SMME SUPPORT NETWORK –LESOTHO

P O Box 11572, Maseru – 100 Ministry of Trade & Industry Building First Floor, Phase II LNDC Centre.



Business Plan guidelines

A Business Plan is a road map for the development of your company. It includes a written description of your business and corresponding financial data. The goals of a business plan are:


  1. To assist you to obtain money from lenders (Get a Loan.) (Sell some ownership in your company to someone else.)

  2. To develop and implement your ideas into actual business practices, products or services.

  3. To identify the strengths and weaknesses of your company and its competitors, and to provide a strategy to further your company’s growth.

  4. To develop guidelines for the operation of your company.


Business Plan Components


  1. COVER: Your business plan should be typed and bound for presentation. The name, address, and phone number of your business should be on the cover. You can also show the date of issue of the plan and type "Copy Number " so you can number and control copies of the document.

  2. TABLE OF CONTENTS: One page showing the topics and page references.

  3. STATEMENT OF FUNDING PROCEEDS: A brief review of the use to be made of the funding sought followed by a detailed listing of each expenditure.

  4. EXECUTIVE SUMMARY: Do this last! Summarize key facts and figures from section 5 through 13. It should be maximum of three pages.

    1. What is the purpose of this plan?

      • an operating guide

      • a loan request

      • a prospectus for investors

    2. Who request the funds?


      The Coordinator

      SMME Support Network – Lesotho Cell: (+266) 58882032

      E-mail: smmenet@leo.co.ls/ coordinator@smmenet.org.ls


    3. For what purpose are the funds being requested? What are the expected benefits to your company?

    4. How will the funds be repaid?

    5. How much are you investing in the venture?

    6. What collateral will be used to secure a loan (i.e. inventory, equipment, building, etc.)?

    7. Summarize financial projections (Yearly Gross Profits, Net Profits, Break-Even, Return On Investment and Cash Flow) Indicate major financial milestones (Note when cash flow turns positive, when break even I achieved, etc.).


  5. DESCRIPTION OF THE BUSINESS:

  1. What is the status of the venture: start-up, expansion of a going concern, purchase of an existing business?

  2. Describe your product(s)/service(s).

  3. What is your mission statement?

  4. Who are the principals and what are their proportions of ownership?

  5. What is the legal structure of your business? Is it a sole proprietorship, partnership, company, corporation? Include copies of supporting documents(s) in the appendix.

  6. If you will be doing contract work, what are the terms? Reference any firm contracts and include copies as supporting documents in the appendix.

  7. Do you have letters of intent from prospective suppliers?

  8. What support will they give your company? Include copies as supporting documents in the appendix.


    For an existing business, address the following questions:

    1. What is the history of the business?

    2. How will your management make the business more profitable? What changes do you plan to make in the business?

    3. If you want to buy an existing business, what is the purchase price? What changes do you plan to make in the business?

Note: If yours is a seasonal business, make sure the seasonality is reflected in your financial projections with appropriate footnotes.


    1. THE MARKET:

      1. What is the geographical area that you intend to serve?

      2. How many potential customers are in that area? Document the sources of your estimates.

      3. What percent of the market do you have now? How much do you think you will have in the future? How quickly will you reach that percentage? Document the sources of your estimates.

      4. Describe your target customer (age, sex, occupation, lifestyle, income, geography, reading and viewing habits likes, dislikes, etc.).


      5. Who are your competitors? What are their strengths and weaknesses?

      6. Identify competitive or substitute products/services.

      7. Is your business seasonal: Explain.


What is the trend in the business and industry? (Are revenues growing, stable, or in decline?) Include copies of supporting documents in the appendix.


    1. MARKETING STRATEGY

      1. What makes your product/service unique?

      2. What features or services will you offer that will justify your price compared to competitors prices?

      3. How will you attract and keep your segment of this market? Explain all that apply:


        • Customer quality

        • product quality

        • price

        • location

        • promotion

        • persuasion—personal selling ?

        • satisfaction guarantee/product warranty

        • distribution

        • extend credit (if yes, what is your credit policy and payment terms?)

        • accept credit cards

        • accept checks


    1. BUSINESS LOCATION

      1. What is your business address and why did you choose that location?

      2. Will the building be rented, leased, or owned?

      3. What are the terms of the contract? Include copies of supporting documents in the appendix.

      4. What renovations will be needed and at what cost? How will they impact your lease?

      5. Describe the neighbourhood (i.e.: stable, changing, improving, and deteriorating). What are the traffic count, parking, and accessibility for customers/suppliers?

      6. What other kinds of businesses are in the neighbourhood?

      7. How much can your business expand before you will be forced to move or add on to the present building?

      8. Will your building pass an PDA (People with Disabilities) inspection? In not, what modifications must be done, and at what cost?


    1. LICENSES / PERMITS / REGISTRATIONS

      1. What licenses or permits are you required to obtain? How long does it take to get the needed licenses/permits?


      2. o you have a registered trademark for the name of your company to protect it against being used by another company? Include copies of supporting documents in the appendix.

      3. Is your business affected by zoning regulations?


    1. INSURANCE / BONDING / EMPLOYEE BENEFITS

      1. Describe the insurance coverage (i.e. liability, property, workers compensation, etc.) you have to protect both the company and yourself.

      2. Will you/your employees need to be bonded?

      3. Will your company provide employee benefits for you and/or your employees?

      4. Explain, and include copies of supporting documents in the appendix.


    1. MANAGEMENT

      This is the most important section of your Business Plan. The best source for this section is a resume that explains the business manager’s background in detail.


      1. Who will have day-to-day responsibility to manage the business?

      2. What is your business background?

      3. Do you have business management experience?

      4. D. What formal and informal training have you had that contributes to your managerial abilities?

      5. E. Are you physically suited to the job?


    1. PRODUCTION PROCESS

      1. Please explain in detail your production/manufacturing/service process

      2. Description of product and proposed production volume.

      3. Description of production procedures.

      4. Plans for equipment and machinery.

      5. Plans for raw materials and other resources.

      6. Estimation of operation costs (cost of investment and cost of production).

      7. Operating competitive advantages.

      8. Draw a flow-diagram if possible


    1. PERSONNEL

      1. Describe your organizational structure and include a brief description of who does what. Include an organizational chart if necessary.

      2. List proposed salaries and wages. Are they consistent with industry norms/ Labour Code?


      3. What management assistance resources are available to you (e.g.: accountant, lawyer, outside consultant)? List by name.

      4. What skills must your employees have? Will you train the people, or will you hire an outside trainer? Will you hire only already skilled workers?

      5. Can you use part-time help to meet changing sales volume?


If you will be using independent contractors, have you discussed this with the LRA to make sure they are not considered employees.


    1. FINANCIAL DATA

      1. Projected income statement detail by month, first year yearly summaries for second and third years notes of explanation and assumptions

      2. Cash flow projections detail by month, first year’ yearly summaries for second and third years notes of explanation and assumptions

      3. Projected Statement of Financial Position (Balance sheet) notes of explanation and assumptions key financial ratios (quick ratio, inventory turns, etc.)

      4. Break-Even analysis (The level of sales where your gross profit equals your operational costs.)


    1. For an existing business, you should supply:

      1. Current Statement of Financial Position and Statement of Financial Performance (Income Statement) less than 60 days old.

      2. Year-end Statement of Financial Performance ( Income Statement) statements for the past three years

      3. Statements of Financial Position and/or tax returns for past three years

      4. A Capital Equipment list, complete with purchase price and depreciated values

      5. A detailed Inventory listing with unit prices included

      6. Aged accounts receivable and accounts payable


    1. APPENDIX OF SUPPORTING DOCUMENTS

      1. Personal resumes for all principals, partners, officers.

      2. Personal financial statements for all principals, partners, and anyone owning 15% or more of the company.

      3. Letters of intent from prospective suppliers or customers.

      4. Copies of all leases, contracts, or agreements, deeds, certificates, or other legal documents.

      5. Any visuals of your product/service that may help (i.e. photos of your product/service, exterior/interior of store or plant).


CHECKLIST OF SECTIONS COMPLETED



APPENDIX OF SUPPORTING DOCUMENTS


Business Plan Format (an Example)



There is no one way to organize your business plan, but here is a suggested template that can be used to get started. In addition to the written and financial information, it is suggested that you include photographs (of the business store front, product, people, etc.) judiciously throughout the plan (pictures remove much of the mystery from the mind of the potential investor or lending agency) to help keep the plan concise.


  1. Cover: Name, address, and phone number of business and list of principal owners. Give your plan a business-like appearance by typing it on high-quality paper and putting it in a CD/DVD or cardstock binder or a three-ring notebook.


    Name   Address                            

                                  Telephone Principal Owner(s)



  2. Table of Contents: A single page showing major topics and page references.


  3. Executive Summary: Ideally, it is a one page summary of the entire plan. Usually the last section of the business plan that is written but it is the first section read (sometimes the only section read!). It explains to the busy investor or lender what, who, why, how much, when, where. Immediately followed by tables, figures, and other vital information including the cash flow projections. It must be concise and persuasive. Address the following questions and add additional information that will help you achieve your goals.


    1. What is the purpose of this plan?



    2. Will it be used as:

      1. an operating guide?

      2. a financing proposal?


    3. What business structure have you chosen (i.e., sole proprietorship, partnership, corporation, S corporation)?


    4. Who are the principals and what are their proportions of ownership?




    5. Why will the venture be successful?




      For a financing proposal:


    6. Who is requesting the funds and how much is needed?




    7. What will the money be needed for?




    8. How will the funds be repaid?




      h. What collateral will be offered to secure the loan?




      i. Why does a loan or an investment make sense?




      • impact on local economy

      • job creation

      • increased tax base

      • investment in the future of the community


  4. Description of the Business:


    Describe in some detail the business including type of business, size, history, successes, failures, seasonality, industry, overview trends, and other facts.

    Often includes a discussion of the progress to date of the business (for example, how quickly it is growing). A discussion of business risks should also be addressed in this section. Answer as many of the following questions as are appropriate:


    1. Industry overview




    2. What business are you in?


      1. type of business: primarily merchandising, manufacturing, or service?




      2. what is the nature of the product(s) or service (s)?




      3. what will be special about your business?




    3. What market do you intend to serve?




    4. What is the total market, and what is your expected share?




      1. How can you serve the market better than your competition?



      2. Present status of business: start-up, expansion of a going concern, or take-over of an existing business?



      3. If you will be doing any contract work, what are the terms? Reference any firm contract and include it as a supporting document.



      4. Do you have letters of intent from prospective suppliers?




      Taking over an existing business:


      1. What is the history of the business?



      2. Why does the owner wish to sell at this time?



      3. If the business is going downhill, why? How can you turn it around?




      4. How will our management make the business more profitable?




      5. What changes do you plan to make in the business?




      6. What is the purchase price formula? Give breakdown for building, improvements, inventory, and goodwill.




  5. Business Location:


    1. What is your business address and why did you choose that location?




    2. Will the building be leased or owned?




    3. What are the terms and length of the lease contract?




    4. What renovations will be needed and at what cost?




    5. Describe the neighborhood (i.e., stable, changing, improving, deteriorating)




    6. What other kinds of businesses are in the neighborhood?




    7. How much can your business expand before you will be forced to move or add on to the present building?




  6. Operations: Operations will explain the day-to-day manner in which the business operates as well as describe the product and proposed production volume, production procedures, plans for equipment and machinery, plans for raw materials and other resources, estimated operation costs (cost of investment and cost of production).


    Describe also the operating competitive advantages, physical plant, warehouse, or retail store. Manufacturers may want to describe processes, quality control techniques, and capacity.




  7. Licenses and Permits:


    1. Is your business name registered with the secretary of state?



    2. State how you will be affected by local zoning regulations.



    3. What other licenses or permits will you be required to obtain?




  8. Management: Describe key management and their abilities.


    1. What is your business and management experience?




    2. What education have you had, including both formal and informal courses, which contribute to your managerial abilities?




    3. Are you physically suited to the job?




    4. Do you have direct operational and/or managerial experience in this type of business?



    5. Describe your organizational structure and include a brief description of who does what. (Include an organizational chart if necessary.)


      . List proposed salaries and wages.




      g. What other management resources will be available (accountant, lawyer, etc.)?




  9. Personnel: Write a paragraph or two about your personnel needs.


    1. What are you anticipated personnel needs?

    2. What skills must your employees have?

    3. Can you use part-time help to meet changing business volume?


    4. Will you have to train people, and at what cost?


  10. Insurance: Describe your potential business risks and tell what insurance coverage you will purchase to protect yourself.




  11. Marketing:


    The marketing section is generally the "meat" of the business plan - after all, if a business can’t attract customers it’s not much of a business! This section can be organized into the four P’s of marketing and the other key marketing factors. The marketing section usually includes a breakeven analysis.


    1. Who exactly is your market? Describe age, sex, occupation, lifestyle, income, etc., of your various market segments.




    2. What is the present size and growth potential of the market?




    3. What percent of the market will you have now and in the future?




    4. How will you attract and keep your segment of this market?




      • product quality

      • price

      • public relations

      • personal selling


    5. What features or services will you offer that will justify your price?




    6. How will you handle credit sales? (extend your own credit, accept major credit cards etc.)





  12. Competition: Briefly describe your competition and tell how their operations are similar and dissimilar to yours. What is your unique selling proposition and how will you use it to control your market share?




    Finances: The Finance section typically contains the "numbers" of the business and demonstrates the viability of your venture. It can be organized into three sections: historical data, sources and applications of funding and projections.

    Historical data is appropriate for existing business who are expanding or seeking financing for a number of purposes. The historical data typically includes three years of cash flow statements, income statements and tax returns, balance sheets, and performance against budgets. The Projections section should include at least three years of cash flow projections, two years of which are in a monthly format (to demonstrate seasonality and other trends, plus to demonstrate the ability to budget and forecast). Some investors prefer to see five years of projections, with the first two years in monthly format and the last three in annual format (often an investor is paid within a three to five year period). The projections should also include three to five years of income and balance sheet projections. A list of sources and applications (uses) of funding is also appropriate for the business plan. This list specifically shows all sources of funds, how the funds are used (including a list of capital equipment, if appropriate).


    1. Historical data:




    2. Source and application of funds statement.




    3. Capital equipment list:




    4. Current balance sheet and operating statement (less than 90 days old).


    5. Break-even analysis.


    6. Profit and loss:


      • detail by month, first year

      • detail by quarter, second year

      • notes of explanation and assumptions


    7. Cash flow projections:


      • detail by month, first year

      • detail by quarter, second year

      • notes of explanation and assumptions


    8. Projected balance sheet


      • notes of explanation and assumptions


    9. For an existing business:



  1. Long Range Plans:

    Briefly describes new products and services in the making, and other long term plans for expanding the business. It is an opportunity to pique the interest of the reader in the future of the business.



  2. Supporting Documents:


    1. Personal resumes for all principals.


    2. Personal financial statements for principals.


    3. Letters of reference.


    4. Letters of intent from prospective suppliers or customers.


    5. Copies of all leases, contracts, or agreements, deeds or other legal documents.


    6. Any other information that might help our cause or answer potential questions.


  3. Appendices: Includes copies of leases (if appropriate), patent and licensing information, photographs, interesting news articles, resumes, credit reports, letters of intent, references, contracts, legal documents, and other supporting documents.