Business Plan

All EntrePass applicants need to submit a business plan about translating their dream into reality. It involves taking an idea for a commercial endeavour and working systematically through all the factors that will have an impact on the successful startup, operation and management of the business. The plan involves several steps and procedures, culminating in a written document called the business plan, which forms the blueprint for your business. As potential investors, banks and suppliers are interested in the details of entrepreneurs business plan, it is crucial to have a well-crafted one to showcase the business strategy and the means of achieving the objectives.

Products / Services

Several issues on the type, quality, production, price, consumer benefits and other related areas will have to be identified and addressed before entrepreneur plunge into business. Questions may ask include:
 

• What kind of product or service are going to sell?
• What makes the product different from the ones already existing in the market?
• What are the perceived benefits to customers?
• Is the product easy to produce or obtain from suppliers?
• Can the product be sold easily?
• What is the profit margin of the product?
• What are the unique features of the product that is not easily substitutable?
• Is there anything special about the product such as its quality, taste, preparation, freshness or hygiene factors?

Answering these questions can help a business to decide on the kind of product or service that it wishes to sell on the market. Entrepreneur will also need to set the suitable price for the product or service. Such a pricing structure will depend on the various costs of running the business; the product image; competitor’s price and the discounts and offers business may want to give to customers.

Market Analysis

For businesses, a market can be defined as the aggregate number of people who will buy or are likely to buy your product. Entrepreneur needs to examine the business environment to determine the consumers who will buy his product. Examining the environment involves determining the existing sales of such a product and the number of companies selling similar products. Entrepreneur can gather market information by reading relevant newspaper articles, trade magazines, market research reports and government statistics. Generally, alyse the information by grouping them into opportunities and threats for the potential business. Then you can assess your potential business’ strengths and weaknesses in the face of these opportunities and threats. Always relate business to the market to examine how entrepreneur can turn his endeavour into a thriving business.

Target Market

Any business planning should clearly identify the current and prospective buyers of your product or service. Properly identifying the potential customer base helps to drive marketing and sales strategies. It is important to determine the size of the target market. Demographics such as the income, occupation, age group, gender, education level and lifestyle of the people in the target market ought to be studied to build up the customer profile. The way entrepreneur position your product in the market will depend on how customers perceive his product in terms of its benefits and values. Other aspects that should be considered are the geographical location of customers and also their motivations for buying your product.

Promotional Mix

Even if entrepreneurhave a very good product or service, it will be redundant if fail to sell it. Hence, any business must ensure that the intended message regarding its product or service is delivered to its target customers to facilitate sales. The image of the business and the unique characteristics of the product should be communicated to the buyer.

Basically, entrepreneur will need to determine the promotional mix to reach the customers.  Business may want to place advertisements promoting products or services in newspapers, magazines or on television. Alternatively, business may try direct selling or direct mailing to target customers. Promote products by distributing samples and offering discounts. So how should the business promote it's product or service – use one of the above approaches or a mix of them? Entrepreneur need to estimate how much can sell through a planned promotional mix. Then, relate this estimated sales figure to the estimated cost would incur. Working out the sums carefully helps determine the business promotional mix.

Competitive Analysis

Part of the business planning should incorporate competitive analysis. This involves:

• identifying your direct and indirect competitors;
• what and how much they sell in units and sales dollars;
• the number of years they have been in business; and
• their specific market niche.

Financial Concerns

Projected Profit

Businesses are set up solely for profits. The business will be considered profitable if the revenue for each year exceeds the total expenses. Profit is very important to provides the basis for investors to put money into the business and for banks to offer you loans and for authority to approve the business plan. To determine the projected profit, a business needs to deduct the estimated total expenses from its projected revenue. It can check if its profit is healthy by comparing its projected profit with the industry average. Very often it will take some time before a new business starts to generate a profit. Hence, you should be as realistic as possible when generating your projected profit.

Projected Cash Flow

Entrepreneurs must project the monthly cash flow for the next 12 months into the business. They should convince themselves that they have enough money to pay for their business operations, suppliers and bank interests every month. Projected cash flow also helps businesses to set a benchmark for their in-coming and out-going funds. For new businesses, it is useful to have a projected cash flow statement for 12 months. During the building up stage, a business startup may incur losses but it must have enough cash to meet its monthly obligations. Otherwise, the business becomes insolvent.

It is good practice for an entrepreneur to prepare projected profit and cash flow for at least two business scenarios – the best and worst cases. The best case scenario shows projected profit and cash flow in the most ideal business situation. For instance, customers make the maximum number of purchases from the business, suppliers do not increases their prices and there are no cheaper new substitutes which force the business to lower it's products’ price. The worst case scenario shows the opposite. If still generate a healthy cash flow even in the worst case scenario, then the business is likely to survive better in the early years. Investors and banks will also be more comfortable in putting their money into such a business.

Financial Ratios

Besides the above, there are some key financial ratios that entrepreneurs should be familiar with when starting a business. You should know that the:

• Return on Equity

  (ROE) is the percentage derived by dividing profit by equity. ROE tells investors if they can make a decent profit when investing in your company and whether banks are willing to lend you more money. A high ROE relative to your competitors is preferred.

• Profit margin

  The ratio is the percentage derived by dividing profit by sales. This indicator tells the banks about your ability to repay your loans as well as the risk profile of their loans to your firm. Investors will use this indicator as a gauge their probability of recovering their investments and perhaps even receiving dividends. A higher profit margin compared to your business rivals is something entrepreneurs must aim for.

• Debt-equity ratio

  The ratio is used to measure the company’s debts relative to the shareholders capital. This ratio, which should ideally be kept low, helps banks to decide on whether they should lend you more money.

• Inventory turnover

  The ratio is derived through dividing sales for the year by the inventory. This indicator is particularly useful in manufacturing management. A high inventory turnover ratio suggests that there is strong demand for your product and that little stock is available in your inventory.

Writing the Business Plan

Having learnt various considerations when writting a business plan, it is time to put the plan into writing. Entrepreneur should note that a good business plan should: state clearly the business objectives; be better placed to look for potential funding; seek out new opportunities; better organise and manage the business; and preempt potential problems. A suggested business plan should include the following sections:

• Executive Summary
• Table of Contents
• Type of Business
• Products/Services
• Market Analysis
• Target Market
• Promotional Mix
• Competitive Analysis
• Management Team/Branding Strategy/Operational Issues
• Financial Projections
• Appendices