The Business Plan
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INTRODUCTION
In October 1993 I stood in front of the managing director of an international computer company. I wasterrified, but prepared to deliver my presentation. After weeks of product analysis, market research,drawing up organisational structures and constructing financial models, I was ready to present acomprehensive business plan.My aim was to convince the director that we - the financial company I was working for and a localcomputer company - were the best suited to become sole distributors of his product in South Africa.Shortly after I started the slide show, he cut me short. "I have read your business plan in great detail," hesaid. "I'm here to ask you questions, not to hear a repeat of your written proposal."This was my first lesson in business development. I had become so wrapped up in compiling the business plan that I had forgotten why I had done it. The aim of any plan - whether it is to obtain moneyfor a venture, or to convince a buyer that your company is the only firm worth looking at - must never beneglected. This director had flown from Paris to see how we ran our operations, to ask questions and tomake up his mind about whether we were capable of selling his products.Afraid that his irritation had hampered our chances of winning the contract, I switched the slide projector off and awaited his questions. After we had answered the queries, he stood up, shook our handsand said our application had been successful.Often, however, the person or people you are presenting your plan to might want time to think about the proposal. It is advisable, therefore, to ask when you can expect to receive an answer. This willenable you to assess whether they are interested in financing your plan.Toasting our new venture later with cocktails, the Frenchman told me he had made up his mind togo into business with us before the presentation. He said he wanted to be associated with a companywhich could draw up a plan in such "a concise, literate and logical form."His comments were the last things on my mind when I was drawing up the business plan, butthere is no doubt that these issues are crucial. However, they would be worthless if the financialinstitution you have approached for aid does not read your plan. If a document is 300 pages long, containsspelling errors and obvious inaccuracies, you can be sure it will not even be read by the clerk assigned tothe project.This book is in three parts. Part One looks at factors which limit and impede entrepreneurs fromentering business and obtaining funds for their ventures in South Africa and explains differences between business plans, feasibility studies, due diligence, business profiles and information documents. Part Twodiscusses how to conduct business and market analysis, which factors to include in your plan and how to pull it all together. Part Three is an example of a business plan.Jacques MaglioloJanuary 1996
The Business Plan
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CONTENTS PAGE
Introduction
3
PART 1: WORKING IN A DIFFICULT BUSINESS ENVIRONMENT 9CHAPTER 1: A STARTING POINT 10
Critical spheres for using business plans
10
Is the plan practical and achievable
10
The plan as an evaluation tool
10
A marketing mechanism
11
Corporate success rates
11
Liquidations and de-registrations
11
Registrations
12
De-registrations
13
Registered firms less de-registrations
14
Ratios: De-registered to registered
14
Companies listed on the Johannesburg Stock Exchange
15
Self-evaluation questionnaires
16
The need to start a business
16
Characteristics of successful entrepreneurs
17CHAPTER 2: TARGETING A MARKET 20
Economic activity
20
Sector Gross Domestic Product
21
Assessing the effects of wages
21
Using statistics
21
The Value Added Statement
22
Labour costs and productivity
23
Sector growth potential
25
Primary
26
Secondary
27
Tertiary
29
General perceptions
30
Stores and retailing
30
Building and construction
31
Manufacturing
31
Service industries (or the informal sector)
32
Market opportunities
32
Taking advantage of a transitional phase in our history
32
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