SHORT GUIDE FOR
‘BUSINESS PLANNING’
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CONTENTS
Page
PREFACE
INTRODUCTION
1
1.1
1.2
1.3
CONCEPT AND PURPOSE OF BUSINESS PLANNING
Why Business Planning
Planning under uncertainty
Integrating Strategic- with Financial Planning
1
2
3-4
2
2.1
2.2
2.3
BUSINESS PLAN FORMAT
Introduction and Summary Format
Detailed Format (Table of Contents)
Guidelines to complete main components of Business Plan
5
6
7-14
3
3.1
3.2
3.3
GENERAL GUIDELINES TO WRITE A BUSINESS PLAN
For whom is the Business Plan written
Specific objectives for the internal Business plan
General characteristics of a well written Business plan
15
16
17-18
APPENDICES
I
II
III
IV
Note on Feasibility studies and Investment Planning/Evaluation
Management and Organisation of Economic activities
Example of a Business Plan format for Micro Finance organisations
Organisation Scan
- Characteristics of effective development Organisations
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PREFACE
Business planning is gradually becoming an important subject in the world of
development organisations.
ICCO’s and Cordaid’s 1) partner organisations in the South increasingly are confronted
with the need to develop a ‘business plan’, an ‘investment analysis’ or a ‘feasibility study’.
Not only ICCO and Cordaid have begun to look sharper at the viability and sustainability
of economic activities. Other donors and financiers are also becoming more alert on this
matter.
Partner organisations sometimes face difficulties in developing a business plan.
Some organisations need a basic explanation on the concept of business planning: ‘What
is a business plan, what is its purpose and what subjects does it cover?’
In other cases an example of a good business plan would help, or a more elaborate
guideline or handbook.
Of course there is ample literature on the subject of business planning, however much of
it is with western, industrial companies in mind. For many partner organisations this
literature is not easily accessible or it turns out to be difficult to translate the concepts to
their own situation.
For this reason, ICCO and Cordaid have asked I/C Consult 2) to prepare a short guide on
business planning. The short guide is not meant to be a complete handbook. It provides a
basic introduction to the concept of business planning (section 1) and offers short
guidelines to complete the main components of a Business plan (section 2).
This may turn business planning into a helpful exercise for the organisation’s own
development.
Although this short guide is specifically written for development organisations that
carry out or support substantial economic activities (3), be it Micro Finance, production
or trade etc., the concept of business planning is also applicable to NGOs who fully
concentrate on the implementation of a diverse range of social programmes and
activities. In the introduction (see next page) this is further highlighted.
ICCO and Cordaid hope that this short guide may contribute to the development of sound
and sustainable economic initiatives that stimulate poor people and their communities to
deploy entrepreneurial capacities!
2)
(3)
I/C Consult is an advisory unit, dedicated to support and strengthen the overseas partners of ICCO and Cordaid
In February 2000 the ‘ICCO guidebook for Appraisal and Reporting on Savings and Credit activities’ was issued.
This guidebook also contains ‘minimum standards for credit and economic activities’ which will be applied to partners
which receive a substantial ICCO contribution. Interpretation of the word ‘substantial’ is generally up to prudent
judgement, however as an operational indication one may think about activities with a turnover -respectively with total
assets- greater than US$ 50.000. For ‘savings and credit’ activities the relevant criterion is usually ‘total of loan
portfolio outstanding’.
INTRODUCTION
What is a business plan and what does it do?
NGOs are increasingly involved with the necessity to make ‘business plans’. For many of
them, this is a new subject which is seen as another job, in addition to strategic- and
operational planning. In fact, however, as this guide will explain, a business plan is not yet
another report, submitted in addition to strategic- and operational plans. It rather links
strategic- with operational planning by paying specific attention to three important aspects:
 Translation. The organisation’s vision and chosen long term strategies are to be
clearly translated into shorter term operational plans. In doing so, it must be ensured,
that short term results can be monitored not only from the financial perspective
(budgets etc.) but also from other important perspectives, like customers, internal
business processes and learning/growth.
 Focus. In doing so, a business plan provides focus for critical management processes:
- optimal allocation of resources (for maximum impact)
- capital allocations (investments)
- objective setting for the various organisational units (departments) in relation to
overall programme-objectives
- defining strategic initiatives for management of organisational change
 Learning/Growth. Finally, a business plan must also determine what feedback is
required for ‘learning and growth’ (provide the basic elements of systems and
procedures that need to be incorporated in a monitoring and evaluation system).
For whom is this guide written?
The object of this brochure are the non-governmental organisations (NGOs) and cooperative organisations, who work as partners of donor funding agencies.
The brochure concentrates on economic activities. However, sections 1 and 3, which deal
respectively with the concept/purpose- and general guidelines for a business plan, are in
fact applicable to all types of organisations. This also includes NGOs with a diverse range
of social programmes and activities.
Section 2 gives a ‘business plan format’ and is specifically written for organisations that
carry out/support substantial economic activities (see also footnote under Preface)
This section is written in general terms, so as to be applicable to different types of
economic activities: micro-finance, production, trade etc. It must be stressed, however,
that it will depend on the type of economic activity to determine the precise subjects that
must be given attention within the main components of the plan.
Micro-Finance, for example needs to concentrate on very specific topics when describing
its financial services, market plan and operations (see example in appendix III) and are well
advised to take account of specific publications on business planning for Micro Finance.
Furthermore, it is necessary to separate the management and organisation of economic
activities from social activities. This is further explained in appendix II.
The footnote below suggests possible further reading material, dealing with business
planning itself or with matters closely connected with it. 1)
1)
(a) “Business Plan Guide” - Dublin Business innovation centre; The tower, IDA enterprise centre; Pease Street, Dublin 2
(b)Manual for the preparation of Industrial Feasibility studies; W. Behrens and P.M. Hawranch; United Nations –
Industrial Development Organisation; Vienna, 1991; ISBN 92-1-106269-1
(c) Internet: www.bizplanit.com/vplan.htm (provides detailed suggestions for the contents of all major components of the plan
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I/C Consult . Short Guide for Business Planning . Concept March 2001
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There may also be other useful internet sites on business planning. No useful suggestions can be made at this moment,
due to lack of clear accessibility, simplicity and free use of the information. Readers who know sites which conform with
the foregoing conditions are invited to make this known by e-mail to the initiators of this brochure:
Credit@ICCO.NL and ICC@ICCONSULT.NL
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1
CONCEPT AND PURPOSE OF BUSINESS PLANNING
1.1
WHY BUSINESS PLANNING?
The Use of a Business Plan
A business plan is often used to accomplish one or more of the following points:





to develop new ideas and make them more concrete
to assess the (economic) feasibility of new ideas and address the inherent risks
to present the new ideas to a financier to raise the required funds (external use)
to discuss/agree new plans and ideas with other actors involved in the implementation
to create common understanding in the organisation focussed on achievement of overall
objectives and to provide guidance to the various parts of the organisation in
implementation and preparing their individual plans (internal use)
The above is complemented with statements that a business plan:
 can help to develop and monitor a view on (financial) sustainability
 may combine a strategic- and organisation analysis with a financial analysis
 selects potential business opportunities, translating them in realistic investment projects
The Essence of Business planning
We have seen above what uses are made of a business plan.
This has not yet told us why business planning is so important or, in other words, ‘what
would go wrong if no business planning was done’. To answer this question we will, in this
guide, make a selected use of the contents of two published articles (1) (2).
Both articles view business planning from different angles. Essentially, however, both point
at the same overall weakness that characterises all organisations that pay no (meaningful)
attention to business planning. This is: “the inability of most organisations to link their long
term strategies and objectives with their short term actions”
Both articles make very useful points to understand the essence of business planning and
make final conclusions on what must be done to achieve the purpose of business planning.
(1) Planning under Uncertainty: ‘Dealing with uncertainty in the environment and
unproven technology in the ‘production’ process’ (1
Business planning has to pay specific attention to the uncertainty (and related risks) with
which any operational plan is surrounded. To enable timely adapting of implementation
plans (and the achievement of objectives that go with them), such uncertainties must be
addressed, more precisely defined and incorporated in a monitoring (control) system. This
will also provide for organisation learning. More on this under section1.2 below.
(2) How to link and integrate strategic planning with the financial budgeting processes
Attention is now focussed on: ‘how to integrate a strategic business plan with an operational
financial (budget) plan’, such that the performance of short term actions and activities can be
linked with making progress towards (strategic) objectives. See further under 1.3 below.
(1)
Harvard Business review article Jan./February 1996: ‘Using the balanced scorecard as a strategic management system’.
(2)
Shell Group of companies: Guides to Planning series (No. 8, Country Business Planning – April 1988)
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1
1.2
PLANNING UNDER UNCERTAINTY
When longer term objectives have to be achieved in an uncertain environment and with an
implementation process that is not based on proven ‘technology’ (ensuring that activities
and output are effective), organisations must remain flexible in the future. They have to
realise, in their overall planning process, that their short term operational plans may require
change or adaptation during implementation. This means that operationally planned inputs
(type and level of activities, level of total resources, allocation of available resources) may
need to be adapted when the original planning environment has changed or monitoring of
the implementation shows that the output does not achieve the expected effects.
In view of the above, organisations should not immediately jump from their strategic
planning to annual operational plans with budgets etc. They must first ensure that all
staff/departments fully understand how the outcomes of strategic planning (including the
necessary actions for strategic change programmes) translate into appropriate actions and
activities for their short term operational plans. This may be called: ‘linking strategy to
actions’ and it will be very important to ensure that such (planned) links are fully understood
by all parts of the organisation and incorporated in an overall monitoring and evaluation
system. The business planning process can ensure this, for example, by clearly describing the
long term drivers of success to which programmes and activities must contribute.
The reasons for Business planning can now be stated as:
 to facilitate regular adaptation to the environment and to influence it where possible.
‘Versatility’ of the organisation has become most important
 to focus the entire organisation on obtaining a better understanding of the past and the
future (learning). This would include understanding of how different parts of the
organisation (‘departments’) must work together for more impact on the longer term
objectives. Different parts of the organisation can now make (together) appropriate
changes in their operational plans, as soon as general monitoring or environmental
changes call for it.
 to ensure that planning is connected with monitoring & evaluation
Planning and monitoring are now combined and seen as a specific process of thinking
about the future and rehearsing the implications of that thinking in advance.
 to ensure, through the above, that the entire organisation learns.
Learning from its planning and implementation experiences to improve impact.
The purpose and outcome of Strategic Planning



formulate long term objectives for the organisation and its individual parts (‘business units’).
develop alternative strategies to achieve these objectives, on the basis of possible future environments
selecting preferred strategies for the various sectors that the organisation is active in
The purpose and outcome of Business planning
 show the medium term implications of implementing the preferred strategies (up to 5 years)
 indicate what actions will need to be taken and what resources need to be committed to the various
programmes/activities in order to improve effect and impact on ultimate objectives
 obtain support for required capital expenditure (investment), planned for the next years
 ensure that the necessary financial/other resources are available. (HRD- and Fund planning)
 provide the basis for planning budgets and targets by the various parts/departments of the organisation for
the following years (operational planning).
This should include a framework of ‘key success factors’ (what subjects and actions will be key to achieving
the ultimate objectives?) as well as a shortlist of overall monitoring indicators which will be used at the
highest organisation level in order to evaluate progress towards achievement of objectives.
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2
1.3 INTEGRATING STRATEGIC- WITH FINANCIAL PLANNING
Weak approach to Business Planning
It is not unusual to see organisations who produce a business plan by just writing down the
outcomes of their strategic planning and continue with an operational plan which is not
linked with the strategic objectives and only shows annual budgets and other (short term)
financial performance measures.
Strategic plans are normally made by senior staff as a very specific exercise (at best each
year but often there is more time lapse), while budgets and their implicit resource allocation
are usually produced in a separate process by finance staff with insufficient (strategic)
involvement of operational staff. These budgets generally show little relation to the
objectives underlying the strategic plan. They are often not integrated with or supportive to
the chosen strategies. Because of this, the regular monitoring of the annual plan focuses
mostly, if not only, on comparing actual and budgeted (financial) results for every line item
of the budget and concentrates on explaining the financial variances.
Strong approach to Business Planning
The connection of the development of a strategy with the development of an implementation
plan, requires more than just a financial budgeting process, for example:
 making business planning a tool to manage strategy, enabling an organisation to integrate
its strategic ‘business’ plans with its financial plans.
 need to prepare a basic scheme for the monitoring of key strategic elements (key result
areas) that all parts of the organisation must deal with in their operational planning.
 recognition of various change programmes that need to be undertaken as a result of the
strategic planning. Such initiatives are also competing for scarce resources which should
not be forgotten in operational planning/budgeting. Change programmes need monitoring
and evaluation also, in order to ensure a close alignment with overall strategic objectives
To make business planning a part of strategic management, the Harvard Business Review
article of 1996 (see footnote previous page) concludes that in a business planning process,
management must focus on 4 critical management processes while following 4 key steps.
Four critical management processes:
(a) Translating the vision/mission (clarifying, strategy setting and gaining consensus)
(b) Communicating and linking (communicating/educating, setting business goals, linking
with the objectives of the various parts/departments of the organisation)
(c) Business Planning (by all parts of the organisation, setting targets, aligning strategic
initiatives, allocating resources, establishing ‘milestones’)
(d) Feedback and learning (articulating the shared vision/mission, supplying strategic
feedback, facilitating strategy review and learning)
Four important steps to perform business planning
(1) set targets for long term objectives to be achieved in the following four perspectives:
 customers (to achieve our vision/mission, how should we appear to our customers)
 internal business processes (what business processes must we excel at)
 learning and growth (how to sustain the ability to change and improve)
 financial (to succeed, how should we appear to our shareholders/financiers)
The four perspectives together build consensus around the organisation’s vision and
strategy and translate these into operational terms which will guide operational planning
by all parts of the organisation into meaningful and interrelated action.
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3
(2) identify the strategic initiatives required
This also requires a communication and linking process, during which management
ensures communication of their strategies up and down the organisation and link it to
departmental and individual objectives.
(3) allocate the required resources for those initiatives
Managers at all organisation levels can now use the (ambitious) goals set for the four
perspectives under point (1) above, as the basis to allocate resources and set priorities.
(4) establish milestones to mark progress in achieving strategic goals
Milestones are tangible expressions of managers’ beliefs about when and to what
degree their budgeted activities can and will affect the required changes in the four
perspectives of point (1) above. That way, milestones are also specific short term
targets to make progress in the chosen strategies.
Together, the four steps mentioned above will link strategy to actions and activities. For
appropriate effect/impact evaluation, these links must also be monitored in order to achieve
the objectives that underlie the chosen strategies.
Traditional financial measures are now complemented with criteria from three other
important perspectives which makes it possible to track financial results and at the same
time monitor the progress which is made in building operationally required organisational
capacities and capabilities as well as acquiring the non-financial assets which have been
strategically identified as requirements for future growth to achieve objectives. (1)
CHARACTERISTICS OF BUSINESS PLANNING
 Provision of focus and quantification including strategic objectives
 Clear relationship and linking of Strategic and Operational planning with Monitoring & Evaluation.
 Provision of shared understanding/learning for all parts of the organisation
VARIOUS PLANNING ACTIVITIES
Shown as a framework which facilitates learning and shared understanding
STRATEGIC
PLANNING
(long term)
Environment
Develop
Strategy
and own internal
Objectives
discussions Strategies
Organisation
and Strategies
BUSINESS
PLANNING
(medium term)
Environmental
Preferred
Develop
Assumptions & Scenarios* Business Plan
Agree consequences and
Objectives for Oper.Plan
* includes
organisational change plans
OPERATIONAL
PLANNING (annual)
MONITORING
& EVALUATION
(regularly)
(1)
Output, Required resources
Departmental Planning, Budgets etc.
Performance
Annual Target
Assessment
Setting
The contents of this section relates closely to an assessment tool that I/C Consult is developing (‘Organisationl Scan). Appendix IV
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2
BUSINESS PLAN FORMAT
2.1
INTRODUCTION AND SUMMARY FORMAT
Who can use this format and for what?
Earlier remarks about who can use this business plan format section, are repeated here:
 Format is written with ‘economic activities’ in mind
The format uses commercial language and is specifically written for NGO’s who deal
with substantial economic activities (defined in footnote of the Preface of this guide).
If such economic activities originated from a multipurpose NGO, they are now
organised and managed in a legal entity separate from the social activities of this NGO.
Note: Both organisational entities may still be connected in a statutory sense for purposes of tax-exemption.
 Economic activities organised in a ‘profit-centre’
Appendix II of this guide, explains that economic activities which still function under
the management of the socially oriented NGO (not yet grown to a substantial and
likely sustainable activity, for example) must at least be organised as a ‘profit centre’
within the overall NGO.
A separate business plan, for the ‘profit-centre’ only, needs to be made in this case.
 Specific format for Micro-Finance organisations
The format is also applicable (in general) to Micro-Finance organisations. It must be
realised, however, that micro-finance organisations need to give attention to specific
subjects which are not specifically mentioned or described in this format. Refer also to
Appendix III, which gives an example of a format for Micro-Finance organisations.
 Use of this format by NGO’s who operate a variety of ‘social’ programmes only
Although the following format is not specifically written for these NGOs, it may still
be useful to select applicable components etc. from it (the concept of business planning
in section 1 of this guide is applicable to them in any case). In doing so, commercial
language has to be transposed into other terminology. For example: ‘Products/Services’
may become ‘Programmes/Activities’ and ‘Industry Analysis’ may become Landscape
analysis’ (of other actors and development relations in the country)
General Format for Business Plan for Economic activities
Each organisation is different and so are the structure and contents of their business plans.
Nevertheless, there are master plans and basic principles that can be followed.
SCHEMATIC PICTURE OF THE CONTENTS OF A BUSINESS PLAN
EXECUTIVE
SUMMARY
OPENING
SECTION
Organisation Description
Products and Services
Industry analysis
MIDDLE
SECTION
 Marketing Plan
 Operations Plan
 Financial Plan
END
SECTION
Management & HRD
Critical Risks
Exit strategy
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2.2
DETAILED FORMAT
Note:
(TABLE OF CONTENTS)
This format draws heavily on the one that can be found on the internet under
www.bizplanit.com/vplan.htm
Additional format headings have been added to satisfy the linkage with strategic business plan matters.
Executive
Summary
A
OPENING SECTION
B
 Concept and Opportunity of plan
 Product/Service description;
 Market
 Management Team
 Finance Requirements
MIDDLE SECTION
C
END SECTION
D
1. Organisation description
– Vision/Mission
– Values/Approach
– Legal organisation
– Business history
–
- Current status and
organisation structure
- Key Management
– Organisational
– Strengths/Weaknesses
1. Marketing Plan
– Customer Description
(Target market
demographics)
– Target market trends
and Growth Patterns
– Market Size and Potential
– Pricing strategy/Positioning
– Advertising
– Other Marketing
– Public Relations/Promotions
1. Management (Team) Plan
– Key Management & skills
– Board of Directors
– Board of Advisors
– Consultants
2. Business Environment
(strategic)
- Political/Social environment
- Economic environment
- Opportunities & Threats
1.1 Competition
– Direct Competitors
– Indirect Competitors
– Compare Strength/Weakness
– Competitive Market Niche
– Market Share analysis
3. Appendices
– Product Samples/Pictures
– Management Resumes
– Site information
– Legal Documents
– Other important Data
3.Translating Strategy
to Operational Action
– Business environment
– Organisation change
requirements
– Future Plans & Objectives
– Key Result (success) Areas
– Resource Planning/Allocation
2. Operations plan
– Location
– Equipment
– Purchasing Policies
– Major Milestones
4. Products/Services (P/S)
–Description P/S
– Advantages P/S
– Proprietary Features
– Product Devt. activities
– Product Liability
3. Financial Plan & Analysis
– Income statements
– Transparent Cost allocation
– Balance Sheets
– Investment structure and Objectives
– Cash Flows
– Financial ratios
– Sources and
– Financial strategy and assumptions
Disposition of Funds
– Break even analysis
5. Industry Analysis
– Industry Overview
– Company Niche
2. Critical Risks
– Major Risks
– Major Obstacles to Success
– Property Ownership
(Lease terms)
– Manufacturing Process
and Operations
– Industry Participants
– Industry Trends and Growth Patterns
2.3 DESCRIPTION AND GUIDELINES
FOR COMPONENTS OF BUSINESS PLAN
A
EXECUTIVE SUMMARY
The summary needs to catch the attention of the reader (decision maker) who has no
intention to read the plan in detail. It is potentially the most important section of the
business plan. The reader must become interested and convinced by the summary. He/she
may even be tempted to read further but in any case the objective is that his/her
judgement is positive at the end of the summary.
Describe current situation, the aim of the plan and the proposal itself.
The summary is not an abstract of the business plan, neither an introduction or a preface
and also not a random collection of highlights. The summary must be the business plan in
miniature, clear and concise (not more than 2 to 3 pages) and telling what you are up to
and what makes your business tick.




B.1
Try to use only concrete facts and figures which explain your business concept,
market niche and financial projections
Include the details of your investment proposals: what is needed, at what rate of return
Consider the response you hope to generate from your financier
A good summary demonstrates:
 ‘Concept and Opportunity’: describe a business concept that makes sense and a
clear plan for success.
 ‘Product or Service description’: describe also the potential benefit to customers
 ‘The Market’: a clear/definable market and your significant competitive advantages
 ‘The Management team’: Does your team have the required experience, expertise
and capabilities to achieve the objectives. Is your board credible and experienced?
 ‘Finance Requirements’: including concise summary of financial projections
Company (organisation) Description
 Vision and Mission, Values and Approach
- Guiding principles for your entire business, defining your values, outlining your
organisational purpose and ‘reason for being’.
- Vision defines your long-term dream (not easily achievable), describing your
‘reason for being’ and what you constantly try to attain.
- Mission is what you intend to become or accomplish (challenging but
achievable), demonstrating that you understand your business, defining your
unique focus and concisely articulating your objectives.
 Legal organisation
- Describe when, how and where the company was formed and incorporated
- Include a sentence of what business/activities you may legally go into
- Include legal ownership etc. (who is the ultimate owner/controller)
 Business history of the organisation
- General overview of business history
- Explain why you started this business, its driving force and how your
product/service mix has changed over time
- Include historical data on sales, profits, units sold, number of employees and
other important facts.
 Current Status, Organisation Structure and envisaged future changes
- Snapshot of where your business is today. What achievements and significant
milestones can be noted so far?
- Show the current organisation chart and, if applicable, the organisation chart that
is to be achieved during the business plan period.
- Show departments and other organisation units and list activities for which they
are responsible, including activities for own organisation development.
- Include also the total number of staff (broken down in departments) at the start
and the end of the business plan.
- Describe current systems, procedures and practices for planning/budgeting and
monitoring/evaluation. How do these systems relate to each other. Is there a need
for upgrading in the future?
 Key Management data
Describe the current status of the management structure and available skills of senior
staff. Note deficiencies in view of future change plans (from strategic planning).
Be brief. A full ‘Management Plan’ for the future is to be described under D1 below.
 Organisational Strengths and Weaknesses
- List the organisational strengths and weaknesses, resulting from strategic planning
B.2
Business Environment (strategic)
 Political and Social description
- Describe the political and social situation and outlook in the country
- Include how this situation relates with (and/or is relevant for) the business
activities of the organisation.
 Economic environment
- Describe the (relevant) economic outlook in the country.
- Include how this relates with (is relevant for):
 Relevant market structure/segmentation and economic demand of the product(s)
 Economic demand for the product(s) and clients
 Competitors situation
 Production process and sales prices
 Opportunities and Threats
- List these, as a result from strategic planning and include the relationship with:
 Expected developments in the relevant (segment of the) market and general
economic supply and demand for the product(s)in the country
 Specific economic demand for the product(s) in the region(s), possibly by type
of customer
B.3
Translating Strategy to Operational Action
 Regarding the Current Business and its environment
- Describe strategic consequences and objectives for the company in view of
analysis under B2 above
 Regarding Organisational Change requirements
- Describe strategic consequences and objectives for organisational development
(management structure, human resource development, organisation structure,
management systems, etc.), in view of the analysis in the last part of B1 above
 Future Plans and Objectives
- If not yet done above, list the clear objectives (business wise and for future
organisational change) which must be addressed by individual parts of the
organisation in their operational planning
 Key Result (Success) Areas
- From the above, list and define key success areas for the organisation in the
future which will become part of the monitoring & evaluation system (and to
which further monitoring indicators will be attached to monitor progress made by
applicable parts of the organisation).
 Resource Planning and allocation
- How much of the available funds should be allocated to the various actions and
activities, in order to ensure that, together, they will achieve maximum impact on
the achievement of the overall organisation objectives? Which activities need to
be emphasised?
-
B.4
What adaptation of the resources (including its allocation) is required when the
environment changes differently from what came out of strategic planning?
Products and Services



Explain your products/services
Identify their features and benefits
Discuss what needs/problems they address in the market
 Don’t focus only on features of the product/service. Describe also benefits offered.
 Describe which specific problem that product/service addresses in the marketplace
and how it solves that problem (becoming attractive to customers). Where will you
operate? What makes your service different? What materials/equipment is needed?
 Present a strong plan for the future, avoiding attacks by competitors (don’t give
impression that an improved product will sell itself)
 Possibly include a third-party evaluation/analysis of your product
B.5
Industry Analysis










Address the forces at work in the industry surrounding your business.
Any business that falls between the supplier of raw materials up to the end of the
distribution channel (for your type of product/service) is part of your industry.
Describe the basic trends and growth over time of the industry and where your
company fits in. Demonstrate understanding of external business conditions
and the factors that may contribute to your success
What is the size of the industry you are in, by revenue and number of other firms?
Describe characteristics of this industry (growth trends, units sold, employment)
What factors influence growth or decline in your industry (previous + future trends)
What are the entry barriers for your industry
What government regulations effect your industry and your business
Explain generally the distribution system in your business (difficult to gain access?)
What role does technology play in the (future) growth of your industry
C.1.
Marketing Plan


Exists of two major parts: (1) defining your target market
(2) specific outline of how to market, promote and sell your product/service
Be clear about characteristics that define who your target customers are (not
everyone is a buyer; a well defined target market is better than having a huge
one; focus on a specific product for a specific target-group; explain how you
meet your customer’s needs)
 Customer description, Target market trends and growth patterns
- Breakdown your customer profile on both the business and consumer level, for
example as follows:
- Demographic characteristics (specific, objective and observable), i.e. Age,
Gender, Income level, Family life cycle, Occupation, Education, Race/Ethnic
group, Social Class, Industry, Years in business, Revenues, Number of
employees
- Geographic characteristics (identify customers, based on location where they can
be reached), i.e.: Country/Region, Province, City/Towmn, Size of population,
Climate, Population density
- Psychographic characteristics (based on person’s psychological attitudes, beliefs,
hopes etc.), i.e.: Social Class, Lifestyle, Leader/Follower, Introvert/Extrovert,
Independent/Dependent, Conservative/Liberal, Traditional/Experimental,
Socially conscious/Self centered
- Consumer/Behavioural characteristics (relation to their purchasing/usage
customs), i.e.: Usage ratio, Benefits sought, Method of usage, Frequency of
usage, Frequency of purchase
 Market Size
- Identify, on the basis of target market analysis above, what the size of your
customer base is.
- If it is too large (difficult and costly with well financed competitors in the area),
consider narrowing it down and focussing on a particular niche.
- If it is too small, will you be able to capture enough customers to make a
sufficient profit?
 Market Trends
- Define the trends of your market over the next few years, including:
- Growth rate; changes already in the makeup of your market and expected ones in
the future; how are and how will your customers change the use of your product
or service.
Note: To gather all information needed, talk to people in target market, conduct surveys,
facilitate a focus group, work with a market research firm, go to local libraries, look at
other’s computer data bases, watch and find out about competitor’s behaviour etc.
 Sales strategy: Pricing, Advertising, Public relations/promotion
- Demonstrate that you have identified specific marketing avenues and procedures
to reach your target customers and effectively sell to them
- What specific marketing mediums will be used to reach customer (how often at
what costs) and why these avenues instead of others
- Are you able to attract free Public Relations? How? Which publications/mediums
will you target and why should they be interested to run your story?
- How will your marketing and PR efforts change as your business grows (+details)
C.1.1 Competition
 Define and clarify your position, strength and competitive advantages
 Demonstrate knowledge and strategy to handle changing competitive conditions
 Identify both direct and indirect competitors and show no under-estimation of
their power and strength; provide details of their sales (volumes and proceeds)
-
-
-
C.2
Competitor Profile: What are their strengths and weaknesses, their (credit) policies
and delivery terms; how is their customer service; their financial strength, access to
suppliers, distributors, retailers, economies of scale, etc.
Market share: Analyse competitors by their % share of the market (volumes and
proceeds). Who are the big players, where can you begin to take market-share away
(do you have a market niche). Possibly provide five year analysis with shifting
market share over time, etc.
Comparison of strength and weaknesses: (theirs compared top yours).
Consider product superiority, price advantages, market advantages, management
strengths/weaknesses. Also consider your barriers to enter and compete in the
market:, like: high start-up costs and capital requirements, substantial expertise
required, manufacturing difficulties, market saturation (no room for new
competitors), economics of scale, brand identity, access to distribution, government
policy etc., entry barriers etc.
Operations Plan


Outline clearly the process by which you manufacture, distribute and sell
How do you go about the internal operations and equipment necessary to
produce your product or service.
 Location
- Where located? What square metre is needed in how many locations. What type
of space (office, warehouse, manufacturing, combinations)?
- When will come the time that above facilities are insufficient to continue business.
- Provide a lay out of facilities under Appendices of Business plan.
 Equipment
-
-
What equipment is already in place; what significant equipment must be acquired
under the plan and at what costs (include not only manufacturing equipment but
also vehicles, computers, office equipment)
What increase of production goes with newly acquired manufacturing equipment
 Labour
- Break down the required labour in terms of: part-time/full time, functions,
number of hours worked and hourly pay
- Criteria used to locate and hire quality employees. What skills are needed.
- Salaries of staff in management, production, distribution, sales and administration
 Purchasing Process, Inventory and Policies
- Outline key suppliers, purchasing process and unique purchasing requirements
- Where are finished goods stored; at what space costs. How is inventory tracked?
 Manufacturing and Service process
- Describe manufacturing and service process from raw materials to finished product
- How is quality control maintained (procedures of measuring/controlling/improving)
- Account for (and assess) total production costs (direct and indirect).
C.3
Financial Plan



Have financial statements reviewed by reputable accountant
Avoid underestimating of costs/expenses and not budgeting unexpected costs
Don’t project sales and profit projections which are unrealistic and unfounded
 Income Statements
- Year 1 in quarterly projections
- Years 2 and 3 (possibly up to year 5): yearly projections
- Existing businesses to provide actual income statements over last 3 years
 Balance Sheets
- Balance sheets projected for the next three years
- Existing businesses to provide last two years Balance sheets
- Ensure to design Balance sheets so that useful management information can be
measured about liquidity, solvability (also financial sustainability) etc.
 Cash Flows
- Year 1: monthly projections
- Year 2/3 (may be up to year 5): Quarterly/Yearly projections
 Sources and Disposition of Funds
This tells what sources of funds you expect to secure capital from and how you plan
to spend it. Example of a main outline is:
Source
Use/Disposition
Profit/Own capital generation
10.000
Equipment investment
30.000
Financiers/Investors
60.000
Other Investm./Improvement 50.000
Bank Financing
30.000
Working Capital movement 20.000
Total
100.000
Total
100.000
 Transparent Cost allocation to departments and to ultimate products/services
- Describe to what extent a transparent cost structure exists. This means that the
business has an (audit proof) system of allocating all its costs, direct and indirect
(overhead) through its departments to ultimate products. This gives the structure
of the cost-price for each product/service. Possibly provide a summary of the
outcomes of this transparent cost-reporting system.
 Investment Structure and Objectives
- Outline and breakdown of investment capital needed
- Name individual items, give economic justification and estimated rates of return
- Show lenders/financiers at what timing (cash flow!) they may expect repayment
of their funds
 Financial Ratios and Benchmarking
- Provide standard ratios which analyse performance of your company/business (to
be compared with other companies in your industry)
- Companies that exist long enough must show performance trends over the last 35 years (which may outline improvements in the measured ratios).
 Financial strategy and financial assumptions
- State and explain your financial objectives/strategies (growth to certain ratios)
- Ensure that the reasons behind the given numbers are clear to readers. Explain
how some numbers have been calculated (for example by stating: sales of 500
units p/month at a price of 3 per unit and projected to increase 2% every month).
 Break even analysis
- Showing the volumes of sales (in units and in money terms) how much must be
generated to cover fixed and variable expenses, before becoming profitable.
D.1
Management Plan


Very important and critical to investors and financiers. A good product with a
well presented business concept, marketing strategies and operations plans may
still not work without an experienced, knowledgeable/able management team.
If there are weaknesses, the plan must clearly explain how this is going to be
put right in the near future.
 Management Team
- Give narrative description for each team member, clarifying his/her background
and intended contribution. Provide title of position, duties and responsibilities,
previous industry and related experience, previous successes and accomplishments,
educational background (briefly)
- Also include senior staff (not in the MT) contributing necessary skills/experience
- Ensure that there is teamwork between individual members and a balanced
collection of skills that meet the needs of the business.
 Board of Directors
- Give brief descriptions of persons (and their role) on your Board:
names, background, experiences/skills, expected contributions.
- Experienced board members provide the necessary credibility to financiers in a
start-up or early stage company
- As the business grows, it is expected that outside members (investors, advisors,
strategic partners etc.) are added to the board for future success.
 Board of Advisors
- Brief descriptions of persons (their role/expected contribution) with background
- Unlike the Board of directors, the board of advisors is not legal in nature but
functional and is expected to consist of individuals with valuable industry expertise
and insight. They help and consult on your business.
- Ensure that this board is not assembled as a pure formality
 Consultants
- Briefly mention the outside consultants that you will work with when the business
starts growing (accountants, lawyers, banks, insurance agents, technological
advisors, web developers etc.)
D.2
Critical Risks

Demonstrate your competence and ability to understand the potential
problems that could occur to your business and present contingency plans to
deal with them. Give honest assessments of the possible business downsides.
Divide the risks in controllable and uncontrollable business risks.

Within each organisation and each plan, additional project or investment, the existing
risks or uncertainties can be divided in:
'
(1) ‘insurable risks’ –uncertainties that are insurable (loss of assets through fire, theft,
etc., but often also the loss of business as a consequence of the insurable event)
(2) ‘business risks’, which can be further divided into:
a) risks that cannot be directly influenced by actions of management.
Examples of such risks are certain political events (government regulations), economic
discontinuities, societal changes or external technological developments
b) Risks which can be influenced by direct actions of management
These are the normal risks of any business, the most important of which are lower than
planned volumes and lower gross or net-margins on products sold (due to higher
purchasing volumes/prices and/or lower selling volumes/prices). The organisation can
react to this, for example, with various marketing and/or cost-reduction actions.
It is important that the organisation analyses to which of these risks it is more or less
sensitive (‘sensitivity analyses’, as part of the financial analysis section in C.3 above).
Also pay attention to:
- Competitors risks to block your efforts and your potential response to that
- Identify and quantify risks of other market barriers (additionally to competition)
- Management issues and/or weaknesses in skills (including assuring continuity of
leadership, threat to lose important staff, etc.). Other staffing concerns?
D.4
Appendices
So far, the business plan should only contain summarised findings and highlight financial
information. Avoid overload for the reader by putting more detailed information and
analysis in appendices.
For example: market research surveys and results, management resumes, annual audited
financial reports, pictures of products and locations, details of manufacturing process.
3
GENERAL GUIDELINES TO WRITE A BUSINESS PLAN
3.1
FOR WHOM IS THE BUSINESS PLAN WRITTEN?

A business plan is meant to inform a broad public
This includes financiers, business partners, board & management, staff, department
heads etc. Given this variety in stakeholders and their particular reasons for being
interested in the business plan, one can immediately understand the need to
differentiate between ‘external’ and ‘internal’ needs within the plan. This is not to say
that two separate business plans need to be written. Both aspects can normally be
combined within one plan presentation. In rare cases of specific financing plans, one
may write a specific plan (part of the overall plan) to a bank or investor. This will be
a matter of tactics. The objectives for the ‘internal part’ of the plan are quite specific
and will be further discussed in section 3.2 below.

A business plan is often aimed at obtaining something from somebody, for example:
external business plan: - credit or financing from banks, investors or other financiers
- licenses/permits from government
internal business plan:

- approval for planned activities from board/management
- obtaining understanding from all staff/departments of the
relation between their activities/goals with the ultimate
objectives of the whole organisation.
A business plan is often directed at affecting the behaviour of people
For the ‘external’ parties the plan aims at generating agreement (for example from
partners and/or financiers) with the proposed course and investments for the future.
For internal behaviour by staff/departments, refer to next paragraph.
Conclusion:
One must think beforehand for whom the business plan is written and what reaction one
is trying to generate from whom. [for example: ‘don’t talk very much about investment
plans when your first strategy is to sell your company’].
This way, it is easier to decide how that (anticipated) reaction can be achieved and how
the expectations of the reader of the business plan can be met.
If the business plan is written for various categories of ‘public’, it has to be written in
general broad terms meeting various expectations (external and internal).
EXTERNAL PARTIES
Financiers
Government
(Business) partners
INTERNAL PARTIES
BUSINESS
PLAN
Board
Divisions/Departments
Staff
3.2 SPECIFIC OBJECTIVES FOR THE INTERNAL BUSINESS PLAN
Whereas an external business plan aims at convincing relevant parties to agree with the
proposed action plans and investments and subsequently fund them or co-operate with the
plans, a business plan for internal use has quite different objectives.
- It aims at understanding the overall direction of the organisation by the various parts
of the organisation. It will also need to provide an understanding of how various parts
need to work together (teamwork) so as to achieve overall organisation objectives.
- It gives a monitoring framework within which achievement of the objectives will be
assessed at the overall management level. Departments are guided by this to prepare
good (annual) operational plans, to achieve objectives and key strategic issues.
In view of the above, the most important objectives of an internal business plan are to
ensure:
(1) Clear communication:
- of the preferred strategies that resulted from strategic planning
- of the translation of these strategies into operational guidance for departmental
implementation to achieve the longer term organisation objectives. This should
include management decisions on the most effective overall resource allocation
(2) Co-ordination and control:
- Setting the parameters for a good interactive planning procedure between various
organisation units (departments) to work together to achieve higher objectives.
- Ensuring an effective monitoring/evaluation system and practice, which gives all
organisation units the ‘key result areas’ in which success is to be achieved and
the performance indicators that need to be planned/monitored accordingly.
Note: In case of proposed new investments/fixed assets (see appendix I), such proposals are judged in the
plan by analysing and describing (also financially) how they contribute to the achievement of objectives
This way, an internal business plan aims at:
- Explanation of the objectives and the strategies, both for the organisation as a whole
as well as for all different parts (units/departments).
- Specifying the required actions/activities/processes and determining who will be
responsible to implement these within a stipulated time frame.
- Giving an overall vision and a management plan to motivate and manage staff and
departments to work as a team and make interdepartmental and intermediate decisions.
- The determination of an overall organisation development plan (including specific
training) which is required to implement and control the plan effectively.
Final conclusions

It may be concluded that the internal business plan does not provide a strategic plan
to the various parts of the organisation. It rather describes the important elements that
need to be taken into account during the operational planning (by the various
organisation units) of how they have to implement the preferred long/medium term
strategies which resulted from the strategic planning.

It may also be concluded that the narrative descriptions of a business plan are equally
(if not more) important in comparison with the financial (numerical) figures.
The function of the financial part of the business plan must could also be seen as the
support for the new ideas and proposals brought forward in the plan.
3.3

CHARACTERISTICS OF A WELL WRITTEN BUSINESS PLAN
A business plan has a beginning, a middle part and an end
Refer to the format for the plan in section 2. Describe respectively the current
situation, the aim of the plan and the proposal itself.

A good business plan ‘flows’
It takes the attention of the reader and stimulates the imagination.
Like in good stories, incorporate the ‘plot’ of the plan, the (organisational) motives
for it and the people who have to implement it. Avoid weariness and don’t go on too
long with a specific subject. Avoid specific jargon. Apply an active use of language.

Time horizon 3-5 years
The business plan should run over the next 3-5 years (medium term planning)

Integration of departmental plans with overall business plan
At some stage the overall business plan will need to be followed up by operational
plans of the various organisation units. This will become a matter of guidance from
the top and (operational) planning from the bottom of the organisation, reviewed
together in a participatory manner before finalising the whole process in an
integrative and fully agreed manner (picture below). Guidance from the top includes,
among other things: understanding the strategic objectives, provision of ‘key success
areas’ to be used in monitoring/evaluation and general resource allocation directives.
BUSINESS PLANNING CYCLE
MONTH
MANAGEMENT
TEAM
M
Discuss
Outcome
Environm.
Assump-
PLANNING
FUNCTION
+ FINANCE
Tions/Premises
+ Change
J
J
Issue overall
planning
premises and
Guidelines for
Departments
and Products
A
S
O
N
Discussion
Agreed
with Stake
Business
Holders
Plan
and
D
including
Resources
Resources
Review
Plans
& Services
Plans for
Org. Devt
Change
SECTORS
Plans Org
PRODUCTS
DEPARTMENTS etc.
Develop Business Plans
Operational Planning
(Sectors, Profit centres, Total company
& Budgets, etc.
Participatory way of producing the plan
J

Refer to previous point. All departments involved in operational planning (in close
relation with the business plan) should be in agreement with plans and budgets as
they have been ultimately approved by management. At the end of the whole process
they must feel responsible, accountable and committed to achieve the implicit targets
in both departmental and overall organisation plans.
Finally: • make the text as short/concise as possible and use appendices where needed.
• Be on time with the business plan! Partners, financiers as well as the
own internal organisation need time to digest and consider the plan
before they can act.
Incorporate a clause for confidentiality if needed
APPENDIX I
Note on Feasibility study, Investment Planning and -Evaluation
It would take too far in this context to give full attention to the subjects of feasibility studies
and investment evaluation. Some remarks must suffice to relate the subjects with business
planning.
An investment (project) can be defined as any venture or scheme undertaken by a company in
which money is spent in order to obtain benefits in later years
A feasibility study precedes the investment evaluation and is carried out to determine
whether a prospective investment is viable in commercial, technical, financial, economic and
environmental terms. Prerequisites for all of these subjects should therefore be defined and
critically examined on the basis of alternative solutions to achieve the organisational
objectives.
Investment evaluation 1) follows after the feasibility study. It is now up to the parties
involved in the project to carry out their own appraisal in accordance with their individual
objectives and strategies, including evaluation of expected risks, costs and gains. In other
words: ‘technically, the feasibility study may have positively demonstrated that we are
looking at a strong, profit generating project/investment, however, there are various other
(strategic) points to be considered to make a final decision.
The amount of work carried out on investment evaluation depends on size/complexity and
significance of the project. It must be understood that the organisation will have an underperforming asset for many years to come if the ‘feasibility study’/‘investment evaluation’
has not been correctly conducted. The nature of capital investment is such that decisions are
seldom reversible without substantial additional costs.
1)
As such investment evaluation is a tool to assist in final decision-making and comprises two steps:
(1)
a numerical analysis based on establishing a ‘net discounted cash flow’ which
compares future benefits with investment costs. The results of the analysis (often expressed in the investment’s ‘net present
value’, ‘earning power’ and ‘pay out ratio’, are compared with the financial yardsticks of the organisation)
(2)
a qualitative analysis in which concepts of uncertainty and risk play an important role and are placed in a strategic
framework (some investments with a weak numerical outcome are still implemented, merely on their strategic strengths!).
That is why it is important to put evaluation techniques within a strategic framework and to view investment (project)
evaluation as an integral part of business planning. In other words, an individual investment proposal should be viewed in
the context of an organisation’s planning cycle (see picture of ‘framework of various planning activities’, section 1.3).
APPENDIX II
Management and Organisation of economic activities
Since this guide is written primarily for non-government organisations (NGOs) and for
their economic activities, a quick look will now be taken at management and organisation
of economic activities in NGOs and how business planning (for economic activities)
should be conducted in various situations.
Requirements for good management and organisation of economic activities in NGOs
Separate legal company for the economic activity
A lesson learned in the past is that any economic activity that is becoming ‘substantial’
within the overall operations of a NGO can only be well managed when it is separated
from the NGO in all following aspects:
legally (separately registered)
organisationally (including having a separate board and management)
administratively (own annual accounts, externally audited).
There may still be management connections between the ‘economic’ organisation and the
more socially oriented NGO (if only to ensure tax exemptions on the economic activity)
but the economic organisation is to be guided by economic principles with an experienced
own management and board.
If there is a separate legal entity for economic activities, the business plan will comprise
by definition a comprehensive company plan with own economic objectives (not
subjected to a management/board that may subordinate economic priorities to social ones)
and an own balance sheet and profit/loss statement with separate financial monitoring.
Establishing an economic activity as a ‘profit centre’1) within the overall NGO
organisation
For various reasons an economic activity (before becoming substantial) may temporary
remain as part of the overall NGO organisation. In that case, the minimum requirement for
good management is that the economic activity is organised as a ‘profit centre’ within the
overall NGO. The organisational unit in the NGO that is in charge of the economic activity
must then have an experienced economic activity manager with full delegation of authority to
achieve economic goals set by overall NGO management.
The business planning for this economic activity will now also need to be separated from the
overall company. This has consequences for obtaining the necessary financial management
information, including a separate balance sheet and profit/loss statement (to be audited
separately by the external auditor –within the overall NGO accounts-)
It will also require a good allocation of relevant assets and costs from the overall NGO to the
profit centre for the economic activity (no hidden subsidies from the mother NGO).
1)
Definitions:
Profit centre this is a ‘cost centre’ (see definition below) that, apart from costs, deals with revenues at the same
time. Such revenues may result from selling directly to the market, but also from charging other departments in the
same organisation with services rendered to them (intra company transfer prices).
Cost centre: this is a component of the organisation which performs a particular type of activities for the benefit
of the ‘production process’ (for example sales-, distribution-, production-activities, or ‘indirect overhead costs’,
etc.), the costs of which are grouped together for cost-transparency reasons or other identification purposes. Further
distinction can be made between ‘main cost centres’(dealing with core activities which are directly related to the
production process) and ‘support cost centres’ (with activities that support the production process).
APPENDIX IV
Example of a Business Plan Format
for Micro-Finance organisations
Executive Summary


Description of Microfinace Institution including location, mission, goals and current
statistics
Proposed amount and use of funds
Strategic environment


Political and Economic Environment
Legal and Regulatory Issues
Market and competition


Description of Target Market
Current and Potential Competitors (Size, market share, key strategies, institutional
strengths and weaknesses)
Financial Services



Description of Services
Service Delivery and Methodology
Competitive Advantages
Operations






Loan Administration
Savings Administration
Service Structure (Branches etc.)
Pricing and Cost structure
Breakeven analysis
MIS description
Organisation





Brief history of organisation
Descriptions of key staff positions (include organisation chart)
Brief profiles of key managers
Bosrd structure and brief profile of members
Ownership structure
Growth Plans


Marketing/expansion plans and strategy
Portfolio and performance projections
Financial information



Historic statements
Projections
Key ratios
Management Resume
APPENDIX IV (attached to Business Planning)
ORGANISATION SCAN - SHORT
Use to obtain an overall picture of strengths and weaknesses of your organisation.
It is a summary of Organisation Scan – Elaborate.
Name of organisation:…………………………………………Date:………………………
Country……………………………….
___________________________________________________________________________________________________ 22