One of the most popular and widely used terms in the business world is the term “business plan”. We are taught about business plans from high school and it’s a term that everyone is familiar with. However, only a fraction of those people know what a business plan really is and its fundamental value to all businesses.
Studies show that in South Africa one of the six major reasons why startups fail is because of a lack of business planning on the side of the entrepreneurs. Now this doesn’t mean that entrepreneurs don’t have documented business plans, but rather that they don’t understand the whole process of business planning: what it is meant to do, and how valuable it is.
Drawing up a business plan is not the summation of business planning; it is merely one very important part of it. Every business starts with a good idea or a great product, but without a proper business model and structure you will not be able to turn that idea into a successful company. You cannot merely have a great idea and then hope that it’s good enough to “sell itself”; you have to put business structures in place to ensure that people get to know about your product and that it gets to reach them in convenient ways. You have to plan for the foundation phase of your business; draft out the need that your business is addressing; study the market you’re entering into; determine how you will acquire your customers; do a risk assessment. These are some of the processes involved in business planning, most of which can be included in your business plan document.
That document therefore becomes the blueprint for your business, the actual plan that you will refer to and follow as your business goes through various challenges and various stages of growth. It has to be, as the name suggests, a documented plan on how your business will be structured and function in order to reach its vision and targets.
Most people do not look at a business plan this way though. They don’t realize its importance and as a result they end up with inadequate business planning for their businesses. They see it as a document that must be kept and filed away, taken out only when they are in need of funding. Granted, a business plan is one of the documents that every potential investor will require from you, (making it very important for such external uses), but more importantly it is for the internal use of helping you run and build your business.
It is also very important for you to know that there is a difference between the internal business plan that you should prepare and keep for your business functioning and the one you prepare to present to investors .The one you prepare for the investor must be concise and simple; detailed but not too long. The standard would be 12 pages with about 4 appendices pages. In this first entry I will show you a great structure for the business plan prepared for an investor, and the most important headings to have in it.
Structure and important headings:
- Executive summary
- Business Description
- Background or Problem
- Project Plan
- Operational and comparative advantage
- Marketing plan and strategy
- Risk Factors
Most of these should range between one page and one and a half pages long. Spend the most time preparing the executive summary, marketing and financials parts of the business plan. This is what investors are most interested in. Your marketing strategies must be realistic and your financials must be accurate and supported.
Over the course of time I will go into more detailed explanations on the kind of information that each of these topics should contain such that your business plan looks attractive to an investor. Keep visiting the page to get updates. Otherwise you can ask me directly for a specific one and I will do my best to post it as soon as possible.
Please do comment for any questions or additions that you may have.