“Proper Preparation Prevents Poor Performance!”
Planning helps you to think things through thoroughly. It can be time consuming, but it can help you avoid mistakes that may be disastrous.
The core elements of a business plan should include:
1. Executive summary
2. Business description
3. Management and Operations plan
4. Development and Production plan (for businesses in the manufacturing industry)
5. Marketing strategy
6. Financial plan
It is very important that your business plan be well thought out, straight forward and easy to understand. Your business plan should be reviewed periodically and updated if circumstances, opportunities or business operations change.
TIP: If you experience difficulty in writing your business plan, seek assistance from a reputable source such as National Entrepreneurship Development Company (NEDCO).
1. The Executive Summary
The executive summary explains the basic elements of your proposed business. These include:
Name, location and contact information of your business
A brief description of your product or service
Your target customers
How much financing is needed
How this financing will be used to make your business profitable
How you plan to attract and maintain customers.
Your executive summary should entice readers and stimulate interest in your business. It is advisable to write the executive summary after you have completed the other elements of your business plan. Then, you will be equipped with all the necessary information from which you can extract highlights to include in your executive summary. The completed executive summary, however, should be the first item in your actual business plan document.
2. Business Description - What form of Business?
A business description details the characteristics of the industry in which you wish to operate. For example, you will need to describe whether the business is in:
Trading such as wholesale or retail, for e.g. suitcase trading
Manufacturing such as making preservatives e.g. sweet mango, pepper plum
Service-oriented e.g. catering, landscaping, hairdressing, etc.
Additionally, you should state whether the type of business is a sole proprietorship, partnership or is in some other arrangement.
The sole proprietorship is defined as a business that is owned and operated by one person who has full control of the business and who is personally liable for all its debts. This form of business is very popular for self-employed persons. Examples include:
A partnership is a legally binding business relationship between two or more individuals (not more than twenty). The partners are liable for all the debts related to the business and no one partner has complete control of the business. Examples of a partnership may include:
Small contractors (construction) etc.
A Limited Liability Company (LLC) is another form of business company. It differs from the two types above because it offers limited liability to its members. Limited liability refers to a situation where each owner/ member of a company is not personally liable for all the debts of the company. Each member is only liable up to the amount contributed.
LLCs are formed by a group of entrepreneurs who see benefits of collaborating with similar or related industries. For example a group of farmers in a particular area may form an LLC and all contribute to the purchase of a vehicle which they can all use to transport goods, as opposed to each farmer acquiring their own vehicles. This alternative can result in financial savings for the farmers as well as circumventing the problem of having underutilized vehicles.
TIP: Whatever the form of business operation, it is advisable that you register your business with the Registrar of Companies to ensure that the name selected is unique and not being used by another company. Additionally, registering your business can be beneficial in several ways. Some of these include the ability to:
Access loans from reputable lending agencies so that you can expand your business or acquire assets
Pay National Insurance and so qualify for the relevant benefits and;
Access training programmes offered by institutions (in Trinidad and Tobago) specialized in assisting SMEs
How to register your business name?
You will need to complete and file the Registration of a Business Name form. This form is to be submitted to the Companies Registry with the applicable fees. For a Limited Liability Company (LLC), once you have a name reserved you will have to file Articles of Incorporation.
To register your business name, you can obtain forms from the Ministry of The Attorney General and Legal Affairs via its website http://www.legalaffairs.gov.tt or from its office located at:
Corner of London & Richmond Streets
Tel. (868) 624-1660
Protecting your product or idea
Trademarks, Patents and Copyrights
A trademark or service mark is a word, name, symbol, device or combination thereof, adopted and used by a manufacturer, service provider or merchant to identify goods and services in order to distinguish them from others. A patent gives legal recognition of a new product or work of art. For assistance with patents and trademarks you can contact the Intellectual Property Office at the Ministry of The Attorney General and Legal Affairs.
3. Management and Operations Plan
Managing your business
You will need to think about who is going to manage your enterprise. It may be you or someone you hire to work on your behalf. If hiring, it should be someone you trust and who has the required skills to do a good job. The person responsible for management should provide leadership from the very beginning as many decisions need to be made at the start-up stage.
Decisions may include:
4. Identifying a suitable business location and deciding on a marketing plan
5. Finding initial funds (capital)
6. Managing the purchases required to start the enterprise
7. Hiring additional staff.
These are managerial decisions that will dictate the future growth of the business. The management plan should include details about the ownership structure, management and human resource needs.
4. Operations Plan
The operations plan specifies where you will locate your business (along with the physical requirements) and how you will service your clients. If you are into manufacturing, your operational plan should provide details on the manufacturing process. If in the service industry, you should explain how you plan to serve your customers. Any implementation of measures to maintain certain standards where your product or service is concerned should be included in the plan.
Hint: You should find out about the regulations that govern or monitor the type of business you are getting into! For example, if you are getting into catering, there are certain standards around food preparation, packaging, distribution etc. that you would need to adhere to.
If you depend on suppliers for certain inputs into your business, your operations plan should describe the arrangements you have with your suppliers in terms of re-orders (frequency and quantity) and costs. Alternatives or back-up suppliers should also be included.
5. Development and Production Plan
If you are in the manufacturing industry, you would find it helpful to outline a development and production plan. Maintaining your output level to satisfy your customers’ demands is an essential skill.
The following questions therefore need to be answered:
What quantity and how frequently should my goods be produced? (This would depend on sales turnover)
What raw material is used in production?
Is the raw material available?
Do I need anyone to assist in the production?
If special skills are needed, how can they be acquired and retained?
What are the total production costs?
All items directly and indirectly related to the manufacturing process must be considered in the estimate of the unit cost of the product. In order to estimate the cost of production you would need to do the following:
Identify all the inputs needed to produce and sell.
Calculate the cost of the production of a specific quantity that you can manage.
Identify production inputs under the following headings:
o Fixed cost: Costs that will be incurred regardless of the level of production e.g. if you rent space for a hairdressing salon, the rent will need to be paid regardless of the amount of business you receive from your customers.
o Variable Costs: Costs that are directly related to the level of production. The more goods produced, the more variable costs will be incurred and vice versa. For example, if you manufacture furniture, the cost of fabric to upholster the furniture will vary since the amount of fabric to be purchased will depend on the quantity of furniture to be produced.
N.B. Total production cost is the sum of all fixed costs plus all variable costs.
6. Marketing Strategies
Your business venture needs effective marketing regardless of the product or service you provide. In developing your marketing strategy you must identify the customer you are targeting and how you plan to reach them. To achieve this you should include the following issues in your marketing plan:
9. Product differentiation
10. Advertising and
11. Promotion strategies.
The price of your product or service will directly impact the success of your business. If you want to stay in business, you must at least breakeven i.e. your income must cover your expenses. It is however advisable to compete on quality rather than reduce your prices in order to attract more customers. You must be able to compare your prices with those of your competitors and determine the reasons or their prices being higher or lower than yours. You should never sacrifice quality for quantity and never compromise the quality of your product to save on costs – this will inevitably lead to loss of customer loyalty and future business.
Distribution is the process of getting your product or service to your customers. The direct sales method involves selling your product directly to the customer. For example, making pies and selling them yourself. Wholesale distribution usually involves the sale of your product to another party who would subsequently re-sell to customers or use it in the production of his or her own business. Examples of this include the making of preservatives to sell to grocery owners who in turn sell to customers and farmers who sell their vegetables to restaurant owners who will use the food stuff in the meals they prepare for sale to customers.
The distribution channel you choose will depend on your type of business. If you are in the service industry, your distribution strategy is likely to be a direct one.
Transport is extremely important when delivering a service. For example, if you are in the landscaping business, owning a van may become very necessary to move those tools which are bulky e.g. a lawnmower.
It is important that the delivery channel you choose is able to deliver your goods or services to customers on time. Late deliveries may cause the customer to be dissatisfied and result in loss of customer loyalty and future sales.
Your promotion strategy is the way you plan to entice potential customers to purchase your product or service. Some common ways to advertise include distributing fliers, putting up signs and posters, word of- mouth, newspaper advertisements and call cards. Social media avenues such as Instagram, facebook and twitter can also be used to promote your products and/or services.
Packaging is another important aspect of promotion especially for food items such as preservatives, juices, etc.
Sales promotion involve strategies specifically aimed at giving you a boost in sales by offering special prices or discounts to customers, or using competitions, etc. You must, however, be sure that the sales promotion will not cause your income to be lower than your expenses.
Product differentiation refers to your ability to use your creativity to make your product or service as unique as possible to distinguish it from the others in the market. If you are in the service industry, your personal appearance, your package deals and the quality of your service can set you apart from the others in your industry. On the other hand, if you manufacture goods, the type of packaging as well as distribution channels will be critical to your success.
7. Financial Plan
The financial plan is another important feature of the business plan. You should be able to describe what your inflows and outflows of cash will be (cash flow statements) profit and loss statements and balance sheets.
Sources of Financing (Where do I get the money?)
A main reason for the failure of small businesses is insufficient capital (money).
To avoid this dilemma you should review your situation by answering:
12. How much money do I have?
13. How much money will I need to start my business?
14. How much money will I need to stay in business?
15. If I need additional financing, where can I get it?
When venturing into a small or micro enterprise, you must understand that you will incur start-up costs for your business. If you do not have the initial funds for start-up, you may need to approach a financial institution such as a commercial bank, credit union, special credit-providing institution of the state, etc. that may assist you in securing funding for your business. It is important to have an effective business plan in order to access financing from these institutions.