Transcript Growing & Managing SME’s In Ghana: The need for Effective
Developing a Winning Business Plan
Elikem Nutifafa Kuenyehia Legal & Management Consultant Adjunct Lecturer, GIMPA
Preliminaries & Objectives
• Who?
• What?
• Why?
• Format • Timing
Objectives of this session
• To answer the question ‘why bother with a business plan?’ • To arm you with the ability to : – Write a business plan – Critique a business plan • To demonstrate that anyone can write a business plan • To facilitate discussion on the elements of a business plan • To answer questions you may have about business plans
Agenda
• Recommended Business Plan Approach/Philosophy.
• Role of business plans.
• Elements of business plans.
• Wrap up • Questions & answers
Recommended Business Plan Approach/Philosophy
• Must tell a STORY about: – The enterprise – The management team – The product or service – Financing needs – Strategies – Financial & non financial goals • Must be balanced – Must highlight both positive and negative
Recommended Business Plan Approach/Philosophy cont’d
• Must be a forward looking document – Time frame of about three years • Be clear, concise and well organised – Easy to read and grasp key points – Be simple to understand • Provide realistic data to substantiate claims • Relentless attention to detail
Recommended Business Plan Approach/Philosophy cont’d
• One size does not fit all: – Detail of info presented will vary depending on: • Whether plan to be used to solicit funds • Whether existing business or start up • Who is writing • Prepare it yourself – Its your venture – Get help if necessary – If you use someone else, be actively involved
Role of a business plan
• Serve as a roadmap by charting future course for enterprise • Translates vague notion of wanting to start a business into quantifiable targets and a plan for reaching those targets.
• Provide a yardstick for measuring actual performance. • Make him/her proactive by revealing potential problems.
Role of Business Plan cont’d
• Force in-depth understanding of industry and competition.
• Force him/her to consider upfront profitability of venture.
• Serve as a medium to attract both lenders and investors and • Reduce the risk and uncertainty associated with launching a business venture • Enhance chance of success
Elements of a business Plan
• executive summary • mission and/or vision statement • business entity • product or service • management team • market and competition • marketing and sales • risks and reward • financial planning and financing
Executive Summary
• Must provide overview of the entire business venture.
• Should be capable of being read alone.
• Must grab attention.
• Should be able to read in five minutes • Should clearly communicate: – What business venture is – What distinguishes business from competition
Executive Summary cont’d
• Should clearly communicate: – Consumer pain (existing problem or opportunity gap).
– How relevant business will remove this pain (solve customer problem).
– Basic business model • Should briefly describe: – Target market – Management expertise – Competitive advantage – Financing requirement • Cedi amounts required • How funds will be utilised • Possible return on investment • Should be written after entire plan written
Executive Summary Must Answer Following:
• What is the business idea? In what way is it unique?
• Who are the target customers?
• What is the value for those customers?
• What opportunities and risks does one face?
• How much investment is necessary?
• What are the sales, cost and profit situations?
• What is the competitive environment like?
Mission vs Vision Statement
The mission statement:
– defines the company purpose and – defines the direction in which it will move
• The vision statement:
– Sets a quantified target for the enterprise to achieve within a time frame
The Business Entity Section
• Provides information on the background of the company or relevant entity behind the business venture. Details such as: – How entity organised – Process involved in providing product or service – How resources utilised
The Business Entity Section cont’d
• Must answer the following questions: – What form of venture?
– When entity established and by whom?
– Details of shareholding/partnership structure.
• What skills and experience do they bring?
• What is their involvement in the venture?
– Start up or going concern?
– Total No. of employees – Location of entity – Plans to outsource etc
Product Or Service
‘if you do not know what the customer value is, the whole thing is a waste of time’
Essential premise of a business plan should be to address a current customer pain i.e. it should recognise a customer need and seek to address that need.
Must seek to address the need in a way that is better than the competition
Product Or Service
• Must make it crystal clear: – The detailed function the product or service fulfils – The value the customer will gain from the product or service – How the product/service differs from the competition (both direct and indirect).
• If relevant include details about product development, nature of technology etc – But in plain simple language
Management Team
• Most important section of the plan after executive summary.
• Success of venture will typically depend on ability of management team to execute.
• Must select competent team to execute – Even sole proprietors will depend on ‘wider team’ – Must be balanced (technical, managerial, business)
Management Team cont’d
• In choosing management team, need: – Common vision – Complimentary skills, attributes and strengths – Lean Team – Resilience – Ability to get along
Management Team cont’d
Section must answer following Qs: – Who are key members of management and what are their roles?
– What distinguishes them (education, professional success, standing etc)?
– What transferable experiences/abilities do they possess?
– What experiences/abilities are lacking?
• How will that gap be closed?
– How high is motivation of each person?
Market & Competition
• Must demonstrate that you have a thorough understanding of: – Needs of the customer.
– How competitors are meeting those needs.
• Requires understanding of: – Industry and industry dynamics.
– Market growth and drivers of that growth.
• Use external Data to back your claims
Market & Competition (cont’d)
• Amalgam of data sources: – Annual Budget – Newspapers – Statistics published by ISSER, Statistical service – Census Data – Internet – Primary research • Use reliable data sources and do a sense check
Market & Competition cont’d
• Should include info on: – Customer segmentation.
– Strengths and weaknesses of competitive set.
– Your competitive advantage vis-à-vis competitive set.
– Your positioning vis-à-vis competitive set
Market & Competition Cont’d
• Should answer questions such as: – How is the industry developing?
– What are the key success factors in the industry?
– What market volumes (value and amount) do you expect?
– What would influence growth?
– Who are target customer groups?
– What are the key buying factors influencing customers?
– Who are the major competitors?
Marketing & Sales
• Includes description of: – Target customers.
– Pricing.
– Distribution.
– Promotion & Advertising strategies.
– Sales tactics.
• Project sales based on above & reasonable assumptions.
Marketing & Sales cont’d
• Should clearly & concisely articulate: – Core target customer group.
• Gatekeepers and ultimate customers.
– Size of core group.
• Include brief but rich profile of core customer to justify marketing and sales decisions made.
Marketing & Sales
• Must answer questions such as: – Who are the target customers? What do they ‘look’ like?
– Size of pie? Size to be captured by you?
– What is the sales price and its justification?
– How will you draw attention of target to product/service?
– What advertising & promotional devices?
Risk & Reward
• Highlight risk and state the measures to counter these risks – Important because business plan is about
anticipated
events given certain
assumptions
– Risk section therefore address issue of what happens if key assumptions changes • Address the rewards that investors can expect from the company’s success • State how investors will harvest their investment • And include the exit strategy for potential investors
Financial Planning & Financing
This section should:
• Indicate the potential of the business venture • Include exhibits of forecasted financial statements • State the amount and nature of the money being sought • Describe the uses that will be made of the capital raised • State how additional funding will be obtained
Financial Planning & Financing cont’d
• Will include: – Actual income statements for existing business.
– Pro forma income statements for first three years. Based on assumptions.
– Pro forma balance sheet detailed anticipated assets and liabilities.
– Pro forma cash flow analysis projecting anticipated monthly cash flows.
Conclusions
• A winning business plan: – Tells a
story
about how it will ease customer pain
differently
from the competition.
– Acts as a road map and proactive problem solving document.
– Is realistic and grounded in data.
– Is balanced (risks, strengths, weaknesses).
– Is written by the entrepreneur (or he should be actively involved in writing it).
– Depends on the people behind it to bring it to life.
The End
Questions?
Follow Up Questions
May email follow up questions to: [email protected]