If you’re planning to start your own business make sure you have a good business plan.
A comprehensive business plan can mean the difference between seeing your new business flourish and having it fail before it’s even really started.
A business plan has two core functions. The first is well known: it serves as a proposal to banks, leasers and investors when starting a business. The second purpose is to act as an operational document – a preset guideline – for when the business starts its operations. In both cases, a business plan is an essential and very useful document, and it is vital that you write one for your new business venture.
What is a business plan?
Essentially, a business plan is a document that explains and promotes a new or prospective business. Its goal is to explain what the business will achieve, why this product or service is needed and how the owner and stakeholders will operate the business. It acts very much like a jobseeker’s CV: it highlights the benefits, advantages and necessity of the venture, while outlining its future potential. A business plan should be concise, should only include relevant information and should highlight the benefits of the new business.
The parts of a business plan
• Preliminary materials: Your title page, executive summary and project introduction.
• Product or service: Describe what your new business is planning to offer the market.
• Marketing and sales strategy: Describe why the product is necessary and important, and how you plan to market it to the public.
• Organisational structure and personnel: Describe the form your business will take (for example, partnership or close corporation) and outline which skills and people you will need.
• Legal requirements: Outline the laws and regulations your business needs to comply with.
• Financial plan: Lay out the business’s budget, costs and other financial matters, like investment needs.
• Risk strategy: Describe the biggest risks to your business and outline how you plan to mitigate or eliminate them.
Business plan as proposal
A business plan used as a proposal should promote the new venture or idea to potential investors, banks and lenders, as well as to prospective business partners. It should emphasise the need and uniqueness of the product being proposed, and should chart the realistic future growth of the business. Keep the tone positive and promotional, but do not over-exaggerate the potential or financial returns of the business – it is better to underestimate and have bigger returns than to disappoint investors.
Business plan as operational document
A business plan used as an operational document should outline in relative detail the goals, intentions and milestones that the business aims to reach. It should serve as a roadmap for the business’s daily operations, in order to keep the operations on track and in line with the original purpose. Businesses run the risk of losing their focus as day-to-day upkeep overtakes the bigger picture: the operational business plan is a reminder of what the company wants to achieve, and how it plans to get there. Aspects such as the marketing strategy, future growth plans, legal requirements and the risk strategy are especially useful for this purpose.
The part-time University of Cape Town (Law@Work) Start and Manage a Small Business short course is presented online throughout South Africa. Contact Amy-Jane on 021 447 7565 or visit www.getsmarter.co.za for more information.