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dream a reality. All you need is a business plan which is essentially a description of your proposal or existing business. Investors and financial institutions expect to see a business plan when you approach them.
This is essentially a document giving information on the business’ products or services, markets, marketing strategies, manufacturing procedures, ownership, management structure, needs (organisational, personnel and financial) and projections.
A well-prepared business plan serves two important functions. Firstly, it is a basic management tool that helps guide the future direction of your company. Secondly, it is a mandatory document if you plan to seek business financing. In Zimbabwe it is often referred to as a project proposal which ideally should be used to communicate the proposed or existing company’s strengths and potential.
Every business starts with a strong business plan – it is the foundation and the building block of every company. A good business plan will not only be the blueprint of your business, it will also provide you with a good entry into many doors, including the door of investors and financial institutions.
The due diligence of starting a company can be overwhelming and the challenge becomes even greater when you are trying to convince potential investors or financiers.
A properly done business plan should formulate realistic goals, commitment, milestones and flexibility in the business venture. It should show where the business seeks to go with the entrepreneur’s roadmap for a successful enterprise.
The entire business planning process forces the entrepreneur to analyse all aspects of the venture and to prepare the effective strategy to deal with uncertainties that arise. With the time, effort, research, and discipline needed to put together a formal business plan, the entrepreneur is forced to view the venture critically and objectively.
The competitive, economic and financial analysis included in the business plan subject the entrepreneur to close scrutiny of the assumptions made about the venture’s success. Considering that all aspects of the business venture must be addressed in the business plan, the entrepreneur develops and examines operating strategies and expected results for outside evaluators.
A good business plan drives the entrepreneur to use the right communication tools for external financial resources.
An effective business plan provides true information for getting investors. They will delve into the pro-forma statement details provided for their decision making in pursuing their investment into the proposed business.
Such issues as return on equity and the service to debt are also addressed in the pro forma statements. Risk management strategies should also be spelt out comprehensively and potential investors use this as a tool to show how the entrepreneur has prepared to face contingencies and the unprecedented risks.
Here is a brief outline of what constitutes a comprehensive business plan:
Executive Summary
Although this section appears first, it should be the last part to be written and should briefly highlight the key elements of the business plan. A brief history of the company, products and services, how the products will be made or services performed, outline of the management team, financial projections and how much money you are seeking as well as for what purpose and how it will be repaid should be stated.
Business Description
This section should give a general description of the business including the industry background, the business you are in or plan to be in, description of products and the potential, goals and milestones of the business. In terms of the industry, you should also include a brief discussion on the specific chosen sector and also include your own views of the current status and prospects for the industry.
Marketing
This section has been widely regarded as the most difficult for new entrants as it is here that you have to show how you plan to turn your idea into a product or service that people will want to buy.
For those seeking finance the objective would be to convince lenders or investors that there is a market for your product or service.
You also have to demonstrate that you understand the potential customers and their needs and that you can sell the product. You have to come up with a marketing plan outlining the marketing strategy, pricing, advertising and promotions roll out.
Operations
In this section you have to describe how you plan to produce your product or perform your service including how and where it will be carried out, your physical space and equipment needs and your labour requirements. It is also key to detail your proximity to supplies and access to transportation.
Management
An experienced, trained and talented management team is critical especially if you are seeking equity financing. You should therefore provide a detailed structure of the proposed team clearly spelling out the role of each team member. Legal issues pertaining to stock agreements, employment contracts and the ownership should be clearly spelt out. A board of directors, advisors or consultants is also necessary under this section.
Financial Information
The amount of information required in your business plan will depend on the stage of financing, the amount of money needed and the nature of financing being sought.
You will include here the financial forecast or projection of the profit and loss statement, cash flow, breakeven analysis, cost controls and a budgeting plan. Your financial projections and funding request must be keyed to you market expectations and this should be prefaced by your sales projection.
Critical Risks
You should highlight the potential problems you are likely to face in this venture, obstacles and risks as well as the alternative courses of action you are likely to take.
Harvest strategy
A brief outline of how you are going transfer assets in the business, continuity of the business strategy and identification of a successor is desirable under this section. Do not underplay the relevance of this element as it displays your thoroughness or lack of it in your plan.
Milestone schedule
A realistic schedule outlining your timing and objectives, deadlines and milestones is critical to your company’s success. It also demonstrates the ability of the management to plan the company’s development.
Please note that this is by no means an exhaustive outline of how you want your business to be, but it can serve as an outline of what constitutes a business plan.
As always, let’s make money.
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