Our last write up was on ‘Testing Business Ideas’. This was basically to enable you check the possible feasibility of your business idea. I strongly suggest this first stage so that you do not commit resources on the more detailed business planning only for you to realise that what you have is not a commercially viable idea. A diligent feasibility assessment will significantly reduce this risk. Business Planning is more detailed than your typical feasibility study discussed earlier. It is required both for new business ventures and those seeking to grow. No matter the size of the venture you are considering, a detailed business planning is imperative. The scope will obviously differ from setting up a local Restaurant to a 2,000MW Power Plant.
What is a Business Plan: A Business Plan is a very important road map detailing where you are, where you want to go and how you plan to get there. It does not in any way guarantee success, but the process enlightens you further as you consider all relevant issues that may impact on your business one way or another. It also helps you deliberately think through and articulate various strategies in respect of all functions of your business. Subsequently, your business plan will serve as a management control and guide tool as well. This is in addition to the fact that most serious investors and creditors will require it for review. You should also review it regularly in light of real-time situations and circumstances within which your business is operating.
Before you start writing: You must prepare and go through the process of writing your business plan properly. Do not attempt to simply write down your thoughts all at one go. That will not help you. You must first consider all the issues that need to be addressed and write them down. Identify your sources of information such as the internet, government agencies, research organisations, public documents, professionals and consultants, the market etc. You should also identify individuals such as colleagues, friends etc. who will participate in the work one way or the other and clearly define their roles.
Below are some of the issues you have to ponder, discuss, and address in coming up with your business plan. This is not an exhaustive list, and the requirements of one type of business proposition will differ from another. You will have to identify which are the most relevant to your own situation and circumstance.
Company Overview: It is good to start from your company details. Provide your legal status, ownership structure, board composition and management details, existing businesses, other key relationships and any relevant corporate history including achievements and challenges faced.
National Economy: Understanding the national economy within which your business will be operating is very important. You need to understand how government policy will affect your business. You need to understand the various dynamic interplay of key macroeconomic variables. You need to understand what factors currently support your business and which ones do not. A proper understand of how inflation, interest rates, exchange affects your business will make it possible for you to take both pro-active and responsive measures to seize opportunities and protect you from such vagaries.
Any global trends that will likely impact your situation can also be discussed here.
Product Analysis: What problem do you want to solve or what convenience do you want provide? What product(s) or services do you seek to offer to achieve that? How similar or different will it be to any existing competing or substitute products? How do you intend to offer the products to your customers? At what cost will you be able to deliver it to the customers and at how much will you offer it? You have to simply understand the value the product offers to the customers. State any proprietary technologies, proprietary rights, sole distributorships etc. that you may have.
Is the product perishable or what is it’s typical shelf life? Is it a ‘returnable’ product or do you need to offer warranties? How does your offering compare with the current industry practice? How will your offer be better?
Market Analysis: Who are your customers? Are there few strong customers or many disparate ones? What value does your product offers to them? What is your brand positioning? Is the market growing or shrinking? What are your sales, and marketing strategies? Mention clear metrics and milestones regarding sales and revenue targets that you plan to achieve and how that will be realised. Include in reasonable detail both you market and marketing plan.
Competition: Who are your competitors? Are there are several businesses offering the same product or just a few? What are their sizes in terms of market share? Asses their market penetration and resources available. How do you plan to win over their customers and/or attract new ones? Where will you fit in the competitive space?
Industry Analysis: A detailed understanding of your industry is critical to your success. You must fully understand the role of your industry within the larger economy; who are the major players such as regulators, producers, consumers etc. Does the industry imports its raw materials? If so what are the constraints associated with that?
Operations Plan: If your business includes some production and service delivery, you should capture the assets you require for this. These may include plant and equipment, vehicles etc. Do you already have these resources, or how do you plan to acquire them? Production, service delivery and logistics flow should also be clearly defined. How close or far away are you from your raw material sources and markets?
Human Resources: You have to clearly state the human resources requirement of your business, from skilled to non-skilled labour, including part-time engagements. Expected remunerations should computed and dovetailed into your financial projections. A clearly spelt out organisational structure detailing man- and job-specifications should also be included. Understand the relevant labour laws applicable to your situation and ensure compliance. Also ensure you plan to comply with applicable tax, health insurance and pension laws.
Financial Planning: You must provide detailed projections of any funding requirements and how you plan to meet them. How much sales revenue do you plan to generate taking into consideration credit policy? Are you injecting further equity or you want to raise debt? How much is required to purchase equipment? What are the estimates for staff salaries, admin expenses, sales and marketing expenses, financial charges? You have to make realistic profit and loss accounts as well as cash flow projections. If there are any cash deficits, you have to indicate where and how you plan to cover them. Break-even analysis, key financial ratios, and other relevant financial indicators should be stated. Very importantly, all key assumptions must be clearly stated. Engage your lawyer and accountant to ensure that you comply with all applicable regulations.
Depending on the business, a projection of anything between three to ten years may be appropriate.
Environmental Impact: By regulation, several businesses must provide a detailed environmental impact assessment of their venture. It is necessary therefore that you study what the local and international requirements are as they affect your business. You should then make necessary arrangements to ensure full compliance.
Executive Summary: This should be written after the full study is completed. It is aimed at providing a summary of what the business proposition is and how that will be achieved. How much funds are required and how it will be used to achieve what over an indicated period. Who are the customers and how you plan to attract and retain them. Depending on the scope and size of the business, this summary should be anything between one to three pages. Its aim is to get the reader sufficiently interested as to want to go into the details.
I provide below links for further reading and a free and paid business plan softwares.
I wish you success!