‘A goal without a plan is just a wish’ said Antoine de Saint-Exupery. Embarking on a successful business requires a detailed plan, hence the concept ‘Business Plan’. Before we delve into the concept of a business plan, there is the need to give brief explanations of the concepts ‘business’ and ‘plan’ respectively.
What is a business?
The word business is used in different contexts. It is used to describe an economic process or entities that participate in that process.
There is no universal accepted definition of a business; thus definitions by scholars include but not limited to the following:
Business is an economic system where goods and services are exchanged among one another for money.
A business entity is a commercial organization that aims to make profit from its operations.
An integrated set of activities and assets that is capable of being conducted and managed for the purpose of providing a return to investors or other owners.
An organization or enterprising entity engaging in commercial, industrial or professional activities.
All businesses exist to make profits by supplying goods or services to others (customers).
Businesses that supply goods might manufacture the goods or buy them from other parties (for example, food retailers buy food off food producers and sell it to their customers).
What is a plan?
A plan is a written account of the intended future course of action (scheme) aimed at achieving a specific goal(s) or objective(s) within a specific time frame. It explains in details what needs to be done, when, how, and by whom, and often include the best case, expected case, and worst case scenarios.
Plans can be formal or informal
▪ Structured and formal plans, used by multiple people are more likely to occur in projects, diplomacy, careers, economic development, military campaigns, combats, sports, games, or in the conduct of other business. In most cases, the absence of a well-laid plan can have adverse effects: for example, a non-robust project plan can cost the organization time and money.
▪ Informal or ad-hoc plans are created by individuals in all their pursuits.
The two concepts explained above when fused together gives the idea ‘Business Plan’.
A Business Plan is a written document that describes in details how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan for a marketing, financial and operational view point. Sometimes, a business plan is prepared for an established business that is moving in a new direction.
Business Plan is a formal written document containing business goals, the methods on how these goals can be attained and the time frame that these goals need to be achieved. It also describes the nature of the business, includes background information on the organization, the organization’s financial projections and the strategies it intends to implement to the business.
The main thrust of this write-up is on the format, structure and content of a new business plan proposal. However, there is the need to cast some light on ways in which existing businesses use plan as a guide. Change is inevitable for the success of any business in today’s fast-moving environment. These changes may be as a result of economic or technological development, customer needs, growth opportunities or even challenging status quo. When the need for a change arises, instead of coming up with a new plan entirely, they only need to review their already- made plans to reflect and adjust to the current business trends. Sometimes an existing business operates without a well written business plan from the outset. In this case, the owner of the business needs to prepare a new plan for it.
However, formats, structure and content of a business plan proposal varies from one type of business to another, but for the purpose of this write-up, our focus would be on small- scale businesses that require simple business plan format.
Below is an outline of a simple business plan containing the following core components. These are:
• An executive summary
• Company/Business description
• The product or service
• Management and organization
• The market analysis
• The industrial analysis
• Competition analysis
• Business risk and mitigation
• Financial Plan/Projections
This the summary of the entire Business Plan. It covers all the key points and is usually prepared last. This is the part of the Business Plan that outside parties will review first before looking at the entire plan.
It is always important you capture all the points in the executive summary.
This section shows a detailed description of the company. It covers the company’s mission, vision, history, current status and future plan.
The Product or Service
This section deals with product/services features, components and quality. The issues of product or service cost, how the product will be produced, quality control consideration and after sale service must be addressed in this part of the plan.
All the regulatory requirements and approval consideration must also be properly addressed here.
Management and Organization
The make-up and experience of the entire management must be addressed here. As we know the success of any business has a lot to do with the people running the business. The entire personnel plan should be addressed here. Other business helpers such as advisers and consultants should be mentioned also.
The Market Analysis
Here you must define your target market and identify market segments. You must know the customers that will buy your products or services; you must mention the size of your market and whether it is a growing market, seasonal or shrinking market.
The Industrial Analysis
You must know your industry and the factors that may affect sales in the industry.
You should be able to describe the key “success factors” (today called ‘critical success factors’ CSF) in the industry and the various opportunities in the industry.
You must also know the various threats in the industry.
You cannot compete effectively in an industry, if you don’t know your competitors. In this section, you must mention your main competitors, especially in your locality.
You must mention the reasons your customers will buy from you, instead of your competitors. You must mention the strength you have compared to your competitors.
You must also mention your weakness and how you are addressing those weaknesses.
Business Risk and Mitigation
Here you must mention the main risks that could affect the success of your business. You must also mention how you plan to prevent or minimize the risk.
The financial plan must include the financial forecasts, cash flows and balance sheets. You must also compute your breakeven point here.
It is advisable to have the financial projections for at least two years.
The incorporation of the components of business plan discussed above, are not just key to the success of your business, but they also serve as avenues for growth and diversification in the dynamic business environment. Failure to adopt a standard and appropriate business plan before the outset of any business may hinder the prospects of such business and eventually runs its course in a very short period of time.
Sanusi is a Secondary School Teacher in BUA Cement Schools (Sokoto) where he teaches Economics to senior students with over ten (10) years of working experience in teaching. He bagged his Bachelor’s degree in Economics/Education and Master’s degree in Banking and Finance all from Usmanu Danfodiyo University, Sokoto. He has some few publications to his name and he is currently pursuing a professional program in Accounting (ICAN).
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