The business plan 1
Yvonne Harvey, Contributor

We are still on section three of the syllabus: Establishing a Business. This week we will discuss the business plan. For the examination, you should be able to outline the various features of the business plan, including the executive summary. In addition, those of you doing the school-based assessment (SBA) will find the information very useful, since you are required to do a part of the business plan, that is, the production plan, the marketing plan or the financial plan.

A business plan is a written document indicating an entrepreneur's proposed venture. It shows its proposed production, marketing and finance. The business plan is the entrepreneur's 'road map' on the journey towards building a successful business. It describes the direction the business intends to take, its goals, where it wants to be in the future and how it is going to get there. Some regard the business plan as a document that tells the entrepreneur's story by looking at the vision, current status, expected needs, defined markets and projected results of the business.

Functions of the business plan

1. It guards the operations of the business by charting its future course and devising a strategy to get to the end of that course. It gives managers and employees a sense of direction.

2. It is used to attract lenders and investors.

3. It is used as a sales tool.

Who are the users of the business plan?

1. Lending institutions. Commercial banks, for example, may require the business plan as part of the processing of loan applications.

2. Strategic partners or investors. Such persons would want to assess the viability of the business of which they will be stakeholders.

3. Landlords. They need to ensure that the activities of the business will be viable so that tenants will be able to make their regular monthly rent payments.

Sections of the business plan

A business plan usually has four main sections:

1. The executive summary

2. The production plan

3. The marketing plan

4. The financial plan

The executive summary

This is the first part of the business plan, but it is usually done last. It summarises all the necessary points of the proposed venture. If there is a financial request, it should explain the purpose of the financial request, the dollar amount required, how the funds will be used and how the money (loan) will be repaid.

The executive summary is useful in instances where individuals are too busy to read the whole business plan, but need some vital information about the proposed business.

The executive summary includes:

1. The name of the business

2. The type of business

3. Information about the owners, for example, their names, addresses, qualifications and work experience

4. A description of the product (detailed)

5. A statement of the financial needs. This includes how much is needed, what the funds will be used for and what will be the proposed means of repayment.

6. An overview of the planned strategic actions to ensure that the business is a success.

The production plan

Information that may be included in the production plan:

• The production process
• Type of production (primary, secondary, tertiary, etc)
• The level of production (subsistence, domestic or export/surplus level)
• Use of technology (state the processes that the machines will be used for (sewing, cutting, dyeing, etc)
• Whether the fixed assets will be rented, leased or bought
• The expected life of the fixed assets if they will be bought
• Maintenance of the fixed assets (for example how much will it cost per year)
• Sources of equipment (places where they can be obtained and the costs)
• Planned capacity (how much they will be able to produce)
• Terms of purchase of assets (cash or hire purchase)
• Location and layout of machinery (time may be lost if machines are far apart)
• A list of the raw materials needed
• Labour - number needed, cost (wages), statement of availability, skills and experiences needed
• Overheads - all expenses
• Production cost (this plus mark-up [profit] equals final price)

I will stop here for today. I hope that those of you who will be doing the SBA have already decided on the plan that you will be doing. Next week I will continue with the business plan by looking at the marketing plan and the financial plan.

Gleaner Managing Director Oliver Clarke with students at the opening of McGrath High School's Centre of Excellence. - Ian Allen/Staff Photographer

Yvonne Harvey teaches at Glenmuir High School.