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Business Plan Development

Business Plan Development

WHAT IS A BUSINESS PLAN

A Business plan is a document which provides a detailed programme outlining all the aspects that will impact on your business, including the environment in which you will operate. To a degree, a business plan is a selling document, and the description should therefore also be attractive, as you will almost certainly use this document to sell your idea to potential investors or bankers.

Drawing up a business plan is a time consuming, though very necessary, exercise, but by doing your research, you will learn a lot about yourself and the proposed business.

THE IMPORTANCE OF A BUSINESS PLAN

It is important that you provide sufficient time to conduct adequate research and to compile your business plan. If prepared properly, this document will allow one to:

  • Put your thoughts down on paper in a logical order.
  • Address pitfalls in the planning stages.
  • Measure performance against targets set in your plan.
  • Use the business plan to apply for financial assistance.
  • Use the business plan as an effective decision-making tool.

There are nine steps involved in the formulation of a business plan.

STEP ONE –

PREPARE A COVER PAGE AND CONTENTS PAGE

The cover page should be well presented, business-like, neat, and professional. It should portray the following information:

  • Name (sl of the owner(s);
  • Name of the business.
  • The address and telephone number of the owner(s) of the business; and
  • Type of business.

The headings within the contents page should be clearly detailed and numbered.

STEPTWO-

INTRODUCTION AND BACKGROUND INFORMATION

The introduction should be concise and ‘interesting, covering the following points:

  • Describe briefly what you intend producing or selling.
  • Where the business is situated.
  • When you intend launching.
  • Why you believe the business to be viable; and
  • Short, medium, and long-term business goals.

It is important that your introduction be brief, yet addresses the above requirements.

STEP THREE-

PURCHASING PLAN

It is vital that you determine who your suppliers will be and that you develop a relationship with such businesses, In this regard, you should address the following :

  • Explain products needed to be purchased.
  • Detail the suppliers from whom you intend purchasing and highlight lead times between the placing of orders and delivery thereof;
  • Explain the credit terms suppliers are prepared to offer, if any; and
  • Highlight the reliability of individual suppliers as regards their ability to deliver.

STEP FOUR – MANUFACTURING PLAN

(If applicable to your proposed business)

It is necessary to document exactly how you propose manufacturing your product, detailing the facilities available and the resources required. In particular, you should address the following:

  • A brief step-by-step description of the production process.
  • Provide a graphic layout of the factory floor.
  • Provide a workflow diagram of the processes involved in your manufacturing programme.
  • List all the required equipment, clearly detailing the production output of such machinery/equipment; and
  • Detail the costing and pricing of the products to be manufactured.

STEP FIVE

MARKETING PLAN

Investors usually look very closely at this section of a business plan prior to deciding whether to invest. Because sales figures are the most difficult to forecast accurately, these figures are the most important to justify.

The following should be contained in the marketing plan:

Explain and substantiate your specific target market or customer’s base. This may be broken down into geographical areas, income groups, age and sex groupings. It may be necessary to contact your local

council or Central Statistical Services for the necessary information. The following probing questions may assist in determining your market, namely:

  • Who are your customers?
  • Where are they?
  • Why do they buy?
  • When do they buy?

Explain what market share you expect to capture and why.

Determine your competitors and consider:

eWhere they are.

•How long they have been in business; eHow much of the market they enjoy; and eWhat are their strengths and weaknesses.

Explain any differences between your products/ services and those of your competitors.

Also explain how you intend packaging, selling and promoting your products, detailing distribution networks.

Considering the above is necessary to enable you to quantify your market in terms of monthly sales to determine an annual sales figures for the first year. This is normally the most difficult part of the business plan. Contact your accountant or nearest lthala office for guidance.

STEP SIX­

FINANCIAL PLAN

One of the most important aspects in starting a business is the preparation of a financial forecast.

The financial plan should contain the following information:

  • A detailed income statement for a projected period of 12 months (see Annexure A for an example).
  • From the income statement generate a monthly cash flow forecast for the business (see Annexure 8 for an example).
  • Breakdown your financial requirements into three categories, namely, building, equipment and working capital;
  • Reflect the amount of your own contribution/or funds that you have available to invest in the business.
  • Detail levels of security or collateral you have available, providing an estimate of the market values. Fixed deposits, fixed property, life policies with surrender values, endowment policies are all reasonable forms of security and are normally accepted by financial institutions; and
  • A complete set of financial statements reflecting at least the past two years, should be attached in the case of an existing business.

If you experience difficulty in respect of the financial plan, it is advisable to contact your accountant or nearest lthala office, for guidance.

STEP SEVEN –

PERSONNEL PLAN

The people involved in the business must have the necessary skills and experience if the business is to be successful. To adequately assess personnel, you should:

  • Detail the educational qualifications, previous work experience and training courses attended by the owner(sl (you might attach a brief CV of the owners skill));
  • Indicate the number of staff to be employed.
  • Indicate the job designations and functions within the business.
  • Detail personnel remuneration packages, incorporating provisions for leave pay, annual bonus and the like.
  • Indicate any plans for expanding in the short-term and corresponding increases in the staff complement; and
  • Indicate the owner(s) remuneration requirements, considering their personal commitments.

STEP EIGHT­ CONCLUSION

Just as your introduction should be interesting, so your conclusion should be positive and motivating.

It should comprise:

  • A summary of why you believe your business plan will succeed; and
  • Why you believe finance should be approved.

Other sources of information

When compiling a business plan, it will be necessary to research much of what is required for such a document. The following are some of the resources available to you:

  • lthala offices: Client Liaison Advisors.
  • Central Statistical Services.
  • Council for Scientific and Industrial Research (CSIR).
  • National Productivity Institute (NPII.
  • local Councils.
  • Department of Trade and Industry (DTI).
  • Chamber of Commerce.
  • Magazines.
  • Libraries.
  • Universities.
  • Competitors.
  • Own experiences.
  • Local Business Service Centres.
    • SMME Desk at the Department of Economic Development and Tourism; and
    • Durban Manufacturing Advisory Centre

THE WAY FORWARD

Should you require financial assistance, you are now in a position to submit your business plan to a financial institution. such as lthala and other commercial banks, in order to seek loan finance.

Remember that you have gone to great lengths to develop an accurate and comprehensive business plan, and that such a plan must be regularly evaluated. Ensure that you measure your actual performance against forecasts set.

STEP NINE-

GENERAL

If you are applying to lthala or other commercial banks, for financial assistance, it is necessary to attach your business plan to a completed application form. Ensure all the necessary supporting documentation as listed on the last page of such an application is also provided You may submit your application, business plan and supporting documents to your nearest lthala office, or branch of commercial bank selected. In the case of an application to lthala, the application or enquiry should be directed to our Client Liaison Advisor.