Business Plan

The Business Plan is the most important document in bringing a project to fruition, it can be a complete plan and feasibility study including drawings capital equipment schedule etc. etc. covering well over 100 - 200 pages or a much simpler affair with only basic financial information and a few pages of commentary.

Warning! - Throwing a few numbers into an Excel Sheet and taking it to the bank for funding is not the way to do it. The effective business plan is a balancing act between your market, the volume you can sell, your capital costs, overhead costs and the profitability of your product.

Unless you have experience, if you are hoping to attract funds from investors or banks then consult a professional. Normally you will only get one chance with the funding agencies so you have to know your business before you go to the bank. Whilst you are enthusiastic about your project the bank will not have the passion that you have. They will look at many other points rather than your enthusiasm.

The other significant point about a business plan is that if properly done, it is your insurance against disaster. If the properly completed plan looks good and shows profit you have a much better chance of success and you will know the targets you must reach.

I have many times found clients disappointed at first when they realize that their idea is not profitable as they envisaged it originally. But that disappointment turns to elation when between us, we can modify the ideas to bring the plan to a profitable outcome.

The type of plan will depend on several factors, but generally follow the guidelines that if it is a medium to large project with land transactions and large amounts of capital equipment the more elaborate plan is better. Should the project be a small One man band operation, then usually the simpler form will be enough.

Create the Plan for the following purposes

1) Attract finance from the Banks or venture capitalists

2) Model the business variables to ensure you are on a winner.

3) Ascertain the land area and services required

4) Define the capital cost of the project.

5) Define the overhead costs, (energy, water etc.).

6) Predict the market for your product.

The preliminary work on a plan is mainly concerned with quotations and market research. Whilst some companies estimate the capital costs and land requirement etc., this is dangerous unless you have specific skills in this area.

Usually the Business Plan contains the following major sections, please click on the links to see a breakdown of the information required :-

Business Plan Guidelines

Marketing Plan

Finance Plan

Technical Plan

One area which should be noted in the business plan is the Packaging Design and Development

The subjects covered in a more BP for a small project are:-

Overall existing market

your target market, present statistics of the whole market

Sales you will achieve within that market over time, (usually 3 to 5 years).

Distribution of your product to clients and customers.

Raw material requirements and how they will be supplied.

Initial plan of Area and buildings required (If applicable)

Capital equipment required.

Profit and Loss

Break-even-analysis

Balance Sheet

Profitability

Executive Summary, this is the most important part of the document, usually a couple of pages describing the business with expected results. The business plan information supports this summary in detail.

You may wish to complete the plan yourself, the skill set required for the simple version the skills can generally be acquired in cooperation with your local accountant, where particular specialist skills are involved then your advisor can comment on the draft plan and help with the product or service specifics.

With the more comprehensive plan it is wise to ask your expert/consultant to prepare it, the level of skills required for engineering, civil work, production, financial's etc. is beyond the scope of most people starting up a business.

Whilst the preparation of a professional business plan is a cost, it is, also insurance and can provide a road map to the rest of the project. It is much better to finance the preparation of a suitable business plan than go ahead with a poor plan or no plan at all and find that all the capital investment is worthless, much better to make adjustments and modifications on paper and not so expensive.

The financiers, be they Bank, Venture Capitalist, see many business plans see many plans per day so it has to be:-

1) Credible, preferably completed by an industry specialist or known company.

2) Have supporting information, quotations, Market Reports from authoritative publications.

3) Contain a realistic payback period and level or profitability

By the time your nominated expert(s) have completed the plan you should have a document showing you a clear direction of where you have to go. There may be adjustments but know we have targets to meet profits to make. The investment in this document has pointed the way to where you and your new business need to be.

The fact you will have several meetings with the consultant should give you a good grounding in the details of the plan.

Consultants- I would suggest going to a company specializing in the industry you are entering. If you have one of the larger companies, I would suggest asking them to include a specialist in the team.

I hope that on completion of the plan you will have knowledge on how profitable it will be. Of course it is possible it would not have enough return on the investment, in which case you have lost the 'seed money' not the whole capital cost of the company.