The Importance of a Well Written
Business Plan (BP)
PRESENTED BY IAN JUUL
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Introduction - my past businesses include;
1. Selling Wild Birds – aged 10
2. Accounting / Consulting Practice - Sold
3. Telephone Meters / Electronic Ballasts - Sold
4. Accounting / Consulting Practice - Sold
5. Panel Manufacture / Fabrication - Sold
6. Sports Clothing Embroidery (NIKE, Adidas, Wilson etc) - Sold
7. Wooden Furniture from Indonesia – Failed / Liquidated
8. Accounting / Consulting Practice – Closed
9. Removals / Storage – Sold
10. Advertising Magazine - Failed
11. Consultant – London - Closed
12. Restaurant – Spain - Sold
13. Retail Gift Shop – Florida - Sold
My family were also Entrepreneurs (property development, African artifacts, mining, farming, fast food, timber logging,
haulage)
Small Business Development Corporation – 7 years.
• Investigated around 15 Businesses a month – lending Money, mentorship and support programs.
• Lent between $ 5,000 and $ 2 million. Lent $$ to hawkers in squatter camps to global businesses (Nando’s / KFC).
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Why do you need a Business Plan ?
1. Planning Tool - Forces you to consider a wide range of factors that potentially impact
the viability of your business. It is a formal ‘Checklist’ – have I considered everything ?
2. Formal requirement – Applying for finance, negotiating rental contracts, negotiating
supply contracts, looking for investors & partners and even Customers sometimes ask
for your BP eg RFP Process / Tenders & Bids.
3. Creates discipline & structure – It tests those wild ideas and brings a measure of
‘reality’ to the conceptual process. Often Entrepreneurs run ahead of themselves and a
BP forces them to get real and find solutions.
Ideally the BP should be a detailed written document. In reality, BP’s are usually
fragmented ideas and they are not committed to writing. This poor practice increases risk.
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The negative sides of a BP
The negative things about a BP are;
1. They take time to complete. BP’s are commitment of time and sometimes cost.
2. Barrier to starting business. A new business is exciting and taking ‘time-out’ to complete a
BP seems like an obstacle & causes a delay.
3. They outdate quickly. Business is dynamic with constant changes, so a BP needs constant
revision and this gets tiring.
4. Confidentiality risks – Intellectual Property. All your research and ideas can be misused.
5. Criticism – Sharing a BP invites Criticism and not everybody likes Criticism.
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Before you Start
Before you start the BP consider;
1. Non-disclosure Agreement (NDA) – Get your own simple NDA and get any-one who reads your BP to first
commit to an NDA. An NDA offers some protection.
2. Who is your audience – CRITICAL. Tailor the BP to your audience. A bank is going to be looking at shortterm EBITA (earnings before interest and tax) and loan securities, whilst a potential Angel Investor will be
looking at medium to long-term ROI (return on investment) over a certain period. A leasing agent will be
looking at what product lines you are selling so that he can leverage and balance a tenant mix in a Mall,
whilst a Distributor will be looking at what product volume you can move.
3. Size. A small business needs a smaller BP. A larger business needs a larger BP.
4. Your business type. A retailer will concentrate on local competition, demographics, inventory turnover
ratio, trading hours etc whilst a manufacturer will concentrate on machine capacity, quality, work flows,
logistics. ONE SIZE does-not fit all.
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Step 1 – Break Even Analysis
The essence of business is the flow of money from your customers to your vendors and you
are trying to keep as much of this money flow as you can.
B/E Analysis – it is probably the most important Business Calculation you need to learn.
B/E Analysis estimates the Sales you need to ‘Break Even’ ie. Using the money you collect
from your Customers as Sales, you can pay your running costs and Vendors.
B/E requires estimating your monthly running costs and dividing this by your Gross Profit
Percentage. Eg. Costs are $ 15,000 a month and GP is 60 %, the B/E point will be 15,000 / 60
% = $ 25,000 per month or around $ 5,800 per week or $ 1,000 a day and X per hour etc.
Learn about Gp % age and determining your Expenses.
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Step 2 – Using B/E Analysis
Once you have calculated your B/E analysis you use it for;
1. Sensitivity Analysis – If I increase my monthly expenses by employing one more person, how
much more in Sales do I need to generate to cover this extra Payroll. Payroll increase is $ 5,000
and Gp % age is 60 % - New Sales required is $ 8,333 per month or $ 1,924 a week. If I save $
5,000 per month, I need $ 8,333 pm less in sales to Break Even.
2. Competitor Analysis – If you employ 5 staff and rent 3,000 Sq Ft shop and your competitor
employs 10 staff and 5,000 Sq Ft – logic says that your competitor’s B/E point must be at least
100 % / double what yours is. This helps estimate Market size ?
3. Bench-marking - Your B/E point helps you ‘bench mark’ your Business. Compare yourself against
the competition, it helps with your Financial planning (how much Working Capital do I need)
and it also helps bench mark work and capacities – If I need $ 25,000 a month to B/E and I am
selling $ 5 items – that is nearly 200 items a day. I need X staff, X inventory, X floor area etc
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Step 3 – The traditional B/P Components
Once you are confident that you can easily exceed your B/E point, then progress to completing the
traditional components of a BP which include a detailed synopsis of;
1. Key Owners and Management – The quality of management will determine the success of the
business. The second biggest reason for business failure is, poor management skills. Include
Resumes etc of key owners and managers.
2. Marketing – Marketing Mix (Product, Place, Promotion, Price), Demographics, Location,
Competition, Marketing Plans etc.
3. Technical – Manpower, Permits, Capacity, Manufacturing issues, Quality, Logistics etc.
4. Financial – B/E Analysis, Cash Flow Forecast, Funding, Balance Sheet, Profit & Loss, Ratios,
Statistics etc
5. SWOT Analysis (Internal - Strengths, Weaknesses, Opportunities, Threats) and maybe a PEST
Analysis (External - Political, Economic, Social, Technological).
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Step 4 – Review & Revisit
Once you have completed your BP and covered everything that you think you need to
address, please review the BP with people who are suitably placed to Review it before you
share the BP.
Welcome Criticism – Criticism may hurt but it helps you become better. Take the advice, revisit and re-plan. Remember to use the NDA for any-one reviewing the BP.
Revisit and update the BP on a regular basis. Business environment is very dynamic, so
regularly review and adjust your BP.
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Questions?
Thank you.
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