With the recently launched Youth Entrepreneurship Development Fund (YEDF) in Kenya, there are so many 'ready-to-drink' business plan templates out there. All that one needs to do is buy one at only fifty bob at the photocopy bureau, replace the business name on it with that of your group, then present it for approval and funding at your local District Commissioner's office. This is especially good because it helps you make a business plan that looks exactly like the one successfully presented by the group ahead of you. If they got funded, why not you?
A successful business plan is sweet as a hymn. The joy that comes from seeing an investor vote for your ideas with a cheque is simply unexplainable. For this reason, we resist every temptation to toss your way a ready made script. Second: we respect - and are we are sure that you do too - the fact that staff at the Ministry of State for Youth Affairs can tell the difference between Tom and an image of Tom. Fair enough, we don't see why you shouldn't qualify for the funds if you are patient enough to first understand what is required for your group or as an individual, in preparing a winning plan, whether you intend to use it to secure funding from the YEDF or any other source. But first, why a business plan?
Besides helping you get a better understanding of your business, a professionally done business plan plays three other crucial roles. First, it helps you think through the venture and ensure that you have considered all the options available to you, and that you foresee any challenges to your success that could crop up along the way. Secondly, a good business plan convinces lenders - individuals, banks, micro-finance institutions, and other interested investors that you are in control of the project and that their money will be safe with you. Finally, it serves as road map as you turn your idea into a viable business.
The following paragraphs provide a suggested outline of the material that should be included in your business plan. The final product should be tailored to fit the real circumstances and nature of your youth group or the business you intend to start.
An exceptional business plan goes like this:
Here goes the name, contact address, and phone number of your business. In order to project a unique outlook, print it on high quality paper. Your guess is as good as ours that most business plans will be presented in spiral binding. So, why not try something different, say a ring binder?
2. Title Page
Repeat the business name, address and phone number, and add the name and addresses of the principal owners - the youth group, or as the case might be. Also include the date of the plan.
3. Executive Summary
In a maximum of one page, give a brief over view of the business. In the summary, include details such as the business structure that you have chosen - whether sole proprietorship, partnership, or limited liability Company as the case might be - and when it was started. If still in the idea stage, give the date when you intend to start. Outline also a list of the owners and their respective percentages of ownership; what products or services you will be offering; and why you believe the venture will be successful.
For purposes of securing funds, include the amount of money you need for the business; what the money will be used for; as well as how much the owners have themselves invested in the venture. If sending the proposal to a financial institution, indicate what collateral will be offered to secure the loan. Finally, show how the loan or investment will impact on the economy in terms of job creation, increasing the tax base, as well as its benefits to the wider community.
Although this page comes at the beginning of the business plan, consider writing it last after all other sections have taken shape.
4. Table of Contents
This will act as a road map around your document. In a single page or so, outline the major topics and their page references.
5. Description of the Business
This is a detailed section where you address as many of the following issues as they apply to your business: what business you are in - whether primarily merchandising, manufacturing, or service; the product(s) or service(s) you intend to offer; what makes your business unique from others already operating in the same field; as well as the specific market you intend to serve. In other words, who will be your customers and where will they come from?
Also, indicate any special advantages or plans you have to enable you serve the market better than your competition; the present status of the business - whether a start-up or already existing - and if you will be doing any work on contract, indicate under what terms.
If you are seeking support to boost an already existing venture, give a brief history of it in terms of past sales and profits, why you wish to expand or how you can turn the business around if it has not been performing well. If buying a new business, explain how you arrived at the purchase price. In this case, give a breakdown of the cost of building, any required renovations, cost and status of equipment, as well as inventory and goodwill. And if yours will be a seasonal business, such as farming, indicate this too.
6. Business Location
One of the secrets to the success of the Hilton group of hotels is their choice of prime locations. If you are up to succeed you must select the best location for your business, and this should be reflected in your business plan. Explain where your business is located and why; whether the building be leased or your own; terms and length of the lease contract; and briefly describe the neighbourhood - for instance, as stable, improving, fast growing, deteriorating or as the case might be. Finally, give your assessment of how much your business can expand before you will be forced to move out or expand on to the present building.
7. Licenses and Permits
For any business to operate legally, it requires a number of permits and evidence of compliance with the relevant authorities. A hotel, butchery or any other food related facility will require certification from the Ministry of Health, for instance. Show what licenses or permits you will need.
The management team that you put together for your business will be a crucial factor in creating confidence in the lenders and other investors to your business. A well managed business has higher chances of succeeding as compared to a poorly managed one. In this section, give a list of your managers alongside their qualifications and experience. Describe your organization structure and include a brief description of who is doing what; proposed salaries and wages; as well as any other management resources that will be available to you, such as a qualified accountant and a lawyer.
Write a paragraph or two about your personnel requirements. What are your anticipated personnel needs, how many employees will you need and when? Put down the required skills for your employees and how much you intend to pay them.
Describe your potential business risks such as ill health, fire and theft, and what insurance coverage you intend to purchase to protect your business.
11. The Market
In this section, briefly explain who needs your products or services and how you plan to reach them. Describe the present size and growth potential of the market; what percentage of the market you will have now and in the future; as well as the age, sex, occupation, lifestyle, and income of your various market segments. Sate also, how you intend to attract and keep your segment of the market.
Here, you can talk in terms of the high quality of your products, better pricing, personal selling or public relations that you will employ. Explain what pricing strategy you will use. Will you follow the average in the industry? Will your costs be low enough to make you the low price leader, or will you be unique enough to justify premium pricing?
Do not disregard or down play the competition, as doing so amounts to self deception. Briefly describe who your competitors are and show how their operations are similar or dissimilar to yours. Give a candid evaluation of the strengths and weaknesses of the main competitors against your unique selling position. In other words, show how you will be better or different, and how you will use this to control your pricing and market. Some details in this section might sound similar to those used above but do not omit this section anyway.
This is where you describe how your venture's day-to-day operations will be conducted. Any business worthy its name needs furniture, fixtures, equipment, tools and records, among other necessities. Make a list of all this, since you will need to make purchases. Give a brief description of how customers will be served from the moment they walk in until the transaction is complete. Identify also, who your main suppliers will be, the expected pricing they will give you, and how much you intend to make as profit over the suppliers' price. Finally, indicate your working hours.
13. Financial Data
In this section, come up with realistic figures to show the financial projections for your business. Prepare your anticipated income statement, cash flow and balance sheet for your venture. Give details by month or quarterly for the first year, second and third year.
If the company is already in business, attach copies of the current balance sheet and income statement (less than 90 days old) plus those for the past 3 years of operations.
This will assist you and those assessing your business plan to see whether it makes economic sense. If everything is okay up to this point, you can breathe with relief - you have sailed through!
14. Supporting Documents
This is where you muster all strength to prove to the lending institution that you are indeed capable of seeing the business through to success. The only way to do this is by summoning all the credentials, both yours, and those of your partners, as well as past records of your business.
Copies of documents that could feature here include CVs for all owners, letters of reference, letters of intent from prospective suppliers or customers - if available, copies of leases for the premises, contracts, or agreements, deeds, or other legal documents; as well as any other information that might help your case or answer potential questions.
Write your plan in good English, clean of grammatical flaws, and print on a standard A4 size white paper. Make it neat, double spaced and print on one side of the paper only.
Finally, share this resource with your colleagues so they too can know the good news. And should you succeed in starting up your business, keep your eyes on this publication for wonderful tips on how to take your good business to the next level. Good luck!
© 2007 John Wanjora
First Published in Small Medium Enterprises Today Magazine, Nairobi.