VUSSC/Content/Entrepreneurship/Planning for the Business/The Business plan
9. The Business Plan
This plan contains the written describtion of the enterprise, its objectives and the steps necessary to achieve them. It is necessary for new and established ventures.
Why is it important?
- It is the road map;
- It shows the ultimate destination and how to get there;
- It allows for unexpected detours and unforseen problems;
- It shows how to change the route and still drive ahead safely.
Elements of a Business Plan:
- A thourough explanation of the product or service that the business will provide;
- Why this product/service will satisfy customer needs;
- Why this business will be successful;
- The potential revenue, expenses and profits;
- The possible expansion of the business in the future.
Parts of the Business Plan:
- Type of business you intend to conduct;
- The legal form of business: sole proprietorship,a partnership and a corporation;
- Business hours;
- Seasonability of the business;
2. Strategy Formulation:
- What are you doing;
- Where would you want to be;
- How you would be getting there.
Strategy: the managerial game plan for directing and running the business.
Systematic recording of the enterprice's income and expenditures, assets, liabilities and owern's equity, in order to determine its's financial performance and financial position.
- Balance Sheet: It shows at a point in time the firm's position with regards to assets, liabilities and net worth, or owners equities;
- Income Statement (Statement of Financial Performance): It shows over a specific time period all the revenues and expenses which result in the profit or loss from those transactions and cash flow statements;
- Cash Flow Statements: Show the inflow of dollar from receipts into the business, and the outflow in the form of expenditures made by the business;
- Capital Equipment list: A statement that includes the details of operating equipment of a an enterprice and its corresponding dollar value.
Involves those business activities, which relate directly to determining the target msrket (to whom you will sell) and delivering goods or services to those markets.
- Target Market: the percentage of the total market to whom the enterprice plans to sell its product or services.
- Sucess will depend upon how, for example the product will be priced and how the business deals with the competition.
- Price and product differentiation from the competition play and important role in the firm's profitability.
The location of the business may be the key to its sucess.
- Location: the physical site and the geographic area of the enterprice's facilities.
- Layout: the arrangement of fixtures, equipment and machinery in the business. It varies according to the type of business the enterprice is operating.
6. Production/Operation functions:
- The system from transforming inputs into outputs, and also
- Concern with producing or making he output in the most efficient manner at the lowest cost.
- Involves the Recruting, Selection, Evaluation and Training of the individuals who are employed by and necessary for the functioning of the enterprice.
Human Resourse Management: the modern term used to refer to all functions pertaining to personnel.
- The process of obtaining the necessary money to operate the business. Money is the lifeblood of the enterprice.
- Those methods used to ensure that the business achieves its objectives;
- The following statements should be included:
- Sources of applications of cash: This statement shows the sources as well as the applications of cash within the enterprice;
- Application and expected effect of loan or investment: If the new or existing business has applied for a loan or has sought outside investment, there should be a complete disclosure in the business plan of how that apital will be utilised.
- breakeven analysis: is the volume of sales sufficient to cover all fixed and variable costs. It is the point where revenues equal costs.
- Internal Controls: There are certain controls required the systems - inventories, accounts receivable, risk management and crime.
- Financial ratios:or those percentage relationships in the firm such as current ratio, quick ratios, working capital ratio and the firm's performance to industry averages.
10. Executive Summary:
- A brief synopsis of all the elements in the business plan and can only be written last, once all the plan's elements are known. It is however, presented as the first part of the plan.