Wednesday, 15 May 2013

Writing a Business Plan

The preparation for a business proposal includes the presentation of a clearly defined Business Plan or Feasibility Study as the case may be. Mr. Sina Monehin is noted for his expertise in this area, and I think I should share his understanding of this all important matter.        
At the end of the session, you will:

l      Learn and understand the content of a business plan and what to include in it;

l      know what data to use in facilitating the business financial projection;

l      Become skilled in writing a business plan.

Grow from small

What is a Business Plan?
l      The Concise Oxford Dictionary defines a plan as “a detailed proposal for doing or achieving something’.

l      The Encarta Dictionary defines a business plan as “a plan that sets out the future strategy or financial development of a business, usually covering a period of several years”.

What is a Business Plan?
l      “A business plan should set out the business objectives; how and when these will be achieved; the resources that will be needed; the evidence that supports the assumptions”. – Paul Barrow in ‘The Best-Laid Business Plans’

l       “Business plans are simply a formal list of your objectives and a road map which illustrates how you plan to achieve them with a budget for doing so attached” – Sahar & Bobby Hashemi in ‘Anyone Can Do It’

Does a Business Plan Help?
l      Having a business plan does not necessarily guarantee the success of a business.

l      Not having a business plan too does not necessarily mean that a business will fail.

l      There is however a high correlation between not having a business plan and failure rate of a business.

l      Having a business plan helps; the business gets more matured and chances of survival increase.

Some Arguments against Business Planning

l      ‘I’m not borrowing any money so I don’t need a business plan’. Wrong.

l      ‘You cannot predict the future’. Partly correct but remedy do exist.

l      ‘My business has been going for long. I don’t need a business plan – I won’t go bust.’ Risky statement. The universe is constantly changing.

Sound businesses need a business plan. It’s not optional.

The Benefits of Business Planning
l      It’s the recipe for success.
          - it will help you identify needed resources;
          - it will help you test your business propositions b4 you commit to action;
          - it will ensure that your business is best suited to the changing business                      environment.
l      Business planning makes you feel more confident about the future.
l      It helps give an invaluable tool to monitor and control your business.
l      It is a great communication medium in terms of getting the commitment of others to its execution.
l      By identifying weaknesses during the implementation phase, it helps in better resource allocation.
l      Removes reliance on taking decisions through hunch feelings.

What Sort of Plan?
l      Not a universal form of plan exists.
l      Different plans for different purposes.
l      Requirement too varies from plan to plan.
l       Common reasons for needing a plan include:
          -        To raise money
          -        To obtain approval for a course of action
          -        Performance enhancement
          -        enlist external support i.e. from suppliers, government body, etc.

What Makes a Good Plan?
l      The business is not going to exist in space but within a given economic system.
l      Knowledge of key macro-economics indices is important.
l      For Nigeria, the following are the key indices:
        GDP in real terms   - External Reserve
        Inflation                 - External Debt
        Interest Rate - Exchange Rate
        Oil Revenue           - Employment situation

Before You Start to Write Your Plan
l      The plan must be fully researched and documented. Avoid sweeping generalisations.
l      Be appropriate. Just tell the users of the plan what they need to know.
l      Be understandable. Avoid technical jargons.
l      Ensure that it can pass the reality test.
l      Report must have a smart and professional appearance.
l      Presentation must be first-class.

The Business Plan Guide – Executive Summary
l      Usually the last section of your plan to prepare but the first to come up in your presentation.
l       As the name implies, it is a summary covering the essential features of the business.
l       Covers basic business information of:
        Name of business (and when it was started if old)
        Legal status (sole trader, partnership, limited, etc.
        Authorised and issued share capital (and major shareholders)
        Registered office and trading addresses
        Professional advisers (bankers, lawyers, accountants, etc)
        Current mission and objectives
        Milestones and financial performance
        The opportunity and strategy
        The target market
        Competitive advantage
        Profitability potentials
        The management
        The offering 

The Industry, the Company and its Products or Services
l      The Industry:
          -        Present the current status and the prospects
l       The Company:
          -        Describe briefly what business area your company is in or intends to enter, what products or services; and who will be the principal customers.
l      The Products or Services:
          -        What USP’s (Unique Selling Points)
          -        Product Offerings

Market Research and Analysis
l      The marketplace as where everything plays themselves out.

l      Sound marketing information as the foundation for all financial projections.

l      Must be very comprehensive and not leave unanswered questions.

l      Might involve the use of professionals, consultants, apart of doing it yourself.

What Information?
l       Customers:
          -        Who are they? How homogeneous (major market segment)? What characteristics? What influences purchase decision? Etc. List potential customers if they exist.
          For existing business, list principal customers. Discuss trend in sales, expected growth rate, what share of the market, etc.

l      Market Size and Trends:
          -        What is the size of the total market?
          -        What is the potential annual growth rate?
          -        Projections should be for at least 3 yrs.
l      Competition:
          -        Who are your competitors? What market share?
          -        What are their strengths & weaknesses?
          -        Compare on basis of price, performance, service, sales/distribution network, production capacity, and other pertinent features. What strategy to defeat them?
          -        What’s exit and entry like in the industry recently?

l      Competitive Business Strategy:
1.     Determines what makes your business different from the others and why it will succeed.
2.     Your strategy will form a linkage between your mission, the business objectives, marketing and financial projections.               
3.     Environmental Scanning - PEST
4.     P – political pressures
5.     E – economic pressures
6.     S – social pressures
7.     T – technological pressures

Ø     SWOT Analysis:
-         S – Strengths
-         W- Weaknesses
-         O – Opportunities
               -    T – Threats

For more business and entrepreneurial advantages refer to further references for self reliance.