would be able to repay the loan [in the case of financing] or if the Investor would be able to realize a good return on the investments. This chapter explains the difference between financial and management accounting and why both are very important; it presents detailed financial analysis required including: income statement, balance sheet, cashflow, statement of changes in equity and Key Ratios that assists Financiers or Investors to make calculated risk decisions. In addition, personal assets and liabilities of the Promoters are also discussed.
Chapter 13: Feedback
Life after rejection the aftermath of rejection is discussed in this chapter. The process in this chapter helps you in identifying any real weakness which may have caused the plan's rejection. It also helps you to think through the next steps to take in pursuing your objectives
Appendix A: Business Plan Time Line
A general business planning time line is presented here. This is only a guide; your business planning may take a different course. It could be longer if the business plan is for a manufacturing or high tech business; in both cases in-depth marketing, operational and production plan analysis are required which may take months to compile or shorter if it is a profitable confirmed contract (e.g. Government or Blue Chip company), there would be no need for market analysis and the Operational and production plans would be short as the information would already be contained in the contract.
Appendix B: Samples Business Plans;
Three samples of business plans covering three different industry sectors services, transport and manufacturing as shown below are included as examples:
• My Company (Pty) Ltd, t/a My Filing Station. This is a business plan on purchasing a filing station; it gives detailed information of what is required and how the financing requested will be repaid from revenue generated from sales. This is a somewhat guaranteed market, thus the market review is not very extensive; and extensive competition analysis are included (there is serious competition in this market, but the filing station profiled is a market leader with no close second.
• Transport and Logistics Management Corporation (Pty) Ltd. This is a 173 pages business plan on transport service and it is based on guaranteed tender [very lucrative tender from one of the parastatals], thus extensive market and competition analyses were not required. This was also a BBBEE contract which means it enjoyed special government dispensation.
• My Manufacturing Company, cc. This business plan is on manufacturing a private sector initiative; this is a 178 pages comprehensive analysis which required extensive market analysis, including competition, disadvantages, competitive advantages, extensive marketing strategy and sales and equipment planning, etc. As this is a Closed Corporation Company being changed to a (Pty) Ltd, it required establishment of key Committees as required by the Companies Act.
The business plans in these examples are actual documents developed for clients and presented to financial institutions [both private and development financial institutions]. All personal information have been deleted and or changed to protect identity and confidentiality of the clients.
This book is available at CNA and would soon be available at other