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How to write an effective
Business Plan
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Introduction There are 3 types of people: -
1. People who make things happen
2. People who watch things happen, and
3. People who ask “What happened?”
If you do not have a business plan, your future can only ever be an extension of your
past. Goals and strategies are a must unless you want to stand still. Writing a
business plan forces business owners to think through the business in detail and
think about where the business is headed, or where they want it to go, rather than
being taken along with it.
“We cannot solve our problems with the same level of thinking that created
them” - Albert Einstein
Do you have a clear idea of what you want out of your business and your life, and
how you're going to achieve these goals? If you're like most people, chances are
you've never thought very much about this sort of thing - which means that no one
else knows what you really want either. And not knowing what success means to you
makes it harder for others to give you the right assistance and support.
In order to put a plan in place, it makes sense to start by looking at the current status
and also the history of the business, strengths and weaknesses in your business and
your environment. You'll identify issues that need to be addressed and opportunities
you can develop.
At the end of the process you'll evaluate and prioritise your issues and opportunities
according to how important they are against how easy they would be to address.
You'll then select your high-priority issues and opportunities and develop these into
Action Points.
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My Business is? What business are you in, what do you sell?
What need do your products or services satisfy?
Explain your market niche or your competitive advantage in the marketplace?
List your competitors
How do you think your industry will change in the next 3 – 5 years and what do you
need to do to adapt?
What makes you confident your business will continue to grow and be sustainable?
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Values & Motivations Most business people are in their own business for very specific reasons.
One of the main requirements for success is the ability to clearly identify and express your values and the motivators that drive you. Your values are a central part of who you are – and who you want to be.
If you can find out what motivates you and what values you have, then you can achieve your business goals by setting in place those ideas and actions that continually support and reinforce your values and motivators.
What is really important to you? What do you value?
The following is a list of common values.
Circle the ones that are most important to you.
Accountability Accuracy
Achievement Altruism Authority Balance
Being the best Challenge
Commitment Community Compassion
Competitiveness Consistency
Continuous Improvement Control
Cooperation Creativity
Customer service Decisiveness Effectiveness
Efficiency Environment
Excellence Expertise
Faith Family Fitness
Free time Fun
Growth Happiness Hard Work
Health Helping others
Honesty Independence
Innovation Integrity
Leadership Legacy
Making a difference Money
Personal development Professionalism
Quality Recognition Reliability
Resourcefulness Respect
Responsible Results-oriented
Risk taker Security Speed
Spontaneity Stability Strategic Success Support
Sustainability Teamwork Tolerance
Traditionalism Trustworthy Uniqueness
Wealth
Now select for top 5 values
1. _____________________________________
2. _____________________________________
3. _____________________________________
4. _____________________________________
5. _____________________________________
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Core Values of your business – what do you stand for?
We do what we say
We do it fairly
We execute with speed
We take prudent risks
We work as a team
We support each other
We are accountable for our actions
We make tough decisions
We are performance driven
We are dedicated to satisfying customer needs
We help our community
We are concerned about the environment
We act with honesty and integrity
We are proud of our work
We deliver high quality products and services
We respect our team members, customers, partners and suppliers
We listen and share ideas
We communicate openly, honestly and frequently
We optimize our financial and physical resources
We continuously simplify and improve our processes
We work together to meet our common goals
We are creative in delivering value
We anticipate change and capitalize on opportunities
We lead by example
We seek sustainable and profitable growth
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Vision A business vision describes in a few words your long-term aims for the business and a broad outline of how you're going to get there.
Think about the industry you're in, what's important to you, and what you might want to achieve. Consider: -
What does success look like to me?
Why is achieving this important to me?
How will I achieve it?
You can write a business vision, a personal vision, or a combination of both. Your vision creates a destination point for your business plan, enabling you to map out what you need to achieve to get you there.
“To succeed you have to believe in something with such passion that it becomes a reality” – Anita Roddick
Write your vision in the box provided below, but remember, if your vision does not motivate you enough, you may need to reconsider.
Your Vision
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
.............................................................................................................................................
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Key Success Factors
How do you define and measure success in your business? How do you know if your business is a success? Can you tell if you are on or off course? If you are off course, what corrective action(s) can be taken? To create effective measures, you must first identify the key things that, if you do them well, will ensure the success of your business in your industry?” Once you have listed your Key Success Factors (KSF), it is then important to identify ways of measuring your success in each area. These measures are called Key performance indicators or KPIs, For example, if your business success is dependent on the standard of service you provide you might want to create a way of measuring customer satisfaction..
Instructions 1. In the first column are key success factors. Because these vary with each market,
you may want to add some of your own. 2. In the cell labelled "My business," state honestly how you think your business
stacks up in the marketplace. 3. Then decide whether you think this factor is a strength or a weakness for your
business and whether any action is required.
Key Success Factor My business Strength / Weakness
Cashflow / working capital
(Manage and monitor)
Profit margins
(Manage and measure)
Debt collection process
Stock and stock turn
(Manage and measure)
Product range (limited,
extensive)
Target Market (budget,
mid range, high)
Product/service quality
standards
Customer service
standards
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Key Success Factor My business Strength / Weakness
Reliability
Speed of delivery
Market stability
Distribution channels
Expertise you/staff
Brand image and
awareness
Customer satisfaction and
loyalty
Reputation
Location
Appearance
Market niche or point of
difference
Market penetration (low/
high)
Marketing strategy –
including online
Competition (high, low)
Ongoing competitor
analysis
Ongoing market analysis
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SWOT Analysis Template State what you are assessing here. Examples shown are not exhaustive. You should identify and use any other criteria that are
appropriate to your business.
Criteria examples
Advantages of proposition?
Capabilities?
Competitive advantages?
Existing “Point of Difference”
Resources, Assets, People?
Experience, knowledge, data?
Financial reserves, likely returns?
Marketing - reach, distribution, awareness?
Innovative aspects?
Location and geographical?
Price, value, quality?
Accreditations, qualifications, certifications?
Processes, systems, IT, communications?
Cultural, attitudinal, behavioural?
Management cover, succession?
Strengths
Weaknesses
Criteria examples
Disadvantages of proposition?
Gaps in capabilities?
Lack of competitive strength?
Reputation, presence and reach?
Financials?
Own known vulnerabilities?
Timescales, deadlines and pressures?
Cashflow, start-up cash-drain?
Continuity, supply chain robustness?
Effects on core activities, distraction?
Reliability of data, plan predictability?
Morale, commitment, leadership?
Accreditations, etc?
Processes and systems, etc?
Management cover, succession?
Criteria examples
Market developments?
Competitors' vulnerabilities?
Industry or lifestyle trends?
Technology development and innovation?
Global influences?
New markets, vertical, horizontal?
Niche target markets?
Geographical, export, import?
New “Point of Difference”
Tactics: eg, surprise, major contracts?
Business and product development?
Information and research?
Partnerships, agencies, distribution?
Volumes, production, economies?
Seasonal, weather, fashion influences?
Opportunities
Threats
Criteria examples
Political effects?
Legislative effects?
Environmental effects?
IT developments?
Competitor intentions - various?
Market demand?
New technologies, services, ideas?
Vital contracts and partners?
Sustaining internal capabilities?
Obstacles faced?
Insurmountable weaknesses?
Loss of key staff?
Sustainable financial backing?
Economy - home, abroad?
Seasonality, weather effects?
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Goal setting The vision that you have created for the future may seem unachievable at the moment, or a long way off. Once you have analysed the current status of your business, you can measure the gap between where you are now and where you want to be. To get there may require several steps, so it’s important to take it one step at a time and break the task down into smaller more achievable chunks. This process involves setting a series of shorter term goals that bring you closer to your vision. No business or individual can focus on or accomplish more than 5 things at a time. In considering your business objectives, start by identifying and prioritising the top 5 activities that will deliver the results that you are looking for. Goals formatted in S M A R T way are more likely to deliver results.
• SPECIFIC - if they’re too general you lose focus
• MEASURABLE - because you can’t manage what you can’t measure
• ACHIEVABLE - if they’re too tough you may become disillusioned and give up
• RELEVANT - your goals should relate to you and your business
• TIME RELATED - without a deadline, your goal is just a dream that you have forever to achieve
Having the goal is not enough to achieve results; you also need to identify the actions that will enable you to achieve it. Example Goal: You may have identified that to grow your business you want to grow your net profit by 10% per annum Actions: Analyse profit and loss statements over the previous 3 years to identify your current gross and net
profit margin.
Calculate how much additional revenue you need to generate to increase your net profit.
Consider raising prices and or negotiating with suppliers to increase profit margins.
Identify the products or services that give you the best profit margins and identify ways to sell more of them.
Work out your average conversion rate from customer enquiries to actual sales and identify the number of enquiries and sales required each week.
Establish a system to track actual results against your forecasts to keep you on track.
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When setting your goals, check that they are achievable within the timeframe. If not, break them down into a series of more achievable goals.
Decide what actions will be required, the timeframe that it will be completed, who will take responsibility and how you will measure success.
GOALS / OBJECTIVES ACTIONS REQUIRED MEASURE BY WHO BY WHEN
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GOALS / OBJECTIVES ACTIONS REQUIRED MEASURE BY WHO BY WHEN
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Examples of other possible actions
Identify your target market and or ideal customer
Establish a customer database. If possible record what and how frequently customers buy.
Find out and record the reasons customers don’t buy from you. If they buy from your competitors, find out why.
Take time to complete a competitor analysis to identify your strengths and weaknesses in the market place and also identify if there are any opportunities that you can leverage or any threats that you need to action.
Establish a point of difference between your business and your competitors, how can you market it?
Identify additional products or services that you could offer that your competitors don’t.
Create a website
Create a social media strategy
Identify people or businesses that you can team up with to create more business.
Identify what constitutes great service in the eyes of your customers.
Establish a system of recording and monitoring customer satisfaction and identify ways to keep existing customers.
Measure skill level of staff and identify training needs
Ensure staff are trained and motivated to do their job effectively.
Create a complaint handling process
Calculate breakeven for you business and set monthly sales targets.
Identify at least 5 ratios to track and monitor the performance of your business.
Create a profit and cash flow forecast for your business.
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Market Research - My typical/Ideal customer is Private individuals Commercial Businesses Male / Female Small / Medium / Large
Marital status Location Married/ De facto Local, National, International Single Accommodation Status Age Home owner < 10 years Renting 10 – 20 Gen Y Financial status Gen X Wealthy Baby Boomer Disposable income Elderly On a budget Do you have a customer database? Do you know how often your customers buy from you? Weekly Monthly Yearly Other ………………………
What is the average purchase value? $ ................................................... What motivates your customers to buy your product or service? Is their purchase demand driven or discretionary? Based on your typical customer, what is the size of the market? ………………………. Why do they buy from you rather than your competitors?
Who are your most profitable customers?
What market research have you done?
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Marketing
What media do your customers use to look for a business?
Newspaper ............. Radio ..................... Flyers ...................... Recommendation ...... Yellow Pages ........ Street signage ......... Online Search Engine Facebook .............. Local directory ......... Any other methods
What marketing methods do you currently use?
Do you have a marketing plan and budget? Do you monitor to see if your marketing methods are successful? Yes / No
How do you know whether your existing customers are satisfied?
How do you encourage referral business?
Do you have any strategic alliances that will assist you in reaching your target
market?
How do your competitors promote their products & services?
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Financial Analysis
How frequently do you look at your profit and loss statement and balance sheet?
How do you measure financial and business performance? E.g.
o Gross profit to sales ratio
o Net profit to sales ratio
o Conversion rate (% of customers that buy)
o Average sale per customer
o Stock turnover days
o Average debtor days
o Average creditor days
o Work in progress days
o Other …………………………..
Every business is different, so it’s a good idea to talk to your accountant to help you identify the relevant ratios for your business
Are sales on an upswing, level or on a decline?
What is your break even point?
Do you have a credit policy?
Have you established Terms of Trade with your customers?
What profit assumptions have you used for the business?
Have you obtained any Industry Benchmarking in respect of financial performance indicators?
What systems do you have in place to monitor financial performance
What cashflow assumptions have you made?
Have you allowed for seasonal variations and potential cash flow shortfalls? Assistance with calculating these items can be found at www.anz.co.nz/bizhub
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Technology What technology are you using now?
......Accounting software package ......Website ......Social Media e.g Facebook, Twitter, Linkedin ......Using email to communicate with suppliers & customers? ......Setting up an email newsletter? ......Writing a Blog? ......Sending an invoice by email? ......Surfing the web for market research on your competitors and/or new
products & innovations? ......Google alerts to send you industry updates ......Having EFTPOS and Credit card facilities available for customers? ......Using electronic banking ......Ordering office supplies over the internet
What technology could you be using?
Think about what types of technology your customers might be using? (The age groups of your existing and/or prospective customer might provide a clue.)
Are your competitors using technology or could you use of technology give you a competitive advantage?
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Team and management structure
Have you created an organisational structure for your business, outlining roles and responsibilities?
Outline the skills and experience of yourself and management team and identify any skill gaps?
.
How do you currently train your staff and do you have a training budget?
To achieve your business vision, will you need to recruit staff in the future? What skills will be required?
Advisors A business does not achieve success without help. List your:
Lawyer
Accountant
Business mentor
Other advisor Management systems Describe the business systems you have in place.
Do you have a written operations manual for the business?
What accounting software or systems do you use?
How regularly can you produce financial reports and analyse key business ratios?
Do you have systems to deal with compliance issues such as: payroll and employment issues, tax and GST obligations, OSH, etc.
www.anz.co.nz/bizhub
Contact me: e-mail: [email protected] Post: P O Box 40, Nelson Ph: 03-5463409, 027 2705980 Also on LinkedIn