Road Map to Success

FF Fashion

Thu, Mar 05, 2009
The Business Times
By Victor Katheyas


SOMEONE once said that 'a goal without a plan is just a wish'. It would be reasonable to add that a business without a plan would be a very costly failure.

It is not surprising then that lenders, such as banks, pore over a company's business plan before deciding whether to extend credit, and on what terms.

So what makes for a good business plan?

Wong Chi Kong, chief operating officer of Scrawl Studios which won the inaugural Emerging Enterprise award last year, says a good plan has to set out what a company intends to do and how it intends to go about it.

'If these two questions are not answered, or not answered satisfactorily, there's really no point going on and writing the rest of the plan,' says Mr Wong.

Mike Tiong, managing director of McCoy Components which also won the Emerging Enterprise award last year, offers this advice for those contemplating writing a business plan: It must be 'simple, specific, realistic and complete'.

So just what specifics should be included?

Desai Narasimhalu, director of the Institute of Innovation and Entrepreneurship at Singapore Management University, says that having identified the service or product the company intends to provide, the plan should give a sense of the market size.

The plan should also state the amount of money needed to develop a commercial product, and give an indication of how long this will take.

Having done these things, the plan should identify the early adopters of the solution and specify the strategy to 'get them on board', says Prof Narasimhalu.

Methods to create barriers to entry so as to keep the competition at bay for a reasonable time, such as intellectual property rights, should also be spelt out, he says.

Showing an awareness of risks and listing risk-management initiatives is also important, Prof Narasimhalu adds.

It should come as no surprise that numbers need to be included in a business plan. Business is, in many ways, about numbers. And banks that extend credit look to them as an indication of a firm's ability to repay the loan.

Mr Tiong says detailed ROI (return on investment) projections, as well as 'all financial indices and ratios', should be included.

Prof Narasimhalu says a good plan will also indicate when the company may be expected to turn cash-positive and when it becomes profitable.

Writing a business plan isn't just about convincing other people to lend money - it is a beneficial exercise in and of itself.

A business plan is used to map out a company's vision, says Mr Wong. It offers a framework around which internal processes can be built.

Nicklaus D'Cruz, chief executive of OAAG (S) which won the inaugural Emerging Enterprise Award last year, says: 'When you start a business, there are so many things to think about - your marketing strategy, cash management, staffing, fixed and variable overheads, etc. It is only when you get down to writing a business plan, and really dot the i's and cross the t's, that you are forced to think about everything.

'For mature businesses, creating a road map for continued growth and further expansion or survival is also a worthy exercise to steer you down the path of success.'

Sounds like a plan.