Have you thought about starting your own business? Do you need to find funding for an entrepreneurial idea that you have? Sometimes it’s hard to know where to start. Once you have an idea for a business, a good starting point is to write a business plan.
Samke and Josiah want to think more carefully about their business and might also try and get some funding from the Department of Small Business Development (DSBD) in the future. So they need to put together a business plan. No-one is likely to give you a loan unless you have gone through the process of formulating one.
What is a business plan?
• A business plan is a written document.
• It summarises how your business will operate.
• It also summarises the financial objectives of your business.
• It contains plans and budgets to show how you will make your business successful.
• It contains information about any legal requirements that your business might need (such as being registered with the local council or relevant government department).
Why do you need one?
• It shows that you have thought clearly about your business idea.
• It helps convince possible funders or other stakeholders that it is worth investing in your enterprise.
It can seem quite overwhelming to have to get one together and this is why entrepreneurs often try and put it off. But it really is a useful tool for you to make sure that your business will actually succeed, as well as for helping you find funders.
Let’s find a way to put one together that is reasonably easy. There are a number of templates of business plans available on the internet which you can follow step-by-step, but some of them may be too detailed for your needs. If you are starting a large-scale business, then you will need a long and complex business plan. But Samke and Josiah are starting a micro (small) business so they don’t need to make it too complicated. What are the essential elements of a business plan?
Business Plan: Business Details
This section should include:
• Business name or trading name.
• Business postal and physical address.
• Business contact phone number/s and email addresses.
• Whether you are the owner or tenant of your business premises.
• Contact names of the business owners.
• If you want a loan from a financial institution, then include the name of your bank and period of time you’ve been with this bank.
• Confirmation that your business has been registered with the relevant authorities (if applicable).
Business Plan: Executive Summary
This is often written after you’ve covered the rest of your business plan but you place it in your document after your business details. It highlights the points you expand on later in your document. It provides a short and optimistic overview of your business that captures the reader’s attention and creates a need to learn more. It includes:
• The activities that your business will be involved in.
• The business background of the business owner/s or managers.
• The type of customers that you will be targeting and how your business will serve those customers.
• Summary of your competition and how you will get market share. (What is your business’s competitive advantage?)
• Brief outline of your financial turnover (how you will make a profit).
• Description of your start-up financing requirements (if applicable).
An introduction to an executive summary might look like this:
Nobuhle Hair Salon is a hair salon that allows the entire family to have their hair needs satisfied in one convenient visit. There are many “quick salons” like Nobuhle, however, many of these salons only provide the minimum services. The owner of Nobuhle perceives an unfulfilled customer need for a low-cost salon that provides many hair choices and strong customer attention. Using this strategy, Nobuhle will gain significant market share and create long-term relationships with its clients.
(adapted from here http://www.bplans.com/hair_salon_business_plan/executive_summary_fc.php)
Business Plan: Opportunity
This looks at the gaps in the market in the industry you have chosen and why you will be able to fill it. It should include:
• What you are selling and why is there a need for it. (Describe the problem that your customers have and the solution that you are providing them).
• What the trends are in your industry and how you will meet them.
• The vision and mission statement of your business. The vision is what you want your business to be doing in the future. The mission describes how your business will achieve that.
Business Plan: Market Analysis Summary
This shows that you understand your customers and have thought about their needs and how your business is going to meet these. It should address the following types of questions:
• Who is your target market? What are the types of customers you are looking for? (Old? Young? Everyone? Male? Female? Fashionable? etc)
• What are your customers’ needs?
• Where are your customers and how do you reach them? (E.g. Our customers are commuters and our stall is set up near the taxi rank.)
• What are the prices of your services and/or products?
• Who are your competitors and how will you compare to them? Why is there room for you in this market?
Business Plan: Execution
This explains how you plan to get the business up and running. It should address the following:
• How do you plan to attract customers? (Social media? Signage? Posters?)
• How do you plan the logistics of your business? (Will you do bookings? Will you do passing trade only?)
• What technology do you need? (A booking system? Cellphones?)
• What special equipment will you need? (Hair dryers? Braids?)
Business Plan: Financial Plan
This is often the most important aspect of your business plan, especially if you want help with funding. It requires you to make estimates of what you think the business costs will be for the next 12 months.
Here are some areas you should try and include:
• The cost of starting up your business.
• Sales for the first year.
• Gross profit. (How much money you make after you take off the cost of goods that you have sold, e.g. braids).
• Overheads. (Your rent, salaries, the products you use etc.)
• Net profit. (How much money you make after you take off all your expenses and overheads).
• Cash flow. (How much money is being brought into the business versus how much is being taken out of the business.)
• How much you will need to borrow.
• Whether you will make enough to pay it back.
If you are applying for funding, you will need to attach documents that the funder might ask you for, together with your business plan.
As you can see, writing a business plan takes some time to put together. Once you have all this information written down and planned, you will be well on your way to creating a successful business – and hopefully to get some help in funding it!
Always check your document for spelling and grammatical errors. Your document needs to showcase you and your business and you can only do that if your document is written carefully.