Business Plan in a Organisation

Introduction

Any new organisation or an organisation which wants to grow requires a business plan. Planning is an essential part of any organisation which provides structure, long term goals and objectives for management and employees. Any organisation must perform planning as well to determine the suitability of the market which they operate in.

We need to evaluate the following statement: “With a good business plan, we are tools; we’ll be able to succeed” to determine what a business plan is and what the benefits of having a business plan are. The evaluation of this statement covers the following sections:

1. What is a business Plan?
2. What are the elements of a Business Plan?
3. Why Write a Business Plan?
4. With a good business plan, we are tools; we’ll be able to succeed
5. What are the benefits of having a business plan?
6. The five critical ingredients of a successful Business

 

What is a business Plan?

(Venter, et al., 2012) defines a business plan as a written exposition of a venture’s goals and plan of action for the subsequent three to five years. In the case of a start-up, the plan is a written statement of the proposed venture: its purpose positioning, and ambitions. (Du Toit, et al., 2010, p. 157)

A written Business plan is a document which describes the planned interactions with the Micro and the Macro environment for a new or an existing business venture. The business plan provides a road-map (short term and long term) for the entrepreneur to define what are the actions to start up the new venture or to enhance the existing organisation.

A Business plan is prepared by the entrepreneur, but can use the assistance of external sources e.g. expert consultants in the relevant industries.

A business plan defines what the venture is and contains the following elements:

1. Written Document
2. Explanation of the nature of the business
3. Strategy, Vision, Mission and goals of the organisation
4. Who is the management team
5. What products or services will the organisation trade in the marketplace
6. Describing the opportunity
7. Describing of the context
8. Identifying the required resources
9. Indicates the envisaged financial return, and a financial proposal of what financial aid the organisation may need
10. Alignment tool for the new business venture
11. Environmental analysis
12. Incorporates the quantitative and qualitative data and information and
13. Demonstrates the implementation plan for the organisation or new venture

 

Why Write a Business Plan?

(Nieman, et al., 2003) provides the following reasons why a business plan must be compiled:

1. To obtain investment funds – Most banks and shareholders require a business plan as it is seen as vital for approaching and capturing financial resources
2. To serve an inside purpose – The business plan provides: focus, objective, platform and tool where performance can be measured, marketing tool to obtain finance, road map for the business, and identification of the potential risks for the venture.
3. Reduces Risk – Enables the stakeholders to identify the potential risks and put mitigation plans in place to manage the risks (Nieman, et al., 2003, p. 91)

A Business plan is an essential tool for the stakeholders to obtain investment funds, providing goals and objectives for the venture and finally a way to start formalizing the risks and mitigation plans.

 

Who are Primary Stakeholders of the Business Plan?

There are several Stakeholders for the Business Plan:

1. Entrepreneur – Planning document for the Entrepreneur for the venture,
2. Investors/ Financiers – People or organisations who will provide funding for the venture
3. Marketers – Employees or external resources which will market the organisation

 

What are the elements of a Business Plan?

A Business Plan contains the following elements of the business story according to (Du Toit, et al., 2010)

1. Background -  Describing the current as-is situation, the characters and the problem statement,
2. Challenge – Describing the challenges and conflicts that impede a coherent plan to solve the problem
3. Resolution – Portraying of a solution to the challenges and the problem and how the venture will succeed by resolving the problem (Venter, et al., 2012, p. 157)

 

A Business plan must contain the following sections:

1. Introduction – Venture details e.g. company name, contact details, summary of requirements,
2. Executive Summary – Summary of the complete business plan
3. Environmental and Industry Analysis – Analysis of the Macro Environment, e.g. industry trends, competitors, technology requirements, resource requirements
4. Operations Plan – Road Map containing how the operations including the manufacturing of the products or services will be done,
5. Marketing Plan – Marketing plan indicating which target markets the venture will be marketed in, and a plan of action of how the marketing will be done,
6. Organisation Plan – Containing details around the ownership, stakeholders, partnership details (if any) Stock and Board details, and an organisation chart
7. Appendix -  Inclusion of secondary information to support the details of the business plan

 

With a good business plan, we are tools; we’ll be able to succeed

Business Plan as a Tool

(Wickham, 2001) defines the following four ways in which a business plan can assist and guide the performance of the organisation:

1. Tool for Analysis – Business plan contains the plans and disciplines as a guide for the entrepreneur to gather the correct information,
2. Tool for Synthesis – The Business Plan synthesises the vision and a definite strategy and implementation plan,
3. Tool for Communication – The business plan is a tool to assist in the communication between the entrepreneur, potential investors and the employees to provide them with the financial information and required road-map to achieve the vision,
4. Call of Action – The business plan provides an action plan and acts as a road map for all the stakeholders of all the activities which must be undertaken(Wickham, 2001, p. 191)

 

(Entrepreneur, 2006) defines the following reasons why the organisation requires business plan as a tool for the organisation to succeed:

1. Set specific objectives for managers
2. Share your strategy, priorities and specific action points with your spouse, partner or significant other
3. Deal with displacement
4. Decide whether or not to rent new space
5. Hire new people
6. Decide whether you need new assets, how many, and whether to buy or lease them
7. Share and explain business objectives with your management team, employees and new hires
8. Develop new business alliances and deal with professionals
9. Sell your business
10. Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues
11. Create a new business
12. Seek investment for a business, whether it's a start up or not
13. Back up a business loan application
14. Grow your existing business

 

What are the benefits of having a business plan?

(Du Toit, et al., 2010) indicates the following eight reasons for an entrepreneur to write business plan:

1. To sell the business to him/her - The most important stakeholders in any business are its founders. First and foremost, the entrepreneur needs to convince him/herself that starting the business is the right thing for him/her, from both a personal point of view and an investment viewpoint
2. To obtain Bank financing -  Banks require entrepreneurs to include a written business plan with any request for loan funds
3. To obtain investment funds - For many years the business plan has been the “ticket to admission” to venture capital or “:informal” capital from private investors
4. To arrange strategic alliances -  Joint research, marketing and other efforts between small  and large companies have become increasingly common in recent years, and these require a business plan
5. To obtain large contracts -  Entrepreneurs must have a business plan to respond to large tenders
6. To attract key employees - One of the biggest obstacles that small growing companies face in attracting key employees is convincing the best people to take the necessary risk, and to believe that the company will thrive and grow during the coming years
7. To complete mergers and acquisitions -  No matter which side of the merger process the entrepreneur is on, a business plan can be very helpful if he/she wants to sell the company to a large corporation
8. To motivate and focus the management team -  As smaller companies grow and become more complex, a business plan becomes an important component in keeping everyone focussed on the same goals (Du Toit, et al., 2010, pp. 87-88)

 

(Venter, et al., 2012) defines the following benefits of having a business plan:

1. Enforces Discipline – The business plan forcers discipline in the entrepreneur by forcing him to plan every facet of the plan and to obtain all the relevant information,
2. Scrutinize the strategies - This process allows critical and impartial scrutiny of the strategies to secure the long-term future of the business
3. Visibility to Investors – have a visual plan for the investors to scrutinize
4. Benchmarking – Enables the stakeholders to track the progress of the business plan,
5. Self-Evaluation – Entrepreneurs can use the plan for self-evaluation
6. Early Warning System - so that entrepreneurs may turn threats into opportunities
7. Communication Tool – Enables the entrepreneur to communicate with investors and stakeholders of the venture

 

The five critical ingredients of a successful Business

(Coke, 2002) defines the following five critical ingredients of s successful business plan:

1. Simple Language - Simplify definitions and use words in plain business language.
2. Demonstrate Relationships - Clearly demonstrate the relationships among planning elements.
3. Link the connections - Successfully link the connections between your strategic, operational, organizational, resources, and contingency plans.
4. Single Planning Model - Incorporate all functions into a single planning model.
5. Employee Involvement - Achieve total employee involvement by taking the business plan to all levels. (Coke, 2002, p. xxviii)

 

Conclusion

A business plan is more than just a document, it is a method for the entrepreneur to obtain funding, but more importantly it is a tool which enables the entrepreneur to understand how to put the organisation together. Stakeholders and the entrepreneur can measure the success of the venture against the business plan via the milestones placed inside the business plan.  The most important part of the business plan is that it drives the organisation into the future and to attract the correct talent to the business to enable the venture to reach its goals.

 

Bibliography

Louw, L. & Venter, P., 2009. Strategic Management - Winning in the Southern African Workplace. 3rd ed. s.l.:Oxford - Southern Africa.

Nieman, G., Hough, J. & Nieuwenhuizen, C., 2003. Entrepreneurship: A South African Perspective. 1st ed. Pretoria: Van Schaik.

Du Toit, G., Erasmus, B. & Strydom, J., 2010. Introduction to Business Management. 8th Edition ed. s.l.:Oxford University Press.

Wickham, P. A., 2001. Strategic Entrepreneurship. A Decision Making approach to New Venture Creation and Management.. 2nd ed. s.l.:Prentice-Hall.

Coke, A., 2002. Seven Steps to a Successful Business Plan. 1st ed. s.l.:American Management Association.