How to Write a Simple Business Plan for Small and Medium Scale Enterprises (SMEs)

I have been working with SMEs for over 10 years now in making these businesses bankable. However, a critical place to start that often seems left out by most entrepreneurs with ideas, concepts and visions is coming up with a written plan on how to actualize their dreams. Realizing the ideas, concept, visions often begins with penning down the idea with adequate consideration for country, industry and market risks as well as financing outlets.

Why is it important to have a business plan? I have come across people who start their own businesses with their own funds or funds from families and friends and the first thought in their minds are to put these monies into use without marshaling out a plan.

I liken starting a business to going out to war and I always ask these entrepreneurs a simple question; "if you were a general about to go into battle in a known territory or an unknown territory (i.e. a familiar or unacquainted business terrain) will you not have a detailed strategy/plan of action? The answer I often get is; "Yes of Course" I should have a plan of action. Then if that is the case with a battle, we should also treat a new business venture as such, have a business plan i.e. plan of action or strategies.

So how then should an entrepreneur go about writing a simple business plan? Below are three (3) steps which will facilitate the process:

1.  Determine why you need a business plan; reasons could include all or some of the following:

•              To evaluate initial start-up costs.
•               To establish the viability of a business endeavor.
•          To define your products, services and customers and assess competitors.
•               To map out the business model, the goals and the strategy used to achieve them.
•           To communicate to others (banks, investors, partners, etc.) the business idea.

2.    Once the purpose of a business plan has been determined, commence write-up by following this well established outline:

•         Introduction:

o   Introduce yourself. Tell the readers who you are, your background, education, professional experience, your successes to date.

o   Introduce your enterprise and the business concept briefly.

•         Macroeconomic Overview:

o   A brief review of the country, economic trends and as well as outlook to support growth/development of the business idea.

•        Industry & Market Review:

o   An in-depth review of the industry the business will be operating in, regulatory overview (if any) that would determine permissible activities and outlook.

o   An overview of the market which will involve a description of target customers and understanding of demand size. Explanation of your product or service. What does it do for the customer? Does it have any unique features or aspects? How is it produced? Back up your argument with evidence from your experience, reports and market research.

•         Business and Operating Model: This section will address marketing, pricing, advertising and operating strategies; i.e.  

o   Describe any unique selling points or advantages you have and why will your customers buy from your business?

o   Are you providing better value, guarantees, superior quality, reduced risk, or better location?

o   How much money your customers will pay for each of the products or services you will provide.

o   Describe any up-selling or cross-selling opportunities and how many times a customer will buy from you in a typical year.  

o   In addition, this section will break down the company’s organizational structure and human resources to support and deploy the strategies discussed above.

o   Again, use any market research or other evidence you can bring to support your argument.

•        Financial Appraisal/Viability:

o   Explain how many products you can produce or how much service you can provide in a typical year and back this up with whatever supporting evidence you have.

o   Examine how much each unit of product costs to produce. If your business is a service business, describe how much it costs to provide the service. Don't forget overhead expenses, such as payment for utilities and salaries.

o   Detail how much start-up investment the business will require and what you require it for. Explain why your business is viable and what evidence you have to support this claim.

o   This will require some market research to demonstrate that there is a viable market for your product or service.

•         Executive Summary:  Though written last, appears at the beginning of a business plan.

o   It is read first and in most cases will determine if the business plan will be given further consideration. It should not be more than a one or two pager as it is a summary.

3.      Print the business plan and commence use immediately by deploying it to:

•         Evaluate and benchmark initial start-up costs to ensure no overruns;
•         Establish the viability of  the business before commencing operations;
•         Define products, services and customers as well as assessing competitors;
•         Map out the business model, the goals and the strategy used to achieve them; and
•         Engage banks, investors, partners, etc. when prospecting for initial or additional capital.