Updated: Aug 31
Ineffective business planning has been said to be one of the four (4) most common reasons why small business fails. Business plan is an effective way of preventing business failure world wide.
In the report from US Bureau of Labor Statistics on Business Employment Dynamics, about 20% of small businesses fail in their first year of establishment, 50% of small businesses fail in their fifth year, and 70% of small businesses fail in the tenth year leaving only about 30% to survive after the tenth year of establishment.
In Nigeria, it has been reported in the Causes of Business Failure in Nigeria that about 80% of Small and Medium Enterprises (SMEs) fail within the first year of establishment.
Business plan is your business blue print that you must have to build a high profitable business. Business plan identifies your business future success and failure and addresses the key issues that will determine the success or failure of the business.
Business planning is a deliberate efforts undertake by business owners before starting a new business or to grow an existing business.
Business plan is a written document that outlines the future activity for an existing or proposed business venture. A business plan is a document that brings together the key elements of a business that include details about the goals, products and services, the cost, sales and expected profits.
Why you need a business plan before you start your business
Business plan is an official written document that contains the future activity of your business, it helps to keep the business owner on the right track. It gives a sense of
purpose to the business.
A good business plan helps identify the factors (strength and opportunity) that will contribute building your business into a profitable one.
Your business plan if well done will help you identify factors (weakness and threat) that may lead your business into failure. This will help you to put plans or strategies that help prevent or properly manage this factors when they suffice.
Business plan details the structure of your business and describes the roles and responsibilities of each team members.
It's a written document that contains the goals and objectives of the business and these help to keep the business owner and his/her team members on the right track.
A good written business plan creates an environment for capital investment.
Business plan is an essential document that is needed to obtain bank loan and lease for capital expansion.
Business plan improves communication across company, division, department, business partners.
Effective Elements of a Business Plan in today's business world.
These elements are the things that make up a good business plan and in some cases, these elements determine the success and failure of many businesses. These elements are categorized into chapters as shown in our business plan template.
1. Contact details: As simple as it may sound, contact address of the business as important as any other elements contain in your business plan. Though this may not be directly involved in the products/services render but it has a lot with your capital expansion either through bank loans and/or lease or through investors. This is because people and organizations would want to know where their money is going to. To gain investors trust, your business plan should contain details of your business contact. The contact details are include in the cover page of your business plan and they are;
Physical address of the business if any,
Phone contact(s) of the business and the business owner(s),
Your business email addresses and your personal email address,
Your business website if there is any,
Your business social media handles.
2. Vision and Mission Statements: Yous should clearly state the Vision and Mission of your business in your business plan. Your Vision is the future image of your business, It is your business inspiration, the framework for all your strategic planning. Your mission is to achieve your vision and always to meet the needs of your customers/clients but doing this is not always easy because the customers are not always clear of what they want.
The mission statement tries to answer some questions;
What am I going to do?
For whom am I going to do it?
These questions should be clearly answered in your business plan as your mission statement. The mission statement should guide the actions of the organization, spell out its overall goal, provide a path, and guide decision-making.
3. Business Ideas and Goals: These together give the general overview and the goals of your business. These elements together form part of the executive summary as in the template above.
4. Strategies (Objectives): Objectives define the desired end result. Objectives are more specific than the mission statement and they describe the results that must be achieved in order for the overall mission to be accomplished. Your objectives are the step-by-step approach to achieve your mission or goal, mission statement is broken down into smaller elements known as objectives and these are the thing you must carry out to achieve your mission.
What if your're on a mission to increase your sales per annum, you may want to focus on your products both in terms of price and quality of the products and also, to focus on the customer as well as products delivery and these can be said to be your objectives.
Remember to set SMART objectives.
5. Values: Your value is what your business hold unto, It's what you believe in and what your business stand in for. Having core company values can help you ensure each of your employees, from top leadership to entry-level, are working towards the same common goal, and share a bigger purpose. Some of the commonest values express by companies include but not limited to the following;
Commitments to customers
6. Products/Services: What product or service you would want to exchange for money or other services and what change or value does your product or service going to add to your customers for using them?
This is not only important to the business owner but also investors. It's important that you have clear understanding of what products or Services to render. Investors would want to know the products or services your business is dealing with before putting their money into your business. You describe the specific products or services you're going to offer and explain the concept for your business in details, along with all aspects of purchasing, manufacturing, packaging, and distribution.
7. Market Research: Market research has a lot to do with the well-being of your business. Many businesses died off immediately after it establishment because proper market research was not conducted before kicking off the business. This could either be because the business met bad competitors or possibly the business did not know the needs of her market.
Carry out an intensive research to know your major competitors, how they make into the market and what has been keeping them in the market. This is important as you will get to know your ideal customers, how they get their products or services and the available alternatives to the products when not available, the size of the market.
Investors are always interested knowing the size of your market and the growth rate of the your market.
The research can be carried out through questionnaires, face to face discussions, internet, radio, magazines e.t.c.
8. Market Analysis (SWOT): Some products or services vary in market demand from season to season and/or from region to region. e.g. the market demand for tea and coffee may be higher in cold season than in the hot season. Analyzing the research results will tell you what product to stock more or what service to focus on and at what season of the year, this is most important when your business is dealing with more than a product or service.
SWOT (an acronym that stands for Strength, Weakness, Opportunity, and Threat) is an important tool for business analysis. Your strength and weakness are internal factors, the opportunity and threat are external (business environmental) factors.
Strengths may include but not limited to the following;Location
24 × 7 service
Limited retail store, if your're into retailing.
Weaknesses may include;
Less public relationship
Limited staff and resources
Limited stocks and selective brand.
Opportunities may include;
Good public relationship
Threats may include
SWOT analysis should be employed to determine the Strength, Weakness, Opportunity and Threat of your business. Build on your strength and take advantage of every opportunity to your business. Strategies should be put in place to curb the weaknesses while deliberate efforts should be made to overcome any threat that posses itself.
This is key element or a secret of a good business plan that must be available in your business plan before you start your business.
9. Marketing plan: Your marketing plan should answer some specific questions concerning the price of your products, distribution channels (how can your products get to the end users), What is your strategy to attract prospects and convert prospects into buying customers. What do people say about your product or business, how do i present my product or service to the users (Package)? These are some of the basic questions your marketing plan should address.
10. Marketing evaluation: Evaluation is an essential part of marketing and this is more useful to an already existing business, it helps your business eliminate ineffective marketing strategies and develop an overall plan that helps build your business. Evaluation if properly done can help save time and resources employ in ineffective marketing strategies. It's also important to have your evaluation plans and marketing strategies ready in your business plan before starting a new business.
11. Legal and Licensing requirements: An ideal business plan should contain the legal and licensing plan of the business. If your business will require bank loans or lease or local and/or international investors, then, your business should include these elements. These elements play a lot in the authenticity and ownership of your business.
Make plans for the requirements that will give your business the necessary legal backup and the licensing requirements that will grant your business to operate freely without interruptions by any of your business governing bodies. Give your business the appropriate registration license to operate.
12. Management: Management plan as an element of business plan describes how your business will run, both day-to-day and over the long term. It provides you the opportunity to explain the objectives, goals, and planned procedures of your proposed business in detail. Whether or not your business requires other members to operate, it requires management plan.
This management plan may include; How money can be handled, How work of the organization is to done and the way people do their jobs, your inventory, suppliers, and the overall philosophy of the business e.t.c.
13. Organization Structure and Staffing: This is an important element of business plan, it gives the overview of all the people involved in your business and their position in relation to each other. It also provides details of who is responsible for a particular role in your organization. e.g;
Chief Executive Officer (CEO): Responsible for providing direction for the business.
Sales Agents: Manage external research and coordinate all the internal sources of information to retain the organizations’ best customers and attract new ones.
Cashier (Counter Agent): Receives payments on behalf of the organization.
Cleaners: Responsible for cleaning the business facility at all times.
14. Insurance and Security plan: Your may need insurance backup in the case of unpreventable hazard. It's also important to have your security plans documented in your business plan, this will protect your business from theft and pilferage.
15. Financial Plan: This seems to be the most important element of an ideal business plan. It should includes details of every costs (the costs of rents, furniture, equipment, and others) to start up your business, break-even point, cash flow statement and first one year profit or loss projection, your sources of start up capital e.t.c.
Your break-even point is that point that your income covers all your expenses and it's the cornerstone of your business.
Cash flow statement tracks the the amount of cash that leaves or enters the business at any given time.
Profit or Loss projection: Make forecast of sales, operating costs, tax and profits for the following year
16. Marketing Strategies: This refers to a business overall game plan for reaching prospective consumers and turning them into customers of the products or services the business provides. There are four key principles that determine how much of your products or services your business sells.
Differentiation: In what way is your product/service different in superiority from that of your competitors.
Concentration: Here you focus on the advertisement methods or sales effort that you will make to increase sales or getting your prospective customers to know about your products or services. This may include any of the followings;
Placement of adverts on both print (community based newspapers and magazines) and electronic media platforms.
Sponsoring some relevant community programs.
Internet and social media platforms like; Instagram, Facebook, twitter, WhatsApp e.t.c
Installation of Banners and/or Bill Boards on strategic locations.
Use of fliers and handbills in target areas.
Segmentation: Focus on your customers that can and will always want to pay for products or services.
Specialize on either your products, services delivery, customers, location e.t.c
17. Skills: You may need to learn some set of relevant skills before starting up your business, identify these skills, include them in your business plan and make the efforts to acquires them. Your team members especially those that interact directly with your customers should be given the required skills as well because these people present the image of your business before your customers. They speak your business core values and cooperate images directly to your customers.
18. Action Plan: Identify the actions you will need to take in order to develop and implement your business plan. It's is a checklist of the steps or activities you need to complete in order to accomplish the goals you have set. It provides the advantage of improving team work planning. Develop an effective action plan that will help you achieve your goals.
19. Production Plan: Business Dictionary defines it as “the administrative process that takes place within a manufacturing business and that involves making sure that sufficient raw materials, staff and other necessary items are procured and ready to create finished products according to the schedule specified”.
It answers this "what are the necessary resources that you will require to produce or offer your products or services?" It's concerned with the What, When, Where and How questions. These questions are very important and should be answered in your business plan.
20. Implementation Plan: What time is needed to start up and run your business? Implementation plan is an important element of business plan but only a few include it in their plans. You can have the best plans but without good implementation procedures or if these plans are not implemented, they are as important as not making them. Create a list of steps to have a successful implementation of your business plan.
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