Creating an Effective Business Plan

Author: Gillian Wilba

You have this awesome idea for a business. It’s in line with your passion, and you can envisage it adding value to the wider community. You’ve thought about it, prayed about it and bounced it off your significant other and your best friend. You are sure it’s going to be a smashing success. What is your next step? You have some savings put away which could serve as a starting point, but that money is by far not enough to launch your idea in a manner that would adequately bring your dream to reality. Face it, you need financing; the question is how are you going to get a financier to buy into your dream? Answer: You need a Business Plan!

A well-crafted Business Plan shows, in one document, the essence of your business. It incorporates the Background, Vision, Mission, Principals and Financial Projections for your company. The Business Plan also has to show the investor the manner in which you intend to run the day-to-day activities of your business, and the point at which you intend to break even and begin to generate a profit. It is also important that your Business Plan include the ways in which you, the business owner, intends to treat with and overcome any possible risk which may be inherent to your venture, as this addressing of risk will show the potential investor that you have taken all eventualities into consideration, and that you are not just building castles in the air.

A clearly defined Business Plan is divided into eight sections:
  • Executive Summary
  • Company Overview
  • Products and Services
  • Marketing Plan and Analysis
  • Operational Plan
  • Financial Plan Analysis
  • Risk Analysis, and
  • Capital Requirement.
It should also include as appendices the Curriculum Vitae of all Principals to the venture, with clearly defined competencies and skill sets; as well as spreadsheets showing Start-up Expenses and 12-Month Projected Cash Flow. For aesthetics sake, this document should be bound and formatted in a way that transmits the highest level of professionalism to your potential investors.

The Executive Summary, even though strategically located at the front of the Business Plan, is only written after all other sections of the Plan have been completed. This is because the Executive Summary serves as the précis of the Plan. It outlines, in summary the concept, current state of the business and when it was founded, all listed Principals with an outline of their competencies and achievements, the products and services which you will be offering and their direct and indirect benefits to potential customers, your market analysis, price, promotion and distribution strategies, start-up and operational costs, and expected profit and break-even time. This information should be served up in an exciting and palatable format, geared towards grabbing the attention of your potential investor, and whetting his appetite to delve deeper into the details on your exciting new venture.

The Company Overview is an outline of your business and what it brings to the table. It should begin with the back story of the business, and how it came to be, and should have an overview of the existing market which your enterprise seeks to satisfy, as well as some detail as to how your specific business will fit into the current market. The Company Overview should address your competitive advantage, hours of operation, location, possible challenges and overcoming strategies which resulted from a SWOT analysis of your business. A SWOT analysis is an assessment of the venture’s Strengths, Weaknesses, Opportunities and Threats, and should include both internal and external factors which impact on these elements. Do not be dismayed if there are more Threats and Weaknesses than Strengths and Opportunities. If you can show creative ways to overcome these negative elements, that can go a long way with a potential investor. Also to be included in the Company Overview should be your Mission and Vision Statements, as well as your intended Core Values. Your Vision Statement should describe your long-term view of your business and what you hope to achieve. 

Your Mission Statement should state exactly how you intend to achieve that Vision; and your Core Values should be those values which best describe your business, and which motivate its day-to-day activities (e.g. integrity, trust, efficiency). There should also be an in-depth view of each of your key personnel’s competencies and qualifications, as well as any achievements and accomplishments relevant to the business. The inclusion of an illustrated proposed corporate structure at this point would also be an asset.

The Plan should then outline all Products and Services being offered by your business, with some description attached to each product or service amplifying any distinguishing qualities of each which sets you apart from any other similar entity in the industry. Your Marketing Plan and Analysis should present the results of your market research and feasibility studies which you carried out. This entails an analysis of your product, as it related to the industry, and how that product distinguishes your business from its competitors, as well as justification for your pricing structure based on current market trends and demand. The Marketing Plan should also state how your chosen location of the business could maximize sales and profits; and it should also include any advertising/promotion strategies which you intend to implement to attract customers and generate sales. An illustration of a proposed floor plan, highlighting your use of space for product placement or ease of browsing for customers could also be included in this section.

The Operational Plan is where the rubber meets the road. This should include information about inventory requirements and suppliers, the facilities and the equipment to be used. You should also identify, and state how you would treat with, any potential problems which may interfere with your day-to-day operations and provision of service. You should also address any special needs which may be particular to your business and the measures which you intend to put in place to ensure quality product to your potential customers. It is also here in the Operational Plan that you deal with the issue of recruitment. How much staff will your business need, how do you intend to attract employees, and to ensure low turnover? What is your intended payroll structure (weekly, fortnightly, monthly) going to be? Will there be any extra benefits/incentives to employees? The answers to these questions should be addressed in the Operational Plan.

In your Financial Plan Analysis you describe your Start-up Expenses and Monthly Cash Flow for your business, with actual spreadsheets of these elements attached as appendices to the Plan. It is in the Financial Plan Analysis that you give the potential investor an idea of your break-even point, according to the itemized financial projectionist is imperative that all possible expenditures be addressed on these spreadsheets so that an accurate depiction of your finances can be made to investors. This should include all stock, furniture, equipment, leases and rentals, utility fees, insurances, salaries, advertising and signage, contingencies and projected sales based on your current pricing structure. You should also show at this point, the manner in which you intend to make returns to any financier for their investment i.e. how you intend to use your working capital.

Your Risk Analysis describes how you intend to deal with the possibility of damage, loss and injury which may have a negative impact on the profitability of your business; and your strategies for minimizing/dealing with these risks.

Your Business Plan should then be completed with a statement of your Capital Requirement, which is the outline of the financial outlay being requested of the proposed investor. This should be a summary citing financial projections and profit estimates (referred to in the appendices) justifying your overall request.

This may all seem like quite a bit of information, but going into this level of detail will also help concretize in your mind whether or not you are indeed ready to take your idea from the concept stage to reality. Addressing all these variables early can help you to circumvent possible failure, which seems so intrinsic to new businesses. Remember, lack of proper planning always leads to disastrous results!

Also as any potential investor will tell you, their primary interest is what they can get out of any transaction. How will their financial injection into your business benefit them? Therefore your Business Plan — your formal introduction, so to speak — should not only address what’s in it for them, but it should also answer every possible question which may give them pause, and serve up an inviting picture which will make your dream as exciting to them as it is to you.

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