Everyone agrees that writing a business plan is good.
It helps you understand your business idea better.
It forces you to think more about things that are important.
It helps you articulate your idea to customers, employees, partners and funders.
A Bias to Action
I am a big advocate for action.
Act on your idea, build a product and quickly take it to potential customers.
But before you do that, you need to do some planning.
Spend a day or two thinking about, among other things, the opportunity that you have seen, the product that you need to build, the people you will sell the product to and the channels you will use to get your product in the hands of your customers.
Capture these in your one-pager business plan.
Here is how.
For each of the following, write down a sentence or two.
What product or service are you selling?
A fashion designer sells fashions.
What problem does your product solve?
A fashion designer mostly solves self-esteem issues.
People love looking good and feeling good about it.
They like getting praises from peers and family.
This helps them build their confidence levels which helps them achieve the goals they set for themselves.
A fashion designer needs to understand this role in their lives if she is to build a profitable business dressing them.
Who is your customer?
Group your customers, for example according to the work they do, their income levels, their education, their gender or their lifestyles.
A fashion designer could be targeting young professional women, housewives, teenagers or the corporate sector.
Why will they buy from you instead of buying from your competitors?
What makes you stand out?
What’s special about your product? Maybe your turnaround time is short, maybe you give guarantees, it could be your product is superior.
People may, for example, buy their clothing from the fashion designer because they get trending fashions from their designer, maybe her fashions are cheaper or her designs could be more attractive.
What channels will you use to get your products to your customers?
Are you going to sell through wholesalers, retailers or are you going to sell directly to your customers.
The fashion design may choose to work with boutiques who then sell to their customers. She could sell through clothing retailers such as Woolworths, Foschini or Pep. She could sell online too.
How will you market and sell your products?
Are you going to do one on one selling?
Maybe you are thinking of building a sales team.
Are you going to advertise in your local paper, maybe online.
Are you going to distribute fliers?
Alternatively you may want to get exposure through blogging or writing articles for magazines and newspapers.
How much are you going to price your product?
If you buy and sell products, add a mark-up on the cost of buying the product.
If you decide your mark-up is 50% on cost, it means if you buy a product for R100, then you will sell it at R150.
If you make the products, then you need to know what you spend on materials and the cost of labour that goes into making the product.
You then put your markup on this cost of production.
Caution: Make sure your price is in line with market prices for more or less similar products.
How much do you expect to sell per month?
You have to make an educated estimate of how much you expect to sell.
A dress maker who makes a dress a day and sells the dress for R900 will make R4 500 in 5 days and R18 000 in four weeks.
Knowing this information will help you work towards a target. If in one month you sell less than R18 000, then you need to do more marketing and selling.
How much is it going to cost you to make your product?
The fashion designer needs to know exactly how much material goes into a product, add on to that the cost of her labour. If for example, your labour rate is R100 an hour and you take 5 hours to complete the product, it means your labour cost is R500.
If the material required to make the fashion item is R100, add this to the cost of labour R500 to give you R600, which is your total cost of making the product.
The total cost of making 20 products per month will be 20 times R600, which is R12 000.
How much gross profit are you expecting to make?
Gross profit is what remains from your sales after taking out the cost of materials and labour.
In the above example, total sales per month are R18 000 and total production costs are R12 000.
Gross profit per month therefore is R6000.
This gross profit is what is available to over all your running costs plus your profit.
What profit are you going to take home per month?
Profit is what remains when you take out your running costs such as rent, water and light, telephone and costs from your gross profit.
If, in the case of the fashion designer, total running costs (also called overheads), amount to R4000, then the net profit will be gross profit (R6000) less overhead costs (R4000) which is R2000.
Who are your competitors?
Where are they?
What advantage do they have over you?
Maybe they have been in business for a long time and have a lot of customers, maybe they have better networks or they could be cheaper.
Where will you buy your inputs or raw materials from?
Do they stock those inputs?
Are they going to give you favourable credit terms? Such terms could be 30 days to pay for example.
The purpose of this short business plan is to help you get started faster.
Make it short and sweet.
Remember, as a startup, you begin from a position where you really don’t know much about your customers and their needs.
This means that you do not have to spend too much time thinking about issues.
As your sales grow, you will get to know your customers better and you can add the new information to your business plan.
Have you started your business? Did you write a business plan before starting? Did that help you in any way? Share your experiences with us in the comments section below. Thank you.