Thursday, December 23, 2010

Tips for business plan writers

Starting a new business venture requires some research and investigation into the market into which you desire to go into. Whether starting a business online or not, a good business plan and a profile is a requirement , when applying for a small business loan from any financial institution in South Africa. In a recent article about Business Plan Writing, a few important factors were mentioned to help improve your chances of requiring financial assistance. Business planning is of utmost important when persuing your new venture. It is important to go into a business venture with a clear direction and knowlege of your targeted market. It is important to familiarise yourself with what business plan software is available on the market. Writing your own business plan is not that difficult and can be done without having to lay out excessive amounts of money on a professional business plan.

Why you need a business plan in South Africa
Whether you’re starting a new business or looking to expand your existing business, it is crucial to have a business plan in South Africa. If you need a bank loan or investment from outsiders, you need to have a business plan to show for this investment of capital. A business plan is your key to success
Writing a business plan is something that many small businesses fail to do although it is a necessary step in preparing for obstacles in the future. When you write a business plan, it forces you to start thinking about problems and solutions in your business and industry.

The first step to writing a business plan would be to do research into the feasibility and profitability of your new business. Investors and banks have to see that you have the resources and experience to make your business work and a business plan is the blueprint for what you plan to do for the future.

Your business plan should include the following elements:
An introduction that explains what your business is and what your objectives are.
A marketing analysis about the industry your business will be operating in and how you fit into it.
A marketing plan (which is basically your marketing strategy)
A management plan about how where you are going to set up your business, where your business will be located and the regulations and restrictions about your business.
A financial plan that clearly describes how you are going to finance your business and what your financial projections are.
An executive summary which is a one page overview about your business that you should write after you have finalised your business plan. Advice for writing a business plan.

Advice for writing a business plan
When you write a business plan, a good piece of advice is to break it up into smaller tasks. Don’t try to write the whole plan in one day. Start writing section you are most comfortable with – if you have marketing experience start off with the marketing plan. Another tip for writing your business plan is to spend quality time when you are writing it and don’t put it off so that it is a rushed job.

Business continuity plans for your business in South Africa
A business continuity plan is a series of documents that describes the priorities and actions that a business should take in the event of a disaster or system’s failure. A business continuity plan is as important as your initial business plan because it addresses the often overwhelming task of creating plans so that your business runs smoothly.

In conclusion, the internet is full of resources and help such as the article above. Once you have searched for a bussiness plan that best suits your industry, you will be well on your way to having a clear direction as to where u see your business in the next five years and beyond. Help and advice is only a click away through all major search engines!

Find out more about business continuity plans in South Africa

Monday, December 13, 2010

Raising finance for a new business

Raising finance for a new business is often the most challenging task of the entrepreneur. No one enjoys asking others for money (well almost no one) and going hat in hand to your local bank or investment firm is perhaps similar to a trip to the dentist. But it does not to be that hard. Using business plan services should be seem as your first real opportunity to see whether you fist of all can communicate your idea effectively an secondly whether other professionals see the opportunity in the same light that you do. Its one thing convincing friends and family, who after all are often interested in seeing you in a good mood, vs convincing the people to such an extent that hey will invest money into the idea. Granted that if you are one of the lucky few, friends and family may be the same people who will be finding the business in the first place.

In general, raising finance for your business can be divided into 6 simple steps.

1. Seeking out the Investors

This is arguably the hardest part of the process. If you are someone who regularly runs to stay fit you will know that the hardest part is to put your shoes on and start running. Once that is happening the rest sort of happens by itself. Most people start within family circles, friends, business associates and other acquaintances. Others may go directly to the bank or government institutions proving grant or loans for start-ups.

Once you find the right contact willing to finance your business, a well written business plan should normally take care of the rest. The first step often takes the longest so don’t loose fath when I takes longer that expected. Is your idea is viable and it excites you then the right investor or investment body will come along.

2. The Approach.

During the approach, two things must happen. As with any new relationship its always useful to start by breaking down the barriers between you and the other party. In his classic book, How to Win Friends and Influence People, Dale Carnegie talks about finding some thing in common with the other person. A common interest can help you to get to know the other party in question and help them to start understanding that you are actually not to different from them. Remember that the first thing you may have in common is that you may both be interested in meeting the right venture partner. Secondly you need to make the other person believe that you know your subject area and that your business idea can also help them with other own goals fr the future. Simultaneously be building a degree of kudos. The venture source needs to invest capital, and you need to raise capital. Fulfilling your mutual needs is the task you must accomplish together.

3. Choose the most suitable source

once you have identified suitable funding sources, list the reasons why they would be interested in funding your business. Always consider the ‘WIFM’ concept. When listening to your proposal or business concept the other party will be listening through a filter of ‘What’s In It For Met?’ Not everyone invests in the same deals for the same reasons, as certain benefits among the features will be more important to individual capital sources than others. In fact, the same plan is likely to be supported by different people for different reasons. You need to identify the needs and reasons for investing of your potential money source. Study the background of the various funding sources, ideally considering the other businesses they have invested into.

4. Presenting the Business Plan.

During this stage you can really show of your knowledge and passion for the industry and the business that you are intending to start or grow. This is an area where most entrepreneurs actually do well in. Do remember however, that your presentation need to reflect the investors interests and answer questions that thy may have. If you have already build up a relationship with the investor it may be easier to understand and address their concerns. If not, be sensitive to any body language or signs form the investors as to which areas you need to focus on.

A rookie mistake at this stage is to over value your business or present and half developed concept. Unless your market research has show exceptional interest from potential clients, investors will be looking for working concepts. Remember that they are thinking, what can go wrong with this, is it a good investment opportunity. They are not interested in simply paying your salary for the next two years while you further develop your concept.

5. Address their concerns confidently.

Don’t be taken aback if there are allot of questions or objections. These merely indicate that the investors are interested and want their doubts put to rest. They may ask about your income potential and how you came up with the amounts mentioned. Real sales is of course the ideal at this stage as it takes the doubts out of business. "What are you going to do that's different, and how are you going to do it better than what is already being done?" In handling objections, the first thing to avoid is to be defensive. Instead, acknowledge the comment, and respond to the objection in a sincere way. See objections as a support mechanism. If investors have objections or doubts then so may your eventual clients. These may be people who have been involved in start-ups before and its really an opportunity for some very valuable free advice. Don’t be afraid to ask questions of your own.

6. Getting to a yes.

If the first five steps was executed well then this final step should take care of itself. Look for definite answers and commitment, if there is a maybe, discuss next steps and how you could potentially turn the last objections into a yes. Remember, apart from your business plan, your enthusiasm and entrepreneurial spirit are two characteristics that investors will value most.

Saturday, December 11, 2010

Implementing a Feedback Strategy for Your Business Plan

Ask any business owner or manager an they will quickly tell you that at any business level feedback is a crucial element of business imporovement. The feedback process is not only important for existing bsuiensses but similarly so for the entrepreneur writing a business plan or just starting. Whether you are using the snail method of writing your plan or using the latest in business plan software technology with feedback options build in, you need to keep in mind that your business plan will be updated on a regular basis. Where does the feedback come from? Well that is exactly what we are looking at in this article.

Online surveys can improve the efficiency, effectiveness and profitability of your business. To make it easier, we’ve developed templates on each of the survey types below, using proven market research techniques. These templates will give you an edge, and the right data, as you look for feedback on new ideas for your business.

Get Customer Feedback
One of the most popular uses of surveys is as a yardstick for customer satisfaction. Annual, semiannual or quarterly surveys serve as a barometer of your business’ health and allow you to monitor your performance over time. In addition, many businesses send out satisfaction surveys after each customer transaction, using the survey as a way to judge the effectiveness of individual employees and the product itself.

Test the Concept
Expanding your audience to include prospects allows you to check the receptivity of the market to a
product enhancement or a new offering. Sending a survey to two segments – a portion of your customers and a portion of your prospects – provides visibility into whether prospects require different messaging or education than was required to win your current set of customers.

Check Your Vendors
Surveys can help evaluate which vendors are best equipped to deliver the raw materials required to fulfill your product plan. You can send out a survey asking about their shortest lead-time, their standard shipping terms, etc. By downloading their answers into a spreadsheet, you can sort your vendors by those most capable of meeting your new requirements for faster shipping or expanded capacity.

Plan and Evaluate Your Event
A survey is an easy way to collect multiple data points from a large group of people.
Zoomerang users in the marketing and event planning departments have deployed surveys to ask representatives about their arrival times to a trade show, their requested shifts, etc. and have used that information to plan their event. Afterward, they deployed a separate survey to ask the representatives for their opinion on the value of the tradeshow, the number of sales attributed to it, and whether they plan to attend next year.

Gauge Employee Satisfaction
Online surveys are an ideal mechanism for soliciting employee feedback since they provide the
anonymity that is essential to candid feedback. Many companies use surveys to conduct
management evaluations and to ensure privacy Zoomerang can even deploy the survey for you.

Share Best Practices
Guidance is golden and Zoomerang users within associations or even loose groups of vendors are finding surveys an effective way to gather wisdom that they can’t find elsewhere. A quick survey on a how to handle a difficult business question generates responses that can be directly put into practice.

Get It On Your Calendar
Give yourself enough lead time to really learn what the survey reveals: too frequently surveys are
done at the last minute, which makes it impossible to act on the insight. In addition to a quarterly
customer satisfaction survey, consider sending surveys using this rotation:
Operational surveys after each transaction
Prior to regularly scheduled tradeshows and events
Marketing concept tests as product development dictates
Quarterly employee reviews
Quarterly vendor surveys
Semi-annual product releases
Annual employee satisfaction surveys
Benefit queries before changes in annual plans

Survey Deployment

There are several ways to deploy your surveys and each method has its own advantages. A one-time email broadcast to your entire customer or prospect base is a thorough way to communicate. If you
host your survey on your Website, you send a signal to prospects, customers and vendors that you
are constantly listening to them and receptive to feedback.

Building a real-time feedback loop into a number of sections of your annual business plan can
provide you with a way to be nimble – and knowledgeable – in your operations. Examine your calendar and your plan and ask yourself: would it help to test this concept or gather more information?

We acknowledge the guys at “ for contributing to some aspects of this article.

A Business Plan for Business Finance

The business plan is increasingly playing a crucial role when it comes to securing small business finance. Not only with banks, where it is now mostly compulsory to have a business plan if you are hoping to apply for business finance, but also with venture capital firms and angel investors.

Today in order to get your new business going, your business plans are essential at this stage of setting up your business. In it you will already have scoped out what your money needs are and how you plan to raise the startup capital, and you'll be using it to persuade potential investors and lenders of the benefits of funding your new business.

Your financial calculations in your business plans therefore need to be thorough and accurate and presented with confidence. Everyone expects that they'll be able to stick to their business plans and only need to borrow the absolute minimum, but more often than not something unexpected crops up to throw a wrench in the works. It therefore makes good business sense to include a contingency element in the amount of startup capital you request. It's better to do that now and have the extra cash as a safeguard than it is to have to return to your lender or investor not far down the line to ask for more money.

If it wasn't in your original business plans they are likely to be concerned about your financial ability and your request may be rejected. Many people wonder how much startup capital they should request. You want to keep costs to a minimum and invest your money wisely in your new business, while still having the security of a little extra for backup if required. What startup capital you borrow should give you a realistic challenge for your new business but should not be too risky. And back up your calculation with evidence in your business plans, since it has to be credible.

With numerous organisations in South Africa now supporting the use of business plan software in order to get the business plan right, the issue is hard to ignore. Organisations such as Investors Network and the SA Venture Capital Association are all throwing their weight behind effectively constructed and well researched business plans to ensure that not only the business is successful in finding the finance it needs but also that it is able to start successfully.

Saturday, December 4, 2010

The New Business Planning

Both large and small businesses in our economy have for many years based their business practices on ideas and haunches of management, a useful product that clients new where to buy and relied on their staff to drag them through challenging times. Today this strategy s fast becoming outdated and a more calculated approach, using business planning software and a regular updated business plan is often at the order of the day in those more successful and sustainable businesses.

This more effective approach uses sophisticated analytics to help managers improve the allocation of capital and resources, and it broadens the business planning perspective to include regular market research and updated information on client expectations.

Companies that make hefty investments in business planning capabilities expect a return for that investment and its often the more sophisticated in business plan software solutions that are being used. Business both large and small, corporate and start-up entrepreneurs tend to look for a more revolutionary approach to the business planning process. These companies watched the fast changing markets, share prices and exchange rates during the recession sweep their business plans and budgets aside. As sales declined and credit dried up, management became concerned about capital efficiency. Many also became acutely aware that their corporate performance deviated sharply during the downturn from the guidance they'd given to investors.

Shifting to a new approach to planning can enable companies to allocate resources more efficiently and help managers balance the competing demands of short-term profitability and long-term value creation, if it's done correctly. However, this new approach to planning requires mastery of three areas in particular:

Flexible and dynamic planning processes;
More sophisticated analytics and frameworks for resource allocation; and A broader planning perspective to account for the greater weight given to future value and intangible assets.

While the recommendations may sound obvious, in practice, companies rarely adopt them. A company's own historical performance oftentimes remains the most frequently used benchmark for business targets.

In the face of today's market realities, companies must refocus their attention on the most volatile aspects of the business. To that end, higher-performing companies more extensively leverage external information about customers, competitors, investor expectations and regulators, and they establish benchmarks for each. Generally, these business targets are tracked via 10 to 15 key performance indicators that explain virtually all of the company's financial performance. This enables them to make decisions fast and get the right information into the hands of the right people who can act quickly on that information.

But high-performing companies don't just track the performance indicators. They create scenarios that incorporate those factors, and help management understand what could happen.

Such scenario planning in and of itself is not new. Businesses have used scenario planning for decades to create predefined alternative views of their company's future. Companies may consider everything from changes in GDP and the effect of disruptive technologies to the bankruptcy of a competitor with high market share.

Even smaller business are increasingly utilising the scenario based planning strategy to ensure that both their own and their investors capital and time investments are utilised effectively and are protected against possible risks that may harm the business.

Before defining scenario planning, it is necessary to give definition of scenario to make a better understanding of the term. According to Lynch (2003, p. 93-94), scenario are detailed and plausible views of how the business environment of an organization might develop in the future based on grouping of important environment influences and drivers of change about which there is a high level of uncertainty. For example, pub industry in the UK has changed during the past decade. Started from non-smoking area and now the pubs are facing new regulation in which pubs and nightclubs have to turn themselves into non-smoking pubs by 2008. Obviously, it is not possible to forecast precisely over the period of 10 years time that the government will write this regulation. However, pubs can imagine this happening if they look at the non-smoking area policy. Accordingly, it is a need for a pub industry to view business environment of five years or more.

Scenario planning does not make an effort to predict or forecast the unpredictable future business environment. Therefore, it considers multiple and equally plausible futures and works out a strategy to cope with these scenarios in the case that they may well come to fruition.

From a start-up perspective this may often be done by looking at industry reports, through brainstorming or looking at other more evolved industries. The issues really in many ways is that of preparation and as recent economic events have shown us we are seldom sufficiently prepared for what the future may hold.

Sunday, November 21, 2010

A cycle for business planning

The business planning cycle is concerned with reassessing the overall strategies and efficiency of the business achieving it's main objective, after all a "business plan" is essentially a living document where revisions through its are inevitably necessary. Furthermore, a business planning cycle typically occurs annually, as this is ideal in determining what objective is to be realized through following fiscal year.

There are five main components involved in a business planning cycle: strategic planning, consultation-and-scrutiny, financial planning, employee appraisal, and a decision making criteria.

Strategic Planning
Strategic planning is concerned with maintaining: objectivity when performing risks assessments, assessing the current economical climate impacting the business's mission, clarifying or revisiting a companies main objective, and formulating a step-by-step action strategy specific to the unique benefits and challenges predicted for the next fiscal year. Simply put, a business's planning cycle implements a strategy concerned with creating a hierarchy list of priorities required for the business to achieve its goals.

Financial Planning
Financial planning is concerned with the total costs involved in the business’s operations and ultimately all financial commitments in achieving its main goal. Moreover, a business planning cycle involves revisiting the business’s financial plan by objectively assessing significant changes in the industry, and the economy itself prompting any reversions to the financial strategy needing to be made. Lastly, financial planning includes three main components: a cash flow statement, income statement, and balance sheet.

Employee Appraisal
A business planning cycle is typically preformed annually invoking an extensively reassessment of the the performance of its employees. Often called an employee appraisal. An employee appraisal is concerned with objectively evaluating the performance of an employee's talent, quality, and time-cost. Also, during an employees appraisal, employees themselves may also provide feedback to the managers, assisting mangers with gauging workplace morale and the competences level of the management team.

Consultation and Scrutiny
Consultation and scrutiny is a procedure concerned with reviewing and critiquing specific hindrances and benefits related to the business achieving its goals: competitive analysis, business environment analysis, and acquisition planning are some examples of what's reviewed . Furthermore, consultation-and-scrutiny may involve having a third party (consultation firm) objectivity evaluate the overall performance of the business and necessary expectations pertaining to its mission statement.

Decision Making Criteria
A balanced scorecard involves measuring if the business activities and operational costs corresponds to the ultimate vision, mission, and agenda of the business; this is part of establishing a decision making criteria. A decision making criteria is an essential component of an annual business planning cycle guiding the business specific to its mission statement. Other examples involved in a decision making criteria are: a break even analysis, internal rate of return, and a net present value; this are all terms involved in gathering business data vastly contributing to the decision making process.

Sourced from

Thursday, October 14, 2010

How to Write a Business Plan

The purpose of a business plan is to recognize and define a business opportunity, describe how that opportunity will be seized by the management team, and to demonstrate that the business is feasible and worth the effort.  The use of business plan services can of course greatly help with this. Where implementation of the business plan requires participation of lenders and/or investors, the plan must also clearly and convincingly communicate the financial proposal to the prospective stakeholders: how much you need from them, what kind of return they can expect, and how they can be paid back.

Many entrepreneurs insist that their business concept is so clear in their heads that the written plan can be produced after start-up; this attitude "short-circuits" one of the major benefits of producing  the plan.  "A realistic business plan might save you from yourself by persuading you to abandon a bad idea while your mistakes are still on paper," says Ben Botes from Caban Investments in the UK

Do many people need to be saved from themselves?  Are many entrepreneurs so determined to go into business that they overlook or underestimate the potential pitfalls?  Is that all bad?  Can many business proposals stand the harsh light of skepticism?

Let us say we worked out the numbers on paper, and are convinced that we do not need to be saved from ourselves.  Do we still need to write the plan?  The discipline of writing a plan forces us to think through the steps we must take to get the business started, and, to "flesh out ideas, to look for weak spots and vulnerabilities," according to business consultant Eric Siegel.  A well-conceived business plan can serve as a management tool to settle major policy issues, identify "keys to success," establish goals and check-points, and consider long-term prospects.

Who is the audience for it?  Certainly, the plan is very useful if we are looking for investors or lenders.  It is the primary tool used to convince prospective stakeholders that the idea is promising, the market is accessible, the firm's management is capable, serious and disciplined, and that the return on investment is attractive.  But even if we can finance the venture ourselves, these are useful issues to address.

What are the elements of a good business plan, and how does it differ from a bad one? The appearance of the plan says something about its preparers.  It should be professional, though not lavish, so as not to distract from its contents.

While the formats of business plans can be as varied as the businesses themselves, there are components that should appear in all plans.  These include an executive summary, elements which describe the opportunity, elements which specify how the business will operate, an analysis of financial expectations, a closing summary, and any supporting documentation.

Let us discuss each of these in a little more detail, with an audience assumed to be a reader who might be a prospective investor or lender, a trusted professional advisor, or a friend whose business judgment we value.

The cover and title page should contain company name, address, phone number, primary contacts, and the month and year of issue.  Often, the issuers include a copy number to control circulation.

The executive summary introduces the opportunity, and contains highlights of the substantive sections.  It should concisely explain the current status of the company, its products and/or services, benefits to customers, and summary financial performance data.  Where investment is being solicited, it should also include the amount of financing needed, and how investors will benefit and harvest their gains.  With all this information, this summary should still be held to two pages, to insure its being read, and must generate enthusiasm about the proposal to entice the reader to consider the entire plan.

The business plan conclusion is a shorter summary, more directed to what is being asked of the reader.  Supporting documentation includes relevant marketing research, and financial details and statements behind the financial proposal.

Tuesday, October 5, 2010

Creating and Using a Business Plan

Interestingly enough and against the grain of many an entrepreneur, creating and using a business plan is among the most important steps toward creating your business and establishing its credibility, yet many entrepreneurs seem to ignore researching how to develop one. This affects their credibility, hurts their chances of securing funding, and makes it difficult to keep the business on track.
To develop a business plan, you should first consider what your offering, both as-is and in relation to your customers and competitors. What do you offer customers (that your competitors don’t – and, no, it shouldn’t be some meaningless gimmick)? What obstacles exist in bringing the product to market? You must answer those questions.
As a continuation of that, you should also analyze your market. This means finding out what your customers want and how you can reach them. You must provide information about market size, potential market growth, and delivery plans. This should also provide a marketing strategy with detailed information regarding costs. If you are creating a retail business, you should include information about location, including market demographics.
You also need to consider competition, as well as your strengths and weaknesses over them. Find out how to exploit the competitors’ weaknesses, and cope with their strengths. However, be realistic about your prospects and don’t hide information. You’ll only hurt yourself in the end.
Your business plan must also include information about your planned organizational structure. How many employees? How many managers? How many senior personnel? If you have managers, provide information about their experience. Your plan should provide a detailed picture of who’s in charge. Investors want to know that your managers know the industry and your business’s operational procedure.
You should also provide information about manufacturing procedure, as well as any vendor and distributor relationships needed to get the product ready and delivered to the customers.
Provide financial information, including a three-to-five year historical summary and future projections. Of course, if your company is new, you won’t have a three-to-five year history, so just provide what is available. In addition, you should provide information regarding any potential collateral, which can help you secure funding if the numbers don’t help investors feel confident in your business, but be aware that such collateral will be forfeit if the investors are unsatisfied with your company’s performance.
Finally, you need to provide information about company history and objectives.
With this information, you should be able to develop a successful business plan.

Friday, October 1, 2010

Business planning - case evidence and examples

Business plans are certainly not a one size fits all. If you are a serial entrepreneur like myself you may have learned this along the way. Whether you have used strategic planning in the organizational context, perhaps through using a business plan template or two to ensure you get the finer details spot on, a formal business plan when seeking business finance from a bank or investor - perhaps using the least business plan software to ensure you cover the requirements of said investors or banks, a very flexible and practical plan to support you with your small business or simply a to do list for your day to day running of the business, perhaps with a few mind maps and strategies with which to cope. BUsiness planning however you see it really needs to be seen as a crucial aspect of achieving dreams goals or objectives. This is perhaps better shown in tow simple cases, looking at just how business planning can be used.

Case Study #1: Skip the formal document
Reece Pacheco and his fellow co-founders started the game-film editing and sharing service Homefield in 2007. When they started to court investors, they were regularly told to send their business plan. Reece spent a lot of time and energy creating a traditional one. It was difficult because, as he says, "early on, we didn't know everything we needed to know." In two weeks what he'd written was no longer relevant. He also found that the investors and partners most intrigued by Homefield didn't care about the plan. They just wanted to hear his story and why he was passionate about the business. In fact, those that were less interested were more likely to request a plan.

Reece decided that a traditional plan wasn't practical. "The web moves too fast. Most businesses move too fast he explains. "Investors' attention spans have gotten shorter and shorter." And the customers Homefield has secured are much better proof of their company's viability than any five-year projections. So Reece now uses a six-page PowerPoint deck that is flexible and easy to update. The aim is to "build relationships," to convince partners and investors that he and his colleagues are the right people to execute on their unique idea. And so far, it's worked.

Case Study #2: Tell a compelling story
Jenny Machida joined the founding team of Sevident in December 2009 as the Chief Business Officer. Sevident is a start-up focused on developing a rapid diagnostic platform for infectious disease. Like many other businesses, their value lies in the flexibility of the technology they offer, so it's critical to convey its various applications. The challenge is to show that in a business plan without sounding unfocused.

The team started off by describing the business in presentation form. They had PowerPoint decks and one- and two-page executive summaries but hadn't developed a formal business plan because no potential partners, customers, or funders had asked for one. "You don't need a plan until you have an audience for it," Jenny says.

But, they decided to create a formal plan because they assumed potential funders would need one further along in the process. The document they use now, which is roughly 30 pages including data and financials, extends directly from the earlier presentation materials and is regularly updated as the business evolves.

Rather than explaining all the potential applications of their technology, they now tell a concrete story about how they will use the first application. The plan is still flexible in the way it describes the company's operations and how they will play in various markets. "We've made a deliberate choice to foreground the capability of the technology itself," Jenny explained, rather than focus exclusively on a specific market opportunity. The plan demonstrates that they have thought of all of the various options for how the business may develop without laying out exhaustive and low-probability contingency plans. "Everyone knows that there's uncertainty to a new business but you still need to tell a compelling story of how you're going to knock down risk," Jenny says. Sevident is now in active diligence with several venture capital firms.

Both cases show some of the varied uses and options for the business plan, not just the must do and wish I did not have to versions. This really can and should be a key element of succeeding with your business.

Scenario planning for start-ups

With start-up companies especially often seeing business planning more as a chore, large organizations around the world recognize it as a key tool thought which to prepare them selves for the opportunity and challenges that the future may hold. A business plan strategy that has been used with varied success for decades now is that of scenario planning.The scenarios relate closely to key elements of the strategy such as the competition,technology, or geography. The approach is then to develop a “resilient” strategy that can deal with wide variations in business conditions.For instance, each scenario is analysed to determine the optimal setting for each element (What would be the best marketing strategy for Scenario A? For B?) The most resilient option for each strategy element is chosen for each of the scenario-specific settings. 

The resilient options are integrated into an overall, co-ordinated business strategy, takeing all scenarios at face value without judging probabilities.This approach makes maximum use of scenarios in strategy development. It provides management with the maximum feasible range of choice and forces careful evaluation of these options against differing assumptions about the future. But it requires effort and patience; and it works best when the decisions -makers participate directly in the scenario process. An example of this approach is the work that United Distillers (now Diageo) has carried out a number of scenario development exercises to assess the future of markets such as India,
South Africa and Turkey and hence the potential for and possible direction of business.

Scenario planning is regularly used at US-based clothing specialist Levi-Strauss by senior management who sit on cross-functional committees at headquarters level. Scenarios have been used to heighten awareness of the challenges facing the business, and to develop strategy in relevant areas such as the environment. They have been used to help thinking in the context of challenges, such as what would happen if cotton no longer existed, or what would be the impact of the deregulation of the cotton industry in the US.Erste Allgemeine Versicherung, an insurance company based in Austria, first used scenarios in 1988. The main areas considered were politics, economics, the insurance industry structure and changes, technology and demographics. The objective was to look at the business environment and how other competitors might develop. As a result of the scenario process, the company anticipated the fall of the Berlin Wall and the opening up of Eastern Europe before it happened. This was identified as part of one of the scenarios in 1988. This enabled the company to be ready to move into Eastern Europe and therefore be one of the first companies to set up in Hungary. Companies were also founded in the Czech Republic,Slovakia and Slovenia.

BA used this approach to develop strategy, taking each scenario through to a full numerical plan. With hindsight, they thought that the last stage – the full numerical plan - had been more work than warranted by the benefit. This seems to be a consensus, that the best use is staying at the descriptive level, to avoid a focus on the detail of the model rather than exploring the underlying assumptions.Strategy Evaluation This method of connecting scenarios to planning uses scenarios as ”test beds” to evaluate the viability of an existing strategy or compare proposed strategies. It is often the best first use of scenarios in a company’s strategic-planning system. The strategy may have derived from a set of implicit or default assumptions or a single- point forecast – the approach identifies quickly “bottom-line” issues and provides senior managers with immediate evidence of scenarios’ utility.It is often used in “management game” mode, where a business unit is played against a competitor under each scenario. This allows the management to assess the likely success of the business in the diverse conditions of the scenarios. In particular, it homes in on opportunities that the strategy addresses and those that it misses, threats/risks that the analysis has foreseen or overlooked, and factors affecting competitive success or failure. This approach normally highlights the options for changes in strategy and the need for contingency planning.For instance, in 1995, ICL’s manufacturing division had been trading as D2D for several years and increasing the amount of work done by the division for organisations outside ICL. D2D’s business plans needed to cover a range of external business conditions and customers. We applied the test bed of our IT industry scenarios to the plans, and realised that the plans were based on a set of default assumptions closely aligned to one scenario. When we ran the plans through the wind test of the other scenario, we found that a number of the operational and business characteristics that D2D had assumed to have very high value were of less interest to the customers in this scenario. The analysis helped us to decide to sell D2D to Celestica, a global contract manufacturing company, in December 1996.Sensitivity/Risk Assessment   Scenarios can be used in two rather different ways to assess risk. One way is to Identify key
conditions in the future market/industry environment (such as size/growth of market, changes in regulatory climate, or a technological breakthrough) that would be necessary for a “go” decision on a particular project. The other is or to apply scenarios to a portfolio of projects and to use a technique such as a Market Attractiveness/Capabilities matrix to evaluate the comparative risk of the projects or businesses.Using scenarios to evaluate a specific decision (such as a major plant investment or new business development) is very useful if there is a very clear and specific “decision focus” that lends itself to a “go/no go” decision. For instance, a construction company uses the technique
for “back of the envelope” examinations of business propositions, and as part of its project portfolio management. In more complex cases, computer modelling (with scenarios providing assumptions) can be used to evaluate the strategy’s resilience or vulnerability to differences
in business conditions. So for instance 3M Telecommunications Systems Division has used scenarios, linked to payoff and risk assessment, to implement new strategies following deregulation.Hedging or contingency Planning

This fourth method starts with one particular view of the world – this may be the assumptions behind the current plan, or “the most probable” of several separately developed scenarios. Then a strategy and plan is developed to fit this scenario, maybe using a SWOT (strengths, weakness, opportunities, threats) analysis.The strategies & plans developed for one scenario are then tested against other scenarios to assess resilience and the need for modification, “hedging”, and contingency planning. In its step-by-step process, this addresses many key questions that scenario-based strategy should ask, and avoids the pitfall of focusing on only one scenario.Using probabilities attached to scenarios has been extensively used in France, with Michel Godet’s guidance, as described in (5). Probabilities are also part of the Batelle approach, and the CSM (Comprehensive Situation Mapping) tool, which has been used for instance to model

new banking competitors.Perhaps the issue is that large corporations have more at stake, or perhaps its more a case that these corporations realize what is at steak because of what they have achieved. Entrepreneurs to need to take the issue of planning more seriously. Yes of course we need to be flexible and responsive to what clients, the environment and competitors through at us and having a number of well researched and resourced options to our disposal is half the battle won.

Wednesday, September 15, 2010

What your business plan should include

With so much being written about what should a business plan include, you may be confused as to what exactly needs to be included. It really will depend on the purpose of the plan, the industry you find yourself in and what stage of your business you are busy with.

Your business plan should include a summary of what your business does, how it has developed and where you want it to go. In particular, it should cover your strategy for improving your existing sales and processes to achieve the growth you want.

You also need to make it clear what period the business plan covers - generally the next 12 months to two years.

The plan should include:

  1. Your marketing aims and objectives, for example how many new customers you want to gain and the anticipated size of your customer base at the end of the period. To find out about marketing strategy, see our guide on how to create your marketing strategy.
  2. Operational information such as where your business is based, who your suppliers are, and the premises and equipment needed.
  3. Financial information, including profit and loss forecasts, cashflow forecasts, sales forecasts and audited accounts. See our guide on cashflow management: the basics.
  4. A summary of the business objectives, including targets and dates.
  5. If yours is an owner-managed business, you may wish to include an exit plan. This includes planning the timing of your departure and the circumstances, eg family succession, sale of the business, floating your business or closing it down. See our guide: consider your exit strategy when starting up.

If you intend to present your business plan to an external audience such as investors or banks, you will also need to include:

  1. your aims and objectives for each area of the business
  2. details of the history of the business, including financial records from the last three years - if this isn't possible, provide details about trading to date
  3. management's skills and qualifications
  4. information about the product or service, its distinctiveness and where it fits into the marketplace

If you haven't already written one, you can use our interactive tool to create a business plan.

Prepare a business plan for growth

Creating a business growth plan is in many ways as important as the original business plan. Depending on your ambitions you may in many ways be taking on even more risk than what you did originally, only this time you may have a much better idea of what to expect in the market. A advanced business software package will be equipped for this and you may very well be able to upload your original business plan and find suggestions and alternatives on where to go next, what resources you may need, how long such a strategy may take and what the risks involved may be..

Planning is key to any business throughout its existence. Every successful business regularly reviews its business plan to ensure it continues to meet its needs and responds to variations in the market, the economy, its customer base, etc. It's sensible to review your current performance on a regular basis and identify the most likely strategies for growth.

Once you have reviewed your progress and identified the key growth areas that you want to target, it's time to revisit your business plan and make it a road map to the next stages for your business.

This guide explains how you can turn your business plan from a static, 'one-off' document into a dynamic template that will help your business both survive and thrive.

The importance of ongoing business planning

Most potential investors or lenders will want to see a business plan before they consider funding your business. Although many businesses are tempted to use their business plans solely for this purpose, a good plan should set the course of a business over its lifespan.

A business plan plays a key role in allocating resources throughout a business. It is a tool that can help you attract new funds or that you can use as a strategy document. A good business plan shows how you would use the bank loan or investment you are asking for. See our guide on how to use your business plan to get funding.

Ongoing business planning means that you can monitor whether you are achieving your business objectives. A business plan can be used as a tool to identify where you are now and in which direction you wish your business to grow. A business plan will also ensure that you meet certain key targets and manage business priorities.

You can maximise your chances of success by adopting a continuous and regular business planning cycle that keeps the plan up to date. This should include regular business planning meetings which involve key people from the business.

To find out more, see our guides on how to review your business performance and how to assess your options for growth.

If you regularly assess your performance against the plans and targets you have set, you are more likely to meet your objectives. Doing this can also signpost where and why you're going astray. Many businesses choose to assess progress every three or six months.

The assessment will also help you in discussions with banks, investors and even potential buyers of your business. Regular review is a good vehicle for showing direction and commitment to employees, customers and suppliers.

Business plan tips from a successful entrepreneur

Established in 2003 near Cape Town, Fenwick & sons produces decorative ironwork using traditional techniques combined with modern technology. A key challenge for Fenwick & sons has been to keep control of the business as growth accelerates. John explains how this has been achieved.

"Treat your business plan as a work in progress and review it often." We used  business plan services which really speeds up the process and adds to the efficiency in a big way
"Don't become complacent when things are going well, always worry positively about the future."
"Put formal processes in place from the start as informal processes of any kind can often break down, with potentially catastrophic consequences, when rapid growth puts them under pressure."

What I did

Review progress

"A good business plan is a must for any new or growing business since it gives targets to measure against. We had clear goals for our first year's trading, plus an ongoing strategy for steady growth in the first three years.

"However, after three months our sales were 200 per cent higher than we'd forecast. We also found that we were attracting more complex - and profitable - commissions than we'd expected. While this was obviously good news, it also raised questions about how we would cope in terms of staffing, production capacity and order scheduling."

Update the plan

"Thankfully, our original business plan was well researched and put together so we only needed time to review and update our original assumptions. The new profit and cash forecasts provided all the information we needed to help us manage our unexpected growth.

"For example, we brought forward the employment of another blacksmith as well as investment in new equipment. Originally we'd also planned for me to join Tim in the business part time after three years. Our rapid growth meant I joined after 16 months.

"These changes to our plan created a chain reaction. Doubling our capacity and freeing up Tim's time for business development soon led to even bigger and more lucrative contracts."

Control finances

"As we've grown, we've stuck to some basic financial principles and processes, such as proper cashflow forecasting, to prevent overtrading.

"We're very rigorous in our estimates, costing every last step of a job so we don't quote too low. We also have a policy of not offering reductions - we price a job fairly, and that's it. There's no point cutting prices to attract business if you can't cover your costs.

"Other methods we use to control cash are 'just in time' raw material ordering to save on storage costs, insisting on deposits from customers and making sure we get paid in full on time."

What I'd do differently

Target our marketing more carefully

"While we did some successful marketing early on, we should have refined it earlier to reach specific customers and sectors. It's all too tempting to stick with what you've got when you're growing quickly and time is at a premium."

Address work-life balance

"A new business can be all consuming, especially if it's growing quickly, and that's not healthy in the longer run. We should have included work-life balance issues, such as taking holidays, in the business plan. We do now!"

Reviewing the business plan - when and how?

Once you have drawn up your new business plan and put it into practice, it needs to be continually monitored to make sure the objectives are being achieved. This review process should follow an assessment of your progress to date and an analysis of the most promising ways to develop your business. To find out more about these stages see our guides on how to review your business performance and how to assess your options for growth.

This process is called the business plan cycle. In some businesses, the cycle may be a continuous process with the plan being regularly updated and monitored. For most businesses, an annual plan - broken down into four quarterly operating plans - is sufficient. However, if a business is heavily sales driven, it can make more sense to have a monthly operating plan, supplemented where necessary with weekly targets and reviews.

It's important to keep in mind that major events in your business' target marketplace (eg competitor consolidation, acquisition of a major customer) or in the broader environment (eg new legislation) should trigger a review of your strategic objectives.

Regardless of whether or not there are fixed time intervals in your business plan, it must be part of a rolling process, with regular assessment of performance against the plan and agreement of a revised forecast if necessary.

The business plan is all about targets

An effective business plan is really all about targets. Affective targets should be set and will act as a motivating factor for those working on the business to help it succeed.

While the overall plan may set strategic goals, these are unlikely to be achieved unless you use SMART objectives or targets, ie Specific, Measurable, Achievable, Realistic and Timely.

Targets help everyone within a business understand what they need to achieve and when they need to achieve it.

You can monitor the performance of employees, teams or a new product or service by using appropriate performance indicators. These can be:

  1. sales or profit figures over a given period
  2. milestones in new product development
  3. productivity benchmarks for individual team members
  4. market-share statistics
  5. Targets make it clearer for individual employees to see where they fit within an organisation and what they need to do to help the business meet its objectives. Setting clear objectives and targets and closely monitoring their delivery can make the development of your business more effective. 
  6. Targets and objectives should also form a key part of employee performance reviews or appraisals, as a means of objectively addressing individuals' progress. See our guide on how to use appraisals to manage performance.

Make sure that you are both committed to your business plan targets yet flexible in how these will be met and when they may need to be changed. Being flexible in taking advantage of new opportunities is a key benefit of being a small business and should be taken advantage of relentlessly.

Plan and allocate business resources effectively

The business plan plays a key role in allocating resources throughout a business so that the objectives set in the plan can be met. A good business plan software program will almost certainly help you to do this so if your strengths lye elsewhere, it should not be a barrier to your success.

Once you have reviewed your progress to date and identified your strategy for growth, your existing business plan may look dated and may no longer reflect your business' position and future direction.

When you are reviewing your business plan to cover the next stages, it's important to be clear on how you will allocate your resources to make your strategy work.

For example, if a particular business unit or department has been given a target, the business plan should allocate sufficient resources to achieve it. These resources may already be available within the business or may be generated by future activity.

In practice this could mean recruiting more office staff, spending more on marketing or buying more supplies or equipment. You may want to provide funds through current cashflow, generating more profit or seeking external funding. In general, it is always better to fund future growth through revenue generation.

However, you should do some precise budgeting to decide on the right level of resourcing for a particular unit or department. It's important that resources are prioritised, so that areas of a business which are key to delivering the overall aims and objectives are adequately funded. If funding isn't available this may involve making cutbacks in other areas.

Compiling a more sophisticated business plan

Drawing up a more sophisticated business plan may be more time consuming but well worth while. Using the latest in business plan software technology may also be a a great way to ensure that your business plan is indeed a step ahead.

If your business has grown to encompass a series of departments or divisions, each with its own targets and objectives, you may need to draw up a more sophisticated business plan.

The individual business plans of the departments and separate business units will need to be integrated into a single strategy document for the entire organisation. This can be a complex exercise but it's vital if each business unit is to tread a consistent path and not conflict with the overall strategy.

This is not just an issue for large enterprises - many small firms consist of separate business units pursuing different strategies.

To draw up a business plan that unites all the separate areas of an organisation requires a degree of co-ordination. It may seem obvious, but make sure all departments are using the same planning template.

Objectives for individual departments

It's important for each department to feel that they are a stakeholder in the plan. Typically, each department head will draft the unit's business plan and then agree its final form in conjunction with other departments.

Each unit's budgets and priorities must be set so that they fit in with those of the entire organisation. Generally, individual unit plans are required to be more specific and precisely defined than the overall business plan. It's important that the objectives set for business units are realistic and deliverable.

However complex it turns out to be, the individual business plan needs to be easily understood by the people whose job it is to make it work. They also need to be clear on how their plan fits in with that of the wider organisation.