School In A Box/How to Write A Business Plan for a Self-Sufficient School
This chapter will lead you through the sections that must be included in a great business plan. By the time you have finished reading this chapter you will have the foundations of your business plan.
A business plan clearly sets out the objectives of your business. In this case, the business plan will be the plan for not only creating your FSS School, but it will also have imbedded plans which detail each of the businesses the School intends to create and run. It will state how those businesses intend to operate and how the businesses and School will become profitable.
A good business plan will keep you focused on your objectives. It will help you plan for the future because you will have already planned your activities. It will lay down a budget and predict future cash-flow so that you will stay on-track in your drive towards the goal of a self-sufficient school. It will also help you identify areas that you might have overlooked or areas that require more thought and planning.
A business plan is very important when trying to attract finance. Your potential investors will be able to read your brilliant business plan and it will address all their doubts, answer all their awkward questions and convince them that your dream is worth funding.
Before beginning to write the business plan we should assert our decision to be self-sufficient. The plan will be the mechanism that will allow us to make it reality and it should be tailored to the precise circumstances of your school. Business plans from other schools will work as reference and help but every school will need to create their own plan.
A good business plan must answer some of the following questions:
• What type of businesses can be started?
• Who will your clients be and why should they be interested in buying your product?
• How will the clients find out about the existence of your products or production?
• Who produces something similar?
• Who are you competing with?
• Is your work team trained to develop your product?
• Do you have the resources needed to implement the plan or do you know where to get those resources?
- 1 EXECUTIVE SUMMARY
- 2 BUSINESS DESCRIPTION
- 3 MARKET RESEARCH
- 4 COMPETITOR ANALYSIS
- 5 SALES AND MARKETING PLAN
- 6 OPERATIONAL PLAN
- 7 MANAGEMENT AND STRUCTURE
- 8 FINANCIAL PLAN AND PROJECTIONS
- 9 WORKING SECTION ON WRITING
The objective of this section is to help you write an Executive Summary for your business plan.
The executive summary of your business plan is most often the defining section of your plan, which determines whether you have captured the interest of the reader or potential donor.
It is crucial when writing your executive summary that it not be cumbersome or lengthy, yet is still concise about what you are trying to achieve while making a quick clear point about who you are, and what you are trying to achieve.
a. What should go into an executive summary?
The executive summary should cover details of what you are trying to achieve, or have already achieved, however at the same time being honest about the challenges you have faced or are facing.
It is vital that while writing this document you put yourself in the shoes of your reader, ensuring that you are answering the “questions” they would be asking. If for example you are approaching a donor who’s ethos is education, make sure you detail the importance of the “learning by doing approach” and the sentiment that all income levels deserve access to quality education, which is what your institution is trying to achieve.
Don’t Make It Too Long. There is no hard and fast rule on how long an executive summary should be. A suggested maximum of two pages is long enough to detail the information you are trying to convey, but short enough to keep the reader’s attention!
Your plan should cover everything an outsider needs to know in order to understand how your project will work. However even if it is a work of unrivalled genius you need to accept that not everyone who is interested in your project will have the time or desire to read through every detail. How you will run your dairy or who is the big local competitor in the rabbit meat market is too much information for an executive summary.
Generally it’s recommended that this section is written after the main sections of the business plan are complete to ensure that it represents an accurate summary of their content.
The Executive Summary should include:
• A brief description of the plan outlining key business activities
• A sketch of the market and competitor analysis
• Sales projections vs. total operating costs for the school
Make sure when presenting the business plan you are completely au fait with the information that has been disseminated in the executive summary. This is a key area that donors choose to question you from!
The objective of this section is to help you provide an effective overview of how to identify and describe the school businesses that will generate income in the school as well as outlining their non-financial objectives.
a. Introduction of the business descpription
It’s fairly unusual for a school to have a Business Plan although many regular schools will have strategic and operational plans. This makes the Overview section of your plan all the more important, as it is in this section that you will explain how the different financial and non-financial objectives of your school support each other.
It’s also a chance to provide the background information that explains the origins and need for your school along with the range of business activities the school is looking to pursue.
For clarity we will refer to the school’s income generating units as ‘business units’ throughout this manual. Although each unit fulfills an educational purpose, thinking of them as ‘business units’ re-emphasizes the vital role of each in generating a profit to support the school’s financial self-sufficiency targets . Thus when we speak of milk production at the Dairy Farm or the hen-house where the eggs will be produced, they should be referred to as the Dairy Business and Poultry Business etc.
Besides illustrating the goals you want to achieve you also need to identify milestones. This implies that we must know the physical space available, the investment or necessary structures and most importantly the volume of products we hope to sell in the market.
For each project we must evaluate the both the learning and earning aspects.
The San Francisco Agricultural School concluded that they wanted to create space for a hen house for egg production. The search for this space was based upon the type of chicken they were going to have, where they were going to buy them and how many eggs they would produce.
They also investigated the market. Even though they found a number of big companies who already sold eggs to the merchants of the nearby city, they also detected an opportunity since these companies only visited their clients once a week and this service did not satisfy the clients.
When the merchants heard that the School would produce eggs, they showed interest especially in the fact that the fresh eggs were going to allow a better positioning of the price. As a result of this research the school decided to work with 1000 chickens that would produce about 700 eggs per day.
b. Descpription of your business units
This is the most important and difficult part of your business plan. The goal of this section is to explain what the business is, how it will be run and why you think it will be successful. The business plan should detail each income generating unit measuring accordly to the market, the physical space available, the resources available and the contribution that the self-sufficient school can make.
If we are communicating with potential buyers through the business plan then we need to clearly illustrate the plan of action of each business, with presice production estimations (according to the above resources) so that we dont over cater our capabilities and then later fall short of our promises.
Production System. Describe the steps necessary to make your product and deliver it to market. Include planning of the personnel and management structure, the development and organizational culture.
Deciding what the business is now and what it will be in five years, is the most important decision you will make. A small business can be involved in more than one activity. In this case, the key decision is what the central activity (or activities) will be. All of your planning efforts will be based on the perception of what type of business you are in.
If you make a real mistake at this point, your chances of success will be significantly reduced. Therefore you should take time to think calmly about this point.
Key question areas when working on this section:
1. What is or what will be your business?
2. The type of business, is mainly one of commerce, production or services?
3. Is the model of the business single-owner, partnership or cooperative? Advice from a lawyer on this point can be very useful.
4. The state of the business i.e. is it new? or is it an expansion or acquisition of a functioning business?
5. What market do you propose to serve and what is the size and fraction of that market that you hope to cover?
6. Why will your company serve the market better than the competition?
7. Why will your business be profitable?
8. Why have you chosen this particular location?
9. What management and staff are available and what is necessary to run the business?
10. When will you or did you open the business?
11. What days and hours will it be open? Will this be adjusted seasonally.
12. Why will a loan or someone’s investment in shares if relevant, make the business more profitable?
The objective of this section is to help you understand the importance of market research, how to conduct it and how to present your results.
Time after time businesses fail and their founders lose large sums of money - all because they didn’t really understand the market they were operating in. They did not take the time to do 'solid'market research before starting and found themselves faced with unexpected challenges or road bloacks.
“Knowing the market” i.e. getting to know your potential customers, what their needs are, what they buy, how much and how often is a critical part of the business planning process and one that need to be done before you begin your production activities.
Market research will help you make informed decisions on areas such as:
• What products are most in demand?
• What product you should start your business with?
• What other products might also be viable for production in the future?
The better informed your decisions are, the greater the chance of your school businesses being successful! Before you start thinking about how to conduct your research, let us start by taking a step back and making sure we understand what a market actually is.
a. What is a market?
We often use the word ‘market’ and feel safe in the assumption that the person we’re talking to understands the sense in which we’re using the term. This is not always true as the concept of “market” refers to two slightly different ideas as outlined in the table below:
To avoid confusion, normally when we talk about markets in the FSS School Hand Guide we are not referring to physical markets, but to markets in the broader sense of buyers and sellers for a given type of product or service.
A few facts about markets:
• Markets can be local, regional, national or global.
• Markets exist not only for physical products but also for services such as computer lessons or tourist accommodation. Both goods and services can offer interesting business opportunities for a FSS School.
• When there is ‘perfect competition’ in a market, the price of a product or service is determined by the many buyers and sellers reaching an agreement acceptable to both sides.
• Markets can be distorted where one or other side of the transaction has an advantage over the other side. This happens for example when there is only one buyer for a product or through price interference where governments offer subsidies to producers.
b. The importance of market research
It is essential that when you start planning work on your FSS School that you make a thorough study of the market. This should guide you as to where the best business opportunities exist and if you are being realistic about sales possibilities. We mentioned before that many businesses fail because of poor market research.
The following examples might give you some idea of why:
A school starts to produce goat’s milk because it has been offered free training in this activity. Once the goats have been bought and milk is being produced the school discovers that no one will buy the milk – people in the local community just don’t like the taste of it. The business fails. The school loses money.
A school’s cheese project identifies mozzarella for pizzas as a niche product which local restaurants might be interested in. The restaurants try a sample of the cheese and are impressed by its superior flavor and quality. They say they would definitely buy from the school. When the first batches of cheese are ready the school tries to sell them, but the restaurants only buy a very small amount. Finally they discover that although the school’s cheese is much better, lower quality mozzarella is much cheaper and the restaurants’ customers are very price-sensitive. The business fails. The school loses money.
Elsewhere a school in an area with lots of international tourists decides to start a hotel. They buy good quality materials and build a solid looking concrete building with durable plastic furniture. This type of long-lasting building and furnishings represents the sort of home local people aspire to have. After several months with very few guests the school discovers that the overseas tourists actually prefer cheaper buildings made out of local materials like bamboo and thatch. Because they don’t have hotels like that back home such accommodation is considered ‘exotic’ and therefore attractive. The business fails. The school loses money.
In each of these cases the school could have avoided making a loss and in the last case could have made a good profit, if they would have properly researched the market before starting their businesses.
Good market research should provide you the following type of information:
• Who will buy your product?
• Who will supply the goods you need to operate?
• How large is the total market?
• What percentage of the market will you reach?
• What is the market’s potential for growth?
• Can this market be segmented between different types of customer?
• What are the decision drivers for different customers example price, quality, reliability, scale?
• Is the target market local, regional, national or international?
• Who are the direct and indirect competition?
Market research by itself cannot guarantee you success in business however if your research can provide answers to questions like these you will greatly improve your chances of success and avoid costly mistakes.
c. How to conduct market research
As we have discussed, market research is the gathering of information of your market and competitors. There are many ways in which you can go about this and here are some suggestions of how you can go about achieving this:
1. Determine the goal of your market research. Are you looking to find out who the sellers are in your market, the products that are in demand or maybe who your customers will be.
2. You can start researching your market by looking through local magazines, newspapers, government gazettes etc to see who the vendors are and where they are situated.
3. Do a telephone survey by calling local farmers, markets, stores and potential clients and asking them about purchasing and selling habits.
4. If you are taking over a business i.e. not starting from scratch, then phone existing clients and find out from them if they are currently happy and hear what suggestions they have.
5. Observe customers at local stores and see the buying trends in your area. Do people go to different stores for example to buy meat products than to stores for fresh fruit and vegetable produce?
6. Lastly you need to organize all the information that you have collected to see the patterns and give you an advance understanding of the market you will be serving.
d. What you have learn from your market research
Market research should assist you in the following ways:
a. You should have a clear notion of the number of consumers that would be interested in acquiring the good or service offered by the school, in what time frame and what price they are willing to pay.
b. Clarified the characteristics and specifications of the service or product that will help us decide the type of packaging and establish the characteristics of the product that the consumer wishes to buy.
c. Have an understanding of what kind of people will be interested in your goods, which will help you with the orientation of the business and determine the volume of production.
d. Provide you with information about the appropriate price for your product or service in order to compete in the market. Keep in mind the irrational concept held by many people that “an expensive product will normally be of better quality than a product of low cost”.
e. Help you decide the right size for your business to start at which will then be the platform for your future expansion plans and its ongoing growth .
f. Tell you the usual distribution channels for the type of product or service that you are offering and how it functions.
The study of the market enables us to understand what the demand for the product is. For the school, it will not be enough to produce quality and sufficient volume of the product, but it will have to adapt its production to the market demand too. What we want to produce or what is obtained easily is not always what the market demands.
It is important to keep in mind the seasonality of the products because this affect the prices as well. This means that when a product is in demand or in its peak, the prices tend to rise, especially if the product is scarce. On the other hand if there is a lot of demand and no seasonality for the same product, the prices are generally lower.
The objective of this section is to help you analyze your competition and define who they are.
As part of your market research you will have identified target markets in which there is a clear demand for your product. Where the existing demand for a product is strong it is normally the case that there are already some businesses attempting to make a profit by meeting this demand. If you decide to go ahead and start up your new enterprise these businesses will be your competitors. The better you understand the competition, the better the chance that your income generation strategies will succeed.
a. What is a competitor analysis?
When identifying your competitors it is important to understand that these can be direct or indirect. It’s easy to find out whom your direct competitors are because they sell or offer products and services very similar to those offered by the school. To identify them you only need to go through the area in which you are thinking of establishing yourself, consult local newspapers and visit local markets etc
Indirect competitors are those who sell to the same market but not the same product or service. That is they offer other types of products or services, which if they were to be successful would directly limit the possibility of sale of the products offered by the school.
Analyzing the competition will tell you:
• Which companies produce products that are similar to yours.
• How big they are.
• Approximately what percentage of market coverage they posses.
• What their sales price to the public is.
• What the quality of their product is.
• What commercial strategy they use.
b. Why is competitor analysis important?
The stronger the competition the harder it will be for your business find customers and generate income for your school. Once your target market has been determined you will need to evaluate carefully who within this market offers a similar product to yours, how many competitors there are in it and whether you can offer a competitive advantage over them.
One of the most important factors that must be analyzed is the sales of the potential competition. Analyzing the total volume of sales is not enough, you must also consider the type of client they are selling to. Even if the competition companies are very productive, they might also be inattentive to certain areas of the market and therefore your school could seize that market by directing a certain service or product to a particular type of consumer.
The market for any product or service is composed of many segments. This means that within each market are different groups of consumers of all levels of income and social groups. Certain segments of the market demand specific products or services. For example, consumers with high income generally buy more expensive products in the hope of receiving a better quality item or a higher standard of service.
The volume of production of the school won’t generally be that high, so you should orientate your sales to sectors with good buying power. These are the clients who are willing to pay a better price while demanding better quality. To be able to work with that segment of society you require a personalized initial introduction to them that quickly helps you to create a relationship with them so you can count on a stable consumer base going forward.
c. How do your competitors compete?
Once your competitors, their size and the type of market they are catering too are identified, it’s necessary to investigate in what way they compete so that you can discover or strengthen your competitive advantage.
To know how your competitors are competing it is necessary to answer questions like these:
• How varied are their products?
• How do they show their product?
• What qualities do they emphasize?
• What type of service do they offer and of what quality?
• What kind of image do their products have?
The majority of companies operate inside narrow limits. Generally all of their stores have the same variety of product and similar margins, but they differ in other details for example opening hours, comfort and type of consumer. Understanding the competition is fundamental to the growth of the business. If you know your competitors and what they are doing you can capture parts of the market that they cannot satisfy.
It is possible that after studying the competition you will have to reconsider your original idea. Successful businesses have found ways to stand out from their competitors. This means that you will also have to adapt and find a way of doing something more or better than the competition. This is the reason why a competition analysis must be done!
d. Understanding "product offering"
If you understand your competitors product offerings, it will assist you in comparing the products and services offered by the School to those that they offer. Analysis of product offerings in the market will help you know:
• Who is offering the same goods or services?
• What are the characteristics of their products, type, quality etc?
• What is their sale price?
• Where is their market based geographically?
• What is their supply volume?
The following table can assist you in understanding how to look at local product offerings.
|Name of producer||Area of operation||Price of the product for the client||Point out expansion plans||Number of workers occupied||Volume of production (in units)|
|A||Center Region||600||Possible fitting of a new branch||120||1200|
|B||Northern Region||500||No data||80||700|
|C||Western Region||550||no one||90||800|
In many cases it might be difficult to obtain the information to fill this chart in but it is something you must accomplish. It is important to visit the supply centers and the supermarkets to see what products are offered, how they are presented, what characteristics they have, who produces them, what selling prices they have and if they are seasonal or year-round products. If you can gain the trust of the merchants you might be able to get data on how often they go to market, what their sales figures look like and how they are affected by various market conditions.
You can also then decide whether you would like to sell directly or indirectly to your buyers. By this we mean:
1. If you have chosen to sell your product through local merchants, you can analyse the above information and decide where competitively you will make your best sales.
2. If you sell directly for example through your own store, you will be aware of the competitors, producers, merchants etc and make decisions accordingly.
Just one visit isn't enough. since this would lead to a distortion of the market. It’s important that these interviews and polls are made in person and directly at the business concerned. Although the closest market is the most convenient, in many cases it may not have the necessary demand to justify our production. In this case, you should test the feasibility of supplying a market with greater demand, further from the school.
SALES AND MARKETING PLAN
The objective of this section is to help you write a sales and marketing plan and to understand its importance and its benefits.
Formulating a strategy on how you will present your product in your chosen market is your next step. You also need to consider pricing and what channels you are going to use to make your sales. It is fairly clear what sales involve but let’s start by making sure we understand what ‘marketing’ is.
a. Marketing, what is this?
Marketing involves using a range of strategies to meet potential customers’ needs so that they buy your product and you make a profit. Central to marketing is having a clear idea of what the customers’ needs are, which is why you spent so much time earlier conducting your market research!
At its most basic level meeting these ‘needs’ means looking at four key areas that affect whether you will make a sale or not. These four areas are price, product, place and promotion, which are often referred to as the 4Ps.
Let’s look at each one in a little more detail.
For a customer to make a purchase they have to feel that their need or desire for the product or service justifies the price that the seller is asking. How that price is set is a market-determined decision, which can have a huge impact over sales.
A customer will only buy what you are offering if your product or service meets their needs and or desires. Very few products or service are 100% standardized. Adapting the product to maximize its attractiveness to the target customer is therefore part of marketing.
Place is the determination of where the product is sold. The first decision is whether to sell to the retailer or directly to the consumer. The next decision is to work out where the best market will be for your product for example the corner co-op store or the local Sunday town market!
Making sure that your target customers are aware of your product, its features, where they can buy it and the benefits of your product over competitors, will all be communicated through the promotion of marketing of your product.
Defining marketing through the 4Ps doesn’t capture every aspect of marketing for every type of product or service, but it is any easy way to start thinking about the factors that influence how customers make their purchasing decisions.
b. Purpose of the sale and marketing plan
By putting your sales and marketing plan in writing, you will have a document that will guide your activities and offer confidence to others that you can achieve you business goals.
Within the sales and marketing plan you will also often end up looking at relatively specialized areas such as advertising or distribution, where you might use the services of a business outside of the school. Your plan will guide both your and their expectations about what this relationship is designed to achieve.
Finally, no matter how good your research, some decisions you make will still represent ‘calculated risks’ and contain an element of assumption. Through making these assumptions explicit in a sales and marketing plan you will be able to check them later based on your actual experiences. The sales and marketing plan is therefore an important part of your institutional learning and one that will help you continually improve your businesses’ effectiveness.
c. Creating your sales and marketing plan
A good marketing plan does not need to be complex or extensive, although it should contain enough information to help establish, direct and coordinate your marketing activities. It should also contain a clear strategic vision.
Within the plan you will outline the ‘marketing mix’ you have chosen, explain why these strategies can be expected to satisfy your target customer and highlight any calculated risks or assumptions you have made in the process.
In the long term, contacting customers for feedback on your marketing will not just provide new ideas for improvements which could increase your volume of business, it can also show the customer you care about their opinions in itself a useful marketing strategy.
The following chart begins to break down the 4Ps into specific decisions that will need to be covered in your Sales & Marketing plan.
Product Policies⇒ Presentation & Packaging
Price Policies ⇒ Low prices to maximize penetration
Prices same as the competition
Place policies⇒ Direct Sale
Distribution by area
Promotion Policies⇒ Promotion channels
Publicity & advertising
There are further areas that need to be examined when creating the plan:
There are further areas needed attention in relation to the product:
• Market penetration – how to enter the market?
• Market development – how to find new niche’s in the market?
• Product development – how to develop or enhance your product?
• Diversification – how to expand your product offering?
2. PRICE POLICY
When deciding how to price our product we can decide from the following:
• Penetration prices or low prices.
• The same prices as the competition.
• High prices.
When the price policy is established we must understand that the price will provoke a certain behavior from the buyer or client. High prices will lead to expectation of high quality and low prices will lead to a presumption of lower quality.
There may be several different approaches to your method of distribution, but the most important factor is the channel of distribution which could be:
• Direct sale
• Through intermediaries
• Through distributors
Generally, direct sale is the most advisable method of reaching your customers because the longer the chain of intermediation is, the more of your profits you will have to share. We should not neglect the way we are going to make our products known to the clients. Some options are:
• Public Relations
Using a combination of the previously mentioned variables you can establish a strategy to achieve the planned sales. In the analysis you must consider the relevant aspects of the competition so that you can determine what the positioning of your product should be.
d. Creating sales and marketing budgets for your business plan
The demand can be estimated but the sales have to be planned. This subtle difference is the key! That is why the sale projections should be established.
In the sales budget you must complete the sale projections and how much every product will represent in monetary values. This is achieved by multiplying the quantity of the units to be sold by the unit price. You add everything up in the last row to give the total annual quantity of units to be sold and the total amount in monetary terms that these sales will generate.
A. Product’s sale budget
|Produc A (Units)|
Sales (Total of Units):
Sales (Total in Local Currency):
The activity chronogram consists in establishing the activities that will be developed as part of the plan or strategy of communication established.
B. Marketing Activities Chart
|4||Add more rows as necessary|
Each activity declared in the marketing activity chart will require a financial outlay in order to carry out the activity.
The format of the marketing activity chart implies that there is no limit to what you can do, but of course when you transfer the marketing activities to the annual budget you might find that they are too expensive or over-ambitious and you may have to reduce or re-evaluate your marketing activities.
C. Annual budget of Marketing Activities
The objective of this section is to help you write an Operational plan and to understand its importance and its benefits.
a. Purpose of an Operational plan
The Operational Plan as the names implies, explains how the practical side of your business operations will work. No matter how good your sales and marketing strategy are, if you can’t actually make your product you will have nothing to sell when the consumer demands. Likewise, if you can make your product but not at a cost that leaves room for profit, then there’s no point setting up your school business at all.
The Operational Plan explains exactly how you will make your product or deliver your services and what the costs of these will be. The one thing you can be confident about when setting up your schools businesses is that not everything will go according to plan. A robust Operational Plan will hopefully anticipate the major risks and challenges that your business faces with suggestions of how you will deal with them, but not neccessarily help you avoid them completely.
By putting this plan in writing you will have a document that will both guide your activities and offer confidence to others that you will be able to successfully run the operations, which lie at the heart of your proposed business. It is a document to which you can and should constantly refer back, helping to make sure your actions are guided by a well thought out long-term strategy and not by the need for quick-fixes as a short-term response to events.
It is worth pointing out that the relative importance of an operational plan inside a business plan will depend on the nature of the business. For example a school business offering adult evening classes, the operational plan would be expected to be relatively short compared with the marketing plan.
In summary your operational plan will lay out a roadmap for how you will manage the production or service delivery side of your business, minimizing risks and ensuring profitability.
b. Creating your Operational plan
Your Operational Plan should include the following key sections:
• Production process
• Supply chain
• Production costs
• Production experience
• Risk management
When writing the operational plan one must be very careful not to be excessively technical and complicated, this might make analysis harder and in consequence backfire. Keep in mind that:
a. The reader must be able to understand its content.
b. The information presented should give a global understanding of the business.
Example of an operational plan:
How school handles education alongside production
• Explain the process by which you will produce your goods along with a description of the factory, the available equipment, materials needed and the labor requirements.
• The techniques and productive process that will combine those resources for example the assembly line and the full scale potential in terms of production capacity.
• The possibility of productive processes to respond to a rise or fall in demand.
• Your method for checking the quality of the product.
Maintenance and technical assistance:
You should describe the level of support or technical assistance that the company will give to their clients after they have bought the product or received the service. This demands special importance if you are making a new product or one, which is technically complex.
Detail the following:
• How will the production process be accomplished?
• What will the fundamental raw materials be?
• What is their origin?
• What technological processes will be used in the production?
• Details of the qualification and the training of the work force.
• How will the process of distribution be filled?
• Changes in your productive resources
• Changes in technology
• Governmental regulations
MANAGEMENT AND STRUCTURE
The objective of this section is to help you build the general structure and administration of a FSS School and its businesses.
a. Administration responsabilities
The administration is responsible for the success or failure of the school and its businesses and is indispensable for directing certain matters. A group of individuals chasing a common goal must work together to achieve that goal and may have to subordinate their individual desires in order to reach the group goals. Management provides leadership to this group.
You must include a detailed description of the key managerial positions with a profile of the kind of skills required to fill the role or a description of the relevant skills possessed by the person or people already employed in the post.
For each person that occupies a position of responsibility it is necessary that you describe with details their formal professional experience, their specialization in a determined functional area or determined sector and a list of their achievements throughout their professional careers.
These descriptions will increase the trust of possible investors in the Agricultural School and at the same time indicate the strengths and weaknesses of your management team. For your future development, it is useful to make a detailed description of the responsibilities and duties that each member of the organization will perform and the remuneration that will correspond to the position.
You must also define:
• Labor categories that will exist in the FSS School.
• Jobs that each category will fulfill.
• Labor agreement with the workers.
• Hiring channels.
• Number of workers per position.
• Working hours that will guarantee the correct functioning of the School.
Keep in mind that the FSS School will require a core of support staff to deal with any unforeseen events that might occur, affecting the School in general and the productive areas in particular. You should draw up an organization chart of the School by activity areas and name specific people in the managing positions.
b. Specific functions of the administration
►Dealing with the challenge of building an Agricultural School requires many personal qualities for example:
• Business administration skills
• Decision making skills
• Personnel administration skills
• Verbal and written communication skills
• Ability to build relationships and teamwork
►Other required abilities are:
• Be Proactive
• Emotional stability
• Capacity to design, implement and monitor projects
The employers should be entrepreneurs so that they can transmit this way of living. Here are detailed descriptions of the specific functions of the positions mentioned in the organization chart above:
1. EXECUTIVE DIRECTOR OF THE AGRICULTURAL SCHOOL FOUNDATION
The legal representative of the Foundation to whom the Director of the Agricultural School is responsible.
2. EXECUTIVE DIRECTOR OF THE AGRICULTURAL SCHOOL
The functions of the Director are many and his responsibilities will embrace in entirety every activity of the school. He must organize, command and coordinate the activities of the School, seeking to fulfil the goals of specify education and the improvement of the business units.
The Director will principally be in charge of:
• Planning activities according to the philosophy and mission of the organization and establishing annual goals.
• Working with the Production manager to draw up the annual Business Plan.
• Analyzing and diffusing the Management policies so that they work as guidelines for the personnel to produce adequate performance.
• The Management should inform at the request of the corresponding superiors of each important aspect that is related to their area.
• Planning the application of an authorized budget, the personnel, the production and the type of services that will be required.
• Making sure the policies of the Foundation are accomplished and implementing the necessary controls that will secure the integrity of the business.
• Following established and legal processes.
• Making sure the policies are followed in every sector they are responsible for.
• Analyzing and introducing with the co-operation of the manager of each sector, methods of work that will fulfill the program objectives, keeping in mind the vision and policies of the institution as well as the improvement of the product.
• Scheduling work meetings with the manager responsible for each sector with the goal of exchanging information, coordinating jobs, solving problems and offering guidance appropriate to every situation.
3. PRODUCTION MANAGER
The School will also have a Production Manager who will be responsible for production, both agriculture and cattle. He will be responsible for planning, enforcing and controlling the farming production of the school. The Production Manager must be a farming professional with a college level education and with the ability to teach.
Some of the functions of the position are to:
• Prepare reports on the plans and programs of production.
• To deliver the above periodically to the Director.
• Propose new work ideas while maintaining the vision and mission of the program.
• Supervise the execution of the farming production plans, working together with the production coordinator;
• Supervise the execution of the projects and plans of the garden, working together with the manager for Extensive Cultivation.
• Participating in the process of control, evaluation and budget of the projects and plans of Farming Productions.
• Coordinate and in association with the teachers, draw up the annual didactic production plan to be taken to the School directors for approval.
• Be responsible in the presence of the School Director for the execution, implementation and evaluation of the Didactic Production plan
• Coordinate the production activities so that the teaching is effective.
• Give guidance to each sector manager concerning the resources available and priorities.
• Plan the annual program along with the materials and resources required for them.
• Prepare a monthly activity plan of the sector and to request in advance, the necessary resources for its implementation.
• Coordinate the activities of the technical sectors in their charge.
4. PRODUCTION ASSISTANT
The Production manager will count on the support of assistants in each area. The principal functions will be those of executing the plans and developing the productive areas of the School. They should be agricultural technicians and be able to teach.
5. ACADEMIC AND BOARDING SCHOOL SECRETARY
The academic and boarding school secretary is responsible for:
• Administering the school timetable, maintaining the required documentation, the register and presenting all of the documentation requested by the state organizations for the correct functioning of the school.
• Fulfilling and verifying the fulfillment of the correct legal processes.
• Preparing reports of achievements and plans for the Directors.
• Organizing documents and the general archives of the institution.
• Attending to the School’s correspondence.
• Helping visitors and providing information to those interested in the school.
• Taking notes and preparing institutional documents for signature by the appropriate people.
• Delivering correspondence, notes, documents etc. received in the office to their intended recipients and registering them in a post book.
• Ensuring that students attend school and follow the school rules.
• Keeping a check on the state of the dorms and noting of the emergency exits
• Organizing visitor permits and authorizing visits of friends and family.
• Follow up and evaluation of students.
The Production Manager and the assistants will teach specific classes related to their area of production. They will also work with the other teachers in other specific areas.
The administrator is responsible for the entire area of administration and accounting of the institution. Their functions include the accounts registration, legal and tax documentation, dealing with banks, control of balances etc.
Some of the functions of this position are to:
• Write the annual budget of the School.
• Maintain control over the budget execution.
• Periodically check the budget and make the necessary adjustments.
• Process the data coming from the different areas of the school i.e. production, academic and community training center through the accounting software
• Coordinate a continuous flow of information from the diverse areas of administration.
• Maintain periodical meetings with those in charge of production to revise and evaluate the progress of the different plans of production.
• Maintain control and ensure efficient use of the resources of the school.
• Establish an adequate internal control system.
• Negotiate with clients and providers to obtain the best financial terms for the school.
• Maintain a fluid communication with the central administration of the Foundation so as to ensure the provision of necessities for the school for example payment of suppliers, requests for financial input etc.
The Governess is responsible for the master key of all the buildings in the School, principally the hotel. The cook will be in her charge. Some of the functions of this position are to:
• Receive and organize guests.
• Register the arrival and departure of the guests.
• Organize the events that take place in the hotel.
• Control the standard of customer service provided to the guests.
• Encourage excellent customer service..
FINANCIAL PLAN AND PROJECTIONS
The objective of this section is to help you understand financial reporting tools and how they assist in the management of a FSS School.
a. Understanding financials
Financial reporting tools study the cash flow between the FSS School and the variety of bodies they work with. These bodies could be individuals, enterprises, the State etc
They also study the way in which the school will obtain the funds needed to accomplish its objectives. The reporting docs examine the conditions in which one gets the capital, the use of the capital and the payments and interest that are involved in financial transactions.
These financial statements are the final product of accounting and basically summarize the financial situation of the company. This information is useful for the administrators and other interested people like shareholders, creditors or owners. Below there is a detailed explanation of these different financial statements.
- 1. BALANCE SHEET
The general balance sheet shows the financial position of the company at a certain moment. It can be used to demonstrate the capacity of the school of any debts.
- 2. STATEMENT OF RESULTS
The statement of results shows the economic position of the company over a determined period of time. It can be used to demonstrate the ability of the school to generate and retain income.
- 3. CASH FLOW
The cash flow is a forecast of cash available at a certain moment in time. By looking at the cash flow you are able to see whether you need external financial aid or if you could invest excess cash in opportunities that would generate larger profits.
- 4. BUDGET
The budget is an action plan directed to accomplish a predetermined goal, expressed in financial terms that must be fulfilled in a determined period of time and under certain predicted conditions. This concept applies to every area of the organization.
- 5. SALES PROJECTION
One of the more delicate and critical parts of a business plan is predicting income, which refers from the sales projection. You will frequently be required to establish reasonable goals that can be reached by the School. It is tempting to use sophisticated methods of prediction but these can backfire. For example if the economy is in recession, historical data is used to predict sales would give absurd and damaging results. The techniques of prediction tend to assume that history will simply repeat itself and that does not always happen.
One has to examine the behavior of the economy and of the external factors that influence the School’s sales. One must also check the projections for every item and decide whether they are realistic or not.
Nevertheless in a short period of time you can do calculations based on historical data. For example if you examine the seasonal behavior of sales certain times of the year might produce peaks in the volume of sales for example, then you can make a good inference of what may be sold in a year.
In the following chart a summary of a Sales projection of a FSS School is shown:
|Food and accomodation||8,415||63,910||86,340||87,540||108,360|
|egistration and family contributions||1,200||2,400||3,600||3,600||3,600|
|Total income of sales||36,038||140,494||220,547||269,683||340,724|
- 6. DEPRECIATION
Depreciation is the reduction in value of fixed assets during their useful life. By useful life we mean the period during which the asset contributes to the income generation of the company. In order to calculate depreciation, you must take into account the specification of the assets, the deterioration that they suffer as a result of their use, their obsolescence due to technological advances, the action of natural factors and the changes in the demand of the goods and services to whose production they contribute.
Depreciation affects the finances of any company, even though the items to which depreciation applies aren’t for sale but used in the production of the product or delivery of the service. The 'wear and tear' and eventual obsolescence of the depreciated item means that it will need to be replaced at some future point and this will obviously cost money.
Furthermore, there are various methods for the calculation of depreciation. There are also fiscal regulations. A typical monthly depreciation might look like the following:
|Goods||Value||Year V.U.||D.A.||Jan 09||Feb 09||Mar 09||Apr 09||May 09||Jun 09||Jul 09||Aug 09||Sep 09||Oct 09||Nov 09||Dec 09||Total||
|Forniture and equipment||124.400||10||
- 7. FINANCIAL RATIOS
These ratios expressed in percentages, reflect the economic performance of the company. They relate the generated utilities to the resources used in the functioning of the company. To correctly calculate these indicators, you will have to estimate income before interest and after tax. This is done because you want to measure the economic performance of the company without including the financial expenses for the use of loans.
For the calculations you will use the data that appears in the Statement of Results and in the projected Balance Sheet of the company, since it’s necessary to include in this analysis the value of all the resources used by the company. This includes the contributions that do not represent a cash expense like for example grounds and property inputs by investors.
- 8. RETURN ON INVESTMENT (ROI)
Return on investment indicates the profits expressed as a percentage, that the company generates for each invested dollar. To calculate this index you must keep in mind the initial personal investment made by the manager, plus all of the resources for which the manager has to pay an interest rate, for example bank loans. In more general terms the bigger the rate of return is over the investment, the bigger is the project’s appeal.
- 9. RETURN ON NET ASSETS
The return on net assets is the return the manager receives for each dollar that the company posses as assets. It is an indicator of the efficiency of the company since it indicates the profits that are being generated by all the assets of the company. To calculate this indicator, divide total income by the total value of the assets of the company, including interest and taxes.
- 10. LEVERAGE RATIO
Leverage indicates the level of debt (borrowed funds) that the company holds with the bank or financial institutions. This indicator is important for observing the participation of the manager in the company. If the leverage is too high it could indicate debt problems in the company or cause problems when trying to raise new funds to face financial problems
- 11. REQUIRED INVESTMENTS
You must develop an analysis of the infrastructure and funds needed to action your Business Plan and you must quantify it with a high level of accuracy. This analysis besides representing a guide of what is going to be needed for the Agricultural School, will be the base for determining the funds required.
Below there is a table that shows, as an example, a list of the investment required for a FSS School.
Concept Cost (US$)
Construction and equipment for education infrastructure 397 500
Purchase of the school’s vehicle 25 000
Investment in the hotel 101 000
Investment in cattle 93 500
Investment in pigs 24 400
Investment in greenhouse 5 000
Investment in apiary 2 400
Investment in hen-house 60 500
Investment in vegetable garden 5 000
Working capital 30 000
Salaries, services, and other operational expenses 312 852
Investment in technical assistance 46 000
Total 1 103 152
- 12. INVENTORY
An inventory lists personal property, real estate and livestock that the company owns in a determined economical period. For many firms the inventory represents the biggest of the current assets. Problems with the inventory can contribute to bankruptcy of the business. An administration capable of doing an inventory correctly can make an important contribution to the self-sufficiency of their school. In an Agricultural School a very important element of the assets are the animals. This includes animals as both sale goods and as working animals.
EXAMPLE: San Francisco Agricultural School
The annual budget of the San Francisco Agricultural School is about US $200,000, which not only includes all of the school’s operating costs, but also the depreciation of its physical assets. The full amount is covered by income earned by the 16 small enterprises located on the school campus, and thus is money that other entities, such as the government or NGOs, do not have to pay to keep the school in operation.
WORKING SECTION ON WRITING
The objective of this section is to help you go through the step-by-step process of writing you inteneded business plan, using all the sections that we have detailed in this chapter.
a. The buisness
This is the most important and difficult part of your business plan. The goal for this section is to clearly define:
1. What is or what will be your business?
2. What market do you propose to serve; what is the size and fraction of the market that you hope to cover?
3. Why will your company serve the market better than the competition?
4. Why have you chosen this particular location?
5. What management and staff are available and what is necessary to run the business?
6. Why will a loan or someone’s investment in shares (if relevant) make the business more profitable?
1. BUSINESS DESCRIPTION
The goal of this section is to explain what the business is, how it will be run and why you think it will be successful. Deciding what the business is and what it will be in five years, is the most important decision you will make. A small business can be involved in more than one activity. In this case, the key decision is what the central activity or activities will be. All of your planning efforts will be based on the perception of what type of business you are in.
If you make a real mistake at this point your chances of success will be significantly reduced. Therefore, you should take time to think calmly about this point. The description of the business should include:
1. The type of business: is the business mainly one of commerce, production or services?
2. The state of the business: is the business new, or is it an expansion or acquisition of a functioning business?
3. The model of the business: single-owner, partnership or cooperative? Advice from a lawyer on this point can be very useful.
4. Why will your business be profitable?
5. When will you open or did you open the business?
6. What hours and days is it or will it be open?
7. If the business is seasonal or if the hours need to be adjusted seasonally, be sure this is reflected in the responses to points 5 and 6.
2. THE MARKET
In order to generate a constant and increasing flow of sales, you must be an expert on your market i.e. the people who will buy your services, products or merchandise.
Basic marketing considerations are:
1. What is your market?
2. What is the actual size of the market currently?
3. What percentage of the market will you reach?
4. What is the market’s potential for growth?
5. As the market grows, will your participation increase or decrease?
6. How are you going to satisfy your market’s needs?
7. How will you set a price for your service, product or merchandise that generates a reasonable profit and is also competitive?
If you’ve decided on your target market and it is big enough to be profitable as well as having reasonable possibilities of expansion, the next step will be to make inquiries about the competition. This needs to be done for both direct competition (similar operations) and indirect competition.
Consider asking yourself these questions:
1. Who are the five closest competitors?
2. What will you do so that your operation is better than that of the competition?
3. How is the competition’s business doing? Is it stable, growing or declining? Why?
4. In what sense is the competition’s operation similar to or different from yours?
5. What are their strong and weak points?
6. What have you learned from observing how their customers do business?
4. LOCATION OF THE BUSINESS
Finding the best location for a business can help it make money.
If you’re going to open a business first try to find the ideal location, then see how close you can get to it remembering that rent is the combination of space and publicity. In this section of your business plan you should answer the following questions:
1. What is the address of your company?
2. What are the physical characteristics of the building?
3. Is the building rented or owned? Indicate the terms.
4. If it needs renovation, what does it need? What is the expected cost? Get estimates in writing from several contractors and Include them as supporting documents.
5. What is the neighborhood like? Does existing zoning allow your type of business?
6. What type of businesses are in the area?
7. Have you considered locating in another area? Why this is this the best place for locating your business?
8. Why is this building the right place for the business?
9. How does the location affect the operating costs of the business?
In preparing the section on management there are five areas to consider:
1. The personal background of the main partners or owners.
2. Their relevant work experience.
3. Their duties and responsibilities.
4. Their salaries!
5. Resources available for the business.
What sustains a business or causes it to fail is the capacity and abilities of its staff. Several good employees can make a poor business functional. There are several questions here that you can focus on to determine your needs in terms of hiring employees.
1. What are your current and future staff needs? What will your needs be in five years?
2. What abilities do staff need to possess? Do the type of staff that you need exist?
3. Are they to be permanent or temporary?
4. Are they going to be paid a yearly salary or an hourly wage?
5. Will they receive any additional benefits?
6. Will they be required to work overtime hours?
7. Do you need to train the staff?
8. If so, what is the cost for the business both in time spent by experienced workers and in money?
7. LOAN APPLICATION AND EXPECTED RESULTS
This section is important both if you are looking for a loan and if you intend to finance the business yourself to determine how much money you will need and for what purposes. Don’t make estimates when exact prices or budgets are available. If you need to make a calculation, specify how you arrived at the final figures. To do this it may help to make a list with three columns:
The indispensable: you must have this item.
The resonable: you could expect to have this item
The optimal: you would like this item if money were no object
• Second-hand desk: $7.00
• Refurbished desk: $25.00
• Custom-designed teak desk: $750.000
Begin by filling in the “indispensable” and “reasonable” columns and then make an educated choice. It may be important for you to have one or two luxury items, but watch the cost.This tabular worksheet is especially useful in the case of new businesses and can always be used when considering buying additional equipment.
Be sure that this section answers the following questions:
1. How will the loan or investment be used? The response can be fairly general, e.g. working capital, new equipment, inventory, supplies etc
2. What article or articles need to be acquired?
3. Who is the supplier?
4. What is the price?
5. What is the specific name of the model and the quantity to be acquired?B
6. How much have you paid or will you pay in sales tax, installation costs or transportation costs?
The purpose of this section is to summarize the ideas developed in the earlier sections. This summary will help you to ensure that the various parts of the analysis make sense, that they support each other well in a logical and coherent manner and that the reader will be left with a concise and convincing impression that both the concept and the plan are feasible.
b. Financial data
1. FUNDING SOURCES AND DESTINATIONS
This sub-section should be included when the business plan also serves as a FINANCIAL PROPOSAL. This is a new formulation of the information in point 7 above in regards to application and expected results of the loan or investment. The larger anticipated expenses should be supported with copies of contracts, rentals, purchases or both, or similar documents and should be included in the APPENDIX.
2. LIST OF ESSENTIAL EQUIPMENT
Your business plan should contain a “list of essential equipment” to help you maintain control over depreciable assets to guard against the possibility of allowing the reserves for upkeep of essential equipment to get too low and to help you prepare a cost budget.
Essential capital items are the materials that are used to make a product, provide a service or for sale, storage or distribution of merchandise. It is not material to be sold in the normal course of business, but rather material or equipment to be used and consumed doing business. This does not include articles that are expected to be replaced annually or more frequently due to general maintenance or depreciation.
3. GENERAL BALANCE
The general balance or statement of condition shows the assets, liabilities and net worth of a company at a given moment. The general balance for any company small or large, includes the same categories. The difference is in the detail.
4. ANALYSIS OF THE BREAK-EVEN POINT
The analysis of the break-even point provides you with a sales goal expressed in number of monetary units or number of units of production in which income and expenses are equal. That is to say the point at which you have neither profit nor loss. If you know what the break-even point is, you have an objective that you can plan to reach in carefully calculated stages. Many businesses have self-destructed by ignoring the necessity of carrying out this analysis.
It is essential to remember that an increase in sales does not necessarily mean increase in earnings.
5. PROJECTED INCOME STATEMENT
Income statements also called also called profit and loss statements, complement the general balance. The balance provides a snapshot of the company at a given moment. Income statements, which are designed for the future, are called income projections. These are ways of predicting and budgeting to calculate income and anticipate expenses in the short and medium-term future. For the majority of small businesses projections that cover the first three years are sufficient.
6. PROJECTED CASH FLOW
Cash flow is the most important planning instrument for a new or growing business. Businesses need cash to start and to grow. The cash flow analysis:
• Shows how much cash will be necessary
• When it will be needed
• Where it will come from
7. ANALYSIS OF BUDGET VARIANCE
For the majority of small businesses, the projected cash flow provides a budget for the operation. You may want to break down some expense items or payments in more detail to guarantee greater control, but the cash flow is a basic framework for your budget.
The analysis of budget variance is a way of directly monitoring your business. It can help you to minimize costs and increase benefits, all at the cost of one night’s work a month. The analysis of budget variance is an essential part of your planning efforts for the business and should not be ignored even when things are going well.
8. HISTORY OF FINANCIAL STATEMENTS
An integral part of your business plan is the record of what has occurred in the recent past. For the majority of businesses the general balances sheets and income statements from the past three years are sufficient although it may be necessary to go back to earlier years when trying to obtain capital for a risky activity.
The third important component of your past financial situation is tax statements. Since this statement must be completed at least once a year it provides a summary of what was spent, how it was spent and what the deductible expenses were. If you decide to sell the business these tax statements will be the first document you will be asked for to explain the price you are asking for the business.
The true test of managerial capability consists of budgeting, balancing ambition with reality and then steering the business to the achievement of its goals within budgetary limitations. Except for the history of financial statements, which reflect past managerial decisions, the financial information section emphasizes the importance of making careful assumptions about the business’ goals. Conservative estimates should be your first step in the preparation of financial documents. These documents, especially the income and cash flow projections, will provide you with the basis for your planning.
These documents establish a systematic series of goals to achieve of which the most crucial is to know how much time it will take to reach the break-even point. By analyzing your budget variance you will establish your main monitoring system. This system will act as an early warning network when used regularly and will suggest remedies for operational weaknesses.
c. Financing proposal
The purpose of this section is to help you form a financing proposal adapted to the needs of your business and the particular set of limitations of the business and capital.
d. Supporting documents
You will want to include all of the documents that support what is expressed in the body of the business plan. The documents, which should be included, vary according to the needs and level of development of your particular business. The following list is a suggestion:
• Resumes! These are very important.
• Credit information.
• Cost estimates.
• Letters of intent from prospective clients.
• Letters of support from reputable people who know you.
• Rental fees or agreements to buy or sell.
• Legal documents related to the business.
• Demographic census data