Ideas are useless, show me your business plan instead

There are many templates online you can use as a guide, but remember there is no one-size-fits-all when creating such a document.

PHOTO | FILE

What you need to know:

  • Within your organisation, a business plan will help you monitor your performance since you can spot potential drawbacks for your business before they occur.
  • Note that the plan is a living document that will need to be updated severally as your business grows. It also serves to measure the success of your business at any given time.

Have you been mulling over taking a leap into the business world? Are you just getting started in your new entrepreneurial venture? If yes, then you have probably heard that you need to prepare a business plan, which is basically a map to guide you where you want to go businesswise.

According to Joy Wanjiku, a financial consultant with Nyeri-based financial firm, Bright Zone Agencies, a business plan is simply a document that describes your company’s future actions. Over 90 per cent of start-ups, she says, do not make it past the three-year mark because of poor planning.

“A good business plan defines exactly what you want to achieve and how you intend to achieve it. Whether you’re just starting out or growing your venture, you will need a business plan,” says Joy.

WHY DO YOU NEED A BUSINESS PLAN?

 “The problem with many Kenyan youth who want to start businesses,” Joy points out, “is that they usually approach potential investors with just a business name and an idea. The notion that an investor will automatically jump on board based only on the business idea, no matter how brilliant it may seem, is misguided. Ideas are useless, show me your business plan instead.”

If say, you have registered a distribution company and are looking to handle the distribution of a major manufacturer, the manufacturer will first want to assess whether your company is truly capable of supplying their products to its customers, and will therefore ask for your business plan.

“Many young people complain about lack of capital to launch their businesses, yet the secret to securing funding lies in the strength of the business plan,” says Joy.

The fact is that potential investors, banks included, can decide to lend you money and invest in your start-up if your business plan is impressive. When time comes to cash out and sell your business to the highest bidder, the amount of money that you will get out of it will be directly proportional to the strength of your business plan.

Within your organisation, a business plan will help you monitor your performance since you can spot potential drawbacks for your business before they occur.

Note that the plan is a living document that will need to be updated severally as your business grows. It also serves to measure the success of your business at any given time.

WHAT SHOULD THE BUSINESS PLAN CONTAIN?

Writing a business plan is not as difficult as it may seem. There are many templates available online which you can use as a guide, but you should be careful while adopting those as there is no one-size-fits-all when it comes to creating a business plan.

And no, do not pay external advisers to write the business plan for you. This is because while presenting the plan to investors, you will need to show confidence that you personally understand the plan and are committed to the vision displayed in it.

Although business plans vary in length and scope, all should contain these common elements. Above are some of them.

1. EXECUTIVE SUMMARY

This is a short description of the key points contained in your business plan. It should be brief but comprehensive; not more than two pages long.

“Many potential investors only read the executive summary and make decisions on whether to get involved in your business or not based on that first part. As such, it should be sufficiently interesting to motivate the reader to continue reading the rest of it. If after reading the executive summary the reader already knows about your company and is keen to know more, then it has done its job,” says Joy.

Although the executive summary appears as the first section of your business plan, you should write it last.

2. BUSINESS STRATEGY

This section should clearly describe what your business is about. It should include a short history of your business, its purpose, a description of its products and services and the legal structure of the business as it currently stands.

Also include information about your competitors, outline your growth plan, your business model and summarise short and long-term goals.

3. MARKETING AND SALES STRATEGY

Here, you should focus on describing the activities that you will use to sell your products. Why do you think people will buy what you are selling and how do you plan to sell it to them? Do not forget to back up your strategies with facts. Conduct a market survey and display relevant data in this section.

4. MANAGEMENT TEAM AND PERSONNEL

What credentials do you and your team have that make you suitable to run that particular type of business? Which professionals do you plan to hire?

This section seeks to answer the questions of how you plan to manage your human resource processes. Potential investors take a keen note here because they need to know whether the people working in your business are qualified enough

5. SWOT ANALYSIS

It seeks to analyse your business’ strengths, weaknesses, opportunities and threats.

Investors in your business understand that it will face turbulent times at some point, and they want to be prepared when that occurs. A carefully prepared SWOT analysis will enhance your credibility as it does not merely overestimate strengths and opportunities while undermining the weaknesses and threats.

FINANCIAL FORECASTS

This segment translates your entire business plan into numbers. It should include details on how you plan to source for, and spend money for at least the next 12 months. Here, you should include copies of documents such as financial statements and profit and loss statements.

Go on, you now have enough ammunition to write a winning business plan.