How To Draw A Business Plan In South Africa
You've reviewed what a business plan is, and why you need one to start and grow your business. It's time to dig into the process of actually writing a business plan. Whether you're trying to raise money for your business or are developing a plan for strategic growth, a solid business plan is a key component to every successful business. Business plans should be short and concise. The reasoning for that is twofold: 1) You want your business plan to be read (and no one is going to read a 100-page business plan), and 2) your business plan should be accessible, something you continue to use and refine over time. An excessively long business plan is a huge hassle to deal with, and guarantees that your plan will be relegated to a desk drawer. Your plan should be written in a language that your audience will understand. For example, if your company is developing a complex scientific process, but your prospective investors aren't scientists (and don't understand all the detailed scientific terminology you want to use), you need to adapt. Accommodate your investors, and keep explanations of your product simple and direct, using terms that everyone can understand. You can always use the appendix of your plan to provide more specific details. The vast majority of business owners and entrepreneurs aren't business experts. Just like you, they're learning as they go and don't have degrees in business. Writing a business plan may seem like a difficult hurdle, but it doesn't have to be. If you know your business and are passionate about it, writing a business plan and then leveraging your plan for growth will be easy. Now that we have the rules of writing a business plan out of the way, let's dive into the details of building your plan. The rest of this article will provide the specifics of what you should include in your business plan, what you should skip, the critical components of the all-important financial projections, and links to additional resources that can help jump-start your plan. 2. Company Overview 3. Products and Services What are you actually selling and how are you solving a problem (or "need") for your market? The Products and Services section of your business plan is where the real meat of your plan lives. This is where you will describe in detail the problem that you're solving, your solution, and how your product or service fits into the existing competitive landscape. You'll also use this section of your business plan to demonstrate what sets your solution apart from others, and how you plan to expand your offerings in the future. Start this chapter by describing the problem that you are solving for your customers. What is the primary pain point for them? How are they solving their problems today? Maybe the existing solutions to your customer's problem are very expensive, or perhaps they are cumbersome. For a business with a physical location, perhaps there aren't any existing solutions within reasonable driving distance. Immediately following your problem and solution description, you should describe your competition. Who else is providing solutions to try and solve your customers' pain points? What are your competitive advantages over the competition? Now that you have detailed your product and service offering in your business plan, it's time to turn your focus towards your target market: Who are you selling to? A good business plan will identify the target market segments and then provide some data to indicate how fast each segment is growing. When identifying target markets, a classic method is to use the TAM, SAM, and SOM breakdown to look at market sizes from a top-down approach as well as a bottom-up approach. Here are some quick definitions: TAM = your Total Available or Addressable Market (everyone you wish to reach with your product) Once you have identified your key market segments, you should discuss the trends for these markets. Are they growing or shrinking? Discuss the market's evolving needs, tastes, or other upcoming changes to the market. How are you going to reach your target market? What marketing and sales tactics will you be using? The Marketing and Sales Plan section of your business plan details how you plan to reach your target market segments, how you plan on selling to those target markets, what your pricing plan is, and what types of activities and partnerships you need to make your business a success. Before you even think about writing your marketing plan, you must have your target market well-defined and have your buyer persona(s) fleshed out. Without truly understanding who you are marketing to, a marketing plan will have little value. The first part of your marketing plan will cover how you are positioning your company and your product or service offering. Positioning is how you will try and present your company to your customers. Are you the low-price offering or are you the premium, luxury brand in your market? Do you offer something that your competitors don't offer? Before you start working on your positioning statement, you should take a little time to evaluate the current market and answer the following questions: Pricing Once you know what your overall positioning strategy is, you can move on to price. Your positioning strategy will often be a major driver of how you price your offerings. Price sends a very strong message to consumers and can be an important tool to communicate your positioning to consumers. If you are offering a premium product, a premium price will quickly communicate that message to consumers. Deciding on your price can feel more like an art than a science, but there are some basic rules that you should follow: Promotion With pricing and positioning taken care of, it's time to look at your promotion strategy. A promotion plan details how you plan on communicating with your prospects and customers. Here are a few areas that you might consider as part of your promotional plan: For product companies, a distribution plan is an important part of the complete business plan. For the most part, service companies can skip this piece and move on. Distribution is how you will get your product into the hands of your customers. Every industry has different distribution channels and the best way to create your distribution plan is to interview others in your industry to figure out what their distribution model is. Here are a few common distribution models that you may consider for your business: Strategic alliances As part of your marketing plan, you may rely on working closely with another company in a form of partnership. This partnership may help provide access to a target market segment for your company while allowing your partner to offer a new product or service to their customers. If you've accomplished some key milestones in the process of building your business, detail them here. This chapter also defines how you measure success. A plan is only a document on paper without an implementation plan, complete with a schedule, defined roles, and key responsibilities. While the Milestones and Metrics chapter of your business plan may not be long, it's critical that you take the time to look forward and schedule the next critical steps for your business. Investors will want to see that you understand what needs to happen to make your plans a reality and that you are working on a realistic schedule. Investors look for great teams in addition to great ideas. Use this chapter to describe your current team and who you need to hire. The old adage is that investors don't invest in ideas, they invest in people. Some investors even go as far as to say that they would rather invest in a mediocre idea with a great team behind it than a blockbuster idea with a mediocre team. What this really means is that running a successful business all comes down to execution. Can you actually accomplish what you have planned? Do you have the right team in place to turn a good idea into a great business that will have customers banging down your doors? The Management Team chapter of your business plan is where you make your best case that you have the right team in place to execute on your idea. The Management Team chapter also shows that you have thought about the important roles and responsibilities your business needs in order to grow and be successful. Your business plan isn't complete without a financial forecast. We'll tell you what to include in your financial plan. A typical financial plan will have monthly projections for the first 12 months and then annual projections for the remaining three to five years. Three-year projections are typically adequate, but some investors will request a five-year forecast. Following are details of the financial statements that you should include in your business plan, and a brief overview of what should be in each section. Your sales forecast is just what it says: Your projections of how much you are going to sell over the next few years. A sales forecast is typically broken down into several rows, with a row for each core product or service that you are offering. Don't make the mistake of breaking down your sales forecast into excruciating detail. Just focus on the high-level at this point. For example, if you are a restaurant, you might break down your forecast into these groups: lunch, dinner, and drinks. If you are a product company, you could break down your forecast by target market segments or into major product categories. Personnel plan Your personnel plan details how much you plan on paying your employees. For a small company, you might list every position on the personnel plan and how much will be paid each month for each position. For a larger company, the personnel plan is typically broken down into functional groups such as "marketing" and "sales." The P&L also contains the all important "bottom line" where your expenses are subtracted from your earnings to show if your business is making a profit each month or potentially incurring some losses while you grow. A typical P&L will be a spreadsheet that includes the following: The cash flow statement often gets confused with the profit and loss statement, but they are very different and serve very different purposes. While the P&L calculates your profits and losses, the cash flow statement keeps track of how much cash (money in the bank) that you have at any given point. The last financial statement that most businesses will need to create as part of their business plan is the balance sheet. The balance sheet provides an overview of the financial health of your business. It lists the assets in your company, the liabilities, and your (the owner's) equity. If you subtract the company's liabilities from assets, you can determine the net worth of the company. If you are raising money from investors, you should include a brief section of your business plan that details exactly how you plan on using your investors' cash. This section doesn't need to go into excruciating detail about how every last dollar will be spent, but instead show the major areas where the investors' funds will be spent. These could include marketing, R&D, sales, or perhaps purchasing inventory. The last thing that you might need to include in your Financial Plan chapter is a section on your exit strategy. An exit strategy is your plan for eventually selling your business, either to another company or to the public in an IPO. If you have investors, they will want to know your thoughts on this. After all, your investors will want to get a return on their investment, and the only way they will get this is if the company is sold to someone else. 9. Appendix If you need more space for product images or additional information, use the appendix for those details.Lastly, the appendix to your business plan. This isn't a required chapter by any means, but it is a useful place to stick any charts, tables, definitions, legal notes, or other critical information that either felt too long or too out-of-place to include elsewhere in your business plan. If you have a patent or a patent pending, or illustrations of your product, this is where you'd want to include the details. Source: Bplans ______________________________________________________________________________ Have a look at our Pinterest board on Write your Business Plan ______________________________________________________________________________Write Your Business Plan
Rules for writing a business plan
Keep it short.
Know your audience.
Don't be intimidated.
A quick overview of the chapters in a business plan
1. Executive Summary
This is an overview of your business and your plans. It comes first in your plan and is ideally only 1-2 pages. Structurally, the executive summary is the first chapter of your business plan. And while it's the first thing that people will read, I generally advise that you write it last. Why? Because once you know the details of your business inside and out, you will be better prepared to write your executive summary. The executive summary introduces your company, explains what you do, and lays out what you're looking for from your readers.The critical components of a winning executive summary
The company overview provides a quick review of the company's legal structure and location, as well as some background on the company's history if you're writing the plan for an existing business.
The problem and solution
Competition
4. Target Market
Who are you selling to? If there are multiple market segments for your business, this is where you flesh out the details.
SAM = your Segmented Addressable Market or Served Available Market (the portion of TAM you will target)
SOM = your Share Of the Market (the subset of your SAM that you will realistically reach—particularly in the first few years of your business)5. Marketing and Sales Plan
Positioning
Distribution
6. Milestones and Metrics
7. Management Team
8. Financial Plan
Sales forecast
Profit and loss statement
Cash flow statement
Balance sheet
Use of funds
Exit strategy
Are you in need of help with the writing of your business plan? Have a look at the following companies for advise:
9 Steps to Starting Your Own Business
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How To Draw A Business Plan In South Africa
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