Establishing your own business can be one avenue to increasing wealth, as it gives you the opportunity to control and expand your earning capacity. So why is it that some business owners end up in less advantageous financial positions, sometimes losing everything they own?

One factor that can help to determine the success of your venture is the planning that you do before starting, and during the lifetime of your business. A business plan is basically a document that provides a thorough description of your venture.

It gives information about the type of operation, the products or services offered, the industry in which it exists and the target market, its objectives and the strategies to be used to accomplish its goals, and financial details about the business.

Thinking out your plan

In theory, since you conceived the business idea, it should be relatively simple for you to put down these various details on paper. However, writing a business plan is a project that may require expert guidance, as it takes careful thought and analysis to develop a comprehensive blueprint for your business.

Recently, the Private Sector Development Programme (PSDP), an agency that provides technical assistance to small businesses in Jamaica, hosted a workshop that looked at the importance of business planning for organisational growth and sustainability.

Deanna McFarlane, consulting officer in the PSDP’s Corporate Finance Broker Unit, explained that a business plan would assist entrepreneurs to plot a course for their businesses and increase their chances for success. By completing a plan, owners would be better able to identify customers, improve operational efficiencies, focus on strategic goals, obtain financing for start-up and expansion, and attract investors for further growth.

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McFarlane outlined the following steps to completing an effective business plan:

1.   Executive Summary

This section provides the key highlights of the business plan, summarising the profile of the business, objectives, strategies and all the other areas that are detailed in the rest of the document. Although the summary appears at the beginning, you should only prepare it after completing the other segments. It must be well written and attention-grabbing to influence readers to continue to examine your plan.

2.   History & Background

You should provide a description and location of the business in this section, as well as the reason why it was started and its basic objectives. List accomplishments such as major contracts or awards won, along with details on memberships in business and trade associations. If your business is a start-up you can talk about your personal successes that are relevant.

3.   Strategic Direction

In this segment, you need to outline your vision – a short statement that highlights the soul of your business and its reason for being; and your mission – a statement expressing the overall purpose of the organisation. Then outline your goals, listing short-term objectives and your long-term plans over five years. Finally, describe the strategies that must be implemented in production, marketing, sales, distribution, internal operations, management and financing, to attain your objectives.

4.   Environmental Analysis

Describe the general environment within which your business is operating, and state the relevance of your business to the sector in this section. You should also analyse your strengths and weaknesses, those internal factors that can influence your development; as well as the external opportunities and threats that can make or break your business. McFarlane advised entrepreneurs to admit the truth about their businesses, as this would help them to solve potential problems.

5.   Market Analysis

A description of industry factors should be provided in this segment, looking at the size of the market, existing products/services and market segments, and trends that may affect your business. It is crucial to research details about your main competitors and identify their strengths and weaknesses, in order to plan ways to capture market share from them or maintain your dominance.

6.   Marketing Strategy

McFarlane explained that business success depended on the ability to attract customers and keep them satisfied. This section will help you to understand your market, by examining key demographic details such age, gender, income level, geography, buying habits and personal tastes. Give details about your expected sales performance, distribution channels and your competitive strengths.

7.   Organisational Structure

In this segment, provide information on the management and human resources of the organisation by giving profiles on key team members and important external advisors. You should also describe recruitment plans that may be essential to the business, and any relevant regulatory issues.

8.  Financial Analysis

This final section is the most crucial, as it details how the money will be earned and spent. You will probably need assistance from an accountant to create a balance sheet, profit and loss statement, cash flow projections and other revenue assumptions. Looking at the figures will help you to determine if your wonderful business idea is actually feasible.

So, if you haven’t already written your business plan, put aside some time to get it done. As McFarlane confirmed, proper planning will help to build people’s confidence in your venture, and greatly assist you in achieving your business goals.

Copyright © 2009 Cherryl Hanson Simpson. No reproduction without written consent.

Originally published in The Daily Observer, December 10, 2009

Cherryl is a financial consultant and coach, founder of Financially S.M.A.R.T. Services. See more of her work at www.financiallyfreenetwork.com and www.financiallysmartonline.com. Contact Cherryl