The business plan:• The road map to a company’s success

Graphic Business Opinion Jun - 24 - 2014 , 14:00

As a lawyer, I have often come across a number of cases in which I have acted as defence counsel for clients who are mired in debt and have defaulted on their loan obligations to financial institutions especially banks.

In most of the cases, I have come to the obvious realisation that almost all the business operators who have defaulted on their loans have failed to put in place proper mechanisms to fulfil their loan obligations to the lenders.

This has led me to the realisation that the loans have been contracted with very scant regard for repayment. The question which I have asked myself in all these situations is whether these business people have business plans to guide their operations at all? In all the situations I have encountered, it has turned out that these business people have no business plans to guide them in their operations.

The need for a business plan

Rhonda Abrams, a US entrepreneur has described the business plan as ‘‘a strategy for recognising what’s going on in your industry and the world and responding to that in your business. The process will save you a lot of money by liberating your firm from unfruitful directions and by setting your priorities for the year’’.

Norman Scarborough, a business development consultant also speaks of a business plan as an entrepreneur’s proposed business venture, its operational and financial details, marketing opportunities and strategies.

To be successful, every entrepreneur must fashion out a business plan to guide the business on a successful path. The crafting of a business plan is an indication of the seriousness that an entrepreneur attaches to the business. It shows that the entrepreneur has studied the market in-depth and has capitalised on opportunities available in the economy for which he wants to take advantage.

A business plan offers a rallying point for the employers and management and sets goals and targets for the management and employees to achieve. The business plan is a yardstick for measuring the targets set by a company.

Most businesses are borne out of the passion of the entrepreneur to carve out a niche in the market or take advantage of the opportunities in a particular segment of the market. It therefore behoves the entrepreneur who seeks to embark on a business venture to fashion out a business plan to serve as a guide in charting the path of a company’s future and also enable the company to fashion out appropriate strategies for its future growth and development.

It can be said that a business or a company without a business plan is like a radarless aircraft or a ship without a compass.In that case, there is no sense of direction for the managers and employees and thus no growth projections.

In such a situation, the company or business may easily be prone to economic shocks and dislocations in the economy and thus stand the risk of folding up in the face of the slightest economic difficulties.

However, a business plan, by offering a sense of direction for the company is likely to make the managers and employees stand resolute in the face of adversity.

This is because a business plan creates a sense of direction for the company, management and employees to steer the company to a successful destination.

The greatest advantage for a business with a well thought out business plan is the likelihood of maintaining a high retention rate among staff. This could be achieved by constantly drawing attention to the core values of the business thus creating a sense of ownership in the business for its employees.

Access to finance and investments

The importance of a credible business plan in attracting credit and investments into a company cannot be over emphasised. Since a bank’s most credible business is lending, it behoves businesses which intend to have recourse to banks and other financial institutions to prepare credible business plans to be able to source credit. A good business plan speaks for itself about the company’s ability to generate returns and would be a deciding factor in the willingness of a financial institution to lend money to the business.

Beyond the financial institution, high net worth individuals are also likely to stake their future with a business with a credible business plan. In Ghana, due to the nascent nature of venture capital and angel investor funds, it has long been a tradition for start-up businesses to fall on relatives, friends and acquaintances to provide funding for start-up businesses. The best way to attract capital from these traditional sources is the preparation of credible and measureable business plans in order to ensure success in obtaining finance from these sources.

The components of a business plan

A business plan as a reflection of the enthusiasm and passion of the founders of a business must be appropriately designed.

Business plans have been traditionally designed to embrace the following areas of activity- the vision and mission statements which reflect the goals and objectives of the business, market forecasts, financial projections, market analysis and growth strategies.

A good business plan must also forecast such things as the acceptability of the product it envisages to produce or market, an evaluation of the competitive environment in which it envisages to operate and also the financial feasibility of the project.

Norman Scarborough, a business development consultant has catalogued some key elements which should inform the drafting of a business plan to chart the company’s path into the future. These are an executive summary comprising such key elements as the company’s business model and the basis for its competitive edge, the target market and the benefits of its products to the market, the profile of the business drivers and its key employees as well as financial highlights of sales and earnings projections, capital requirements, returns on investments and loan repayments models.

Other components of the business plan should cover such areas as the vision and mission statements which explains the rationale for the business in the first place, industry profile, business and marketing

strategies, competitor analysis, operational plans and description of the management and their respective profiles.

Other business plans also go further to state employee rewards and incentives, criteria for staff recruitment and motivation, training and even the granting of share ownership to employees.

Conclusion and Recommendations

It is an absolute imperative that every business should have a business plan to chart its development. This is because the business terrain is often fraught with difficulties especially in our part of the world where there is macroeconomic instability. A business plan enables a company to surmount all obstacles that might come the way of the company and guard it to its final destination.

For a business plan to be efficacious, it is important that the attention of management and employees must be constantly focused on it. Also, the business plan should be reviewed periodically to bring it in tune with present conditions. GB