Pastor Welcome Thamsanqa Mlungisi Dlalisa
The ability to draft a business plan is among the most important set of skills for every entrepreneur.
Unfortunately, this skill is often not taught in most of our black schools. There are also very few universities that offer graduate and post-graduate programmes in entrepreneurship. In this article, we deal with the basics on the purpose and importance of a business plan in terms of its contribution to a successful business, different elements of a successful business plan and examples of resources needed and procedures to be followed to achieve the plan. Industry-specific and legal requirements for own ventures are identified and explained in terms of how they will affect the venture.
I hope that after reading this article, you will be able to draft your own basic business plan and be able to refine and improve it going forward. A business plan helps you to consider all aspects involved in your business. Drafting a business plan can give you more confidence in your business if you are just starting out, and can help you think through strategies and recognise limitations or problems that may occur, even if your business is well under way. A business plan is a useful tool and is used primarily for two reasons namely, to raise capital and as a means of guiding business growth.
Firstly, a business plan can be drawn up to assess the viability of your business idea. You will find a business plan helpful in this sense as you will need to assess the market for your product or service, as well as your competitors and other important information. Secondly, a business plan can also be drawn up if the business is applying for funding, especially from banks. Here, the bank manager will want to discuss your business plan in depth in order to assess the viability of your business. Business plans can also be formulated as a tool for moving the business into the future.
Let us take a more in-depth look at the importance of a business plan and its components.
Should the primary purpose of the business plan be the raising of finance? Each financial institution has a guideline as to its minimum requirements which need to be included in the business plan. Please consult each targeted financial institution before commencing with the development of your business plan to ensure that you meet their minimum requirements. The business plan may cover the following aspects: cover page and table of contents; executive summary; business description; SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats); vision and mission; business environment analysis; industry background; competitor analysis; market analysis; human resources plan; marketing plan; operations plan; management summary; financial plan; attachments and milestones.
The cover page includes the company’s name, its logo and its slogan and must look appealing. The cover must be simple and uncluttered but yet inviting. It must have a clean appearance such that the potential reader is encouraged to read its contents. The executive summary must provide a nice overview of the business and the entire business plan. In fact, after reading the executive summary, the bank must be partially convinced to fund the project. In other words, they must get the sense that the business is viable and bankable.
The business model section outlines the history and background of the identified business. You also describe how you came up with the idea for the business or how it was formed, what the business will do, as well as the unique capabilities that give your business an edge in the marketplace. This may help investors understand how your business will operate.
The vision and mission section describes where you want your business to be in the future. I have my own way of describing the difference between vision and mission. I always say that “vision” is what you want be and “mission” is how you want to get there. Vision is high up there and mission is closely linked to the strategy, which answers the questions of how you seek to achieve your vision. Short-term objectives are those that can be achieved within one year. Long-term objectives are those that require a longer time frame, usually three to five years, to achieve. There are usually three broad objectives for a small business. These are the creation of the business, the survival of the business and the profitability of the business. These should be discussed in detail in your business plan.
The SWOT analysis section needs you need to consider the internal and external environments which will affect your business. The set of internal factors are called strengths and weaknesses, which may include skills, financial resources, infrastructure, working tools and opportunities. Threats will cover all external factors, such as competitors, technology, economic conditions, political stability, and many others. To the extent that you describe how you will mitigate external factors while exploiting and leveraging your own internal factors, will somewhat determine the viability of your business. This should demonstrate that you have a market for your product or service and that you intend to achieve a competitive position. This section will help you to evaluate the various risks that each of these factors pose the survival and profitability of your business.
In the marketing plan section you describe how you plan to market and sell your business together with its offerings. In addition the marketing strategy of your business must be consistent with the market analysis performed. Here you discuss how you intend to focus on your customer and how you will create customer awareness about your business and ultimately create client satisfaction. This section provides a platform to discuss your strategy in detail, describing how you will support your strengths and how you will exploit your competitor’s weaknesses. After identifying your target market you then describe how you will communicate with them as well as the image you intend to communicate and portray. You will also need to describe your pricing strategy and how they compare to your competitors. The distribution of your product or service should also be discussed.
The human resources section describes who is behind the business. For example, if you are a sole proprietor, include your curriculum vitae and discuss your abilities and experience that you bring to the business. If you need help, discuss how you intend to get that help, whether through studying or using other personnel. For a partnership, discuss each partner’s abilities, skills, qualifications and background using supporting documents. Salaries, incentives, benefits, employee responsibilities, job descriptions and strategies for employee development and training should also be discussed.
In the financial plan section you will need to discuss past, current and projected finances. It starts off by discussing the financial needs of your business. If you are applying for alternative funding, this needs to be stated, outlining how much funding you require and what you intend to use the funding for. All information in this section needs to be supported with relevant data, which should be well organised and easy to find. You then move on to provide a cash flow statement discussing the cash inflow and outflow of your business over a period of time. Also provide an income projection over three years. Discuss your break-even analysis where your business expenses exactly match your sales volume. In other words, at this point your business will neither make a profit or a loss. If you are a new business owner, your financial section will not include your actual performance statements and financial history. If you are applying for alternative funding, banks or venture capitalists may require a personal balance sheet. If you have already established your business, you will need to include your actual financial history. This is found in your past balance sheets and profit and loss or income statements. This financial history is a summary of your financial information from the start of your business to the present.
Some practical tips on how to deal with capital constraints
Many young up-and-coming entrepreneurs struggle to raise capital because of lack of collateral. Unfortunately, the reality is that most of our young entrepreneurs in our black townships do not have the collateral such as houses, land, investments and so on. This constraint may be overcome through some of the tips below. These include:
– Tip 1: raise money through personal savings, which attract interest, instead of loans
– Tip 2: bring in partners with personal integrity who can add value to the business, including capital
– Tip 3: consider raising money from family members, where interest may be zero or very low
– Tip 4: consider selling non-essential personal items to raise capital
One of my friends has used the tips above to start and grow a very strong cooperation. He started his own business with a mere R400 of his personal money and did not enter into costly financing from the banks. He started with a cleaning business with him being the only cleaner. The money he had was used to buy one cleaning uniform, a broom, soap and plastic bucket. This has grown over the past 17 years to become one of the top five cleaning companies in South Africa, with over 2 000 employees on his payroll.
For more information please contact Pastor WTM Dlalisa on 083 395 1165.
