DEVELOPING A BUSINESS PLAN

 

Planning is one of the key factors in a successful small business.  No one can control the future, but with well-laid plans, the business owner/manager will be able to take better advantage of opportunities that arise, and prevent possible difficulties.

Planning is a process that involves the development of goals and objectives and determining methods to achieve them.

 

What is a Business Plan?

A business plan is simply the strategy to achieve the objectives of the proprietors of the business.

 

Why make a Business Plan?

It is becoming increasingly tough to survive in business. It is not good enough to simply have a good product or service. Business people, whether they be panel beaters, manufacturers or doctors must also be good managers. Successful business managers have clear objectives, produce good products or services, understand the market, manage their money properly and are good employers.

Accordingly, the primary reason to formulate a business plan is to address all the issues that make a successful business. In the case of a new business, a business plan will assist in determining the feasibility of the proposal. For an existing business, comparing actual outcomes against projections will assist in refining the business plan and improving performance.

 

THE PLANNING PROCESS

There are a number of factors that must be taken into account when doing your business plan.

They are as follows:

 

Forecasting: 

the process of estimating and anticipating current and future events, based on the best information available at the time.  Forecasting is required when you think about the business you are going to start up, the effort that will be required, the products/services to be sold, the financing of the venture, legal requirements and so on. The assumptions will become the framework for your business plan, and are required continually throughout the planning process.

 

Setting goals and objectives: 

Establishing the outcomes you wish to achieve, first in a broad sense (goals) and then more specifically, in measurable terms (objectives).

 

Policies: 

Outlines of the plans of action that will govern the way your business handles current and future problems. You will need to formulate policies to cover such things as workplace health & safety, quality systems, payment terms, account customers, complaints, returns, etc.

 

Programming and Scheduling: 

Establishing priorities and a planned procedure for the performance of activities in a given time frame. This factor of the planning process guides you in what needs to be done, when it needs to be done, and how long it should take to complete.

 

Budgeting: 

the process of estimating the income and expenditure for the business.  You need to arrange your finances to meet your objectives.  The budgeting process establishes the financial objectives of the business plan. A budget provides both a plan for activities and a means of comparison, when actual performance is reviewed.

 

Developing Procedures: 

Developing methods of performing tasks to ensure the achievement of your business objectives.  These are guidelines to be followed to achieve a specified result.  Procedures are developed to govern the handling of money, the delivery of products/services etc.

The planning process is a means of formalising your thoughts and ideas, in order to establish a framework and direction of your business.

When planning a business, we need to ask ourselves (and answer) a number of questions.

 

A Checklist for your Business Plan

A well-prepared business plan increases your chances of being successful in business.

This checklist draws your attention to the questions which must be answered if your business plan is to be useful.

 

Is small business for you? - Personal considerations

Are you the right type?

  • Are you able to start and operate your own business?
  • Are you going into business for the right reasons?
  • Do you understand the business that you have in mind?
  • Do you have experience in this industry?
  • Do you have management experience?
  • Do you have the necessary technical skills?

Can you afford to start?

  • Do you know how much money you will need?
  • Have you prepared a statement of personal assets and liabilities?
  • Do you have sufficient funds for your personal needs until the business starts generating a surplus?
  • How much money can you put into the business?
  • What security can you offer for a loan?

What business do you plan on being in?

            *What product or service are you offering?

            *What industry will you be operating in?

            *What information do you have about your industry?

-current trends in the industry  

-terms offered to customers

-the long term future 

-goodwill (if buying an existing business)

-average sales   

-the names and addresses of suppliers

-gross profit margins

-terms of credit from suppliers

-the competition

-services offered by trade associations

            *Can the business started on a small scale?

            *Can it be started from home?

 

Market Research and Promotion

 

What market will you be serving?

 

Have you defined your market by:

            *Size?

            *Geographic location?

            *Life cycle of the product?

            *Age, sex, income level and taste preference of your customers?

 

On what basis can you set your prices?

            *Same as competitors?

            *On a cost-plus basis?

What sort of packaging will you need if any?

 

What do you know about your potential customers in terms of:

            -what they buy?                       -where they buy?                    -why they buy?

            -how often they buy?               -what pre and after sales services do they expect?

 

Who are your competitors?

 

  • What will you offer a customer that is better or different?
  • What is your competitive advantage?
  • What is your competitive disadvantage? How can this be overcome?
  • What will affect your market?
    • fashion trends 
    • the economy   
    • industrial relations
    • disposable income
    • consumer confidence etc

You need to know how you will achieve the goals and objectives you have set.  You can do this by developing an action plan.  This plan should be prioritised and clearly outline who will be responsible for carrying out each activity within the required time frame.

The main benefits of developing a business plan are:

·   it forces the small business owner to justify his/her plans and actions

·   it identifies the business’s strengths and weaknesses

·  it helps test the viability of the business

·  it assists in maintaining the business operations, especially focusing attention on the goals and objectives

·  it indicates the small business owner’s ability and level of commitment

·  it assists the business to be proactive rather than reactive.

Without a business plan, the owner/manager will only have a general idea of where they are going, what they hope to achieve, and how they intend to go about achieving it.  Business plans need to be flexible and frequently revised to take into account changes in the external environment.

The business plan is a guide to your business, which allows the reader to understand the culture, vision, goals, and objectives of the new venture.  It allows the ‘entrepreneur’ to think through all aspects of organising and operating a small business and assists them in deciding if the business will be viable or if new directions should be taken.  It also provides a facility for examining the consequences of different strategies, and for determining what resources are needed to launch (or expand) the business.