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How To Draw Up a Business Plan

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HOW TO DRAW UP A BUSINESS PLAN

PREAMBLE

The KwaZulu-Natal Tourism Authority (KZNTA) is promoting the entry of new enterprises into the tourism market. This brochure has been produced as one of a series of How To Brochures to guide people wishing to establish their own tourism enterprises. The brochures target particular fields of business, this one being on HOW TO DRAW UP A BUSINESS PLAN FOR YOUR PROSPECTIVE TOURISM BUSINESS and are designed to provide basic information useful for developing your own business venture. Tourism is a service industry so you should remember the importance of service and dedication especially in the early days but also thereafter, as service excellence will help establish a client base with repeat business and referrals as important as initial marketing. The guidelines contained in this brochure will assist you during the preparation of a business plan and provide you with contact numbers of professional people that can assist you, should you need further assistance. This will help you establish a business which meets certain standards that are demanded by the tourism market.

SOURCES OF INFORMATION

A useful source of information is the KZNTA website (www.zulu.org.za) or the KZNTA office, which has a resource centre from which you can obtain information about similar ventures and products being offered. The KZNTA can also refer you to professional people that can assist you with the preparation of your business plan.

DEFINITIONS

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 who 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 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 breakeven (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.

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 / goals The basic philosophy, what the business is all about, 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 like 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. It may be helpful to consider Figure 1 which illustrates goals and objectives as a hierarchy. The broad philosophy shown in Figure 1 is that there are more actions than there are objectives, more objectives than goals and so on. As you moves down the to the broadest part of the triangle 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 need 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 utilization

You need to estimate the utilization 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 and the fact that you may have to offer launching specials to get the business off the ground.

* 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 etc. It is useful to find out what the general requirement of specific financial institutions are, before you finalise this section also.

Projections

The projections are the forecast of 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 analyze 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.

Conclusion

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

DEVELOPING A BUSINESS PLAN

Now that you have read through this brochure you should understand the purpose of a Business Plan. However, you may still feel that you do not know where to start in preparing one and you may not feel comfortable paying someone to help you until you have at least done some investigation yourself. Here are some basic guidelines to get you started. Once you begin to feel a little more confident then you should read the earlier sections of the brochure again and start to apply the headings to what you have developed here. Having explored your business concept a little more you may feel that the money to prepare a more professional Business Plan than you can prepare for yourself is it.

A step by step guide

1.Write out what you want to do, i.e. what type of business it is to be.

2.Write out your purpose in starting this business.

3.Write out your short term (0-3yrs), medium term (3-5yrs) and long term (more than 5yrs) vision for the business

4.Write down a list of what resources you know you need to start your business: e.g. an office, a bank loan, a kombi etc etc

5.Clearly state any uncertainties you may have, for example, you may be uncertain about the type of business structure to create - a company or a close corporation etc.

6.Identify who your market might be.

7.Identify who your competitors may be and try to find out as much about them as possible e.g. tariffs, types of services offered, possible gaps or weaknesses in their service etc.

8.Try to identify those businesses with whom you may be able to co- operate. For example, a travel agent would be able to co- operate extensively with tour operators or hotels or taxi services etc.

9.Attach a cost to each item in (4) and develop your fixed and your start-up costs.

10. Work out how many months your business may have to survive before its income equals the expenditure

11.Give careful thought about how you will make your business known - how you will market your products or services - and calculate the costs associated with this marketing.

12.Before you spend too much money exploring the business concept you have you must draw a conclusion as to whether the concept you have is likely to make a viable business. Then you can try to reach a decision about whether your business idea is worth pursuing immediately, or whether the Business concept needs to be changed, or whether it should be shelved for a later time.

13.It is very important that you develop as much of the content of the Business plan as you can - then - once you have done all that you can, you should draw in the assistance of professionals.

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

Business Partners Durban: 031-266 7130 Pietermaritzburg: 033 387 1572 Richards Bay: 035-789 7301

Business Practices Committee: 012-310 9791

Department of Agriculture and Environmental Affairs: Pietermaritzburg: 033-355 9200

Department of Economic Development & Tourism: 031- 310 5300

Department of Trade and Industry: 012-322 7677

Ithala Development Finance Corporation: 031-906 0382

KwaZulu-Natal Tourism Authority (KZNTA): 031-366 7500

South African Tourism: 011-778 8000

Southern Africa Tourist Services Association (SATSA): 031-261 2525

Town and Regional Planning Commission: 033-395 3066

Trade Associations: AFRITOUR 021-782 6979 How To Draw Up a Business Plan Note that legislation now requires all businesses providing services to tourists be registered with the provincial tourism authority, Tourism KwaZulu-Natal. Kindly contact TKZN if you are not sure whether registration is mandatory or optional for your business, as well as information on how to register.

zoom HOW TO DRAW UP A BUSINESS PLAN

PREAMBLE

Tourism KwaZulu-Natal (TKZN) is promoting the entry of new enterprises into the tourism market. This brochure has been produced as one of a series of How To Brochures to guide people wishing to establish their own tourism enterprises. The brochures target particular fields of business, this one being on HOW TO DRAW UP A BUSINESS PLAN FOR YOUR PROSPECTIVE TOURISM BUSINESS and are designed to provide basic information useful for developing your own business venture. Tourism is a service industry so you should remember the importance of service and dedication especially in the early days but also thereafter, as service excellence will help establish a client base with repeat business and referrals as important as initial marketing. The guidelines contained in this brochure will assist you during the preparation of a business plan and provide you with contact numbers of professional people that can assist you, should you need further assistance. This will help you establish a business which meets certain standards that are demanded by the tourism market.

SOURCES OF INFORMATION

A useful source of information is TKZN website (www.zulu.org.za) or TKZN office, which has a resource centre from which you can obtain information about similar ventures and products being offered. TKZN can also refer you to professional people that can assist you with the preparation of your business plan.

DEFINITIONS

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 who 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 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 breakeven (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.

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 / goals The basic philosophy, what the business is all about, 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 like 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. It may be helpful to consider Figure 1 which illustrates goals and objectives as a hierarchy. The broad philosophy shown in Figure 1 is that there are more actions than there are objectives, more objectives than goals and so on. As you moves down the to the broadest part of the triangle 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 need 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 utilization

You need to estimate the utilization 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 and the fact that you may have to offer launching specials to get the business off the ground.

* 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 etc. It is useful to find out what the general requirement of specific financial institutions are, before you finalise this section also.

Projections

The projections are the forecast of 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 analyze 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.

Conclusion

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

DEVELOPING A BUSINESS PLAN

Now that you have read through this brochure you should understand the purpose of a Business Plan. However, you may still feel that you do not know where to start in preparing one and you may not feel comfortable paying someone to help you until you have at least done some investigation yourself. Here are some basic guidelines to get you started. Once you begin to feel a little more confident then you should read the earlier sections of the brochure again and start to apply the headings to what you have developed here. Having explored your business concept a little more you may feel that the money to prepare a more professional Business Plan than you can prepare for yourself is it.

A step by step guide

1.Write out what you want to do, i.e. what type of business it is to be.

2.Write out your purpose in starting this business.

3.Write out your short term (0-3yrs), medium term (3-5yrs) and long term (more than 5yrs) vision for the business

4.Write down a list of what resources you know you need to start your business: e.g. an office, a bank loan, a kombi etc etc

5.Clearly state any uncertainties you may have, for example, you may be uncertain about the type of business structure to create - a company or a close corporation etc.

6.Identify who your market might be.

7.Identify who your competitors may be and try to find out as much about them as possible e.g. tariffs, types of services offered, possible gaps or weaknesses in their service etc.

8.Try to identify those businesses with whom you may be able to co- operate. For example, a travel agent would be able to co- operate extensively with tour operators or hotels or taxi services etc.

9.Attach a cost to each item in (4) and develop your fixed and your start-up costs.

10. Work out how many months your business may have to survive before its income equals the expenditure

11.Give careful thought about how you will make your business known - how you will market your products or services - and calculate the costs associated with this marketing.

12.Before you spend too much money exploring the business concept you have you must draw a conclusion as to whether the concept you have is likely to make a viable business. Then you can try to reach a decision about whether your business idea is worth pursuing immediately, or whether the Business concept needs to be changed, or whether it should be shelved for a later time.

13.It is very important that you develop as much of the content of the Business plan as you can - then - once you have done all that you can, you should draw in the assistance of professionals.

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

Business Partners Durban: 031-266 7130

Richards Bay: 035-789 7301

Business Practices Committee: 012-310 9791

Department of Agriculture and Environmental Affairs: Pietermaritzburg: 033-355 9200

Department of Arts, Culture & Tourism: 031- 309 7559

Department of Trade and Industry: 012-322 7677

Ithala Development Finance Corporation: 031-906 0382

Tourism KwaZulu-Natal (TKZN): 031-366 7500

South African Tourism: 011-895 3000

Southern Africa Tourist Services Association (SATSA): 031-261 2525

Provincial Planning and Development Commission: 033-395 3066

Trade Associations: AFRITOUR 021-782 6979

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