Business Name. Business Plan

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1 Business Name Business Plan

2 BUSINESS PROFILE What business are you in? Provide a general outline of your business, sufficient for outsiders to fully understand what your business is all about. Which industry is it in? What is the major benefit, rather than product or service, that you provide to your customers? What are the unique features of your business's products or services? Discuss product or service advantages that give you an edge in the market. Is your product or service substantially better than your competitors? Does it offer the best, the fastest, the most powerful, the cleanest or the most efficient solution?. Page 2

3 What were your sales last year and over the last few years? How well have you performed? If you have not performed to budget, indicate why not. This provides a background to your sales situation and a lead-in to the future of the business. For instance, you may include something like "Although our sales have increased by ten percent a year over the last three years we have never really taken advantage of the opportunities available. This plan is being prepared to enable us to do so in the future." What are your projected sales and profits for the next three years? This is the bottom line. How much profit are you going to make? Year before last Last Year Year 1 Year 2 Year 3 Sales Gross Profit Net Profit. Page 3

4 What proof can you provide that you will achieve this level of sales and profit? Back up your forecasts with some form of evidence that there will be continuing demand for your goods or services. Do you have any advance orders, existing customers that have promised to use your goods or services, market research surveys or sales experience in this industry that implies a natural growth in the market. Do you have evidence of any external factors such as changes in legislation, competitor status or cultural influencers that will lead to a demand for your products or services? Add anything that re-inforces the proposition that you will be successful. For instance, mention any large orders you have received in the past or perhaps profile some of your existing customers. List anything which may add credibility to your business.. Page 4

5 MARKET & COMPETITIVE PROFILE How big is the total market? Is the market growing or declining? Explain who will buy your products or services. Is this a good, strong, growing market or is it declining? If it is declining you should consider diversifying into other markets. Sometimes the figures on total market size are irrelevant, especially when a business is only a small fish in a very big pond. For instance, a Plumber who has just set up shop will probably get no help from knowing the size of the total Plumbing market. However, if he is a one-man plumbing business in a particular suburb and specialising in a particular area, it would be worthwhile him knowing how big the market is in this area, how many competitors there are and how many specialise in the same services as he does. If you are trying to find out how big the market is, try contacting the association that covers your product or service. Or contact the government information service to enquire about their published statistical information. If you are launching a new product which will be retailed, you could contact a number of the larger retailers and ask them how many of these type of products they would sell. You need to establish the most reliable source of information for your product or service.. Page 5

6 Can the total market be broken down into smaller sub-markets or market segments? Try to break down the total market into smaller segments. This will help you develop your plans and competitively position your products and services. Examples of segmentation, which show you exactly how to do this are included elsewhere in this manual in the section "Examples of Segmentation". A quick example: If you are selling computers you might segment your market into large businesses, small businesses, the home buyer, government bodies and students. When you break down your market into smaller segments such as this it is easier for you to decide how to sell your goods or services to each segment. For example, you may need to sell your computers at a low price to students and to sell them through the university magazine. However, to government bodies price would be less of a consideration than reliability. You may also need to employ a sales rep to sell effectively to government bodies.. Page 6

7 Are there any market trends that will affect your business? It is very important to know and recognise the trends and the external factors that could affect the market, so you can assess whether or not your business will be viable in the long term. Are there any cultural, legislative, social, environmental, technological or other influencers that may affect your business? For example, technological influencers have made typewriters, telexes and buggies almost obsolete. Environmental and social issues have seriously affected the plastics industry by forcing companies who were using plastic-based packaging to find alternatives. There are trends in the market for following a more healthy low-fat lifestyle. The hat market will increase in coming years because of awareness of the deteriorating ozone level. Look at your products, services and markets and assess whether there are any potential threats or opportunities that could affect your planning.. Page 7

8 How do you compare to your competitors? The labels on the left hand side of the box below are examples only. Change them to suit your company. Price Strategy Retail price Payment terms You Competitor Competitor Product Strategy Quality Ease of use Reliability Product life Country of origin Promotion No of reps Advertising appeal Distribution Exclusive Direct marketing. Page 8

9 STRATEGIC DIRECTION Target market (Who will buy your products/services?). Based on the market trends, profiles of your business and your competitors, who exactly will you sell your products and services to? What market represents the best chance of success? Where are the opportunities? How will you position your business's products or services against your competitors? Is there a gap in the market? Why will people buy your goods or services? Are you offering the same as everyone else is or something that is substantially different and that fills a need in the market? There could be a gap in the market. I.e. No competitors that sell similar goods or services at a price that you are prepared to sell at or no-one else that has a particular feature or distributes their product in the same manner as you do. In a previous question you looked at the features of your products and services - in this section you should look at the benefits to the customers of these features and whether your competitors can provide the same benefits. This is an explanation of why you will win! Discuss any major product or service advantages that give you an edge in the market place. For instance, all watches tell the time but each manufacturer positions its products differently. People buy Swatch watches because they are fashionable and Rolex watches because of their image. Isolate the unique feature of your products or services - this is called your competitive advantage. A service business would do the same. For instance, a gardener's competitive advantage might be to offer fixed price services. This gives the customer security of price - they know exactly what the service will cost from the start. The gardener could also offer garbage removal, lawn mowing and pool cleaning. The benefit to the customer is ease of purchase. They can order all these services with one phone call, pay with one cheque and have a familiar face doing all the work.. Page 9

10 What are the major things that you will need to achieve in order to meet these financial returns? This is a brief outline of all the things to come. E.g. "We will increase our advertising expenditure, invest in a new machine, improve our distribution by appointing a freight agency and better target our product to the consumer based on the results of our market research campaign". If you are applying for funding for capital expenditure highlight what the funds will be used for. Marketing Strategy highlights: Product/Service Positioning General Marketing Strategy Production Strategy or Retail Strategy highlights: (Depending on the type of business you are in) Organisation and Management Strategy highlights: Number of new employees Training Systems and Reporting. Page 10

11 Financial Strategy highlights: Investor Information If presenting to outside investors or a bank, how much do you wish to borrow and what will be the return on investment? What, specifically, do you need financing for?. Page 11

12 OBJECTIVES AND STRATEGIES The forms on the following pages cover the major areas of your business which you need to plan for. Use them to list all the things that you are going to do over the next year, or years, to improve the performance of your business and to achieve your projected sales and profit figures. Below is an example of how the forms should look when filled in. The "Who" heading refers to who is responsible for making sure that the tasks or strategies are achieved. The "When" column refers to when the task or strategy is to be completed. Strategy (Action Objectives) Who When To employ a new secretary for Sales. PH Mar To produce an internal newsletter for staff. JB April Example of Marketing Strategies Promotional: Develop promotions by product, by region, by segment or type of customer; Develop a print advertising campaign; Develop a lead generation program; Contact "centres of influence"; Issue a PR release; Develop a new sales approach; Contact lost customers and past enquirers; Sell new products to existing customers; Develop an up-sell promotion; Develop a sales promotion. Product: Improve the quality; Launch a new model or product; Develop a returns policy; Lengthen the warranty period; Conduct R&D in the area of xxxxxx; Develop a brand name; Provide add-on accessories to xxxxx; Change the type of package; Group like products into package purchases. Pricing: Alter the pricing structure; Offer discounts and bulk rates; Develop distributor, agent and retailer pricing levels. Distribution: Appoint new distributors, sub-distributors or agents; Develop material for distributors; Sell direct. Example of Financial Strategies Eliminate cash-flow shortages; Improve the collection of money from debtors; Stretch out payments to creditors; Reduce expenses; Rationalise leases; Apply for a $50,000 overdraft; Reduce wage payments; Purchase new equipment; Reduce inventory levels; Look at lower cost rent alternatives. Example of Organisational & Management Strategies Improve morale; Conduct a sales training course; Chart the organisation; Develop policies and procedures. Example of Production Strategies Purchase new machinery; Schedule two months for installation and trials of new machinery; Commence production in October on new machinery; Spend $50,000 on R&D; Lower WIP inventory levels to five percent of production; Develop production policies and procedures; Reduce reject rate; Develop better production scheduling techniques in association with the marketing department's sales forecasts; Find alternate suppliers for XXX raw material; Maintain production at an average ninety percent of capacity. Example of Retailer Strategies Rotate stock on a daily basis; Reduce stock damage/pilferage; Purchase a better cash register; Improve customer service through training; Improve presentation of stock.. Page 12

13 MARKETING PLAN 19 to 19 Total Sales Objective Sales objectives by product, market segment or any other variable that you care to use to measure your performance # 1 # 2 # 3 # 4 MARKETING STRATEGIES Milestones, tasks or action objectives Who When E.g. To contact thirty lost customers every month. SK Last day. Page 13

14 Budget Sales Budget Net Profit Budget Gross Profit Budget Expenses FINANCIAL PLAN 20 to 20 FINANCIAL STRATEGIES Who When Milestones, tasks or action objectives E.g. Apply for a $50,000 overdraft. PH 1/6. Page 14

15 ORGANISATIONAL AND MANAGEMENT PLAN 20 to 20 Number of staff to be hired Payroll Budget Training & Human Resource Budget ORGANISATIONAL & MANAGEMENT STRATEGIES Milestones, tasks or action objectives Who When E.g. Institute weekly Sales training. CL 23/6. Page 15

16 Production Forecast Plant Capacity Production Costs PRODUCTION PLAN 20 to 20 PRODUCTION STRATEGIES Milestones, tasks or action objectives Who When E.g. Reduce reject rate by two per cent a month for three months. CL 28/9. Page 16

17 CASH FLOW STATEMENT Detailed descriptions of these statements are included in this manual. The Cash Flow statement is an extremely important document which needs to be prepared on a monthly basis. A Cash Flow statement shows how much cash the business will have on hand. It only takes into account when bills are actually paid and when monies are actually received. For instance, suppose that $100,000 worth of goods are sold this month. Although this is registered as a sale this month, the money will not be physically received until next month or even later. Therefore it won't appear in the Cash Flow statement until the month it is physically received. The same applies to expenses. An advertisement in the Yellow pages, costing $4,000 for the whole year, will only appear in the Cash Flow statement when it is physically paid for. It doesn't matter how healthy the order book looks, if bills can't be paid the business will fail. Budget Actual Variance OPENING BALANCE Cash Inflow Cash Sales Cash from Debtors Interest Revenue Other Total Available Cash Outflow Wages Rent Credit Accounting Fees Selling and Admin Expenses Office Expenses Purchases of Assets Loan Repayments Directors' Drawings Total Outflow CLOSING BALANCE. Page 17

18 INCOME STATEMENT Income statements (also referred to as profit & loss statements) are important as they tell you whether or not you are making a profit. Businesses should prepare these statements on a monthly basis. Often, to simplify these reports, rather than trying to record the complex inventory movements, many businesses prepare their operational budgets by averaging out a cost of sales figure. Budget Actual Variance Sales Less Cost of Goods Sold Opening Inventory Purchases Duty on Purchases Less Closing Inventory Gross Margin Add Miscellaneous Operating Revenue Commission Revenue Discount Revenue Less Selling and Distribution Expenses Advertising Commission Expense Delivery Expenses Salaries - Sales Vehicles Depreciation on Showroom Equipment Administration and Management Expenses Audit Fee Directors' Fees Office Expenses Salaries - Office Telephone Depreciation on Buildings - Office Financial Expenses Bad Debts Doubtful Debts Discount Expense Interest on Debentures Net Operating Profit Add Non-operating Revenue Profit on Sale of Surplus Equipment Net Profit before Tax Less Provision for Income Tax Net Profit after Tax. Page 18

19 OTHER INFORMATION Any other information that supports your plan should be included. The Appendices can be used to include such things as brochures, customer satisfaction letters, PR releases, etc. MONTHLY EVALUATION Two key elements of successful Business Planning are the allocation of tasks to individuals and the accountability of those individuals. A Business Plan does not produce results because it has been written down - results are produced when employees are given targets and performance goals for which they are accountable.. Page 19

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