Planning your small business is a structured, formal exercise. The output of the planning exercise would be a detailed business plan in a standardised format.
The Business Plan
The business plan translates your grand business vision into a practical program of action. It also helps you raise finance. Most importantly, it serves as a benchmark against which you could evaluate the actual results of the business once it gets off the ground.
Contents of a Business Plan
The first thing you should be aware of is that the business plan is not a single plan. It consists of sub-plans for different key functions of the business. Thus, there would be a Marketing Plan, Operations Plan, Profitability Plan and Financing Plan.
The Marketing Plan would describe the market for your business and explain how you would compete in that market. The market description should be a comprehensive one with the following contents:
- Trends in the industry,
- Total demand,
- Competition in the market, and
- What the customer expects your product to do for them.
Your marketing strategy would explain how you would attract business from competitors to you. You might be able to do this by tailoring your offer to meet the special needs of a segment of the market, for example. Explain how you would do this in the marketing plan.
The Operations Plan would describe the production process and the requirements to carry it out. This would include equipment and facilities and raw materials and other inputs. Finally, you would indicate the sources for all the requirements.
You would also explain how you would arrange the technical expertise and production staff and how the administrative aspects, such as records-keeping and compliance with government regulations, would be taken care of.
The Profitability Plan would show how you would make profits in the business. What selling prices would you charge? What would be your production costs? What volumes would you be able to sell? Would you be able to recover establishment expenses and generate surplus profits?
A three year forecast of your sales, costs and expenses is what financiers would look for. This three year forecast is split into monthly, quarterly and yearly sub-forecasts – showing the gradual increase in the levels of operations.
The Financing Plan would focus on cash flows. Cash is different from profits. Cash inflows would include not only sales but also such receipts as loans and capital brought in by owners. Cash outflows would include costs, expenses, loan repayments, equipment purchases and advance payments.
Month by month estimates of cash flows would show when you would face difficulties. You would then have to negotiate suitable financing.
Your business plan would be evaluated by your financiers. They would have access to the actual operations, profitability and other aspects of similar, existing businesses. With this access, they would be able to assess the realistic nature of your estimates. If they are satisfied, they might agree to fund your business.
Project Implementation Plan
Now comes the final plan – the project implementation plan. If your business is more than tiny in size, you would need to prepare a schedule for your business startup project. All the activities would have to be identified and listed. The activities must then be sequenced and the costs and times involved for each must be estimated and arranged for.
And once your business is operational, you would have to prepare operating plans and monitor actual results against these. It is thus that you exercise control over your business.