Small Business Planning: A Multi-Dimensional Exercise

Set Performance Targets, Analyze Viability, Develop Strategies

Your small business plan is a multi-dimensional document, serving as a benchmark to measure your performance, a feasibility analysis of your business idea and a strategy document outlining your marketing and financial strategies, for example.

If you submit a run-of-the-mill readymade plan as part of your financing proposal, you are losing a high value opportunity to enhance the success prospects of your small business. Instead, work yourself on developing a complete business plan, if necessary with some professional assistance.

Small Business Planning Exercise

A really worthwhile business planning exercise will involve the following:

• Profiling Your Customer: Who are your prospective customers? What need do they seek to fulfill through your product? How satisfied are they with existing offers? How do you reach your customers?
• Identifying Your Competitors: What competition will you face in the market? What kind of a package do these competitors offer? How strong are the competitors? Are there any gaps in their offers that you can fill?
• Your Marketing Strategy: Based on the customer profile and competitive situation, how will you compete in the market? What will be your Unique Selling Proposition? How will you convey this to your customers? How will you distribute your products to meet customer convenience?
• Facilities Requirements: What type of facilities - premises, equipment, utilities, storage, office, etc - will you need?
• Manpower Requirements: What kinds of skills and numbers will be needed to run your business?
• Profitability Analysis: An estimate of revenue, costs and establishment expenses to examine different aspects of profitability. At what levels of sales can you break even? When can this level of sales be achieved with your planned marketing set up? Would your facilities be adequate to service this level of sales?
• Financial Requirements: What would the costs of the facilities needed? How much money is needed to carry you through the initial period when your sales and cash flows are too low to meet all your costs and expenses? How much of contingency provision should be added to these estimates?
• Financial Strategy: How much money can you invest yourself? How are you going to raise the remaining funds? Would you be eligible for some kind government grant? Is yours a high return, innovative business that might interest venture capitalists?

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In addition to the above core issues, your small business plan should also describe the specifics. These would include a description of the business, its location, the form of business organization you plan to adopt, backgrounds of the promoters, applicable regulatory requirements like licenses and permits and the progress already made in setting up the business.

The Small Business Plan Document

You would summarize the answers to the strategic questions and the specifics of the business in an impressively presented business plan document. While an impressive presentation is important that alone cannot compensate for clear answers to the questions we asked in the last section. You must do your field work, with professional assistance if necessary, to develop your small business plan.

A typical small business plan would have the following sections:

• Description of the Business: This section would outline the specific business you are setting up, and provide additional details such as the backgrounds of promoters, form of business organization and the business' location. Details of any progress already made, including licenses and permissions obtained, would also be included.
• Markets & Marketing: The markets would be outlined along the following lines: Situation in the industry to which your business belongs; Description of the product and the needs it fulfills; your target customer group; and the Competition you would have to face.
  This would be followed by an outline of the strategy you plan to adopt: Your competitive strategy; Pricing strategy; Sales (distribution) and customer support plans.
• Facilities Requirements: The requirements of premises, equipment, utilities, materials, technical know-how and any other inputs of significance would be outlined. The section would also explain the arrangements you have made to make each of these available.
• Personnel Requirements: This section would outline the number of personnel required, and their skill and experience levels. An indication would also be given regarding their availability and any arrangements you have already made. An organization chart supported by job specifications of key personnel would be ideal.
• Physical & Financial Estimates: Sales in terms of units and monetary amounts, by months for the first quarter, by quarters for the next three quarters, and years for the remaining two years would be estimated. Based on the sales levels, cost of sales in terms of direct costs such as materials, labor, power & fuel; production overheads; and selling expenses would be estimated next. Finally would come estimates of the establishment expenses such as rent, rates & taxes, general salaries & travel, interest, and other recurring expenses. These would be summarized in a projected Profit & Loss statement.
• Cost of Project & Financing: The facilities costs, and the initial cash losses accumulated while sales are growing to viable levels, would constitute the project cost. The proposed manner in which this project cost would be financed would also be indicated.
• Financial Statements: Balance Sheets indicating the assets, liabilities and owner's funds at the end of each period and Cash Flow statements showing the expected inflows and outflows of cash would be computed based on the above projections.

The business plan document would start with an Executive Summary which would summarize the information in the other sections discussed above. These sections would then follow the executive summary.

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