Your business plan must be more than ‘making a plan’ when it’s too late

In the world of business, it is the person with a sound plan that finishes ahead of the pack. So, taking the time to carefully consider a new venture and plotting your way ahead with a well-constructed business plan will pay dividends when the inevitable challenges come your way.

This is one of the essential first steps in launching a business, but is often ignored and can be costly. This is the advice of Clive Pintusewitz, Director of Small Enterprise and Enterprise Development at Standard Bank.
Standard Bank, in partnership with SABC3 is bringing The Business Coach programme to television screens every Sunday at 4pm. The programme provides South Africa’s small business owners with hands-on advice, and the recently aired first episode saw a bakery owner grappling with a lack of planning.

“The benefits of a business plan become very obvious early on in the life of a small business,” says Mr Pintusewitz. “It is a tool that not only focuses the mind of the owner on what is important to the growth of the business, but is a document that can be used when approaching potential investors and banks when applying for finance.

“For banks and investors, a well-thought out business plan demonstrates that the business owner is not only professional, but also that he or she has thought of the most important aspects regarding the business and is committed to its growth and prosperity. It is also a reference document that can be used and updated so that the entrepreneur can assess targets, what has been achieved and what still remains to be done.”

A comprehensive business plan should contain a number of sections, says Mr Pintusewitz. These include:

• An executive summary which provides an overview of the business, the services or products on offer and what you think it can achieve over the short, medium and long-term (up to five years).

• Who is involved. It is essential that potential investors understand who the drivers of the business are. So include in a business plan:
o Information on the people involved;
o Their  experience and years in business;
o The skills they bring to the new business; and
o What their financial contributions and their roles will be.
• A description of the company that should tell the reader:
o About your company’s mission, vision and values;
o The products and/or services you provide;
o What makes your products and/or services unique or different to others in the market;
o The business environment the small business will operate in. This should include:
 An analysis of your industry, your marketplace, your customers, your competition, and how you measure up against them;
 Discuss how the business opportunity was identified and how it will be implemented;
 What the challenges are and if it will be easy or difficult to operate in the market;
 How  you will compete with people in the area who have similar products and services/ differentiate your offering;
o Explain your management structure and processes, technology, operations, distribution, service, finances and marketing.
• Include your company strategy and how you will face challenges, new opportunities and implement growth plans.

• The business model,  which considers:
o Who you will sell to and how you will make your money;
o The costs incurred in generating revenue;
o Profitability of the business; and
o The investment required to get the business underway and the critical success factors.
• The marketing plan, which should include:
o The product or service, its value and market positioning;
o A pricing strategy; and
o Sales and distribution channels and the promotion strategy.
• The operations plan, which describes the daily operation of your business, and:
o Where the skills and materials will be sourced from;
o How you manage supplier relationships;
o Your payment cycles.
• A financial review, which covers;
o The state of your finances;
o An income statement, balance sheet, cash flow statement, profit projection and budget;
o Accurate financial projections that include start-up expenses and capitalisation, a 12-month profit and loss projection, a 12-month cash-flow projection, a projected balance sheet at start-up and at the end of years one and three, and a break-even calculation.
• An action plan and timeline that sets out the steps that will be undertaken to implement your business plan to meet your goals and objectives.

“The list of requirements for a business plan may look time consuming and difficult. Taking the time to draw the plan up will, however, help you examine your business proposal in depth and consider things that you may not have thought about,” says Mr Pintusewitz.

“If you have the information needed but are unsure as to how to go about compiling the document, consider getting a professional business adviser to assist in compiling or editing the document. It will be well worth the investment.”

Note to the editor:

In the first episode of The Business Coach that aired on 1 July 2012, we saw how the owner of a home-based bakery took his passion and converted it into a business without first considering his plan of action.
In the weeks ahead, SABC3 viewers will see a number of different issues that small business owners experience on The Business Coach.  Viewers can tune in at 4PM on Sunday, 8 July to see how the owner of a restaurant used her retirement annuity to purchase her small business and the advice and support the Business Coach gives her.