How To Draw Up a Business Plan


How To Draw Up a Business Plan


DEFINITION

A Business Plan is a statement of what business you want to establish, what your goals and objectives are. The Business Plan details how you will generate an income and what the costs of establishing the business will be. However, the Business Plan should demonstrate the financial viability of the business and not only describe the business.

INTRODUCTION

This document is written for people who wish to start their own tourism business but do not know where to begin, and do not know what a Business Plan is. The document is therefore aimed at assisting people to understand the content of a Business Plan and then suggests how they may start preparing one. It is only once a Business Plan has been prepared that the entrepreneur and others who need to know how the business will work and whether it is likely to succeed, can make informed decisions about whether the business is likely to succeed. Only once the entrepreneur is convinced of the potential of the business, can such a Business Plan be used to secure investor funding and/or borrowed funding.

THE PURPOSE OF A BUSINESS PLAN

The Business Plan generally serves two main functions:

•  It provides you with a detailed set of guidelines, setting out how to start your business, what it will cost to set it up, what resources are required to ensure the success of the business, what net income you can expect will flow from the business and how long it will take to reach break-even (the point at which income equals expenditure) operating levels

•  The Business Plan may be used to convince banks and/or investors that your prospective business is viable and can be used to find financial support for the business.

If you are intending to add adventure activities to a range of pursuits your existing tourism business already offers you will wish to be aware of the content of this brochure, picking out what is relevant for you and what is intended for dedicated adventure tourism enterprises or new businesses.

THE BUSINESS PLAN

The headings below provide a useful structure for a business plan, but the structure should be changed to suit your individual business.

Executive Summary or Introduction

The Executive Summary or Introduction is the part of the Business Plan that is written last, once you have established that the business can work and should be viable. The Executive Summary is normally a short but powerful statement about what your business is all about and why you believe it will be successful. This part of the Business Plan is arguably the most critical part because often a bank or investor may turn down an opportunity to get financially involved or invest in a project simply on the basis of having read the Executive Summary.

Description of Business

It is important to understand exactly what the business is all about and how it will work. A clear and concise description is useful and can be used as a guide in the future. The business is best described using sub-headings dealing with different aspects of the business. Examples of the headings are set out below:

•  Mission/Goal: The basic philosophy, what the business is all about and the key overriding goals are set out in this section. This will guide other aspects of the business;

•  Vision (short, medium and long-term): The vision deals with the bigger picture and longer term plans of the entrepreneur. It helps the reader understand what the entrepreneur wants to achieve in the short-term (next year), the medium-term and longer term, and may be important for other people such as banks and investors, who are not familiar with your dreams and visions;

•  Goals and Objectives: These are the statements of intent that your business is going to aim at. The broad philosophy is that there are more actions than there are objectives, more objectives than goals and so on. As you progress you are becoming more and more specific and detailed;

•  The Project: The general aspects of the business, the physical infrastructure, the geographical location of the business, the tourism activities (swimming, diving, game drives, walks, trails, or any other activity) and aspects not covered elsewhere need to be detailed;

•  Business Arrangement: Whether the business will be a sole proprietorship, a close corporation, a company or a trading trust needs to be decided upon and the business arrangements need to be clarified (management agreements, lease arrangements and funding options).

Marketing

•  The Market: The market the project will be aimed at should be identified with information, if available, regarding the size of the market and expected penetration. It is also advisable to consider the trend in the market, in other words whether the market is growing or shrinking and take into account the expectations for the future;

•  Supply and Demand: To establish whether there is a need for more projects, such as the one you propose, it is useful to and is easiest done through a competitive analysis of potential competition. Simply put, in the event that you wish to establish a project, the performance of the competition will be an indication of the results you can expect. If other similar projects established in the area you wish to establish your project, which offer similar products and are servicing the same market segment, are doing well, it may confirm that there is room for more projects of that nature and you can expect your project to perform well;

•  Potential Utilisation: You need to estimate the utilisation of your products. This will be influenced by the performance of the competition, the trend in and future expectations of the market the project will be aimed at, the fact that the project is new and starting from a zero base. The fact that you may be inexperienced and will have to learn how to market the project effectively may also influence your market penetration;

•  Tariff Structure: You will have to decide on a pricing structure for products your business will offer. In formulating a pricing structure, you need to take into account the prices charged by the competition, the product and activities on offer compared with what the competition is offering;

•  Promotion and Marketing: How you intend communicating with the market needs to be formulated early on. This is where you deal with advertising, brochures, trade shows and the Internet.

Swot Analysis

An honest and critical evaluation of the strengths, weaknesses, opportunities and threats will help you capitalise on  your  strengths,  overcome  your  weaknesses,  exploit  opportunities  and  avoid  threats  (or  turn  threats into opportunities).

Human Resources and Management

Generally all businesses require marketing, financial/accounting and operational skills. It is important to identify the skills required for your specific business and to ensure that the management team to be employed has these skills, as this could improve the project’s chances of success (include CVs of the key people in your Business Plan). The staff structure needs to be detailed, with a clear indication of what the salary levels will be.

Some financial institutions are concerned with job creation and empowerment, which could mean training and the participation of previously disadvantaged people in ownership in your business. It is useful to find out what the general requirements of specific financial institutions are, before you finalise this section.

Technical Information

The technical information deals with approvals required before your business can be established, plans for buildings, cost estimates for buildings and other movable assets. It also deals with the technical team to be used and may include architects, quantity surveyors, engineers and construction companies.

Once again, some financial institutions are concerned with empowerment, which could mean the use of previously disadvantaged sub-contractors and the like. It is useful to find out what the general requirement of specific financial institutions are, before you finalise this section.

Projections

The projections forecast for expected income and expenses and most financial institutions require figures for at least three to five years, with the first year’s figures set out on a month by month basis. The projections should contain an income statement, cash flow statement, tax computation and balance sheet. The balance sheet needs to contain a day-one situation and thereafter year by year. It is always advisable to detail all assumptions, as financial institutions will want to analyse the projections and even carry out their own calculations.

It may be necessary to seek the assistance of professional people to help you compile the projections.

•  Income:  Examples  of  sources  of  income  include  room  income,  beverage  income,  restaurant/food  income, telephone income, guiding/activity income and other income;

•  Expenses: The direct costs generally refer to cost of sales of the various products, while fixed expenses could include items such as audit fees, accounting fees, advertising costs, bank charges, cleaning expenses, water and electricity and staff costs, to name a few. This list is not necessarily a comprehensive list and will change according the type of business to be established.

A concluding statement confirming your faith in the potential of the proposed business will round off the Business Plan.

Conclusion

You are embarking on an adventure of a lifetime, but if you do not plan well it can turn into a nightmare. If necessary, secure the services of professional people that can guide you through the process of preparing your business plan. The initial cost would be well worth it in the longer term.

LIST OF USEFUL CONTACTS

•  Association of South African Travel Agents (ASATA):

(011) 484 0580/293 0560/1

 

•  Business Partners Limited:

Durban: (031) 266 7130

Richards Bay: (035) 789 7301

 

•  Business Practices Committee:

(012) 310 9791

 

•  Department of Agriculture, Environmental Affairs and

Rural Development (DAERD)

Pietermaritzburg: (033) 355 9690

 

•  Department of Economic Development and Tourism

(DEDT): (033) 264 2500

•  Department of Trade and Industry:

(012) 394 9500

KZN Regional office: (031) 305 3389

 

•  Durban Chamber of Commerce and Industry

(031) 335 1000

 

•  Ithala Development Finance Corporation:

(031) 907 8911

 

•  Provincial Planning and Development Commission;

(033) 395 3066

 

•  SA Tourism:

(011) 895 3000

 

•  Southern Africa Tourism Services Association (SATSA):

086 127 2872/(011) 866 9996

 

•  Tourism KwaZulu-Natal (TKZN):

(031) 366 7500

 

•  Trade Associations

AFRITOUR: (021) 782 6979

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