How to write a winning Business Plan
In this lengthy post, we will be exploring how to prepare a simple but concise Business Plan intended to be presented to Investors as part of the process for raising capital for a start-up business.
To make this practical we shall use one Case Study for a fashion business to demonstrate what each section of a business plan should look like.
You can post your specific questions in the comments section and we’ll do our best to respond.
What is a Business Plan?
A business plan is a document prepared by a company's management, detailing the past, present, and future of the company, usually designed to attract capital investment.
It summarizes the operational and financial objectives of a business and contains the detailed plans and budgets showing how the objectives are to be realized.
Key Sections of a Business Plan
1. Executive Summary
2. Business Overview
About the Business (Overview, Mission, Vision, Values)
About the Promoters
Legal & Ownership Structure
Board & Management Structure
3. Operating Environment
About the Country
Political, Economic, Social, Technological, Legal and Environmental (PESTLE) Analysis
4. Customer Analysis
Customer Profile
Geographic and Socio-Economic profile
5. Market Analysis
Market Size
Market Structure
Competitor Analysis
6. Strategy & Operations
SWOT Analysis
Business Strategy
Suite of Products & Services
Operations Strategy
Marketing & Sales Plan (Product, Price, Place, Promotion)
7. Human Resources Plan
Organization Structure
Recruitment & Remuneration Structure
8. Financial Plan
Source of funds
Use of funds
Financial forecast
9. Risk Management
Risk Profile
10. Implementation Plan
Execution Steps & Timelines
Now, let us explore the various sections in some detail using examples from the Case Study.
1. Executive Summary
This is a one-page summary of the entire business plan. You would develop this section after you have completed all the other sections.
Your Executive Summary should briefly touch on the following areas: What the business is about, where it is located and who it serves. In few sentences or paragraphs, it should also mention how the business is different from what exists and why it would be competitive in the market. Finally, the Executive Summary should give some indication capital requirements, future growth and financial performance.
Case Study Example
Base Two is an apparel brand that provides preppy styled, comfortable clothing, sold through our website & social media to middle-income Nigerians. We are in Enugu, Nigeria. The key enabler of our business is the caliber of people that will be hired to run it. Passion, customer-centricity, and integrity will be the cardinal attributes of our employees.
Start-up funds (N12,396,000) for the business will be raised and a conservative three-year financial projection has been developed for the business to sell about 3,000 units of apparel in year 1, generating N61,530,000 in sales, and growing to 12,000 units in year 3 with sales of N246,120,000. The business is expected to be profitable from year 1 with average pre-tax margins of 20%, growing to 29% in year 3 as we reap efficiencies from lower costs associated with trading higher volumes.
2. Business Overview
About the Business (Overview, Mission, Vision, Values)
About the Promoters
Legal & Ownership Structure
Board & Management Structure
Case Study Example
Base Two is an apparel business that focuses on understanding our customers, creating designs, contracting to manufacture and delivering superior marketing, sales & customer service, leveraging the power of digital connectivity to reach our customers wherever they are.
Our Mission: To celebrate African heritage through affordable everyday clothing.
Our Vision: To be a top 3 global apparel brand.
Our Values: PIDO – People-centricity; Integrity; Differentiation; Omotenashi.
The business will be led by Chimdi Azuike as Founder & CEO. He is an experienced business leader. Prior to setting up Base 2, he ran a successful clothing and lifestyle business in Lagos called Citrus Lifestyle.
The Business is structured as a Limited Liability Company with 60% shares held by the founder while the balance is being offered to a diverse group of investors. A Board of Directors will be formed comprising shareholders who own at least 10% of the company.
3. Operating Environment
About the country
PESTLE Analysis
Case Study Example
Country Profile
The country is bounded by Benin Republic, Cameroon, Chad and Niger Republic and has a total land area of 910,768 km2. Nigeria is a key member of the Economic Community of West African States (ECOWAS) and West African Monetary Zone (WAMZ).
Nigeria is a heterogenous nation with over 250 ethnic groups with 6 geo-political zones comprising 36 states and a Federal Capital Territory (FCT) which are further split into 774 Local Government Areas spread across the 37 territories.
PESTLE Analysis
Political – Sustained democracy since 1999. President Muhammadu Buhari of the APC has been ruling since 2015.
Economic – Largest economy in Africa. Recently emerged from second recession since 2015. GDP growth currently less than 3%. Economic fortunes closely tied to the direction of crude oil prices.
Social – 7th largest population in the world with 200 million. Large youth population with a trend towards westernization. Rapid urbanization. High unemployment rate. High degree of entrepreneurship. Deep cultural affiliation for fashion and entertainment.
Technological – High rate of adoption of technology. 90% internet penetration despite high connectivity costs. One of the highest mobile penetration rates in Africa.
Legal & Regulatory – British legal system, powerful regulators. The Apparel industry is loosely regulated by SON with Customs controlling tariffs and imports.
Environmental – Rising concerns around pollution related to plastics and discarded apparel.
4. Customer Analysis
Customer profile
Geographic and Socio-Economic profile
Case Study Example
Our primary target customer is the middle-income Nigerian (N150,000 – N500,000 monthly), within the 25– 45 years age groups. Shoppers of our type of products tilt slightly toward women, specifically with a female to male ratio of 58:42.
The average revenue per customer is estimated at N20,000/annum.
Our customers are aspirational; value a good education; have strong social connections. They are people that grew up loving the preppy fashion style made popular by designers like Ralph Lauren and Tommy Hilfiger that feature a recognizable brand name or logo.
5. Market Analysis
Market Size – The revenue value of the entire industry in one year
Market Structure – The type of control held by and nature of products offered by the players
Competitor Analysis – How the existing competitors operate and who they are.
Case Study Example
Market Size
Nigeria is ranked amongst the top 10 highest value markets in Africa for apparel. The segment of the apparel market that we are targeting is valued at about N400 billion per annum based on our target customer population of 40 million (25 – 45 years) with each person buying at least 4 items of clothing each year at an average cost of N2,500 per item.
The market is projected to grow at a Cumulative Average Growth Rate (CAGR) of 5.2% between 2020 – 2024.
Market Structure
The apparel industry operates in a pure competitive market structure with many sellers and many buyers; low barriers to entry; no player controlling prices and all players selling largely identical products.
Competitor Analysis
We have a wide range of competitors in this extremely competitive and fragmented industry. We recognize competitors as anyone that sells high quality clothing and accessories to our target market.
We have two broad groups of competitors:
Foreign Brands: Those selling foreign named brands that are popular and imported e.g., Versace, Nike, D&G, etc.
Local Brands: Those selling popular Nigerian brands e.g., Nicole & Giovanni, Keexs, David Wej, etc.
These competitors generally compete on pricing and a wide selection of fashionable apparel.
6. Strategy & Operations
Strengths, Weaknesses, Opportunities and Threats (SWOT) Analysis
Business Strategy – Where to Play & How to Win
Suite of Products & Services
Operations Strategy
Marketing & Sales Plan (Product, Price, Place, Promotion)
Case Study Example
SWOT Analysis
Business Strategy
Our game plan to win is coined REACH and is outlined below:
Suite of Products and Services
In our first year of business, we will focus on 3 categories of products across 4 sizes per category.
Operations Strategy
We will gain competitive advantage through our operations by focusing 3 competitive priorities: Quality, Innovation and Cost.
We will not own any manufacturing facilities. We will design in Nigeria and contract manufacture with reputable third-party suppliers in Asia and then import the finished products into the country.
Marketing & Sales Plan (Product, Price, Place, Promotion)
Product
Our designs will stand out from the existing clutter of similarly patterned items in the market provided by the current players. Today, majority of designs feature boring stripes, plain solids, plaid, spotted or animal prints or funny text.
Our products will be well differentiated by several features including:
Unique preppy, sporty and colourful designs using ultra-soft organic cotton fabric
Exquisitely packed in custom cardboard mailer boxes for bundle purchases (4 items and above) while single unit purchases will be delivered in custom metallic glamour mailer bags.
Customization services (at an extra cost) with the owner’s name and number printed at the back of the garment (like Sports Jerseys).
Price
Our product pricing strategy takes several factors into consideration, including product landing cost; required margins to cover operating expenses; target customer profile & disposable income; competitors pricing and magic price points.
We also plan to offer decent margins to our Wholesaler customers. Our products will be priced as highlighted below:
Place
We will focus on the Retail and Wholesale segments of our customer base in developing our sales channels:
Retail – Our own online channels (Website & Social Media accounts with delivery by Courier companies, brick & mortar fairs, pop-up stores and exhibitions
Wholesale – Partnership with third-party retail stores (general, specialty apparel brick & mortar stores) and e-commerce platforms (e.g., Jumia, Konga, etc.)
Promotion
The bulk of our promotion activities will focus on recruiting consumers online and sustaining engagement and top of mind awareness.
Our bias will be to leverage performance-based marketing channels (so that we pay only based on measurable results), but we will also explore non-performance-based marketing.
7. Human Resources Plan
Organization Structure
Positions to be hired and compensation structure
Case Study Example
We will have a high-performance culture. This will be achieved through a merit-based growth and compensation system hinged on recruitment, training, and performance management.
Recruitment
For full time employees, we will hire with an emphasis on recruiting for on-the-job skills, relevant experience and the right aptitude, attitude, and ethical conduct.
For independent workers, we will place emphasis on the candidate’s skills, attitude, and ethical conduct.
A service culture will prevail and only candidates who exemplify this will be recruited.
Reward Structure
We will seek to align the company’s long-term performance objectives with employee incentives. Compensation and benefits will be competitive within the fashion and retail and industry in Nigeria.
As the business scales, a dynamic team will be gradually recruited to help drive the company’s mission. In the medium term, the team will include specialists in our core functions like Design, Supply Chain & Operations, Marketing, Technology and Human Resources. Other professional services such as Finance and Legal will be outsourced to competent firms in our community. We plan to have a team of 3 employees within 3 years, whilst providing freelance, internship and temporary paying jobs to others.
8. Financial Plan
Source of funds
Use of funds
Financial forecast
Case Study Example
Source of Funds
Initial start-up cost is estimated at N12,396,000 and will be sourced from:
Founder – N2,396,000
Investors – N10,000,000
Use of Funds
The start-up capital will be deployed as follows:
Financial Forecast
This is one section of the Business Plan where you would typically need the assistance of a Finance Professional to help you develop your financial model.
Case Study Example
Note: A loan will be taken in year 3 to fund expansion after the initial start-up phase.
All figures are in ‘000s.
9. Risks & Mitigation
Risk Profile
Case Study Example
Our business faces several risks associated with the industry. Some of the key risks include:
Consumer Purchasing Power – We are impacted by the macro economic environment and its implication on consumer disposable income. We can mitigate any adverse trends by adjusting our products and price mix.
Competitive Intensity – The sheer size, scale, financial resources, and experience of the market players poses a risk to our business. We can mitigate this by focusing on our niche, being more innovative and growing cautiously.
Intellectual Property (IP) Protection – If our trademarks, designs, or other IP are not adequately protected, we face the risk of economic and reputational damage. We will engage competent legal advisors to help protect our IP.
Lawsuits – We may become exposed to liabilities resulting from lawsuits as a part of ongoing business operations. We plan to mitigate this risk leveraging best in class standard operating procedures, liability insurance and competent legal advisors.
Cyber Threats – The risk of hackers and other criminals taking down or altering our website or gaining access to confidential customer data poses significant risks to our business. We can mitigate this by investing significantly in information technology security and other aspects of security.
Foreign Currency Risk – We purchase our primary product from suppliers in US Dollars which sometimes fluctuates against the Naira. We will mitigate this risk by monitoring the exchange rates and purchasing relevant hedge instruments when necessary.
10. Implementation Plan
Execution Steps & Timelines
Case Study Example
That's it! A simple but complete Business Plan. Please post your questions in the comments section.