When you have finally chosen the specific business you want to go into, the next step is to write the business plan.
A comprehensive, thoroughly thought-out business plan is essential to your success as a businessman. Writing it will force you to organize your thoughts about the workability and feasibility (eventual profitablity) of your business idea. It leads to the preparation of a written document containing the purpose and mechanics for starting and running the business — your particular business.
A business plan is a statement of faith put down in writing — with documented logic and cold facts.
Whether you are starting a new business or expanding an existing one, a business plan will help you win the necessary financial and other support for your plan. It is a pre-requisite for borrowing money or for persuading other investors to join it. But even if you do not plan to raise more capital, the business plan will be very, very useful in plotting out your steps in critical start-up and expansion periods of operation so that you can check at any time whether you are on target and within budget at any time.
Steps to follow
Here are basic steps to follow in writing the business plan:
1. State your objective (introduction)
This is the introductory part of your plan. It is used to familiarize the reader (the bank, prospective investors, etc.) with who you are, what your business goals are, and when these goals will be accomplished. If you will submit the plan to a bank, you may indicate at the outset how much you want to borrow and what you plan to do with the funds.
Here is an example of an introduction:
“Kay Ganda Garments is a single proprietorship whose principal business is the manufacturing and retailing of ready-to-wear ladies dresses. Kay Ganda Garments’ goals for the next three years are to:
a. Start manufacturing and retailing by January, 2012
b. Achieve profitability by January, 2013
c. Seek adequate financing for the first 18 months of operation.”
2. Describe your business
For an existing business, the following topics should be covered: business name; date and place of registration or planning to register; date actual operations began or planning to begin; brief history; form of business organization (whether sole proprietorship, partnership or corporation); and names of owner, partners or major investors.
For a new business, provide as much of the above information as possible. Instead of a brief history, explain what the business will be, how the idea originated, and how the business is expected to take shape and grow.
3. Describe your products or services
You should be able to describe your products or services in such detail that the reader gets a clear idea regarding what you are producing and selling. Describe, too, any applications or uses of your products that may not be readily apparent.
In this portion of your plan, you should also be able to note the competitive advantage that your product has over other similar products. Examples of these advantages include patents, trademarks and franchise or dealershp rights, special processes or equipment which competitors are unlikely to duplicate, or having in your company the best and most experienced craftsmen or technicians in a given field.
You should also be able to identify those products which will be competing with yours or may be substituted for yours. State the advantages and disadvantages of your products in comparison with competing ones.
4. Identify your potential market
Determine who and how many are your present or projected customers. Be as specific as possible. Are you selling to bookstores? grocery stories? ladies’ boutiques? directly to housewives? directly to students? Perhaps your market is another business, e.g. a manufacturing firm. Perhaps it is government.
If you are selling to the general plublic, you may need to group potential customers according to age, gender, income, education, and other demographic factors. Then ask yourself how you, as owner-manager, can use this information. If you know, for example, that your potential customers are likely to be mostly young children, ages three to ten, what does this tell you about where you will locate? about how you will advertise and promote? about your pricing structure?
5. Identify your competitors
The competiton need not be a threatening force. Rather, it should drive you to do your best. Try to learn as much as you can about them.
The following information about your competitors should be included in your plan:
a. Description of competitors – Identify those businesses which compete or are likely to compete with you. List them by name if possible.
b. Size of competitors – Determine the assets and sales volume of your major competitors.
c. Profitability of competitors – Which of them are making money? Which are losing? By how much?
d. Operating methods – Determine the operating methods of each of your major competitors in terms of pricing strategy; quality of product or services; servicing, warranties and packaging; methods of selling and distribution channels; credit terms; location, advertising and promotion; reputation; and inventory levels. Discuss only those items which will be relevant to your business. For example, location is not always a relevant factor.
6. Consider your pricing policy
In pricing your goods or services, consider all the relevant factors, including costs of production and distribution, as well as the degree of acceptance by the market. Another factor to consider is the pricing structure of your competitors. Of course, the objective of your pricing policy should be to set the price at a level that maximizes profit in the long run.
7. Determine your marketing methods
It is not enough to have a good product nor that you have priced it right. Your business plan must also answer the following questions about how you intend to market and sell your products.
a. How will you promote or advertise your business?
b. How will you do the selling? Will you employ your own sales staff?
c. What channels of distribution will you use to reach your customers?
d. What do your customers think of you and your product? How can you improve your image and that of your product?
8. Determine your key personnel
Identify the key people in your business. These include the owner or owners and other management people. If your business is a corporation, list the names and addresses of all directors. If your business is a partnership, list the names and addresses of all the partners.
9. Identify your material requirements and sources of supply.
Determine what materials you will need and where you will get them. Remember to include only direct materials. Office supplies and other indirect materials are excluded.
Here, you should prepare a table listing the various materials that go into the product. For each, state how many suppliers there are that you could buy from and then identify which will be your main supplier and why. Having this table will show your readers that you have carefully analyzed your suppliers and selected the one that best fits your needs.
10. Determine the process and equipment you will use in manufacturing your product.
You should provide a step-by-step explanation of the process used to make your product or deliver your service. For each step, explain the work done, the equipment used, and the material involved. If the process is a complex one, it will be good to include a diagram showing the work flow. Then assign positions to the jobs to be done and estimate the number of people to be employed. For each position, set salary rates.
11. Prepare a sales forecast.
For your business plan, you should include a sales forecast that covers at least two years of operation. For thefirst year, sales should be shown on a monthly basis. For the second year, in a yearly, instead of a monthly sales forecast, you should explain how the figures are arrived at and the assumptions on which they are based.
12. Prepare your budget.
If you are in manufacturing, production costs should be budgeted. These would include material, labor, service and manufacturing overhead, and other costs. If you are a service business, operational costs should be budgeted. Sales costs should include selling and distribution, storage, discounts, advertising and promotion. General and administrative costs include salaries and costs of legal and accounting services. Your projections should be prepared monthly in the first year of operation and quarterly for the second and third years.
When you would have done all these steps, you are ready to set your plan to work. That would be the time to obtain your funds, get a license, purchase your building, facilities and supplies, hire and train your people, and start operating.
Remember that if you are to achieve your plan, you will have to work extraordinarily hard. Be ready to work long and hard hours and be totally committed to your business.
But business is uncertain. Not everything will go according to plan. How will you react when the unexpected happens? Don’t blame other people, the government, or the poor business environment. Successful entrepreneurs learn from their failurs. And if you have finished your plan, you are ready to join their ranks.
– mini business plan template to follow –