Lesson 1, Topic 1
In Progress

1.1 The purpose and importance of a business plan is discussed in terms of its contribution to a successful business.

ryanrori January 7, 2021

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The main objective of a business plan is to explain to a reader what the nature of the enterprise is and what its business strategy for the following three or more years will be. The main reason for a business plan is to do systematic planning for your enterprise and then put it into writing.

Who needs a business plan? Every business needs one!! By having a business plan you can have the maximum insurance that your business is going to work, that you won’t lose a cent of your own money or need any more than you had anticipated. The business planning gives you the chance to make your mistakes on paper before you are tempted to make them for real. Planning will enable you to identify all the resources you will need to successfully complete your plan. It will ensure you identify, at the beginning, how much cash you will need; how big a production/service facility will be required; how many people will be needed. Too often these areas are neglected. Preparing a business plan will get you into a new way of looking at your business. Planning is a continuous process that will ensure that your business is best suited to the changing business environment around it.

Planning makes you more confident about the future – It ensures that you are better prepared for some of the uncertainties ahead of you because you have thought about them in advance.

Planning gives you an invaluable tool to monitor and control the business – if it is not in the plan then you should question why you are doing it. Is the progress as good as planned? If it is not, ask yourself why not? And what are you going to do about it?

Planning can help you to obtain finance. It often happens that the entrepreneur does not have enough money to run an enterprise. He then looks for additional finance. Financiers will pay attention to specific matters in the business plan; they will want to see what return they will earn on their investment. A business plan is developed once a feasibility study has been done. The business plan is the entrepreneurs planning document and it serves as an instrument to arouse the interest of potential investors. It is valuable in defining and forecasting potential risks and problems, and the possible results of the opportunity. The plan is not only supposed to spell out the opportunity that is to be exploited, but also the strategy that will be followed to exploit the opportunity. It is an indication that the entrepreneur has the ability to execute the plan. It is the road map to a successful business.

Performance task – Why have a business plan?

“Solly Matahung, the owner of Magic Tours in Centurion, believes in the value of a business plan. Before buying his small travel agency in 1996 Solly wrote a detailed business plan that analysed the business strengths, weaknesses, target markets and the growth potential of the business.

With his years of experience working with other travel agents, Solly could easily have decided that he did not need to write a business plan, but he chose to write one. He says:” I needed to think about if the objectives of my business plan justified the need for another travel agency in Centurion. To help me decide if I was doing the right thing, I also examined the list of equipment the business needed and considered where I wanted to have the agency.”

Today, using his business plan as a guide Solly runs a successful business with ten employees and an office that has expanded to 200 square metres. The agency has also increased its services to include event ticketing; selling CD’s and travel gear.

Solly says: ’A business plan allows you to be proactive rather than reactive, giving you a greater chance of success.

Unfortunately, not many entrepreneurs take the time to draw up a business plan. A consultant who gives advice on business start-ups says: ”A business plan is just what you know written down on paper. When you see the information written down, it gets you to re-examine all the things you need to think about in detail”

A business plan is important to help manage a small business and to get finance. Before giving a loan, banks need to get evidence and reasons why the business will be successful. A banker says: “You cannot just say the rental is going to be R1500 per month. You need to contact three commercial estate agents to find out the average rental, otherwise your figures mean nothing – it’s just guessing! People wanting loans should show they did not just make up the figures. They need to research properly and get evidence to support what they say.”