How to Develop a Business Plan

The second most important thing you can do after your decision to start a agribusiness today is to develop your business plan.

I used to wonder about the need of doing a business plan has I believed that once I knew the business of interest and have some funds I could just jump into the business and figure out things as the business gains traction but found out the hard way this was the wrong approach.

What is a business plan?

A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint.
A business plan is a fundamental tool that any startup business needs to have in place prior to beginning its operations. Usually, banks and venture capital firms make the existence of a viable business plan a prerequisite to the investment of funds in a business. A good business plan starts with an executive summary of the business; includes a detailed description of the business, its services and/or products; and states how the business intends to achieve its goals. It should also provide at least an overview of the industry of which the business will be a part, and how it will distinguish itself from its potential competitors.

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While there is no rule to how much information is required in your business plan; the more information you have the better your business plan would work for you.

Why do you need a business plan?

Below are a few reasons why you need a business plan:

  1. Helps define the business and establish a roadmap on how the business would be run.
  2. It conveys the organizational structure of your business and serves has a management tool that can be referenced to ensure the business is on course.
  3. It shows whether or not the business has the potential to make a profit.
  4. It is used as a goal setting and achievement tool for the business.
  5. It is an essential document in seeking finance for your business.

 

Writing your business plan

While the content of your business plan may vary based on the peculiarities of each unique business venture there are still some basic components which are essential to making a good business plan.

An effective business plan should contain the following 7 components:

  1. Executive Summary.
  2. Business Description.
  3. Market Analysis.
  4. Organization and Management.
  5. Sales Strategies.
  6. Funding Requirements.
  7. Financial Projections.

 

  1. Executive Summary

The executive summary will usually be the first item on your business plan right after the title page. This summary should tell the reader what you want. This is very important as all too often, what the business owner desires is buried in some pages into the plan and the person perusing your plan may not be patient enough to get to that point.

So clearly state what you are offering and what you need in the summary. Include your mission statement, your product or service, and basic information about your company’s leadership team, employees, and location. You should also include financial information and high-level growth plans if you plan to ask for financing e.g If you were preparing a business plan to secure a loan facility it is important you state how much the business is generating , exactly how much you need and how you plan to repay.

  1. Business Description

The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business.
Use your company description to provide detailed information about your company. Go into detail about the problems your business solves and how it benefits your customers. Be specific, and list out the consumers, organization, or businesses your company plans to serve.

Explain the competitive advantages that will make your business a success. Are there experts on your team? Have you found the perfect location for your store? Your company description is the place to boast about your strengths.

  1. Market Analysis

A meticulous market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.

You will need a good understanding of your industry outlook and target market. Competitive research will show you what other businesses are doing and what their strengths are. In your market research, look for trends and themes. What do successful competitors do? Why does it work? Can you do it better? Answering these questions would help you produce a good market analysis.

  1. Organization and Management

The organization and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Describe the legal structure of your business. State whether you have or intend to incorporate your business as a partnership or if you are a sole proprietor.

Use an organizational chart to lay out who is in charge of what in your company. Show how each person’s unique experience will contribute to the success of your venture. You may consider including resumes and CVs of key members of your team.

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  1. Sales Strategies

There’s no single way to approach a marketing strategy. Your strategy should evolve and change to fit your unique needs.

Your goal in this section is to describe how you will attract and retain customers. You will also describe how a sale will actually happen. You wouldl refer to this section later when you make financial projections, so make sure to thoroughly describe your complete marketing and sales strategies.

  1. Funding Requirements

If you are asking for funding, this is where you will outline your funding requirements. Your goal is to clearly explain how much funding you would need over the next five years and what it would be used for.

Specify whether you want debt or equity, the terms you did like applied, and the length of time your request will cover. Give a detailed description of how you will use your funds. Specify if you need funds to buy equipment or materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future strategic financial plans, like paying off debt or selling your business.

For your agriculture based business funding would usually be required and fall under the categories in the table below so this would be a useful tool in calculating how much money you would need to run the business till you actually starting making sales as well as profits:

COST CATEGORYDESCRIPTION
LandLand already owned or made available by a friend/family would be the best option; alternatively it may be purchased out rightly or leased.

The type of agricultural venture would determine the best approach to land acquisition

Building/InfrastructureThis would be the cost involved in the actual building or infrastructure which would be erected. This would usually be a one-off cost except in the case of expansion or modification
Machinery and EquipmentThe machines and equipment that would be required will fall under this category
Furniture and FixturesThis would be cost associated primarily with the office space of your business
TransportIf you would have to purchase a vehicle for the movement of products it should be captured here else this category can be excluded and included in the “Working Capital” in case of vehicle hire on per need basics
Working CapitalThis is the category that covers the cost that is mostly overlooked but is key to determining how long you can sustain the business till you are able to break even. Costs for raw materials, feeds, professional consultancy services, utilities, fuel, man power, licenses, research, e.t.c would fall in this category
MiscellaneousThere is always that costs associated with uncertainties and unanticipated expenses; after getting the total sum from the above categories it is a good practice to add a safety miscellaneous cost of about 10%-15% of the known cost.

 

  1. Financial Projections

Financial data is always at the back of the business plan but that does not mean it is any less important than up-front material such as the business concept and the management team. Supplement your funding request with financial projections. Your goal is to convince the reader that your business is stable and will be a financial success.If your business is already established, include income statements, balance sheets, and cash flow statements for the last three to five years. If you have other collateral you could put against a loan, make sure to list it now.

Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to clearly explain your projections, and match them to your funding requests.

This is a great place to use graphs and charts to tell the financial story of your business.

 

Key Points

  • Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a marketing, financial and operational viewpoint.
  • Components of a good business plan:
    • Executive Summary.
    • Business Description.
    • Market Analysis.
    • Organization and Management.
    • Sales Strategies.
    • Funding Requirements.
    • Financial Projections.
  • Cost Category
    • Land
    • Building/Infrastructure
    • Machinery and Equipment
    • Furniture and Fixture
    • Transport
    • Working Capital
    • Miscellaneous
  • Importance of Business Plan
    • Roadmap for business
    • Determine profitability of business
    • Important document for seeking for partners, investors or loan

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