It is often said that most Entrepreneurs do not plan to fail, they simply fail to plan. This is very important to note as we contemplate the importance of a Business Plan for Small and Medium size businesses.
Most business consultants take on the task of writing business plans for a fee to SMEs, and sometimes the business owners do not know what the plan is for the business they will manage. The result is a failed business.
The best approach to writing a business plan, is to have the business owner engaged from day one. They are to own the process and be guided by the consultant. When this is done, the business owners have a vested interest in the success of the business. They are able to manage the business from a passionate and confident perspective. They are able to contribute to the planning process their unique perspective. For example – often, the business owners are exposed to invaluable insights on the competition, which, if included in the planning will ensure success.
Business Plans should be seen as an important first activity for an entrepreneur, and must be approached objectively. Given the dynamic nature of the business environment, the business plan must be informed by Market Research. This research is necessary to assess the level of competition among other factors in the industry.
Purpose of the Business Plan
1. To sell yourself on the prospective business
Once you are integrally involved in putting your plan together, you will be sold on the prospect of the business. This will allow you to go out with confidence to sell your business to others. If you are not convinced that the business will be successful, you cannot convince prospective investors. A well written Business Plan allows you to do that.
2. Allow lending agencies and investors to objectively assess your business.
Banks are very keen to review your Business Plan when deciding whether to offer you a loan. They will be able to go through the plan to see if the projections are realistic. The bank will interview you the business owner, based on the plan presented. This is why the business owner should be an integral part of writing the plan. Where the bank detect that the business owner does not know the content of the plan, the loan will not be approved.
Elements of a Business Plan
A. Executive Summary
This is a brief summary of the business, and is the first page of the plan. It allows investors or banks to see what is in the plan is just three minutes. They can then decide if the plan is attractive or not to read the details. The summary describes the product or service, the profile of the management team, the opportunity the business will exploit, as well as the projected financial returns.
B. Industry Analysis
This describes in details the nature of the industry. It scans the industry with the use of environmental scanning tools such as SLEPT ANALYSIS, SWOT ANALYSIS and PORTERS FIVE FORCES ANALYSIS.
These tool allows them to assess the competition, strengths and weaknesses of the business, as well as the opportunities and threats. This aspect of the plan is very important as it allows you to develop strategies to compete effectively in the industry.
C. Marketing Consideration
Here you outline your ‘go to market strategies’. How will you reach your customers and what are the competitive advantages you have in the market? It will review the PRICE, PROMOTION, PLACE and PRODUCT strategies of the business.
D. Operational Consideration
Here you review the skills and equipment required to do the business. Will there be need to train staff to do the job? How will you produce the product or service? What will be needed and in what quantity? This area of the plan is also very important, as the investors need to know how the business will be operated.
E. Organisation Structure
What is the structure of the organisation? Is it a simple or bureaucratic structure? Is there an organisation chart with the different roles in the organisation? The profile of the managers will be given to highlight their experience and knowledge. Again, investors are very interested in the capability of the managers who will manage the funds.
F. Financial Consideration
Here we look at where you are planning to get the funds to start the business. The funds could be from personal savings (Equity) or Bank Loans (Debt). What are the sales projection for the business, and what are the assumptions for making these projections? The projected profitability and cash flow will be reflected in this section of the plan.
APPROACH TO WRITING BUSINESS PLAN
The business owners will be required to fill out a business plan questionnaire. Among others, they will be asked the following questions:
1. Why do you want to start your own business? The ‘why’ of the business is important as this will determine the level of attention and interest paid by the owners. We will discuss this ‘why’ is the consultative phase of the planning.
2. What is the mission of the business? What is the inspirational statement you want to make about your business? The mission statement will be the guide to the owner and employees as the business gets going.
3. What are the values of the business. Values are what the business is expected to uphold .Eg. integrity, honesty.
4. What is the product or service you will be offering? Describe it in the best way possible.
5. Who are your direct competitors of the proposed business? You will be required to list your competitors. You will need to research them to determine their strengths and weaknesses.
6. What makes your product or service better?
7. What are you own experience and training in the business?
8. How long have you been exposed to this business?
9. Where do you plan to get the funding for the business? If from personal funds state the amount. Or bank loan (amount)
10. What are your sales projection for the first year of business?
11. What are the monthly expenses you are contemplating for the business?
Answers to these questions will allow the business owners to contribute to the writing of his/her business plan.
Graham-Haynes is an entrepreneur with business interest in the Green Energy and Castor Oil industries. He is currently a lecturer in Entrepreneurship at the University of Technology, (for the last four years). He teaches Introduction to Entrepreneurship; Social Entrepreneurship and Emerging Business Consultancy to third and fourth year students. He is also an adjunct lecturer at the HEART/VTDI where he teaches Entrepreneurship, Market Research and Marketing and Promotion.
He is the Chairman for the College of Business and Management Consulting Unit. This unit provides consulting services to client such as the World Bank, Caribbean Development Bank and CARICOM among others.
PGH worked for GlaxoSmithtkline as Caribbean Country Manager for 16 years, and has a private practice as a Business Development Consultant.