A plan must be:
Explicit: All steps are completely spelled out.
Intelligible: Capable of being understood by those who will carry it out.
Flexible: Capable of accepting change.
Written: Committed to writing clearly and concisely.
Benefits of Planning
a) Reduces ‘firefighting’: Many small business owners spend so much time ‘putting out fires that they never have a chance to do anything else. By preparing a Business Plan you can anticipate problems that are likely to occur and decide how they should be handled in advance.
b) Justifies your plans and actions: Often, one decides to do something because it ‘sounds’ or ‘feels’ right. You may do something because that is the way that you have always done it. Preparing a Business Plan forces you to prove the validity, or at least consider the reasoning behind your plans.
c) Tests your ideas on paper: It is much better to produce a Business Plan and find that the business is likely to be unprofitable than to start the business and find out the same thing.
d) Indicates your ability and commitment: A well-prepared Business Plan is an impressive document. It shows outsiders such as lenders and suppliers that you understand the business.
Components of a Written Plan
A written Business Plan should contain the following:
1) The Business Idea: An outline and description of the product or service and background on the industry.
2) The Entrepreneurs: A history of the founders of the business including their skills, abilities, and proposed ownership structure.
3) Business Objectives: What the business intends to achieve including long-range goals. The advantage of the product or service over existing competitors. The image and character of the business are to be developed. The product or service Technical description of the business.
4) Manufacturing: Description of process and machinery used, Patents and design registrations, Predictions on changes to the industry, Costs of materials, machinery, etc, Plant location and layout, Labour availability, and costs.
5) Retailing: Goods to be sold; Location; Stocking policy and procedures; Suppliers and potential suppliers and the terms of the sale.
6) Service: Description of service, Qualifications necessary to enter the industry, Industry and/or legal controls, Processes and services to be offered.
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7) Financial information
i) Capital Needs: Fixed assets needed; Working capital needed, and Starting capital needed.
ii) Sources of Finance: Types of finance needed, and Owners’ funds to be used.
iii) Cost of Finance: Set up costs; Current interest rates; Ability to meet borrowings and Current returns on owners funds.
iv) Financial Viability: Projected profit and loss accounts; Break-even analysis; Projected balance sheets; Cash flow forecasts; Working capital needs; Budgets; Expenses/Sales/Income and Taxation.
8) The Market
i) Market Research: Market size; Market description; Market trends; Customer profiles; and target markets then Preliminary sales forecasts and estimated market share.
ii) Competitive Position: Competitors; Unique selling position; Quality of existing products or services Marketing practices of competitors.
iv) Marketing Program: Distribution channels; Sales outlets; Storage and transport of goods; Pricing policy; Packaging; Sales promotions and sales strategy; Advertising strategy and costs; Public relations.
6) Management and Operations
Personnel: Numbers of staff needed; Skills necessary; Training programs.
7) Business Organization
i) Form of legal organization: Sole Trader; Partnership; Company or Trust; Registration of business name; Organization chart.
ii) Legal Considerations: Licenses; Federal and State taxes; Consumer Law; Business Law; Insurance.
iii) Premises: Space Required; Buy or rent contracts; Commercial lease requirements and problems; Availability of suitable premises.
Questions to be Answered in a Business Plan
a) Description of the Business:
- What type of business are you planning (retail, wholesale, manufacturing, tourism, hospitality, service)? ·
- What products or services will you sell?
- What type of business is it (new, part-time, expansion, seasonal)?
- Why does it promise to be successful?
- Who are your potential customers?
- How will you attract and hold your share of the market?
- Who are your competitors?
- How are their businesses prospering?
- How will you promote sales?
- Who will be your best suppliers and why?
- Where will the business be located?
- What factors will influence your choice of location?
- What features will your location have?
- How will your building contribute to your marketing strategy?
- What will your building layout feature?
- Who will manage the business?
- What qualifications will you look for in a manager?
- How many employees will you need and what are their job descriptions?
- What are your plans for employees’ hiring, salaries and wages, benefits, training, and supervision?
- How will you manage finances?
- How will you manage record-keeping?
- What consultants or specialists will you need?
- What legal form of ownership will you choose?
- What licenses and permits will you need?
- What regulations will affect your business?