Writing the Business Plan

This is part 3 of our How to Start, Run, Grow & Fund a Business in South Africa. Please read How to Start, Run, Grow & Fund a Business in South Africa (using what you currently have) before reading this. This is part of the Starting a Business section.

You’ve already chosen the business you would like to start and now it’s time to start writing the business plan, starting with your proposed business Value Proposition, but let’s not get ahead of ourselves, you need to understand the business and the business plan format that we use.

A “traditional” business plan contains a lot of redundant parts that for most entrepreneurs starting out it is not necessary, its best to start out simpler and work from there. We recommend a process called “lean planning” when writing your business plan, a lean plan will allow you to rapidly prototype your business idea,
each section can later be expanded to create a more detailed, traditional business plan if required. Lean plans also help solve another problem: many entrepreneurs have such long business plans that they themselves don’t know what is going on in there.

Any business plan that you downloaded from the internet or bought prewritten is useless. A business plan is specific to a person you cannot just use a readymade template.

Before I go any further let me be clear:

A business plan is not worth the paper it’s printed on if you cannot execute on those contents. So those long multi-page business plans that people walk around with but they don’t know the contents are useless. A business plan is also not necessary if you are able to work from memory. None of what I write here is necessary if you can work from memory. I hardly use business plans, nor do I use it the way most people do like its some kind of magical document that is somehow going to make them rich.

We don’t need long business plans for the simple fact that banks don’t lend startups in SA. It does not matter how good your business plan is, if you do not have existing income or sufficient assets to put up as collateral you will not get finance for a business venture or startup in South Africa. Same as no matter how bad your business plan is a bank will lend you money for a start-up if you have sufficient assets to put up as collateral (they don’t really care what the money is far as long as the loan is secured). Here we believe in starting a business based on the resources at hand.

If you need to raise a lot of money for a startup you won’t get much help here. This is not something anyone here can help with as it is due to South Africa’s macro environment. Use your vote wisely next election time. Oh and ideas are worthless.  Anyway, let’s get to business…

Lean business plan format

1. Value Proposition
2. Market Need
3. Your Solution
4. Competition
5. Target Market
6. Sales Channels & Marketing Activities
7 Operations: Resources & People
8. Financials: Budgeting & Forecasting
9. Funding Needs & Use of Funds

The Business Plan

A business plan sets out a business’s objectives and strategies for achieving them.

1. Value Proposition / Description / Identity
A one-sentence description of your business. Describe the gist of your business. This forces you to hone in on what you do and what’s special about it.

2. Market Need
The “problem” your product is responding to by being in the market.  No market need = no need to market your product. If you’re not sure, ask your customers/potential customers why they like your products. You’ll get your answer.

3. Your Solution
A description of your products/services (you can add photos if you want). Describe your product and why it’s so great. Think what you’d say if someone asked you “what do you sell?”

4. Competition
Who else in the market is doing similar things and why your products are better? Think about who your customers will buy from (or do buy from) if your products didn’t exist. Knowing your competition is as important as knowing your customers.

5. Target Market
Who buys your products/services (or will buy your products/services)? Be specific about who buys your products (ex: gender, geography, age, shopping habits, etc). Segment your markets if you plan on reaching them differently.

6. Sales Channels & Marketing Activities
Sales channels: This is where you will sell your items. Example: Your online shop is a sales channel. Perhaps you also sell at a local boutique or craft fair, and your goal is to land several wholesale accounts. It’s good to have multiple channels.
Marketing activities: How do (or will) you market your products? Examples: Search ads or advertising on a design blog. You may need different activities for each market segment.

7. Operations: Resources & People
The resources and people you have, need and want to start, run and grow your business.

8. Financials: Budgeting & Forecasting
How much does it cost you to produce one of your products? How much do your products cost, how many of them will you sell this year, and how will I make a profit? How much does it cost you to make/market your products? How much do you plan to sell in a given time period? These questions will help you develop your financials.

9. Funding Needs & Use of Funds
How much money you need to launch or grow your business, and what specifically will you use the funds for in your business? You may need some funds (even if not a lot to purchase materials). Be sure you understand how those funds will help you.

As with the executive summary don’t get caught up in fancy words such as “value proposition” or “problem worth solving”. This is just to help you think more creatively with regards to competition. Almost any business out there will have existing competition, when thinking about adding value you think about doing things in a better way. The same with solving a problem, people often say a business has to solve a problem (that people are willing to pay for) to be viable but some entrepreneurs take this literally as in they must be overcoming a bad situation,  this is not the case. If I don’t have space in my freezer for an ice tray (an actual problem that I have) and I want to drink an ice-cold whisky and coke, then I have a problem: having to drink warm drinks and I am willing to pay for a solution. How is this problem solved? By people selling bags of ice or by people selling a slimmer ice tray which will fit in the small space available in my freezer.

Another thing you might have noticed is that we did not include management in the business plan. A lot of “common sense” is left out of a lean plan. People often have a business plan and then they have a “working plan” where they go into the nitty-gritty of the day-to-day management. To me personally day-to-day management is common sense:

  • Work must get done correctly in a timely manner and within budget.
  • All business records (expenses and income) must be maintained accurately and kept up to date.
  • You need to pay your bills, suppliers and staff when due and you need to collect whatever money is due to the business.
  • Staff must be managed to make sure they are doing their jobs and not doing things that are detrimental to the business, but also kept happy (like by being paid on time).

Those are all common sense and should be standard in any business. A lot of people also add sensitive information (that gives away too much) to a business plan that should be kept confidential. Once the business is larger then a more comprehensive planning, organizing, leading, and controlling (P-O-L-C) plan can be developed. I also don’t cover cosmetics like coming up with a business name, logo and corporate identity design, how important those are in our context is debatable. Again better to have an actual business with a simple name and logo than no business with a fancy name and fancy corporate identity.

Previous was Choosing the right Business Idea for You

Next up is Supply Value Logistics Chain

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