Business Plan Learner Guide

Learner Guide
Produce a Business Plan
SAQA ID 119670:
Produce a business plan for a new venture;
NQF Level 2, 8 Credits
Version 1 Learner Guide 1

Table of Contents
PROGRAMME OVERVIEW........................................................................................................................4
Programme entry level requirements..........................................................................................................4
Programme Outcomes.................................................................................................................................4
Assessment.................................................................................................................................................5
Learning map (delivery structure)..........................................................................................................6
Learner Support..........................................................................................................................................7
MODULE 1 UNDERSTAND THE ELEMENTS OF A BUSINESS PLAN.......................................8
UNDERSTAND THE ELEMENTS OF A BUSINESS PLAN..............................................................................9
1.1 A business plan in terms of business, financial, marketing and operations plans....................14
The five main areas of a business plan......................................................................................................14
1.1.1 The planning cycle to create the business plan of your new venture................................................15
1.1.2 Apply the planning cycle to each of the four main areas of the business plan..................................16
The marketing plan..............................................................................................................................16
The Operational plan............................................................................................................................17
Staffing plan.........................................................................................................................................18
Financial plan.......................................................................................................................................19
The principles of researching and compiling a business plan...............................................................19
1.2 The codes of ethics pertaining to a business plan.....................................................................21
1.3 The business plan for the purpose of a management tool for a new venture............................26
1.4 The business plan for the purpose of funding a new venture....................................................27
Class Activity 1: Identify the elements of a business plan....................................................................27
MODULE 2 PREPARE TO PRODUCE A BUSINESS PLAN FOR A NEW VENTURE..............28
PREPARE TO PRODUCE A BUSINESS PLAN FOR A NEW VENTURE..........................................................29
2.1 Compile an organisation structure for your own business.......................................................29
Hierarchy.............................................................................................................................................31
2.1.1 Draw up a business organogram for own business...........................................................................34
2.1.2 The broad functions required to effectively complete business activities according to overall
business goals...........................................................................................................................................36
2.1.3 Designate lines of authority and responsibility in relation to organogram........................................37
2.1.4 Determine any relevant human resources needs accordingly............................................................37
Class Activity 2: Compile an organisation structure for your own business.........................................39
2.2 Identify resources and information required to complete own business plan...........................39
2.2.1 Coaches/mentors to assist in compiling business plan......................................................................39
2.2.2 Compile information on the resources needed and procedures to be followed to achieve the plan in
order to effectively execute business plan.................................................................................................39
2.2.3 Decide upon the type of business ownership and complete registration accordingly........................42
Sole proprietor / Sole trader.................................................................................................................42
Partnership...........................................................................................................................................43
Close Corporations...............................................................................................................................44
Companies...........................................................................................................................................46
2.3 The legal registrations and any legislative compliance in relation to a new venture...............49
Completing registration for the business..............................................................................................49
2.3.1 The industry specific and legal requirements for own venture in terms of how they will affect the
venture......................................................................................................................................................50
2.3.2 Legal compliances affecting new ventures.......................................................................................51
Value Added Tax (VAT).......................................................................................................................52
Standard Income Tax on Employees (SITE).........................................................................................54
Pay As You Earn (PAYE).....................................................................................................................55
Skills Development Levy (SDL)..........................................................................................................55
2.4 Gather all relevant information for the completion of the business plan.................................56
Class Activity 3: Identify resources and information required to complete own business plan.............57
MODULE 3 COMPILE A BUSINESS PLAN.....................................................................................58
COMPILE A BUSINESS PLAN..................................................................................................................59
3.1 Design the structure and layout of the business plan................................................................59
Sales and Marketing Strategy....................................................................................................................67
Financial Statements and Projections........................................................................................................67
Legal and Regulatory Environment..........................................................................................................68
SWOT Analysis and risk/reward assessment............................................................................................68
Appendices and Supporting Documentation.............................................................................................68
3.2 Outline a vision statement that represents the goals and objectives of the new venture..........69

What does it mean to have a vision statement?.........................................................................................70
3.3 Identify business and operational goals and outline procedures for the effective
implementation thereof in the business plan...................................................................................70
Setting Objectives.....................................................................................................................................71
How to set business goals and objectives.............................................................................................72
Developing the Action Plan..................................................................................................................73
3.4 Include legal registrations and any legislative compliance in relation to new venture in the
business plan...................................................................................................................................73
3.5 Include an outline of how the business will operate and achieve marketing and financial
objectives in business plan..............................................................................................................74
3.5.1 Include a marketing plan in the business plan..................................................................................75
3.5.2 Include a cash flow plan in the business plan...................................................................................77
Class Activity 4: Compile a business plan............................................................................................79
Reflection.............................................................................................................................................79
Facilitator Observation Checklist.........................................................................................................79
SUMMATIVE ASSESSMENT....................................................................................................................80
Knowledge Questions..........................................................................................................................80
Practical Activities...............................................................................................................................80
Witness Testimony...............................................................................................................................80
Logbook...............................................................................................................................................80
REFERENCES AND FURTHER READING.................................................................................................81

Programme Overview
Programme Overview
Welcome to this learning programme that will lead you to greater understanding of:
 producing a business plan for a new venture
As you work your way through the learning programme you will gain competence
against the following Unit Standard:
Programme Produce a Business Plan

SAQA ID 119670: Produce a business plan for a new venture;
Unit Standard NQF Level 2, 8 Credits
This learning programme is intended for all persons who need to:
 Produce a business plan for a new venture. Learners working towards this
standard will be learning towards the full qualification, or will be working within
a SMME (Small, Medium, Micro Enterprise) environment, specialising in New
Venture Ownership and Management, where the acquisition of competence
against this standard will add value to one's job. This standard will also add
value to entrepreneurs who are seeking to develop their entrepreneurial skills
so that they can become more marketable for bigger contracts, including
commercial and public sector contracts, for example the Department of Public
Works programmes.
Programme entry level requirements

It is assumed that people learning towards this Unit Standard are already competent
in:
 mathematical and communications literacy at NQF level 2
Programme Outcomes
This learning programme is outcomes-based which means we take the responsibility
of learning away from the facilitator and place it in your hands.
Learning will begin in the workshop where you will identify the skills and knowledge
you require in order to meet the specific outcomes and assessment criteria contained
in the unit standard.
In this learning programme, we will be covering the following learning outcomes:
Module 1: Module 2: Module 3:

Understand the elements of Prepare to produce a Compile a business plan
a business plan business plan for a new
venture
 Understand the planning  Compile an organisation  Design the structure and

cycle to create the business structure for one's own layout of the business plan to
plan of your new venture business to determine how a be compatible with the
 Apply the planning cycle to business plan can best be nature of own venture
each of the four main areas integrated  Identify business and
of the business plan  Identify resources and operational goals and outline
 Explain a business plan in information required to procedures for the effective
terms of business, financial, complete own business plan implementation thereof in the
marketing and operations business plan
plans  Include the legal registration
 Identify and explain the and any legislative
codes of ethics pertaining to compliance in relation to new
a business plan with venture in the business plan

Programme Overview
examples  Include marketing plans in

 Explain the business plan for business plan
the purpose of a  Include cash flow plans in
management tool for new business plan
venture with examples  Include an outline of how
 Explain the business plan for business will operate and
the purpose of funding a new achieve marketing and
venture with examples financial objectives in
business plan
 Outline and integrate a vision
statement that represents the
goals and objectives of the
new venture into overall
business activities
During the workshop you will complete a number of class activities that will form part
of your formative assessment. In this you have the opportunity to practice and
explore your new skills in a safe environment. You should take the opportunity to
gather as much information as you can to use during your workplace learning and
self-study.
The workshop will be followed by summative assessment tasks to be completed
through self-study in your workplace. In some cases you may be required to do
research and complete the tasks in your own time.
Assessment
It is important to note that the onus is on you, as the learner, to prove your
competence. You therefore need to plan your time and ensure that your Portfolio of
Evidence is kept up to date and handed in timeously.
A Portfolio of Evidence is a collection of documents of work you have produced to
prove your competence. You will compile your portfolio from activities, tools and
checklists associated with the unit standard and relevant to the unit standard being
assessed.
You will be given the following documents to assist you in creating a portfolio of
evidence:
 Learner Guide: The Learner Guide is designed to serve as a guide for the
duration of your learning programme and as the main source document for
transfer of learning. It contains information (knowledge and skills required)
and application aids that will assist you in developing the knowledge and skills
stipulated in the specific outcomes and assessment criteria. The learner
guide also indicates the formative assessment class activities that you need
to complete towards your Portfolio of Evidence.
 Learner Workbook: The learner Workbook contains all the class activities
that you will be completing to show formative learning. These will be
assessed as part of your portfolio of evidence as formative assessment. You
will be handing in the Learner Workbook as part of your Portfolio of Evidence.
 Learner Portfolio of Evidence Guide: The Learner Portfolio of Evidence
Guide provides details about the assessment, such as the assessment
preparation, plan and specific summative assessment activities that you need
to complete in the workplace.

Programme Overview
Both formative and summative assessment is used as part of this outcomes-based

learning programme:
 Formative Assessment: In order to gain credits for this Unit Standard you
will need to prove to an assessor that you are competent. The Class
Activities throughout your Learner Workbook are designed not only to help
you learn new skills, but also to prove that you have mastered competence.
You will be required to develop a Portfolio of Evidence to hand in to an
assessor so that you can be assessed against the outcomes of this Unit
Standard. Where you encounter a Class Activity icon, you must complete the
formative assessment activity in the Learner Workbook. Comprehensive
guidelines for the development of your Portfolio of Evidence may be found in
the Learner Portfolio of Evidence Guide for the particular learning programme
that you are working with.
 Summative Assessment: The NQF’s objective is to create independent and
self-sufficient learners. This means that you will also be required to do
independent research and assignments, such as Knowledge Questions,
Practical Activity (completed in the workplace), Witness Testimony and
Logbook.
The assessment process is discussed in detail in the Learner Portfolio of
Evidence Guide. When you are ready, you will advise your mentor that you
are ready for assessment. He or she will then sign off the required sections in
the Learner Portfolio of Evidence Guide and you will be able to submit your
Portfolio of Evidence for assessment. The summative assessment activities
placed in the Learner Portfolio of Evidence Guide for your convenience. If
any of your assessment is conducted using observation, role plays or verbal
assessment, place a signed copy of the checklists, once completed by your
mentor or line manager in your Learner Portfolio of Evidence Guide, as
indicated.
The Training Provider will assess your portfolio. If successful, you will receive the
credit value of this learning programme. The entire assessment process is explained
in the Learner Portfolio of Evidence Guide and you are urged to read this guide as
soon as possible as it explains the assessment process in detail and clarifies your
rights and responsibilities to ensure that the assessment is fair, valid and reliable.
If you are not successful, you will receive all the guidance needed to resubmit your
Portfolio of Evidence within a specific time period, as per the Training Provider
requirements.
Learning map (delivery structure)

Assessment Formative Assessment 30% Summative Assessment70%
Contact Learning Summative
Theory input Prescribed assessment in PoE:
Learning Learning and
Formative assessment reading, knowledge questions,
application at the
(workbook activities): support, practical workplace
activities workplace
group activities, coaching activity, Witness
for 80 hours of simulations Testimony, logbook
notional learning 21 hours 3 hours 48 hours 8 hours

   
Compilation of Portfolio of Evidence
Complementary workplace practices Coaching and Mentoring; Performance Management

Programme Overview
Learner Support
Please remember that as the programme is outcomes based – this implies the
following:
 You are responsible for your own learning – make sure you manage your
study, practical, workplace and portfolio time responsibly.
 Learning activities are learner driven – make sure you use the Learner Guide,
Learner Workbook and Learner Portfolio of Evidence Guide in the manner
intended, and are familiar with the Portfolio requirements.
 The Facilitator is there to reasonably assist you during contact, practical and
workplace time of this programme – make sure that you have his/her contact
details.

Module 1
Module 1
Understand the elements of a business plan
After completing this module, the learner will be able to identify and demonstrate
understanding of the elements of a business plan, by successfully completing the
following:
 Understand the planning cycle to create the business plan of your new venture
 Apply the planning cycle to each of the four main areas of the business plan
 Explain a business plan in terms of business, financial, marketing and operations
plans
 Identify and explain the codes of ethics pertaining to a business plan with
examples
 Explain the business plan for the purpose of a management tool for new venture
with examples
 Explain the business plan for the purpose of funding a new venture with
examples

Module 1
Understand the elements of a business plan

A business plan is a document that describes an organisation's current status and
plans for several years into the future. It generally projects future opportunities for the
organisation and maps the financial, operations, marketing and organisational
strategies that will enable the organisation to achieve its goals.
A business plan is a formal statement of a set of business goals, the reasons why
they are believed attainable, and the plan for reaching those goals. It may also
contain background information about the organisation or team attempting to reach
those goals.
The business goals being attempted may be for-profit or non-profit. For-profit
business plans typically focus on financial goals. Non-profit and government
business plans tend to focus on service goals, although non-profits may also focus
on maximising profit.
Experienced business owners and managers will tell you that the business plan is a
very important management tool. The business plan is a written road map of where
the business is going, what it has to do to get there, and what it will look like on
arrival.
Business plans may also target changes in perception and branding by the customer,
client, tax-payer, or larger community. A business plan having changes in perception
and branding as its primary goals is called a marketing plan.
Business plans may be internally or externally focused. Externally focused plans
target goals that are important to external stakeholders, particularly financial
stakeholders. They typically have detailed information about the organisation or team
attempting to reach the goals. With for-profit entities, external stakeholders include
investors and customers.
We can simply say that a business plan is a document that details the past, present
and intended future of the company.
If you have a comprehensive and well-motivated business plan, you, as well as
potential investors, can obtain a thorough understanding of your existing or proposed
business, your own goals and objectives and your financing requirements.
Remember:
A business plan is a document that summarises the operational and financial
objectives of a business and contains the detailed plans and budgets showing how
the objectives are to be realized.
It communicates a viable business idea. We communicate with employees, suppliers,
investors, financial institutions and other stakeholders. The main reason for this
communication is to convince stakeholders that the new venture will be successful
and it is worthwhile to invest in the enterprise.

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The following is an example of a very basic business plan for a coffee shop:
Coffee Shop Business Plan example

Executive Summary1
Java Culture coffee bar is determined to become a daily necessity for local coffee
addicts, a place to dream of as you try to escape the daily stresses of life and just a
comfortable place to meet your friends or to read a book, all in one. With the growing
demand for high-quality gourmet coffee and great service, Java Culture will capitalize on
its proximity to the University of Oregon campus to build a core group of repeat
customers. Java Culture will offer its customers the best prepared coffee in the area that
will be complimented with pastries, as well as free books that its patrons can read to
enjoy their visit.
The company will operate a 2,300 square foot coffee bar within a walking distance from
the University of Oregon campus. The owners have secured this location through a three-
year lease with an option for extending. The have also provided $140,000 of the required
$170,000 start-up funds. The remaining capital will be obtained through Bank of America
commercial loans.
The company is expected to grow sales revenue from $584,000 in FY2001 to $706,000
in year three. As Java Culture will strive to maintain a 65% gross profit margin and
reasonable operating expenses, it will see net profits grow from $100,000 to $125,000
during the same period.
1.1 Objectives
Java Culture’s objectives for the first year of operations are:
o Become selected as the “Best New Coffee Bar in the area” by the local restaurant
guide.
o Turn in profits from the first month of operations.
o Maintain a 65% gross margin.
1.2 Keys to Success
The keys to success will be:
o Store design that will be both visually attractive to customers, and designed for fast
and efficient operations.
o Employee training to insure the best coffee preparation techniques.
o Marketing strategies aimed to build a solid base of loyal customers, as well as
maximizing the sales of high margin products, such as espresso drinks.
1.3 Mission
Java Culture will make its best effort to create a unique place where customers can
socialize with each other in a comfortable and relaxing environment while enjoying the
best brewed coffee or espresso and pastries in town. We will be in the business of
helping our customers to relieve their daily stresses by providing piece of mind through
great ambience, convenient location, friendly customer service, and products of
consistently high quality. Java Culture will invest its profits to increase the employee
satisfaction while providing stable return to its shareholders.
1
http://www.entrepreneurmag.co.za/advice/sample-business-plans/restaurants-and-bars/coffee-shop-business-plan/

Module 1
Company Summary
Java Culture, an Oregon limited liability company, sells coffee, other beverages and
snacks in its 2,300 square feet premium coffee bar located near the University of Oregon
campus. Java Culture’s major investors are Arthur Garfield and James Polk who
cumulatively own over 70% of the company. The start-up loss of the company is
assumed in the amount of $27,680.
2.1 Company Ownership

Java Culture is registered as a Limited Liability Corporation in the state of Oregon. Arthur
Garfield owns 51% of the company. His cousin, James Polk, as well as Megan Flanigan
and Todd Barkley hold minority stakes in Java Culture, LLC.
2.2 Company Locations and Facilities

Java Culture coffee bar will be located on the ground floor of the commercial building at
the corner of West 13th Avenue and Patterson Street in Eugene, OR. The company has
secured a one-year lease of the vacant 2,500 square feet premises previously occupied
by a hair salon. The lease contract has an option of renewal for three years at a fixed rate
that Java Culture will execute depending on the financial strength of its business.
The floor plan will include a 200 square feet back office and a 2,300 square feet coffee
bar, which will include a seating area with 15 tables, a kitchen, storage area and two
bathrooms. The space in the coffee bar will be approximately distributed the following
way–1,260 square feet (i.e., 55% of the total) for the seating area, 600 square feet (26%)
for the production area, and the remaining 440 square feet (19%) for the customer
service area.
This property is located in a commercial area within a walking distance from the
University of Oregon campus on the corner of a major thoroughfare connecting affluent
South Eugene neighbourhood with the busy downtown commercial area. The
commercially zoned premises have the necessary water and electricity hook-ups and will
require only minor remodelling to accommodate the espresso bar, kitchen and storage
area. The coffee bar’s open and clean interior design with modern wooden decor will
convey the quality of the served beverages and snacks, and will be in-line with the
establishment’s positioning as an eclectic place where people can relax and enjoy their
cup of coffee. The clear window displays, through which passers-by will be able to see
customers enjoying their beverages, and outside electric signs will be aimed to grab the
attention of the customer traffic.
Products
Java Culture will offer its customers the best tasting coffee beverages in the area. This
will be achieved by using high-quality ingredients and strictly following preparation
guidelines. The store layout, menu listings and marketing activities will be focused on
maximizing the sales of higher margin espresso drinks. Along with the espresso drinks,
brewed coffee and teas, as well as some refreshment beverages, will be sold in the
coffee bar. Java Culture will also offer its clients pastries, small salads and sandwiches.
For the gourmet clientele that prefers to prepare its coffee at home, Java Culture will also
be selling coffee beans.
The menu offerings will be supplemented by free books and magazines that customers

Module 1
can read inside the coffee bar.
3.1 Product Description

The menu of the Java Culture coffee bar will be built around espresso-based coffee
drinks such as lattes, mochas, cappuccinos, etc. Each of the espresso-based drinks will
be offered with whole, skimmed, or soy milk. Each of these coffee beverages is based on
a ‘shot’ of espresso, which is prepared in the espresso machine by forcing heated water
through ground coffee at high pressure. Such espresso shots are combined with steamed
milk and/or other additives like cocoa, caramel, etc., to prepare the espresso-based
beverages. Proper preparation techniques are of paramount importance for such drinks.
A minor deviation from the amount of coffee in the shot, the size of the coffee particles,
the temperature of milk, etc., can negatively affect the quality of the prepared drink.
3.2 Sales Literature

Two thousand flyers will be distributed in the adjacent neighbourhood, on the University
campus, at the malls and in the selected office buildings within two weeks prior to the
opening of Java Culture. Subsequently, free postcards with Java Culture endorsement
will be printed to increase the company visibility among the patrons.
Market Analysis Summary

U.S. coffee consumption has shown steady growth, with gourmet coffee having the
strongest growth. Coffee drinkers in the Pacific Northwest are among the most
demanding ones. They favour well-brewed gourmet coffee drinks and demand great
service. Eugene, OR, with its liberal and outgoing populace and long rainy winter, has
traditionally been a great place for coffee establishments. Java Culture will strive to build
a loyal customer base by offering a great tasting coffee in a relaxing environment of its
coffee bar located close to the bustling University of Oregon campus.
4.1 Market Segmentation

Java Culture will focus its marketing activities on reaching the University students and
faculty, people working in offices located close to the coffee bar and on sophisticated
teenagers. Our market research shows that these are the customer groups that are most
likely to buy gourmet coffee products. Since gourmet coffee consumption is universal
across different income categories and mostly depends on the level of higher education,
proximity to the University of Oregon campus will provide access to the targeted
customer audience.
4.2 Target Market Segment Strategy

Java Culture will cater to people who want to get their daily cup of great-tasting coffee in
a relaxing atmosphere. Such customers vary in age, although our location close to the
University campus means that most of our clientele will be college students and faculty.
Our market research shows that these are discerning customers that gravitate towards
better tasting coffee. Furthermore, a lot of college students consider coffee bars to be a
convenient studying or meeting location, where they can read or meet with peers without
the necessity to pay cover charges. For us, this will provide a unique possibility for
building a loyal client base.
4.2.1 Market Needs

General trend toward quality among U.S. consumers definitely plays an important role in

Module 1
the recent growth in gourmet coffee. Additionally, such factors as desire for small
indulgencies, for something more exotic and unique, provide a good selling opportunity
for coffee bars.
4.3 Industry Analysis

Coffee consumption has shown a steady 2.5% growth rate in the United States over the
last decade. In 1994, total sales of coffee were approximately $7.5 billion with gourmet
coffee representing 33% (or $2.5 billion) of that. The retail coffee industry is flourishing in
the U.S. Pacific Northwest. The local climate, with a long rainy season, is very conducive
for the consumption of hot non-alcoholic beverages. At the same time, hot dry summers
drive people into cafes to order iced drinks. Further, coffee has really become a part of
the lifestyle in the Pacific Northwest. Its discerning coffee drinkers are in favour of well-
prepared, strong coffee-based beverages, which they can consume in a relaxing
environment.
4.3.1 Competition and Buying Patterns

Competition
According to the 1997 Oregon Food service Statistics (NAICS 72), Eugene had 45
established snack & non-alcoholic beverage bars (NAICS 722213) with total sales of
$14.2 million. Among other establishments that offer coffee drinks to their customers are
most of Eugene’s limited- and full-service restaurants. Java Culture’s direct competitors
will be other coffee bars located near the University of Oregon campus. These include
Starbucks, Cafe Roma, The UO Bookstore, and other Food service establishments that
offer coffee. Starbucks will definitely be one of the major competitors because of its
strong financial position and established marketing and operational practices. However,
despite of Starbuck’s entrenched market position, many customers favour smaller,
independent establishments that offer cosy atmosphere and good coffee at affordable
prices. Cafe Roma is a good example of such competition. We estimate that Starbucks
holds approximately 35% market share in that neighbourhood, Cafe Roma appeals to
25% of customers, The UO Bookstore caters to another 10%, with the remaining market
share split among other establishments. Java Culture will position itself as a unique
coffee bar that not only offers the best tasting coffee and pastries but also provides
home-like, cozy and comfortable environment, which established corporate
establishments lack. We will cater to customers’ bodies and minds, which will help us
grow our market share in this competitive market.
Buying Patterns
The major reason for the customers to return to a specific coffee bar is a great tasting
coffee, quick service and pleasant atmosphere. Although, as stated before, coffee
consumption is uniform across different income segments, Java Culture will price its
product offerings competitively. We strongly believe that selling coffee with a great
service in a nice setting will help us build a strong base of loyal clientele.
The above example is just the beginning of the business plan. As we go through this
programme, you will see that there is much more specific information that is added to
the above example.

Module 1
To compile a good business plan, you need to be able to think strategically,

investigate and read the market, convince lots of people to give you information,
understand financial statements, crystallise your ideas clearly, and communicate
them to others. To run a business successfully, you need all those skills, and more.
When you learn how to write a business plan, you gain a lot of skills needed to run a
business2.
1.1 A business plan in terms of business, financial, marketing and

operations plans
Your business plan needs to have a wider scope than you might initially think. Your
section on finances will determine whether the marketing and operational plans are
feasible. The financial plan should include initial financial requirements, historical and
projected financial statements, and breakeven analysis. Operations forecasts need to
also be built in order for you to more accurately predict how much you will need to be
predicted once you are running. Your investors will want answers to four basic
questions:
 How much money is needed?
 How long will the money be needed?
 What rate of return can be expected?
 What are the risks?
A projected balance sheet should show the initial financial position of the business
with the relative investment levels of the owners, investors, and creditors. Therefore
the impact of initial cost overruns on the amount of capital needs should be
addressed. Projected income (profit and loss) statements and projected cash flows
should be prepared. Sensitivity analysis of the best, worse, and average case
scenarios should show the impact of deviations in revenue and expense projections
on income and cash flow. Properly prepared cash flow projections will uncover the
need for and timing of short-term financing (operating loans). This is essential to an
effective operational plan.
The five main areas of a business plan

Your business plan should consist of five areas:
1. Your strategic focus (your niche, or core business)
2. The marketing plan
3. The operations plan
4. The staffing plan.
5. The financial plan
2
http://www.seda.org.za/MyBusiness/Factsheets/Pages/Compileabusinessplan.aspx

Module 1
After you have identified the strategic focus of your business, you can then use the
planning cycle (below) to create the content for the 4 main areas of the business
plan:
 The marketing plan
 The operations plan
 The staffing plan
 The financial plan
1.1.1 The planning cycle to create the business plan of your new venture
Step 2: Step 3:
Step 1:
Test your Analyse and
Think and
ideas through draw
strategise
research conclusions
Step 1: Think and Strategise

Clarify your objectives - what do you want to achieve in your business and each area
of your business?
Be concrete, using figures and targets, workflow diagrams, financial statements with
rand values, etc.
Step 2: Test your ideas through research

Use more than one type of research method. Speak to a wide variety of people, read,
research your industry, and use your eyes and ears.
Do not try to only find facts that confirm your optimism. Find out which parts will not
work and which parts will need extra investment. As you get feedback, you 'subtract'
from your initial idea until only a kernel of possibility remains. If that kernel is viable,
you can proceed with your business.
When speaking to people, stay neutral and do not ask leading questions. People
might tell you what they think you want to hear. On the other hand, you build valuable
contacts and potential custom through research, so portray a professional image.
Be sensitive when doing research. Ask permission from heads of institutions, and
owners of shops. Do not pressure people into giving confidential information about
others
Step 3: Analyse and draw conclusions

Always err on the side of caution. For example, if someone in a similar industry has a
turnover of R100 000 a month, assume that this is the maximum you can expect, not
the minimum.
The planning cycle is a continuous process. As you do more research you will
change your thinking and strategy, which will in turn inform further research. The
cycle continues after you've started a business. Your research then consists of your
sales figures, your expenses, feedback from your customers, feedback from your

Module 1
staff, and information about what your competitors are doing. A business plan is a
dynamic, ever-changing constantly updated tool that all successful business owners
use.
1.1.2 Apply the planning cycle to each of the four main areas of the business
plan
Apply the planning cycle to each of the four areas of the business plan. Once you
have answered all the questions below through a process of thinking, research and
analysis, you should have a fairly good idea of what you want to achieve with your
business and how you will achieve it.
Your strategic focus

Questions to ask:
 What exactly is it that my business will do?
 Will it optimise quality, speed, affordability, flexibility (the ability to custom-
make as opposed to mass-produce, or provide variety as opposed to a single,
affordable product) or dependability? No business can optimise all five. Small
businesses are seldom good at mass production.
 What will my business NOT do?
The strategic focus is a thinking process, informed by the total research done for the
following four areas (marketing, operations, staffing and financial plan). It may seem
logical to do it last, but it fact you need to get some focus before you start on the
other areas, otherwise it becomes an impossibly large task. Your strategic focus
needs to be constantly revisited throughout the process.
The marketing plan

Questions to ask:
 A sales forecast - How much will I sell?
 A client profile - Who will buy my product?
 A competitor profile- Who are my direct competitors, what substitutes are
there in the market?
 A product profile - What is the core product and what are the extra features?
 A distribution strategy - Is location important, will I deliver?
 A pricing strategy - what will people be prepared to pay? How much can I
expect to sell at that price? Will this cover my direct costs plus overheads?
 A promotional strategy - how will I create awareness of and demand for my
product?
Ideas for research methods for the marketing plan:
 Buying information from market research companies is very expensive.
 Doing your own market research it is much cheaper, you will learn more,
make new contacts and even promote your business.

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 Collect demographic statistics (from municipalities, Statistics South Africa,

academic research institutes).
 Other businesses might pass on their research findings to you, especially if
your business will benefit theirs.
 Speak to people in similar business in a different area, who are not direct
competition.
 Do door-to-door surveys or distribute questionnaires
 Count how many people and cars go past the location you have in mind for
your business if you are going to rely on passing trade
 Investigate direct competitors - their produce, their turnover, and their
customers.
 Speak to the suppliers of your competitors.
 Test your ideas when speaking to people you meet.
 If you already have a business and want to expand or change in any way,
speak to your customers, as well as to people who are not yet your
customers, but who you want to attract.
The Operational plan

For manufacturers:
 What are the important features of the product? How is each product made?
 What equipment, accessories, material and labour do I need?
 What is total number of factory hours needed to meet sales forecasts? How
many delays can I expect and what might cause them?
 Will there be any variation in demand and how will this affect production?
 Who are my suppliers?
 What kind of facility do I need and where should it be located?
 What should my factory floor layout look like?
 How can I ensure quality and cost control?
 What will my workflow processes and schedules look like?
 What will my stock control system look like?
 How is the manufacturing process administered, from receiving an order to
sending out an invoice?
For retailers:
 How will I keep records of my stock, in other words, how will my stock control
system work?
For service businesses:
If you sell services, you will need a more basic form of operations planning, including
workflow planning and time sheets. Don't neglect to link these to administrative
functions such as quoting and invoicing clients.

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Research methods for operations and stock control:

 Use the sales forecast from your marketing plan as starting point to plan your
operations.
 Become familiar with the technical aspects of your business. Even if you have
a technical expert as partner, make sure you understand the answers to the
above questions.
 Speak to suppliers, other business owners.
 Read up on workflow processes in your industry.
 Get the help of industry specialists.
Staffing plan
Questions to ask:
 How many people do I need? How many should be full-time, part-time or
contractors?
 What should their skills, experience and personal qualities be?
 Who should report to whom?
 How will responsibilities and tasks be divided into job descriptions?
 How much will salaries amount to?
 What other costs are involved (e.g. pension, UIF, sick funds)
 Are there minimum wages or a collective bargaining council agreement that
govern my industry?
 What kind of training will I carry out and how much will this cost?
 Can I outsource certain functions rather than employ staff of my own - how
much will this cost?
 How do I hand over more and more of the tasks in my business to staff
members so that it frees me up to do what a business owner is supposed to
do: strategic planning.
Research methods for the staffing plan:
 Look at your operations plan and work out how many people you need.
 Think very carefully about how much of the work you will be able to take on
yourself and plan to delegate as much as possible as soon as possible. Many
business owners take on too much for too long and have problems
delegating.
 Study similar businesses for job descriptions and management structures
(who reports to whom).
 Approach personnel agents and industry experts.

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Financial plan
You must try to forecast:
 Sales for the first year (or for the next year if you are already in business)
 Cost of sales
 Gross profit
 Overheads
 Net profit
 Start-up costs
 Debtor and creditor period
 Cash flow
 How much you will need to borrow
 Whether you will make enough to pay it back3
The financial plan should show:
 Start-up expenses and capitalisation: a description and explanation of what it
will cost to launch the business and where you expect to get this money
 12-month profit and loss projection (month-by-month) and a three-year profit
and loss projection (quarter-by-quarter)
 A 12-month cash-flow projection and a three-year cash-flow projection
(quarter-by-quarter)
 A projected balance sheet at start-up and at the end of years one to three
 A break-even calculation
The principles of researching and compiling a business plan

You first need to ask yourself, “What is the purpose of this plan? Will it be used as an
operating guide and/ or a financing proposal?” Researching and compiling a
business plan has three primary functions, namely to serve as:
 An Action Plan
 A Strategic Plan
 A Sales Tool
Action Plan:
A business owner should use the business plan as a tool for setting the direction
of a business over the next few years. The plan should also include the action steps
and processes to guide the business through this period.
A business plan can help to move you to action. You may have been thinking about
starting a business or engaging in some venture for years, but the process may seem
too daunting, too large and too complicated. A business plan will help you to pull
apart the pieces of starting a business and examine each piece by itself. So instead
of one large problem, you have a set of smaller problems, and by solving the small
problems, the large problem is automatically solved. So writing a business plan can
3
http://www.seda.org.za/MyBusiness/Factsheets/Pages/Compileabusinessplan.aspx

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help to move you to action by breaking down a seemingly impossible task (starting
a business) into many smaller, less intimidating tasks.
Strategic Plan:
Once you have started your business, a business plan can be an invaluable tool to
help keep you on track and moving in the direction you want to go. It can provide
you with an objective tool for determining whether the business is on track to meet
the goals and objectives you have set.
In the bustle of daily business, it is very easy to lose sight of your objectives and
goals. A business plan can help to keep you focused. A business plan can also
serve to help others, including suppliers, customers, employees, friends, and family,
to understand your vision.
Of course, a business plan is not a guarantee that problems will not arise, but with a
well- thought out plan, you can better anticipate a crisis situation and deal with it
before it becomes too serious. Furthermore, a well-constructed plan could help the
business avoid certain problems altogether. Business planning is probably more
important to the survival of a small and growing business than it is to a larger, more
mature one.
Sales Tool:
Perhaps most importantly, a business plan can serve as a sales tool. You will
probably need outside financing to start your business, and a business plan is the
tool you need to convince investors to come on board. You may also want and
need credit from suppliers - a business plan can help you get them. Finally you may
need to convince family members, or even yourself, that your ideas will bear fruit. A
well-written business plan can serve to sell people close to you on the benefits of
proceeding with your concept.
Your financing proposal must answer the following questions:
 Who is asking for money?
 How much money is being requested?
 What is the money needed for?
 How will the funds benefit the business?
 How will the funds be repaid?
 Why does the loan or investment make sense?
Research methods
 If you don't know basic financial management concepts and functions, learn
them. Read, study, or ask. It is the basis of business. If you need to, you can
use your accountant as a financial teacher, as long as you don't lean on him
as business strategist
 If at all possible, learn how to use spreadsheets for your financial planning.
Your competition is, and it gives them an edge over anyone who doesn't.
 Your marketing, operations and staffing plans should give you the answers to
the first six forecasts above (sales, cost of sales, etc).

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 Look at the industry standard for average debtor and creditor periods
 Speak to other business owners.
 Approach support organisations and business consultants.
A Business Plan form

A business plan can take many forms, from a glossy, professionally-produced
document to a handwritten manuscript in a file outlining the goals, objectives,
strategies and tactics of the business.
The format of a business plan depends on its presentation context. It is not
uncommon for businesses, especially start-ups to have three or four formats for the
same business plan:
 A short, three- minute summary of the business plan's executive summary.
This is often used as a teaser to awaken the interest of potential funders,
customers, or strategic partners.
 An oral presentation - a slide show and oral narrative that is meant to trigger
discussion and interest potential investors in reading the written presentation.
The content of the presentation is usually limited to the executive summary
and a few key graphs showing financial trends and key decision making
benchmarks. If a new product is being proposed and time permits, a
demonstration of the product may also be included.
 A written presentation for external stakeholders - a detailed, well-written, and
clearly formatted plan targeted at external stakeholders.
 An internal operational plan - a detailed plan describing planning details that
are needed by management but may not be of interest to external
stakeholders. Such plans have a somewhat higher degree of transparency
and informality than the version targeted at external stakeholders.
1.2 The codes of ethics pertaining to a business plan

You need to determine the values, beliefs and thus a code of ethics for your
operation and such should be incorporated into your business plan. The ethics may
include for example obtaining information for the compiling of the business plan. It
would be unethical to say pay employees of your prospective competition to give you
their trade secrets.
Business Plan Preliminary Research
Before you begin writing your business plan, consider four core questions:
 What service or product does your business provide and what needs does it
fill?
 Who are the potential customers for your product or service and why will they
purchase it from you?
 How will you reach your potential customers?
 Where will you get the financial resources to start your business?
You must determine what resources you will need to conduct your research.
Resources include but are not limited to internet, newspaper, journals, library,

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stationery, printing facilities to mention a few. Are you going to need mentors? Are
you going to involve consultants or development agencies such as SEDA?
You will also need to ascertain how you are going to conduct your research. Are you
going to conduct interviews with prospective suppliers and customers? Are you going
to quantify or qualitative your research?
The above questions must be answered before the business plan is actually
compiled.
Ethics in Detail
Morality comprises rules of conduct about what we
ought and ought not to do. It also encompasses
expectations of character, that is, what sorts of
persons we should strive to be. From an ethical
perspective, then, public policy has to ask not only
what the rules of conduct should be how society
should act, through its governmental agencies but
also what implications public policy has for our
character as a people.
Bowle outlined three arguments in support of this broad view of corporate
responsibility.
First, the right to make a profit is not absolute. Business and profit seeking are
already controlled and limited by laws and regulations. However, the law is a
minimum standard of what must be done. Ethical standards are higher and prescribe
what ought to be done. For example, a building could be constructed to meet the
letter of the law regarding building codes, yet violate the spirit of the law and
represent shoddy workmanship.
Second, the rights of stockholders are not absolute. The fact that stockholders are
the legal owners of a firm does not give them unlimited rights to do what they want
with the firm. Just as a landowner cannot denude, strip mine, and pollute a piece of
his land, neither can stockholders of a firm do anything with their property without
regard to the consequences for the public good. In fact, stockholders represent but
one player in a corporation. Other stakeholders are the employees, managers,
customers, suppliers, and the community in which a company or company facility is
located. These other players often have as great a stake in the firm as the
stockholders, and the corporate manager has a moral responsibility to them also.
Third, businesses, like all citizens, have duties of citizenship to society. Corporations
benefit from a host of societal programs and institutions, including family and
educational training of workers and infrastructure of utilities, transportation, and
communications. The obligations of justice that apply to individual citizens apply also
to corporations.
What must a corporation do to be morally excellent and exhibit an appropriate level
of responsibility to the community?
1. First, it must develop a clear set of corporate values and foster an ethical
point of view. The corporation must recognise responsibilities to clients,
employees, and the community as well as to stockholders. Consultation with
the corporation's legal department would be only the first step in determining
what is morally right: officers also must develop the capacity to be on the alert
for ethical issues and formulate clear strategies and structures within the
corporation to make appropriate moral choices.

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2. Next, the corporation must enhance and encourage the moral autonomy and
excellence of each individual within the corporate culture. This is so that
sufficient opportunity is given to personalise the corporate moral objectives
within specific areas of responsibility.
3. Finally, the morally excellent corporation must shift the primary motivation for
its conduct from a profit to a service orientation. Management should
emphasise the production and marketing of quality goods and services that
customers truly need, foster a positive working environment for employees,
and treat suppliers and contractors fairly and honestly. In doing so, the
company will make a profit.
Corporations need to implement these principles to develop corporate moral
excellence. What are some of the implications of moral excellence for these
corporations? The moral autonomy and excellence of all employees should be
encouraged within the parameters of the corporate culture.
Adherence to company policy and confidentiality

Company policy and confidentiality must be adhered to at all times. Refer to the
previous section for confidential matters in business.
As an employee you have to know what the company policy is regarding
confidentiality and ethical behaviour. The Code of Conduct handout gives an
indication of what is expected of employees regarding ethical behaviour and
confidentiality.
We will discuss certain ethical and unethical behaviour in business.
Unethical behaviour in business

 Bribery these lead to unlawful access, fraud and theft.
 Loose talk the leakage of confidential information.
 Industrial espionage staff gives assistance to offenders either under
pressure or for payment.
 Invoice fraud the amounts which are owing to the creditors are fictionalised
or they are inflated.
 Product fraud poor quality products are released on to the market.
 Advertising fraud misleading or invalid claims are made for the products.
 Favouritism the staffs are promoted on the basis of favours, gifts and
nepotism. Contracts are fraudulently granted.
 Encroachment upon and penetration of confidential information systems.
Stealing of computer time for one's own benefit.
Ethical behaviour in business

 Employees must be honest with and loyal to clients.
 The concept of the work ethic ties in closely with the concept of total quality
management. A good work ethic will also result in high productivity.
 Pride. This type of pride does not refer to arrogance or ego. It comes from
the self-respect that comes from achieving or accomplishing. Being and

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doing one’s best gives one the right to be proud. Managers need to create a
work environment where people are empowered to achieve positive results.
People also need to be given the freedom to do their best and to be treated in
such a way that they want to give their best.
 Loyalty. Successful organisations have loyal employees. These employees
are motivated to always carefully consider the interests of the organisation.
This loyalty should not however be a blind loyalty and employees should still
be free to question decisions.
 Honesty. Someone who is honest is truthful, law abiding and incorruptible.
Dishonest people lie, cheat and steal.
 Do not accept any bribes whatsoever or enter into unlawful transactions in
any way.
 Do not overcharge customers, or give any discount or free travel, which is a
violation of company policy.
 Do not make any false promises.
 Do not disclose any confidential information, especially to the competition.
 Do not withhold any information that can be
detrimental to the customer.
 Do not violate any laws or policies of the country.
 Treat and respect every customer as human being
and with dignity and respect
Cost of Poor Ethics

 Loss of trust which leads to poorer relationships and less effective team work,
 Loss of confidentiality,
 Limited communication,
 Lack of self-esteem, of commitment and less loyalty
 Loss of your/the organisation’s good name
 Contributing to an ethical work environment:
 Make the decision to commit to ethics
 Recognise that you are a role model by your actions and values
 Assist others by instilling ethical behaviour
 Discuss ethical practices
 Articulate your values
 Talk to people
 Be consistent

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Receiving and Giving Gifts and Favours in a Business Context

A gift in the workplace is quite sensitive. It is sometimes hard to know when a gift is
appropriate and when not. Here are some guidelines of when it is safe to assume
receiving or giving a gift is 100% appropriate:
 When it is your or a co-worker’s birthday
 When a member of the organisation is retiring or resigned
 When someone’s years of service with an organisation is being celebrated
 When the gift is for thanking someone for hard work
With clients, mostly the only gift that is appropriate is a corporate gift. Many
organisations have corporate gifts such as a pen with their logo on; files with their
logo on, some organisations even have soap made with their logo on it.
When receiving a gift from a client you should also be very careful. First find out
exactly what the reasons are for the client wanting to give you this gift (in a tactful
manner) and what the gift is.
Here is a list of gifts that are totally improper to give or receive in a corporate
environment:
 Underwear (or anything that has a “sexual vibe” connected to it)
 Really expensive gifts such as jewellery
 Clothing for example an evening gown, the list goes on and on.
Here are some things that are appropriate:
 Giving gifts
 A scarf is appropriate for a lady and a tie for men
 Mugs are very popular corporate gifts
 A pen
 Chocolates or sweets
 On birthdays, flowers are appropriate for ladies
 Golf balls
The list once again goes on and on but you can see that none of the gifts above has
any strings attached. It is best to always give someone a gift that is neutral yet
practical. (Something the person can use).
The importance of honesty in business dealings

Honesty in business dealings can’t be stressed enough. You should never tell a
client that you can deliver on something when you know you can’t! It will reflect badly
at the end of the day.
It is important to make a distinction between confidentiality and honesty here. If for
example, the price your organisation pays for a product is confidential then you
shouldn’t tell the client how much the organisation pays for the product; however you
shouldn’t lie to the client and add another R10 to the price for your own gain.
If a client finds out that you or someone in the organisation has lied they won’t be
happy and might take their business somewhere else. Be careful of this!

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Someone once said: “if you are a liar you have to have a brilliant memory to
remember what you lied about and what you said”.
This is very true because one lie brings on another and eventually you will be caught.
The Deliverables In Own Work Situation

Lazing about with your work is not only unethical but also impacts negatively on the
organisation and your fellow employees.
What is more satisfying than delivering work that has been done properly on time?
If you stay away from work for no reason or because you just didn’t feel like going,
don’t hand work in on time and are generally unproductive your superiors will
definitely be unhappy.
It is of utmost importance to be consistent with your work. You should try to work at
the same (reasonable) pace so you are a productive worker, and when the pressure
is on a bit you need to put in a little extra so that you deliver on time.
Your superiors will be happy with your work if you always do your best to hand in
your work on time, always arrive on time, don’t stay away from work unless you are
really ill or have a real emergency and are dependable.
If a worker has been fired or resigns because s/he stayed away from work often, was
not productive and did not finish their work on time s/he will need references to find
another job. This will be difficult as the supervisor will not be able to give a good
reference.
1.3 The business plan for the purpose of a management tool for a new
venture
Planning is one of the keys to establishing and running a successful business, it is an
initial tool to give the management an idea of the way forward. Its ongoing use as a
management tool is important for continuing business success.
It helps you prepare for unforeseen events and to take advantage of known future
events.
Once your business is operating, compare results against the business plan. This will
enable you to:
 Assess new products or services
 Avoid sales crises
 Avoid liquidity crises
 Avoid succession crises.
 Monitor your success against the targets you set in the plan
 Determine when and where corrective action is required
 Plan for, and control, business growth
 Evaluate and compare options
By writing your business plan you will be well prepared for what you are entering into.
You will also be better prepared for answering questions when you apply for funding.

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The funding institutions will be asking you questions and needing to see if you are
prepared for opening this new venture.
You also need to keep reviewing. This is critical as the market changes all the time
and some adjustments often need to be made.
1.4 The business plan for the purpose of funding a new venture
Not only is a business plan a good management tool it really sets the scene for
sound investment. A proper business plan has the funding structures built into it so
you will be well versed regarding the amounts that you need. It also serves as a
document that proves that you are serious about your venture as you have put some
thought into it.
Walking into a Financial Institution without your plan would completely futile as they
want to see what your projections are and if it’s really sound regarding the niche
market that you will occupy. This will give the Financial Institution an instant insight
into all that you need and also serve as proof that they will get their moneys returned.
Class Activity 1: Identify the elements of a business plan

Please follow the instructions from the facilitator to complete the
formative activity in your Learner Workbook

Module 2
Module 2
Prepare to produce a business plan for a new
venture
After completing this module, the learner will be able to prepare to produce a
business plan for a new venture, by successfully completing the following:
 Compile an organisation structure for one's own business to determine how a

business plan can best be integrated
 Identify resources and information required to complete own business plan

Module 2
Prepare to produce a business plan for a new venture

Every business, from the smallest to the very
large ones, has a hierarchy. The hierarchy
explains the ranking of the people who work
there. It also explains the levels of work, the
power and the authority that the employees
have, from top management to middle
management to supervisors to workers.
In small businesses one person will do more

than one job, such as purchases, stock
keeping, sales and issuing of invoices, while in
bigger businesses the work will be more
specialised. For example, purchases will be a department on their own, with people
doing only that.
2.1 Compile an organisation structure for your own business

The “business speak” for dividing work is called functions. We will talk about the
purchasing function, the sales function, etc. This then means that when we talk
about the purchasing function, we are referring to the work people do which has to do
with purchases.
In businesses today, even small ones, the work is divided along the following lines:
Production / Operational Department / Function

The production department is where the physical production of products takes place,
where goods are made, packed, etc. it stands to reason if you are going to make
goods, such as car parts, the first thing that has to happen is the production line must
be planned, so that the making of the car parts can flow from start to finish. In the
production department, raw materials and semi-finished products are converted into
finished products for the market.
The Operations Department is more than just the production department.
Operations must also plan, organise, co-ordinate and control the process so that a
product or service of the proper quality is provided in the right place at the right time
to the right customer.
Purchasing Department / Function

The purchasing department has to ensure that goods and services of the right quality
are purchased. The purchasing department is also responsible for buying all the
materials, equipment, machinery as well as services such as maintenance,
installation and transport services. The purchasing function is therefore responsible
for purchasing goods and services
 of the right quality,
 in the right quantities,
 at the right time,
 at the right price,

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 from the right supplier

 And delivered to the proper destination.
In the transport industry, the purchasing function will be responsible for buying
vehicles, parts for the vehicles, the petrol or diesel that the vehicles run on, etc.
Marketing Function
The marketing function must find out what the needs of the customers are which
products or services they need and then work out a plan so that your business can
fulfil the need of the customers. This is why you have to do a marketing plan.
Financial Department / Function

The financial function spends the money that is available in the business in such a
way that the business can operate. So, while the purchasing function has to find out
where to get the best deal for vehicles and parts, the financial function has to make
sure that there is money available to buy the vehicles, service them, buy spares for
the vehicles, etc. If the business has to borrow money, the financial function has to
draw up the cash flow statements, budgets and balance sheets that are needed to
apply for loans.
The financial function also has to make sure that the other departments do not spend
too much money and that the money for goods or services that were provided by the
business comes into the business. In other words, they check that invoices are paid
and make sure that the money is deposited into the bank account.
Sales Department / Function

The sales department ensures that the products are sold to the customer, by making
contact and building relationships with customers.
Administration Department / Function

The administration function controls the information systems within the business.
The administration department, for example, processes invoices, sends out
statements, takes telephone calls and refers the caller to the correct department, files
the business documents, sends letters to clients, etc.
The administration department, therefore:
 obtains information
 processes information
 And makes the information available for the management of the business.
Human Resources Department / Function

The Human Resources function must appoint employees to do the work, they must
ensure that the employees have the necessary skills and knowledge to do the work,
they have to ensure that employees attend training, etc.
Public Relations Department / Function

The public relations function must bring the business to the attention of the general
public, for example by placing advertisements, holding promotions, and so on. It is
the job of PR to make sure that the world outside the business has a good
impression of the business.

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Quality Control Department / Function

The quality control department must make sure that the quality of the product or
service is good. In other words, that the products that are made by the business are
of a high quality and that quality standards are applied at all times.
If you open a packet of crispy chips and they are soggy and tasteless, it means that
the quality control department of the business that made the chips did not do their
work.
In transport, it will be the duty of the quality control function to ensure that buses run
on time, that buses are road worthy and have enough fuel. They will, of course, not
do the work themselves, that will be the job of purchasing and operations. Quality
control will give production and purchasing guidelines about when buses have to be
serviced, for example, and then they will ensure that the buses are serviced on time.
Bringing it together
We will now look at examples of how the different functions work together to form a
complete whole: an effectively run business.
 The HR function will determine the salaries for employees, while the
administration function will ensure that the salaries and wages are paid on
time and the financial department must make sure that there is enough money
to pay the salaries and wages.
 The purchasing department will find out where to buy to goods and services
needed, they will place the order, finance will make sure that there is money to
pay for the goods and administration will make the payment.
What this all means is that you have to decide who will be doing what in your
business. This is why all businesses have a hierarchy, usually shown in the form of
an organogram.
Hierarchy
When you draw the hierarchy of your organisation, you determine who will do what.
At the same time, you determine the skills and knowledge that will be required of
employees and managers.
In big businesses, the different departments will have managers who are in charge of
the department. The managers will have staff that work for them, supervisors in
charge of the different sections of the department and then workers, such as clerks,
drivers, security staff, typists, reception staff, etc.
In a small business, most of the managing will be done by the owner of the business,
with maybe one or two supervisors in charge of production or operations and then
workers, who have to do the actual work.
On the following pages are examples of organograms that show the hierarchy of
most commonly used organograms4.
4
Source: http://thethrivingsmallbusiness.com/types-of-business-org-structures/

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Matrix Organisational Structure

A matrix structure provides for reporting levels both horizontally as well as vertically.
Employees may be part of a functional group (i.e. production) but may serve on a
team that supports new product development. This kind of structure may have
members of different groups working together to develop a new product line.
Functional Organisational Structure
Functional Organisational structures are the most commonly found. This structure will
have departments that have people who perform the same functions grouper
together. Such as human resources, accounting and purchasing are organised by
separating each of these areas and managing them independently of the others.
Product Organisational Structure
Another common structure is to be organised by a specific product type. Therefore
the product group falls within the reporting structure of a senior leadership person
and that person oversees everything related to that particular product line.

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Customer Organisational Structure
You can even organise your business by customer type. This is done in an effort to
ensure specific customer expectations are met by specific customised service
approaches. An example of this would be in healthcare. A different customer type
might be outpatient and their needs are very different than inpatient customers.
Geographic Organisational Structure
This structure makes sense in a large country like South Africa. This is for
organisations that cover a span of geographic regions; it sometimes makes sense to
organise by the region. This is done to better support logistical demands with regards
to the supply chain, and differences in geographic customer needs. Typically a
structure that is organised by geographical regions reports up to a central
oversight structure.
The overall business goal of my own business

Your business is something that will start gaining a life and personality of its own
once you are really clear on what the overall business goal of your New Venture is.
Having clear vision and mission statement as well as well planned goals and
objectives will allow you to start seeing the bigger picture. You will be covering more
on this important new stage in Module 3
The main business activities required in my own business

The purpose of structure is the division of work among members of the organisation,
and the co-ordination of their activities so that they are directed towards achieving
the same goals and objectives of the organisation. Structure defines tasks and
responsibilities, work roles and relationships, and channels of communication. So
you need to be able to define what your main business activities are.

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The purpose of an organisation structure is assisting you in grouping these activities

coherently. It is needed for:
 Accountability for areas of work undertaken by groups and individual
members of the organisation
 Co-ordination of different parts of the organisation and different areas of work
 Effective and efficient organisational performance, including resource
utilisation
 Monitoring the activities of the organisation
 Flexibility in order to respond to changing environmental factors
 The social satisfaction of members of the organisation
2.1.1 Draw up a business organogram for own business

Organisational structures help everyone know who does what. To have an efficient
and properly functioning business, you need to know that there are people to handle
each kind of task. At the same time, you want to make sure that people aren't running
up against each other. Creating a structure with clearly defined roles, functions,
scopes of authority and systems help make sure your people are working together to
accomplish everything the business must do.
Creating a structure with clearly defined roles, functions, scopes of authority and
systems help make sure your people are working together to accomplish everything
the business must do To create a good structure, your business has to take register
of its functions. You have to identify the tasks to be accomplished. From these, you
can map out functions. Usually, you translate these functions into departments. For
example, you have to receive and collect money from clients, pay bills and vendors,
and account for your revenues and expenditures. These tasks are all financial and
are usually organised into a finance or accounting department. Selling your products,
advertising, and participating in industry trade shows are tasks that you can group
under the umbrella of a marketing department. With differing ways to organise the
tasks, you can always choose something less traditional. But in all cases,
Organisational structure brings order to the list of tasks.
Example of a simple chart for a fruit delivery business: (the reporting structure moves
from the top down, in order words the managers are at the top)
YOU
Who tells the supervisor what to do
Supervisor
Instructs the driver to dispatch and the packers to pack
Driver Packaging People

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Considerations
Employees do best when they know who to report to and who is responsible.
Organisational structure creates and makes known hierarchies. This can include the
chain of command within an organisation. A good Organisational chart will illustrate
how many vice presidents report to a president or CEO and in turn, how many
directors report to a vice president and how many employees report to a director. In
this way, everyone knows who has say over what and where they are in the scope of
decision-making and responsibility. Hierarchy can also include macro-level
management. For example, one department may comprise several teams. Perhaps
several departments form one division of a company, and that division has a vice
president who oversees all the departments and teams within it.
Features
Organisational structure encompasses all the roles and types of jobs within an
organisation. A complete Organisational chart will show each type of position and
how many of these there are at present. When smaller organisations look at their
Organisational structures, they usually focus more on job roles than hierarchy. Small
businesses, particularly growing ones, often change quickly -- adding positions and
shifting people's responsibilities as they remain flexible enough to adapt as to go
along. For these businesses, having known definitions of people's roles can be
useful, especially as things change.
Types
Organisations that are very hierarchical are usually referred to as having vertical
Organisational structures. Typically, these organisations want their employees having
more limited scopes and performing their jobs in particular ways with little variation.
Therefore, they have many layers of management to oversee that things are done
correctly and uniformly. The banking industry is a good example. Money must be
handled carefully and responsibility, there is significant risk involved, and rules and
regulations dictate specific procedures. Small businesses, innovation-based
companies and professional organisations tend to use horizontal structures. These
involve fewer layers of management and more focus on peers and equality. The idea
is that each person takes on more responsibility and has more freedom to perform
her work as she sees fit. Group medical practices are a good example. Physicians
don't oversee physicians. There may be a managing partner who oversees the
general operation, but otherwise, professionals are peers each practicing in their
style -- all contributing to the organisation's success.
Creating your own organisation chart

Four Tips to Creating Your Organisation Chart
1. There is no box on the chart labelled "Owner." If you are an owner, you need
to occupy one or more boxes on the chart and play by the same rules you
would have for any other employee.
2. Every position on the chart reports to one (and only one) manager. Giving two
or more managers the power to direct the activities of one employee is an
invitation to miscommunication and chaos.

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3. Make sure you divide up the work according to what the business needs.
Don't try to design a position to fit the particular talents of one individual. If
(when) that person leaves, you'll have to start all over with a new chart
because you won't be able to find a replacement.
4. Instead of using titles, designate positions in terms of the results they will
obtain.
Note: Refer back to 2.2 on the different types of organisational charts or
organograms that are commonly used.
2.1.2 The broad functions required to effectively complete business activities

according to overall business goals
When creating your Organogram you will need to be aware of the reporting
structures, departments and hierarchy of lines of authority. Prior to creating this
diagram through the knowledge that you have of your business because you have
created a business plan, you should have a good idea of who is needed where. So
when creating it instead of a simple structure you could have departments and the
people within them graphically represented.
Source: http://www.boxtheorygold.com/blog/bid/105210/The-Organisation-Chart-Your-First-Business-System
It graphically represents the following:

 Operational structure
 Leadership
 Relationships within the organisation
It divides a company into high-level administrative departments such as:
 Marketing

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 Finance
 Operations
This Chart is like the skeleton of the body; upon it hangs all the muscle, tissue, vital
organs, and life-giving systems of the organism.
2.1.3 Designate lines of authority and responsibility in relation to organogram

Within this chart those who are at higher levels are managers. Some people who are
on the same level across the chart, they are usually considered peers.
Your supervisors and other workers fill lower-level positions. The flow of authority is
downward where business activities also become increasingly specialised.
Your chart needs to show clearly who reports to whom – this is for good planning
regarding any Human Resources you might need to employ as you will have a good
idea of who will be the lines of authority. It also serves as a diagram for employees to
also know this.
2.1.4 Determine any relevant human resources needs accordingly

The human resources management refers to activities, policies, beliefs and the
general function that relates to employees.
Staffing a business includes a variety of activities such as:
 Human resource planning
 Compensation and benefits,
 Recruiting, selection
 Placement and induction,
 Training and development and
 Performance appraisal
The human resource function should be able to anticipate the staffing needs of the
company. A basic skills survey must be undertaken to assist determining the human
resource needs of the business

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Undertake Basic Skills Survey

The Skills Survey that you will develop is necessary to answer the following
questions:
 What new skills the company might need?
 Whether the company needs to increase or decrease staff?
 Whether there is technology available to improve staff productivity and job
satisfaction?
 Whether the staff needs any training in order to be able to keep up with new
methods of production and technological developments?
 Who will replace the existing employees that plan to retire or leave the
company?
Assuming this is a new company. You will look into the skills and attributes. You will
look into what tasks are involved in the production or creation of the product you sell.
Then you will look into what technologies may be employed, what cannot be done by
technology and then determine the skills and attributes of the persons who might be
required to work in the business. You will also look into what training, if any, is
needed so that they can perform at their optimum. Basically you would be looking
into the profiles of prospective plan form a skills and attribute point of view.
Many small businesses start with only one individual, the entrepreneur. As the
business develops and expands over time the workload increases and the
entrepreneur might not have the time or skills required to cope with all the demands
of the enterprise.
The entrepreneur must decide whether to remain a one-man operation, refuse
additional business, or to recruit additional staff members and hopefully increase the
output of the business.
Human labour is the most important resource in small business because its influence
determines how well the other production factors are utilised. Despite the rapid
progress in technology, businesses are led and managed in the right direction by
people.
To determine the capacity one must look at the work in a more organised way. Look
at the work process within your business and determine what the work flow should
be. This will assist you with determining how best to run your business. You then
have to divide the job into different jobs. People can then be assigned to perform
these jobs. For all entrepreneurs and start- up businesses, this process is a very
informal arrangement, but as your business develops, it becomes more important to
be specific about duties and employment. Job descriptions form an integral part of
the division of work.
Before deciding on the allocation of work to a specific job, consider the following:
 Job generalisation. Job generalisation implies that employees are given a
wide range and variety of tasks to perform. Examples of people in a business
with generalised jobs are the entrepreneur or small business manager
him/herself, supervisors, general workers and even secretaries.
 Job specialisation. Job specialisation limits the number of different tasks a
particular worker performs. Examples of specialised jobs are technicians and
computer specialists. These positions also require higher skills and salaries

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Class Activity 2: Compile an organisation structure for your own

business
2.2 Identify resources and information required to complete own

business plan
One important element is that you need to describe the source and amount of your
initial equity capital, as well as account for the equipment necessary to produce your
products or services.
You need to look at what you already have such as office furniture or computers; and
do you have existing staff, and will you need to hire others?
These plans for obtaining needed personnel, equipment and money needed for your
capital expenses will be detailed throughout your plan. In describing each of the
resources that you have and need, couch each in terms of the value it will bring to
your fledgling business, both in the near term and down the road.
2.2.1 Coaches/mentors to assist in compiling business plan

Coaches and mentors can be your key advisers. These are non-tangible resources
whose value to your business can be immense. You might need to have someone in
the business arena that already has started a business similar to yours to advise you
on how to go about putting your plan together.
Sometimes the Financial Institutions offer assistance with regard to this. SEDA and
Government funded organisations also have people who are able to assist you with
sound advice and there are template available on their website:
www.seda.org.za
2.2.2 Compile information on the resources needed and procedures to be

followed to achieve the plan in order to effectively execute business plan
There are six types of business resources that can play a role in the business
venture planning.
1. Physical resources
2. Reputational resources
3. Organisational resources
4. Financial resources
5. Intellectual and human resources
6. Technological resources

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Physical resources are the touchable property the business uses in production and
administration. These include the business’s plant and equipment, its location, the
facilities available at the site. Some businesses also have natural resources such as
minerals, energy resources, or land.
These natural resources can affect the quality of its physical inputs and raw
materials.
Physical resources can be the source of Sustained Competitive Advantage (SCA) if
they are valuable, rare, hard to copy or irreplaceable. However, because most
physical things can be manufactured and purchased, they are probably not rare or
hard to copy.
Reputational resources are the perceptions that people in the business's

environment have of the company. Reputation can exist at the product level as brand
loyalty or at the corporate level as a global (worldwide) image. Although technological
resources may be short-lived because of innovations and inventions, reputational
resources may be relatively long-lived. Many organisations maintain high reputations
over long periods of time. Fortune magazine's annual survey of corporate reputation
indicates that 7 of the top 10 corporations in any given year have appeared in the top
10 many times. The Fortune survey uses eight different criteria for their rankings:
A resource is anything that can affect the successful outcome of a plan, project, or
activity of enterprise development and/or economic development or anything called
upon as a basis of supply, service, information (such as scene data), or assistance
during the enterprise development process as it affects economic development.
Entrepreneurs are individuals who are unique resources to the new business,
resources that money cannot buy.
 The quality of management
 The use of corporate assets (business property)
 The business's financial soundness (reliability)
 The business's value as an investment
 The quality of products and services
 Innovativeness
 The ability to attract, develop and retain top people
 The extent of community and environmental responsibility
Research indicates that the most important of these are product quality, management
integrity (honesty), and financial soundness (reliability). The value of reputational
(standing) relationships goes beyond personal relationships because these
reputations continue even after the individuals originally responsible for them are no
longer around (either in that job or with the business).
Organisational resources include the business's structure, routines, and systems.

The term ordinarily refers to the business's formal reporting systems, its information-
generation and decision-making systems, and formal or informal planning.
The organisation’s structure is an intangible resource that can make the difference
between the organisation and its competitors. A structure that promotes speed can
be the entrepreneur's most valuable resource. In the post industrial economy
(business markets), organisations will be required to make decisions, innovate, and

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acquire and distribute information more quickly and more frequently than they have in
the past.
Organisational resources also show up as the skills and capabilities of the people.
Different combinations of resources can be associated with the age and life-cycle
stage of a business. Depending on where the business is in its life cycle, certain
resources are more vital than others. For example, although human capital and
experience are more important early on, organisational resources dominate later.
Financial resources represent money assets. Financial resources are generally the
business's borrowing capacity (power), the ability to raise new equity, and the amount
of cash generated by internal operations. Being able to raise money at below-
average cost is a positive advantage to the business's credit ranking and previous
financial performance.
Various indicators of a venture's financial resources and financial management skills
are its debt-to-equity ratio, its cash-to-capital investment ratio, and its external credit
rating. Although start-up entrepreneurs see that access to financial resources is the
key to getting into business (it is certainly a necessary component), most agree that
financial resources are seldom the source of sustainable (upholding) competitive
advantage. Why is it, then, that upcoming entrepreneurs see money and financial
resources as the key to success but established businesses seldom do?
Financial resources are valuable and necessary, but because financial resources are
not rare, hard to duplicate, or non-substitutable, they are insufficient (in most cases)
to be a source of sustainable competitive advantage. Although money as a resource
is static, the ability and skill to manage money is dynamic, complex, and creative.
Intellectual and human resources include the knowledge, training, and experience
of the entrepreneur and his or her team of employees and managers. It includes the
judgment, insight, creativity, vision, and intelligence of the individual members of an
organisation. It can even include the social skills of the entrepreneur. Entrepreneurs
often recognize great opportunities where others see only competition or chaos;
therefore, entrepreneurial perception is a resource.
The values of the entrepreneurs and their beliefs about cause and effect can form the
initial impression of the business's culture. For example, entrepreneurs who believe
in racial and cultural diversity and who can build a workforce around these values do
even better. A new study indicates that diversity interacts with strategy in three ways
to improve productivity, return on equity and market performance.
Frequently, the most important and valuable resource that the new venture has is the
founding entrepreneur. These are unique people with their own special
characteristics, histories that cannot be duplicated, and complex social relationships.
Technological resources are made up of processes, systems, or physical

transformations. These may include laboratories, research and development
facilities, and testing and quality control technologies. Knowledge generated by
research and development and then protected by patents (exclusive rights) is a
resource, as are licenses, trademarks, and copyrights. Technological secrets and
processes are resources as well.
There is a distinction between technological capital and intellectual capital.
Intellectual capital is embodied in a person or persons and is mobile. If the person or
persons leave the business, so does the capital. Technological resources are

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physical, intangible, or legal entities and are owned by the organisation.

Technological resources-machines, computer systems, equipment, machine tools,
robots and complicated electronics can be duplicated and reproduced. There is
enough mobile and capable engineering and scientific human resources to take apart
and put together any of this complex technology. A patent, however, might make it
illegal for the competition to commercially develop an exact copy.
2.2.3 Decide upon the type of business ownership and complete registration
accordingly
There are a number of business formations that an
entrepreneur may choose for his own business namely:
 Sole Proprietorship also known as Sole Trader
 Partnership
 Close Corporation (these cannot be registered as
from the new CIPC requirements previously CIPRO,
but current CC’s may continue operating)
 Private Company (under the current bill at the time
of writing this material, it is proposed to be called Closely-Held Company)
 Public company (Widely-Held Company)
 Cooperatives
Sole proprietor / Sole trader

This is a kind of business that is owned by one person with the aim of gaining profits.
This person bears all the risks of the business as a whole. S/he is the one who
manages and takes all the decisions. S/he is the one who established the business
using his/her own capital.
The limitations of the Sole Trader:
 The amount of capital contributed cannot allow immediate expansion of the
business
 A sole trader has an unlimited liability; losses made by the business extend to
owner’s entity private assets, which mean that the debts of the business are
the debt also affects the owner.
 A sole trader may not be versatile and skilled enough to do everything for the
entity.
 A sole trader has no continuity. On the owner’s retirement or death, his / her
personal influence In the entity will be a lost.

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Accounting Requirements:
For income tax purposes, a sole trader must keep proper records- all transactions
must be recorded. An income statement and balance sheet must be prepared at the
end of the financial year.
The following are the Advantages of being a Sole Proprietor:
 It is an easy and inexpensive business to start
 The owner is very independent
 The owner is in personal contact with the entity’s clients
 The owner can supervise the staff closely
 The owner can take decisions quickly and adapt the entity’s operations to
take advantage of business opportunity.
 The only requirement is that the name of the business must be registered.
 There is healthy competition between sole traders which leads to better
service.
 The owner gains experience in all aspects of the business.
Partnership
It is a business that can be owned by two or more but limited to twenty partners with
the objective of making a profit. The partnership agreement can be written or verbal.
 Each partner must contribute something in order to be a partner.
 The Partnership Agreement must include the following:
o Name of the enterprise
o The names and addresses of the partners
o The nature of the business to be conducted
o The total of the capital of partnership and the proportion to be contributed
by each partner.
o The provision in respect of accounting records and their maintenance
o Details in respect of profit or losses sharing
o The duration of the partnership
o Dissolution procedures on termination of the partnership.
Advantages:
 Partners bring additional capital into the business and bring new ideas
 Partners can specialise in different section of the enterprise
 The increased in capital base and division of labour between the partners
facilitates
 Expansion of the enterprise therefore the continuity of the business is
enhanced. On the retirement or death of a partner some adjustments and
reorganisation of the membership may be required, but business may
continue as usual.

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Disadvantages:
 Because the partners are jointly and severally liable for the debts of the
partnership, they run the risk of losing their personal possessions.
 Partnership do not have much flexibility in decision making , since the
stipulated which n
 Normally 75% of the membership consent to any change in operational
procedures.
 A lack of capital amount to undertake big projects may hinder further
expansion.
Accounting Requirements;
 The partnership must keep proper records of its accounting books.
 The financial statements must be made available to SARS if they are
requested for tax purposes.
 The partnership is taxed and the Partners are also taxed on their profits.
Close Corporations
*please note the new amendments to a CC- they no longer are considered to be
a form of company but those that are registered may continue operating.
This type of company was formed by one up to a maximum of ten members, It was
formed when the members registered a Founding statement with the registrar of
close corporations. It was formed only by natural persons, and they all participated in
the management.
This form of ownership offered a simple and inexpensive way to form a company or
to acquire corporate entity status.
Characteristics of a Close Corporation:
 It has a legal personality- that means the company can be sued in its own
name
 It has limited liability; members can only divide the profits limited to the capital
they contributed.
 It had a perpetuity or continuity of existence.
 In order to form a C.C they had to submit a document called a FOUNDING
STATEMENT which serves as the constitution of the CC and regulates its
internal and external workings.
 The Founding Statement includes the following terms of agreement:
o Full names , ID numbers and addresses of each partner
o The registered address of close corporation
o The nature of the business objective
o The total contribution and the size of each member’s contribution to the
close corporation expressed as a percentage
o The nature of members contribution, whether cash, property or services

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o The date of the financial year end

Advantages of close corporation:
 It has a simple management structure with no board of directors
 Does not have prescribe annual meetings, members decide when to meet
and agree on the procedure of the meeting
 Does not need its financial statements to be audited
 No statutory returns need to be submitted to Registrar
 A close corporation can assist its members to acquire an interest in the
close corporation
 And to acquire an interest of another member
 Member’s interests are not taxed. The profits of the close corporation is
subject to tax
 Company has a legal personality, when the company is making a loss or
is owing it can be sued. It can be sued in its own name, but private
possessions of member are protected
Accounting Requirements
 The close corporation must keep the proper records of all the books and
records of all
 Transactions including the following;
 Contribution by and payments to members
 Loans to and from members
 Keeping register of noncurrent assets and liabilities
 Compiling of annual financial statement
 At the end of the financial year, the following statements must be prepared
 An income Statement & balance Sheet
 Cash flow statement & notes to financial statements
 The report of the accounting officer
 An audit report (which is not compulsory)
Duties of the Accounting Officer:
 Within three months of finalising the annual financial statement of the close
corporation,
 The Accounting officer must:
o Determine whether the annual financial statement agree with
accounting records
o Determine the accounting policies used in preparing financial
statements;
o To report the above mentioned points to the members of the close
corporation
o Report on the nature of contravention of the Act that occurred during
the financial year

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Companies
In South Africa, a company is an entity formed under the provisions of the
Companies Act of 1973 (Act No 61 of 1973). A company is an association of persons
with a common goal of carrying on a business for the purpose of making a profit.
Accounting and disclosure requirements of the Company:
Companies must maintain an extensive and expansive system of accounting to cover
every facet of their day to day operations. At the end of the financial year, every
company is required to prepare,
 Annual its financial statement, which must include the following;
o An income statement;
o A balance sheet;
o A cash flow statement;
o Notes to the annual financial statement;
o An auditor’s report.
o The annual financial statement must be prepared in accordance with
Generally Accepted Accounting Practice and must meet extensive
disclosure requirements.
Tax requirements:
Companies in South Africa pay many different taxes, such as normal tax on
secondary tax on Companies (STC). The size and nature of their operations make it
compulsory for companies to register VAT.
Private Company
 A Private Company is a company that has a minimum of two members to a
maximum of fifty
 The name of the private company must end with the words Proprietary limited
(Pty) Ltd.
 The shares of the private company are not freely transferable.
 A private company must submit the financial statements to the Registrar on a
regular basis
 The private company must hold at least one meeting per year
 It requires its financial statements to be audited at the end of each financial
year
 It has a legal personality
 It can be managed by one director
The founders of the company must lodge the documents with the Registrar of
Companies, who will then issue a certificate of incorporation. If the Registrar is
satisfied with all registration formalities, the company will receive a certificate to
commence business and that will be the time the company will commence its
business. The company must also submit a document called Articles of Association

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What is article of association? An article of Association regulates the internal affairs

of the company such as:
 Meetings and meeting procedures,
 The rights of shareholders,
 Borrowing powers of the company,
 Power and duties of directors
Public company
A company that can be owned by minimum of seven people who can sign an
association clause in memorandum, but there is no limit to the number of
shareholders- the number of shareholders is only limited by the number of shares
issued.
The characteristics of a Public Company:
 The shares of the public company are freely transferable to the public
 The name must end with words Ltd
 A public company has an limited liability, the shareholders are liable for the
debts of a company only to the extent of their shareholding in the company
 Must appoint at least two directors
 It raises its capital by issuing the prospectus (the document which invites the
public to buy shares in the company).
 The company must be liquidated according to the prescribed regulations laid
down in the Companies Act
 A company is subject to double taxation, it taxed on its profits and also on
dividends since it has a legal personality
 Must send its annual financial statements to the Registrar, since the affairs of
this company are in the public eye.
What is Prospectus and what should be included in the Prospectus?

It is a document that introduces the company to the public, in fact it is the document
that invites the public to buy shares in the company, and the prospectus is usually in
the form of a very attractive brochure. It must be set out in such a way that the
prospective investor has a good idea of the future prospectus of the company as well
as a brief description and/ or history of the company.
It should include the following items:
 A statement that the prospectus has been registered with the Registrar of
Company
 The date of registration
 The contents of memorandum and Articles
 There must a written invitation to purchase shares
 It must deal with shares which are available for purchase, or offer to secure
debenture in the company

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 A written consent of persons who will act as directors, including names,

addresses and ID numbers
 A statement of written consent of the auditor, attorney, banker or broker to the
effect that they will act on behalf of the company.
Advantages of a public company:
 Large amounts of capital can be raised from the general public, because
people are always looking for investment avenues
 People invest in a public company as there is limited liability
 Shares are freely transferable and do not affect the continuity of the
company, they can bought by anyone without shareholders permission,
and this does not affect the activities of the company
 A public company may be listed (in South Africa) on JSE.
 Shareholders enjoy the protection of the Companies Act due strict legal
requirements.
 A public company is a legal entity and enters into a contract in its own
name, which has the advantage of limiting the limited liability.
 Small companies can invest in a number of companies and share in the
wealth of the country’s economy
 Management is usually in the hands of capable and competent directors,
some of whom are voted in by the shareholders.
Disadvantages:
 A public company is complicated and inexpensive to establish. The
prescriptions laid down in the Companies Act are lengthy, and failure to
comply with any of the clauses is criminal offence
 There is no personal contact between management and shareholders
 If a public company fails it can have a disastrous effect on the economy.
The founders must lodge the document with the Registrar who will issue a certificate
of Incorporation; if the Registrar is satisfied with registration formalities he/she can
issue a certificate to commence business. The documents that must be submitted
includes Articles of Association and Memorandum of Association.
What is memorandum of association?
It is a document that regulates the external affairs of the company. It includes the
following matters:
 The name of the company with words „Limited‟ Ltd at the end
 The registered address of the office of the company
 The objective of the company
 A limited liability of the owner (shareholders)
 The authorisation of shares (how many shares can be issued)
 The association clause, usually this is the last clause in the memorandum and
it is where the founders or the promoters of the company make a formal
declaration that they wish to form a company. Their names, addresses and

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the number of shares they agree to buy are indicated in the association
clause.
2.3 The legal registrations and any legislative compliance in relation to a

new venture
When you start a new company you need to lodge formation
documentation with the Companies and Intellectual Property
Commission (CIPC) for registration.
The new Companies Act 2008 of South Africa requires the

following documents to be lodged:
 Notice of Incorporation (CoR 14.1)
 Memorandum of Incorporation (MOI) (CoR 15.1 A)
If a proposed name is rejected, the company may still be registered and the
registration number then becomes the name of the company at incorporation. An
approved name may then be submitted later. Application to reserve a name (Form
CoR 9.1) has a cost of R50 if done electronically.
Open a bank account

In order to open a bank account, the applicant needs to have a proof of who the
directors are, and the original company documents. This procedure might take longer
if required documentation are not in order.
Completing registration for the business

Businesses are registered at CIPC. Their web site is very easy to follow and an
online registration can take place. (CIPC was previously known as CIPRO)
The following is a summarised procedure to follow when registering a business at

CIPC:
 Name Reservation. You will need to submit six names from which the
Registrar will choose for registering your business. The names must be in
order of preference. The form to use will depend on the type of the business.
For CCs we use CK7. The same is also used for Cooperatives the difference
is that you indicate under comments that you are reserving a name for a
Cooperative. For a company either public or private we use CM5.
 Once your name is approved, you then complete other registration
documents. If you are registering a CC then you complete CK1 (founding
statement). If it’s a company that a suite of CM forms is necessary. If it’s a
Cooperative then a suite of CRs is necessary.
 You must have an Accounting Officer if it’s a CC or under certain
circumstances a Cooperative. If you are registering a company then you must
appoint an Auditor.
 A (PTY) LTD, a CC or a Cooperative can commence business as soon as is
registered while a public company must wait for a Certificate to Commence
Business before its starts operations.

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You may visit CIPC website to get more information on their registration process and
the various forms that are applicable to a certain business type as well as costs
thereto. www.cipc.co.za
2.3.1 The industry specific and legal requirements for own venture in terms of
how they will affect the venture
It is easy to start some businesses, but others need to go through many legal
formalities before being registered as a business.
The owner of the one-person business is fully liable for the debts of that business. In
other types of ownership the liabilities (responsibilities) for the owner are limited.
There are many one–person businesses because it is easy to start your business this
way. E.g. stall owners, tourist guides, taxis and cafes.
Contact your local authority to find out if you need a licence, but most one-person
businesses do not need a licence, except for those working with food, liquor,
transport of persons and other types where other persons might be at risk as a result
of your business activities or its products.
You only need to register for VAT if your turnover is more than R1 000 000.00 per
year. If you plan to have a flea-market stall on private property, you must obtain
permission from the owner to do so.
Licensing requirements depend on:
a) Your type of business
b) If you run your business from home or from an office
c) The province or metro where your business is located
If your business needs a licence the licensing authority will want to check if your
business complies (obeys) with local laws and health, building, fire and safety
requirements.
Your business must also comply with the requirements of the Regional Services
Council.
Look at different types of businesses to address the legal formalities of each type of
business. E.g. the close corporation and business have their own legal personality,
while the sole proprietor and partnership do not.
This means that the person in the sole proprietorship and the partnership are usually
responsible for the tax and debt obligations / commitments of the business. They
therefore have unlimited liability for commitments of the business.
The shareholders of companies and members of close corporations have limited
liability in respect of commitments of the particular business form. The person can
therefore be held responsible to a limited extend for the commitments of the business
or close corporation.
The duties and legal requirements that apply to all business forms include:
 That the person is of full legal capacity. An insolvent (bankrupt) person or a
person under judicial management may not set up a business. The risk that is
related to entrepreneurship often cause entrepreneurs to lose everything.
 That the type of economic activity that will be undertaken is clearly stated.
The requirements differ in respect of various types of businesses that are set
up. Find out from you municipality or licensing authority where you intend

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establishing the business which legal obligations you have to fulfil to establish
a business in a specific area.
 That the name of the business is accepted. The law governing business
names limits the choice of names. The trading name of a business must be
approved to protect business and avoid duplication. The names of companies
are approved by the registrar of companies.
 That the registration of patents, trademarks and designs is carried out.
 Entrepreneurs can patent unique products, services, trademarks or designs.
Registrations of patents are performed by a patents legal representative.
 That the testing of products takes place. Products can be tested by the South
African Bureau of Standards. (SABS)
 That licensing is done. Local authorities must be approached in any event
concerning regulations and rules regarding licensing in a particular area,
before a business can be established.
 That the registration with the Receiver of Revenue takes place.
 The employer must collect the employee’s tax and pay it to the Receiver of
Revenue.
 The business must pay tax on the net income annually.
 If the business has an annual turn-over of more than R300 00 it must be
registered for Value added tax.
 That registration with the Unemployment Insurance takes place. An employer
is obliged (something that must be done because of legal or moral duty) by
the Unemployment Insurance Act 1966 (Act 30 0f 1966) to make contributions
to the unemployment insurance fund, Employees in the lower income groups
qualify in terms of this law for payment of unemployment insurance by the
employer.
 That the Regional Services Council registration takes place. All businesses
must in terms of the Regional Services Councils Act 1985 (Act 109 of 1985)
pay services levies and turnover levies to the Regional Services Council. The
service levies is a percentage of the amount that is paid in salaries and
wages , and the turnover levy is the percentage of the turnover of the
business
 That registration with the Department of Commerce and Industry takes place.
A new manufacturing business must register with the Department of Trade
and Industry. Businesses that require import permits are also obliged to
register with the DTI.
 The general Industrial and Commercial Legislation is complied with.
2.3.2 Legal compliances affecting new ventures
Sole Trader
Sole Proprietors are taxed individually. The business owner
adds all the income received from his own personal sources

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and also from the business. He is taxed in all material facts in the same manner as
natural persons using the same taxation rate.

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Partnership
Section 66(15) of the Income Tax Act requires that partnership make a joint return to
SARS. Each partner is individually liable for this. Section 77(7) stipulates that the
partners are liable for tax in their individual capacity. The Commissioner therefore
apportions taxable income from the partnership among partners in their profit-sharing
ratios and each partner is taxed according to his share of the profits.
Close Corporation and Private Company

A close corporation is a private company for income tax purposes. A close
corporation has legal entity status and is therefore a taxpayer on its own. A member
of a close corporation is a shareholder for income tax purposes. Profits distributed to
shareholders are thus called dividends (again from a taxation perspective).
The shareholder must prepare his own tax return and the cc must also prepare own
tax return. Dividends declared are thus subject to Secondary Tax on Companies
(STC). STC was levied on companies but is now treated as holding tax meaning it is
charged on shareholders rather than on companies.
Cooperatives
Cooperatives are treated as a private company for income tax purposes and as such
provisions that apply to the private company apply mutatis mutandis to that of a
cooperative.
Public Companies
Private Companies and Public Companies are only distinguished from each other
only for donations tax purposes whereby public companies are exempt from
donations tax
Small Business Corporations (SBC)

Close corporations, cooperatives and private companies may be classified as a small
business corporation for tax purposes. Taxation will thus differ from those close
corporations, cooperatives and private companies not otherwise classified as SBC.
To be classified as a SBC, the following requirements must be met:
 All shareholders must be natural persons for the entire year of assessment
 The gross income for the year of assessment does not exceed R14 million
 None of the shareholders at any given time during the year of assessment(of
the entity) hold any shares or has any interest in the equity of any other
company other than:
o a listed company
o any portfolio in a collective investment scheme
o a social or consumer co-operative or burial society
o not more than 20% of the total receipts and accruals consists of
investment income or personal service company
o an employment company.
Value Added Tax (VAT)

VAT is an indirect system of taxation which was introduced on 29 September 1991.
VAT is currently levied at 14% on the value of all goods and services supplied by
vendors.
Vendors are suppliers that are required to be registered with SARS for VAT.

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The basic framework for calculating VAT is as follows:
A= Calculation of Output Tax

1. Standard Rated Supplies R0000 x 14%
2. Zero-rated supplies R000 x 0%
Total A
B= Calculation of Input Tax
1. Standard Rated Supplies R0000 x 14%
2. Zero-rated supplies R000 x 0%
Total B
1. Input tax on capital goods and services R 0000
2. Input tax on other goods and services R0000
3. Adjustments including bad debts R0000
VAT payable (refundable) = Total A-Total B.
Output Tax is the vat the vendor charges to customers

Input Tax is the vat the vendor pays to supplier.
Registration for VAT

Section 23 of the VAT Act deals with the registration requirements and states that if a
person carries on an enterprise, it has to register as a vendor if its turnover (value of
taxable supplies: standard and zero rated) at the end of any twelve month period (for
all enterprises carried on by it) has exceeded R1 million. Registration is also
necessary if there are reasonable ground for believing that turnover in the next 12
months will exceed R1 million.
VAT Exempt Supplies

The following supplies are exempted for VAT:
 Supply of financial services (unless they are zero-rated)
 The supply (by way of an agreement for letting and hiring) of residential
accommodation in a dwelling (dwelling is a place used predominantly as a
place of residence or abode of a natural person)
 The supply by the State or any institution of a public character of certain
education services(pre-primary, primary, secondary, tertiary)
 The supply of road transport for passengers (e.g. taxis), unless zero-rated
 The supply of rail transport for passengers(unless zero-rated)
 Trade union subscriptions
 The supply by an association not for gain of certain donated goods
 Supply of crèche or after-school care for children
 The sale or letting of land outside the Republic
 The supply of services to members in the course of management of a
sectional title body corporate, a share block company, and any housing
development scheme for aged persons( unless supplier elects for them to be
subjects to VAT) the supply of lodging or board and lodging by a local
authority which operates a hostel or boarding establishment for non-profit
purposes

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 The letting of land for the purpose of erecting a residential dwelling

 The supply of certain lodging or board and lodging to employees of an
employer.
The important exemptions are those relating to financial services, residential

accommodating, trade union subscriptions, and educational services.
Zero-Rated Supplies
Zero Rated supplies are subject to VAT at 0%. The following are zero-rated supplies:
 Goods which are expected
 Sale of an enterprise or part of an enterprise as a going-concern
 Sale of basic foodstuffs
 Sale of goods to a vendor in a customs controlled are
 Sale of petrol and diesel
 The disposal of certain “old” mining and prospecting rights
Registration for various taxes

Businesses should register for all applicable taxes with SARS again depending on
the form of ownership and the business activities undertaken or to be undertaken
including but not limited to:
Business Tax Rates

YEARS OF ASSESSMENT ENDING BETWEEN 1 APRIL 2012 AND 31 MARCH 2013
Companies and close corporations Basic rate 28%

Personal service provider companies Basic rate 28%
Foreign resident companies which earn income from a SA
Basic rate 28%
source

SMALL BUSINESS CORPORATIONS (AS DEFINED)

Tax rates for qualifying small business corporations will be as follows:
Taxable Income (R) Rate of Tax (R)
0 – 63 556 0%
63 557 – 350 000 7% of the amount above 63 556
350 001 and above 20 051+ 28% of the amount above 350 000
MICRO BUSINESSES (AS DEFINED)

Financial year ending on 28 February 2013
Taxable turnover (R) Rate of Tax (R)
0 – 150 000 0%
150 001 – 300 000 1% of the amount above 150 000
300 001 – 500 000 1 500 + 2% of the amount above 300 000
500 001 – 750 000 7 500 + 4% of the amount above 500 000
750 001 and above 20 000 + 6% of the amount above 750 000
Standard Income Tax on Employees (SITE)

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Site is taxation on the employee’s which the employer withholds to pay it over to
SARS. SITE is payable on the first R60, 000 of net remuneration. If the employee
earns more than R60, 000 of net remuneration per annum, the employee is then
liable for Pay As You Earn (PAYE)
Pay As You Earn (PAYE)

Employees’ Tax refers to the tax required to be deducted or withheld by an employer
from remuneration paid or payable to an employee. The amounts so deducted or
withheld must be paid by the employer to SARS on a monthly basis. The process of
deducting or withholding tax from remuneration as it is earned by an employee is
referred to as Pay-As-You-Earn (PAYE).
An employer who is to registered or required to register with SARS for PAYE and/or
Skills Development Levy (SDL) purposes, is also required to register with SARS for
the payment of Unemployment Insurance Fund (UIF) contributions to SARS.
Skills Development Levy (SDL)

Organisations with a payroll of +R500k need to register for Skills Development Levy.
Portion of this levy is given to Sector Education and Training Authority (SETA). This
money is used for education and training in the different economic sectors.
Failure to register or comply with the SARS requirements is severe including

penalties and criminal charges.
Legal requirements for setting up YOUR specific New Venture would include:
 PAYE – All employees who earn more than R60 000 per year pay PAYE (Pay
As You Earn) on the amount above R60 000 earned and they must complete
a tax return. People who are self-employed must also pay PAYE and must
pay Provisional Tax at the end of February and August of each year on their
income of the previous year.
 SITE – Standard income tax on employees. Employees earning up to R60 00
per year pay SITE and they do not have to complete a tax return.
 VAT – Business that have an annual turn-over of more than R150 000 must
register for the payment of value added tax. (VAT)
 UIF – Unemployment Insurance Fund – This fund provides for people who
contributed to the fund and who then become unemployed.
 RSC – All businesses must, in terms of the Regional Services Councils Act,
1985 (Act 109 of 1985) pay service levies and turnover levies to the Regional
Services Council. The service levy is a percentage of the amount that is paid
in salaries and wages, and the turnover levy is a percentage of the turnover of
the business.
 COID – Compensation for Occupational Injuries and Diseases Act.
Registration at the Compensation Commissioner.
 Skills Development Levy – A levy of 1% on the sum total of salaries paid to
permanent employees of the business to fund learnerships and other forms of
skills development

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 Industry registrations – Any new manufacturing business must register with

the Department of Trade and Industry (DTI). Businesses that require import
permits are also required to register with the DTI.
 Naming – The law governing allocation of business names limits the choice
of names. The choice of a name for any business must comply with the
Business Names Act 1960(no 27 of 1960)
2.4 Gather all relevant information for the completion of the business
plan
The following is the relevant information on the resources needed and
procedures to be followed to achieve the Plan:
Description of the enterprise

 Primary activities (the basic functions of the business)
 History of the enterprise
 The enterprise’s position in the market
 Market analysis
 Competition
The goal and strategy of the enterprise

 Mission (states the aims of a business), objectives and goals
 Strategy for achieving goals and opportunities
 Management summary
 A short and concise presentation of your business plan.
Aspects that should be addressed in the business plan

The business plan must be clearly presented. If it is not clearly presented, it can
indicate that the necessary management skills are lacking. The business plan must
contain a management summary and a list of contents, after which all elements of
the business plan must be dealt with systematically. It must not be a theoretical
document without action plans.
Conciseness is a prerequisite for a business plan. It must contain enough information
without becoming too long. Keep it simple and come straight to the point. Detailed
information can be attached as supplements.
The business plan must be a user friendly document. It must be easy to read and the
pages bound together in some way. There must be no loose sheets of paper.
However, it must not be unnecessarily decorative. A neat, business-like document is
what is needed.

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Number the paragraphs

The first paragraph of the business plan must be a management summary. Its
purpose is to focus the attention of the interested persons on the business idea. The
rest of the business plan is used to illustrate the information in the first paragraph.
The first paragraph must contain the following:

a) the mission of the enterprise
b) who the management of the enterprise is or will be
c) who the target market is and how large the potential market is, what the
expected market share is and how the target market will be reached
d) what product or service will be provided
e) Funds that will be needed (exact amounts), how the money will be applied
and how it will be repaid. Also mention how much money the owner has
invested in the enterprise (what the owners interest is)
f) The position of the enterprise within the market must be clearly indicated. The
size of the market must be conveyed, and how it has been calculated. You
must indicate how you set about determining the size. The business plan
must indicate clearly what the mission of your enterprise is and that you know
exactly which needs your product will satisfy.
g) Indicate your expected sales and how you have calculated them. Also give
your cost of sales per unit
h) You must discuss your competitors (opponents that your business competes
against in the market) and your relationship with your competitors very
thoroughly.
i) Also discuss the weaknesses (risk) openly and indicate how you will manage
them
There are therefore three requirements that a business plan must meet:
 The proof that there is really a demand for the product or service
 That the management team is experienced and balanced in its composition
 That the business plan shows a profitable enterprise for all parties and the
risk involved not too great.
Class Activity 3: Identify resources and information required to

complete own business plan

Module 3
Module 3
Compile a business plan
After completing this module, the learner will be able to compile a business plan, by
successfully completing the following:
 Design the structure and layout of the business plan to be compatible with the
nature of own venture
 Identify business and operational goals and outline procedures for the effective
implementation thereof in the business plan
 Include the legal registration and any legislative compliance in relation to new
venture in the business plan
 Include marketing plans in business plan
 Include cash flow plans in business plan
 Include an outline of how business will operate and achieve marketing and
financial objectives in business plan
 Outline and integrate a vision statement that represents the goals and objectives
of the new venture into overall business activities

Module 3
Compile a business plan

It is widely accepted that for the business or any activity requires thorough planning.
A well-presented business plan will go a long way in helping towards getting finance
for your business.
There are a number of uses for the business plan. The following a list of such uses:
 A reference tool for decision making by the owner for example, how are we
doing as an enterprise since we’ve started operations. We will look at the
business plan as to what were our original plan/goals/targets to ascertain the
progress. We may very well ascertain that we are lagging and then put
measures into place to remedy the situation
 A reference tool for use by the financial institution and or potential investors to
evaluate the viability of the business- Included in the business plan are
financial projections and related assumptions. Prospective investors will use
the business plan and ascertain whether or not the projected figures make
financial sense and if indeed the business will be profitable and sustainable
 Regulation may stipulate that a business plan is
needed before granting licensing. An example would
be when one applies for accreditation as a training
provider. A business plan will be needed to determine
the viability of the organisation’s proposed training
interventions.
The most common use is by financial institutions. The
financial institutions must decide whether or not they give
financing to a proposed venture. The decision will centre on
the business plan.
3.1 Design the structure and layout of the business plan

We are going to be focusing on the written version of the business plan:
Specific attention should be given to four key areas when writing your business plan:
the business itself, the management of the business (the entrepreneurs involved), the
market in which the business operates, the financial management and planning - the
risks and rewards associated with the total investment in the business.
Executive Summary
The executive summary is the most vital part of the business plan — it has to sell
your strategy for success to the investor.
The summary is an overview of the entire plan and must contain the highlights of the
business plan and summaries of each section. Therefore, although it is at the
beginning of the document, it is usually written last to capture the essence of the
plan.

Module 3
The Business Overview

Write a business profile, including the following:
 Information on the background and history of the business
 Indicate the business form (What is the business structure; i.e. sole
proprietorship, general partnership, limited partnership, close corporation, or
private company?) Who is (are) the principle(s)/ members?
 Legal registrations and any legislative compliance in relation to new venture
are explained and included in business plan (Legal registrations include but
are not limited to PAYE (Pay As You Earn), VAT (Value Added Tax), RSC
(Regional Services Council), COIDA, Skills Development Levy, Industry
regulations)
 If a company or close corporation, state the full registered name and enclose
Form CK1 or CK2 where applicable
 If a company or close corporation, state the address of the registered office
 Is it a new business, take over, expansion, or franchise?
 The vision and mission, and the company's long and short term goals in terms
of business growth and development, as well possible exit strategies (for
example: buy out investors, sell to larger company, go public, etc)
The product or service

Describe in full the product or services offered by the business and the innovative
features of these products and services, their benefits to your customers and the
competitive edge they afford the business over rivals in the market.
 The expected product life cycle where applicable
 Include descriptions of key technologies employed and current and future
research and development
Describe the location, premises and - where applicable - production facilities

Why you have chosen your particular location? What are the attributes and/or
important features of your present or desired business location, e.g. central business
district, near freeway etc? Why is this a desirable area?
 What kind of building do you need? Are the premises adequate for the short
to medium term?
 Why is this a desirable building?
 Does the community around which you intend to locate the business show
enthusiasm for you and your business?
 What are the advantages and disadvantages of the site in terms of wage
rates, labour unions, and labour availability?
 How much space do you need?
 Do you need a long-term or short-term lease? If the premises are leased -
attach a copy of the lease agreement, state the term of the lease, the date
that the lease expires, whether the lease is subject to annual increases,
percentage increase per annum, the monthly rental

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 Is the building accessible by public transportation?

 Is the building close to customers or suppliers?
 Is free or low cost parking nearby?
 If the premises are owned - the present market value, when purchased, the
purchase price, amount for which the premises are insured, date that the
insurance expires
 If the property is bonded - to whom, value of the bond, outstanding balance of
the bond
Production and technology

 Describe production processes and capacity, identifying any possible problem
areas
 Details of suppliers and sub-contractors, and any contractual arrangements
governing the supply of key inputs
 Elaborate on the business's past achievements and strengths and past
problems and weaknesses, and critical success factors
The Company Management

The entrepreneurs
Include a description of the skills and experience of the entrepreneurs covering the
key areas of technology and product development, production, sales, marketing,
finance and administration
 Describe the position and the specific functions and responsibilities of each
entrepreneur and/or manager
 Who is on the management team?
 What are the duties of each individual on the management team?
 Are these duties clearly defined? How?
 Who does what? Who reports to whom? Where do final decisions get made?
 What and how will management be paid?
 Attach a detailed curriculum vitae (CV) of each entrepreneur
 Their personal details (This section should be completed individually by each
of the owners of the business):
 First name(s) and surname
 Date of birth
 Identity number
 Business and home telephone numbers
 Full residential address
 Nationality
o If not a South African, whether you are a permanent or temporary
resident
o How long have you been resident at your present address?

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o Whether your residential property is owned or rented

o If resident at the present address for less than three years, state your
previous address
o Whether your previous residence was owned or rented
 Marital status
o Married, single or divorced
o Married by ANC or COP
o -Whether your status has changed since 1984 (If so, attach a copy of
the contract.)
o If married by ANC, attach a copy of the contract
o If divorced, the date on which it was final (Attach a copy of the final
decree of divorce.)
 Number of dependants, including spouse
o Number of children and their ages
 Spouse’s details
o First name(s) and surname
o Date of birth
o Identity number
o Employer, current position at work and work address
o Business and home telephone numbers
o Annual income
 Personal references
o Names, addresses and contact telephone numbers of at least three
people to whom reference can be made
 Employment history
o Highest educational qualification obtained and when achieved
o Formal apprenticeships and when completed
o Career history details: employer, employment period, type of work, last
position held, annual income
 Capacity you will be employed in this business
 Indicate the financial contribution of each entrepreneur to the business, and
the current shareholding structure.
 What is your experience in this business?
 What is your business background?
 How does your background/business experience help you in this business?
 What management experience do you have?
 Do you have managerial experience in this type of business?
 Do you have managerial experience acquired elsewhere-whether in totally
different kinds of business, or as an offshoot of club or team membership,
civic or church work, etc.?
 What weaknesses do you have and how will you compensate for them, i.e.,
will you hire employees or pay consultants who have management
abilities/expertise that you don't have?

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 What education do you have (including both formal and informal learning
experience) which have bearing on your managerial abilities or knowledge of
the industry?
 Why are you going to be successful at this venture?
 Do you have direct operational experience in this type of business?
 What additional resources have you arranged to have available to help you
and your business (accountant, lawyer, etc.)?
 Your financial status:
o Do you have or have you had an interest in another business? Give
details.
o The monthly income you will earn from the business
o The rand value of other financial benefits that you will receive from the
business
 If you have been sequestrated, when were you rehabilitated?
 Give details if you were found guilty of criminal offences.
 Give details of judgements for debt against you.
 Details of personal assets
o Fixed property
o Stand number, street address, name in which registered, market
value, municipal value
o Details of these properties sold under Deed of Sale
 Machinery, vehicles and equipment, etc
o Registered owner, description, year model, date purchased,
registration number, leased or owned
o Furniture and fittings
o Estimated market value
 Ownership vested in yourself and/or your spouse?
o Jewellery, cameras, etc.
o Estimated market value
 Life insurance
o Life insured, insurance company, policy number, annual premiums,
death value, date taken out, type of policy, surrender value,
beneficiary
 Banking accounts
o Account in the name of, name of bank, branch name, type of account,
account number, current balance
 Investments, fixed deposits, etc.
o Investment in the name of, where invested, type of investment,
amount invested, interest rate, expiry date
 Membership of close corporation
o Name of member, name of close corporation, percentage
membership, amount contributed, copy of the latest financial accounts

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 Details of personal liabilities:

 Fixed properties (listed above)
o Stand number, bonded to, rand value of bond registered, outstanding
balance, monthly repayments
 Machinery, vehicles and equipment (listed above)
o Registered owner, registration number, financed by, outstanding
balance, monthly repayments
 Furniture and fittings (listed above)
o Items not yet fully paid for, outstanding balance(s), monthly
repayments
 Jewellery, cameras, etc (listed above)
o Items not yet fully paid for, outstanding balance(s), monthly
repayments
 Life insurance policies ceded to a third party (as listed above)
o Policy number, ceded to, why ceded
 Credit cards
o Name of cardholder, name of bank, present balance, expiry date,
ordinary limit, budget limit
 Banking accounts (listed above)
o On which account number(s) do you or your spouse use overdraft
facilities? What are the limits? What are the expiry dates? What are
the present balances? Provide details of security held by the bank.
 Short- and long-term personal liabilities, excluding normal trade creditors
o Owing by, owing to, outstanding balance(s), how or when payable,
monthly repayments
 Suretyships
o In favour of whom have you signed sureties? State amount of the
sureties, purpose of suretyships.
 Income
o The gross monthly income of your spouse
The management structure of the business

 Show company ownership structure, business units and subsidiaries where
applicable
 Attach an organisation chart showing the functions and responsibilities of
directors, key management and staff
 Formulate remuneration, incentives, share options, and conditions of
employment of key management and directors
 Analyse any deficiencies in management and how these positions are to be
filled
 Comment on current and future employment levels, labour relations and
union membership
 Include details of auditors, attorneys, bankers and professional advisers

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Personnel
 What are your personnel needs now? In the near future (3 years)? In five
years?
 What skills must they have?
 Are the people you need available?
 Will your employees be full-time or part-time?
 Will you pay salaries or hourly wages?
 Certain employee benefits are mandatory. Find out what they are.
 Will you provide additional fringe benefits? If so, which ones? Have you
calculated the cost of these additional fringe benefits?
 Will you utilise overtime? If so, you may be required by law to pay time and a
half, double time, and/or other extra costs.
 Will you have to train people for both operations and management? If so, at
what costs to the business?
Franchise information (where applicable)

If the business is a franchise, include what is covered in the management package
the franchisor provides in this section
The Market
Industry analysis
Summarise the industry in which you will compete. Find most of the facts from
government statistics and trade organisations. Discuss topics such as:
 Current trends and developments in the industry
 Large and important players in the industry
 How the industry is segmented
 Problems the industry might be experiencing
 National or global events influencing the industry
 National and global growth forecasts
 How legislation affects the industry (for example, how the law limiting smoking
in a restaurant affects the industry)
Market analysis
 Who exactly is your market? Describe characteristics: age, sex, profession,
income, etc., of your various market segments.
 What is the present size of the market?
 What market you intend to service, the size of the market, and your expected
share

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 What is the market's growth potential?

 As the market grows, will your share increase or decrease?
 How are you going to satisfy the market?
 How will you attract and keep your share of the market?
 How can you expand your market?
 How are you going to price your service or product, to make a fair profit, and
at the same time, be competitive?
 What price do you anticipate getting for your product or service?
 Is the price competitive?
 Why will someone pay your price?
 How did you arrive at the price? Is it profitable?
 What special advantage do you offer that may justify a higher price? (You
don't necessarily have to engage in direct price competition).
 Will you offer credit to your customers (accounts receivable)? If so, is this
really necessary? Can you afford to extend credit? Can you afford bad debts?
 Describe the existing market and its potential for growth
 Include a detailed analysis of the size and maturity of the market, trends and
seasonality exhibited by the market, and the business's current and expected
market share together with an analysis of the time, resources and actions
required to achieve this desired market share
 List existing and potential customers, supported by letters of intent, orders on
hand, contracts, where applicable
 Include a detailed analysis of competitors, the price and quality of their
products, service and delivery, and their expected reaction to your activities
 Highlight and discuss your competitive advantage
 Why you can service that market better than your competition
Your competition
 Who are your five nearest competitors? List them by name.
 How will your operation be better than theirs?
 How is their business: steady? Increasing? Decreasing? Why?
 How are their operations similar and dissimilar to yours?
 What are their strengths and/or weaknesses?
 What have you learned from watching their operations?
 How do you plan to keep an eye on the competition in the future?

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Sales and Marketing Strategy

 Describe current and planned sales and marketing strategies and promotional
activities (advertising, exhibitions, promotions, public relations, etc.)
 Describe your distribution strategy and channels
 Formulate sales staffing, recruitment, remuneration and commission
structures
 Include sales projections (in monetary terms) with an analysis of the time
expected to reach sales targets and milestones (e.g. break-even point)
 Describe your pricing strategy and how it compares with your competition
 Where the business is a franchise, include the full marketing strategy of the
franchisor
 Debtor terms that will be allowed
o Cash sales
o 30 days
o 60 days
o 90 days
o over 90 days
o What is the industry norm?
o When will outstanding debtors be regarded as bad debt?
Financial Statements and Projections

 Include only a summary of the financial statements and projections in the
body of the business plan — attached detailed analysis as an appendix
 Include operating budgets, cash flow projections, income statements and
balance sheets for at least three years (recommended five years). Provide
monthly projected figures for the first and second year, quarterly figures for
years three and four and annual projections thereafter.
 Where applicable, provide:
o Historical financial performance as shown by at least the last three
sets of audited annual financial statements and up to date
management accounts comprising income statements (monthly
and year-to-date), balance sheets, and debtors and creditors age
analysis
o Costing methodology employed, or to be employed, and detailed
costings giving a full analysis of cost of sales
o Pricing policies giving a full analysis of theoretical and actual
mark up and gross profit percentages
o Rebates, discount structures and terms offered to and received
from customers and suppliers respectively
o Break-even analysis
o Details of overdraft and medium and long term loans
 Ensure that your financial projections agree with any other statements in the
business plan (for example, costs involved in your proposed marketing
strategy)

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 Formulate and motivate your capital requirements
Legal and Regulatory Environment

Include:
 Details of any licences, copyrights, trademarks and patents registered (or in
the process of being registered)
 Details of any legislation and regulations governing the industry, product and
production processes
 Proof of compliance with tax and labour legislation (VAT, PAYE, RSC, UIF,
COIDA, Employment Equity Act, Skills Development Act, etc) where
applicable
 Details of duties and tariffs to which inputs or products are subject if the
business is a regular importer or exporter
SWOT Analysis and risk/reward assessment

Discuss definite and possible strengths, weaknesses, opportunities and threats:
 Give an honest assessment of the risks faced by the business, entrepreneurs
and investors in relation to the potential for growth, profitability, and capital
appreciation
 Discuss strategies that can be implemented to address the risk factors
highlighted
Appendices and Supporting Documentation

The following supporting documentation should be included where applicable:
 Newspaper clippings, promotional literature, product brochures, market
research, trade and industry publications
 Partnership, association or shareholders' agreements
 Offers to purchase, purchase and sale agreements
 Contracts, orders, letters of intent
 Memoranda of understanding, lease, franchise, agency or distribution
agreements
 Documentation relating to licences, copyrights, trademarks and patents
 Quotations or pro-forma invoices for capital items to be purchased
 Detailed personal balance sheets of the entrepreneurs
 Copies of identity documents and marriage certificates of the entrepreneurs
 Schedules of life assurance and endowment policies of the entrepreneurs
 Copies of company or close corporation certificates and registration
documents
 Drawings, work flow charts, plans, factory layouts, maps, etc
 A list of persons to whom reference can be made regarding creditworthiness,
product and service quality, and the skills, abilities and integrity of the
entrepreneurs

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A personal financial statement must be included as a supporting document in

your plan if it is a proposal for financing. Also, include your résumé as a
supporting document.
3.2 Outline a vision statement that represents the goals and objectives
of the new venture
Every business, no matter how small, should have a vision statement.
You have to know:
 what you are going to do differently from other similar businesses,
 where you want your business to be in 1 years’ time, in two years, in five years
 how you are going to get there.
 The vision statement should help your employees see how their hard work
contributes to the success of the business.
 The vision statement should also show the values that are important to the
business, such as knowledge, customer service, customer safety, etc.
 The vision statement is also included in the business plan.
A clear vision is important to a business for the following reasons:

 A vision promotes change. A vision is like a road map for a business. When
you have to make changes in your business, such as buying more vehicles, or
starting new routes, your vision helps you to make the right decisions.
 Businesses that have a vision statement do better than businesses which
don’t.
 The vision statement helps you and your employees to focus on things that are
important to the business.
 If you make your employees aware of the vision statement it increases job
satisfaction, commitment from employees and productivity.
A vision, in other words, is a short statement of what the company wants to achieve:
the desired end result of a company, organisation or business.
XYZ is a highly effective and profitable company that plays a key role in the
community. XYZ is respected for its high quality service and exceptional
safety record.
If we evaluate the vision statement from a customer’s perspective:

 From a customer perspective: we have to be effective if we want
passengers to use our service.
 We can only stay in business if we are profitable.
 Our company and the service we provide have to be accepted and
supported by the community in which we provide out service.

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 We regard safety as very important in our business.
What does it mean to have a vision statement?

 Having a vision means that managers always think about how to take their
organisation into the future, with the changes and challenges it may bring
 We live in a society that is constantly changing. The vision serves as a road
map and a checkpoint to keep the organisation focused on its goals and
objectives, as well as its core business activities.
 Visions provide focus and direction. The vision helps employees and
management to focus on what is most important to the organisation. This
means that the vision helps management and employees not to deviate from
the core business of the organisation.
 A vision shows employees how their efforts contribute to the organisation’s
success.
 The vision should also show the values of the organisation, e.g. knowledge,
innovation, customer service, etc.
There are many ways of writing vision statements. You can write a couple of
paragraphs, or you can state your vision in points form.
3.3 Identify business and operational goals and outline procedures for
the effective implementation thereof in the business plan
All of us have dreams and ideas for our future but how many of these dreams
become a reality? In order to achieve them, we have to start thinking about what we
want for our business and our future. In other words, what are the short and long
term goals we need to set for ourselves which would help us make our dreams come
true? It is important that you know yourself well in order to set realistic and reachable
goals. Setting objectives also means that you have to draw up an action plan.
What Is The Difference Between A Goal And An Objective?

A Goal is a general outcome statement.
An Objective spells out clearly and in a way that it can be measured, what the end
result should be.
You first decide on a goal that can be achieved, to enable you to focus more
accurately on the objective. It would be difficult to develop an objective without some
idea of what the goal is.
Therefore, you first decide on the goal. Then you will write SMART objectives, is
such a way that it will help everyone who is involved to know what is has to be done.
This is why the goal always comes before the objective.
Example:
 The Goal: Improve production in the assembly plant,
 The Objective: by 10% before January 15, by upgrading the machinery
involved.
The goal is usually only the action or activity. That is, to diet, to stop smoking, to
spend more time with the children, to paint the house, or tidy the garage, etc.

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These goals are fine for things such as home and sport activities. They do not have
enough information to really motivate you to achieve them. That is why we write
objectives.
Setting Objectives
Objectives must always be SMART:
 Specific - Objectives must be specific. Don’t say, “I want to bake more cakes
per day,” rather say: “I want to bake 50 cakes per day”
 Measurable - You must be able to measure the objective so that you can
check if you achieve it. Objectives are something that you can use to control
the work that is being done. Did you bake 50 cakes? Include as many of the
following as possible:
o Quality: To SABS standard 1076; without any rejects; as per
maintenance schedule rules, etc.
o Quantity: reduce rejects by 5%; tidy up all the scrap; a minimum of six
bottles per case, etc.
o Cost/Value: reduce the overheads by 5%; cut the competitors price by
at least Rl, etc.
 Attainable - You have to set objectives that can be reached. If you set
objectives that cannot possibly be reached, you are wasting time and you and
your staff will become discouraged. You cannot possibly start baking 1500
cakes per day, if you have been baking 50 cakes per day
 Relevant - The objective must be relevant to the specific goal as well as the
goals of the business. Don’t set an objective that has no relevance to the
goal: “I want to make 45 meat platters per day” has no relevance to baking
cakes. If your objectives are not relevant to the goal, you will confuse
yourself and your staff
 Time bound - You have to set a date by when you want to achieve the
objective. “I want to bake 70 cakes per day by the end of February.”
Examples could be: Within the next two weeks; by January 15; before lunch
break/stocktaking/home time, etc. An objective without a time limit is like an
athlete running a race without being timed. He may win, but how good is that?
Here’s a handy tool to use when writing objectives. Use this format and your
objectives should always be SMART.
Objective Target Date Responsibility

What you want done By when it should be Who should do it
done

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General rules when writing goals and objectives:

 Always write down the goals and objectives. We tend to try and achieve goals
once we have written them down.
 You have to make sure that everyone who is going to be involved has to
understand the goals and objectives, so always use clear and simple
language.
 Test the objectives on someone else first. If they express the slightest hint of
doubt, don't argue - fix it!
 Communicate both in writing and verbally, if you can.
 Make sure that the people who have to do the work to achieve the goals
understand what is expected of them. Ask the person to repeat in his/her own
words what is expected of them. Then you can listen to what they are saying
and check if they really understand.
Setting objectives in both your work and personal life is very important if you want to
achieve your goals. It gives you a sense of direction and focuses you on the
important things in your life. By setting action plans we are able to monitor our
progress and achievements. Remember, your future is what you want to make it. All
your dreams can come true – you only need realistic goals and motivation!
How to set business goals and objectives

Business goals5 set the tone on what is important to the business so that work is
directed to achieving what is important. Goals help businesses reach new levels and
advancing in the marketplace, plus help motivate the workforce and give employees
direction in their decision making.
Short-terms goals should be achievable in less than one year, while long-term goals
take over a year to accomplish. Long-term goals should be adjusted annually for
changes in the competitive landscape, technical innovations, and societal trends.
Steps to Set Business Goals and Objectives
1. Review the mission and vision statements. If the business does not already
have a mission or vision statement, then take the time to develop them. These
statements should clearly state what the business hopes to achieve. For example,
Nike's mission statement is "To be the world's leading sports and fitness company."
2. Brainstorm ideas. Brainstorming ideas on how to achieve the mission and vision
statements, do not focus on the specifics or if certain ideas or realistic. The key here
is to write down as many ideas as possible without stopping. If you have a
management team, then set a meeting for everyone to brainstorm ideas together.
3. Select the top 1 to 3 ideas. Sort through all of the ideas and look for the ones that
clearly are linked to the mission and vision statements, realistic and profitable. The
strongest ideas will become your business goals. Do not select more than three
goals, as if you divide up your resources to achieving too many goals then you are
more likely to not achieve any. Both long-term and short-term goals can be chosen in
this step.
4. Make these goals S.M.A.R.T. For a goal to be S.M.A.R.T, is should be specific,
measurable, achievable, realistic, and timely. For instance, instead saying the goal is
to "reduce inventory costs", state that the goal is to "reduce costs by 10% before April
5
Taken from: http://voices.yahoo.com/6-steps-setting-business-goals-objectives-7448236.html

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31, 20xx." Goals that are S.M.A.R.T are easier to measure progress and helps keep
everyone on track for success.
5. Set milestones and progress measurements. Break the goals up into
milestones with deadlines. This serves as a way to measure progress, keep
employees on track, and ensure that the goal will be met in the desired timeframe.
These milestones should also be S.M.A.R.T.
6. Assign responsibility to each goal. John C. Maxwell, an expert in leadership,
once said, "A pessimist complains about the wind. An optimist expects it to change. A
leader adjusts the sails." Find leaders in the organisation to take responsibility that
each goal gets fulfilled. Provide the leader with the overall big picture of what the
business hopes to accomplish, as well as what their specific responsibilities and
deadlines are.
Developing the Action Plan

Once you have written down your goals and objectives you have to develop plans for
the realisation of the objectives. These plans are called action plans.
In the action plan you must specify and explain clearly WHAT has to be done, WHY
it must be done, WHEN it should be done, WHO must do it and HOW it should be
done.
An action plan is like a map that you will use to find out if things are being done the
way you want it done.
3.4 Include legal registrations and any legislative compliance in relation

to new venture in the business plan
Earlier in your Learner Guide we had a close look at the various legal registrations.
This however now needs to be shown in your actual business plan. There will be an
area in your actual business plan where you will have to actually show what
compliances that you have adhered to. It is of no use having gone to the trouble of
all the registrations without you mentioning them in your business plan.
Clearly state:
 PAYE Number
 VAT Registration number
 RSC Regional Services
 Skills Development Levy Number
Include any other regulations that are needed for your particular industry that you
have had to register for. The obvious products that are affected by legal concerns are
alcohol, tobacco and petrol as they all include tax. Ensure that you include the
information that they will need to see regarding this.
3.5 Include an outline of how the business will operate and achieve
marketing and financial objectives in business plan
The purpose of the Operations Plan6 is to describe the where's and how's of your
business, meaning where you will locate the business (along with any physical
necessities) and how you will produce products or services for your clients.
6
Taken from: http://suite101.com/article/business-plan-operations-a46471

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To write an operations plan, you'll need to answer the following questions:

 How will your product be made (for product-based businesses) or how will
you serve your customers? Can you describe the process from start to finish?
 What regulations and organisations are in place to monitor your industry?
How do you plan on staying up to date? Are you a member or plan on
becoming one?
 Who are your suppliers? How do you receive products/services from these
organisations? How long will it take? How much will it cost? Do you have
backups in place?
 What quality-control measures will you implement, if any?
Getting the Business Operational

Your next step in writing an operations plan is determining what you've already done,
and what still needs to be done in order to get your business up and running. Write
these points out in full, explaining to someone who doesn't know your industry just
what it all entails. Then, take the questions you answered in the first section of your
operations plan, and answer them at length as well. Feel free to create separate
sections to list the risks associated with your business, as well as your quality control
measures and supply procedures. Most business plans take several pages to flesh
out this section of the operations plan, but manufacturers and producers may have
dozens of pages along with flow charts and appendixes.
Operational Processes
To outline your businesses' operational processes, you'll need to detail the day-to-
day operations. To do so, make sure you list the following items (where applicable to
your business):
 General, such as the hours and days your business will be open;
 Buildings, including layouts, engineering drawings and lease agreements.
Essentially, anything to do with the physical space your business will inhabit;
 Equipment, such as what you'll need to get, what you already have available,
and how much it will all cost;
 Special requirements specific to your business that are operational in nature,
such as ventilation or parking;
 Any and all materials needed to produce your products or services;
 Production, including the length of time needed to create each product;
 A description of your inventory plans; and
 The costs involved with all aspects of the operational processes.
Most business plans take several pages to flesh out this section of the operations
plan, but manufacturers and producers may have dozens of pages along with flow
charts and appendixes.
Another part of your business plan is a marketing plan. One of the things that a
marketing plan has is the financial objectives that determine the return on the
marketing plan and its overall profitability.

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Revenue
A marketing plan is devised to produce revenue through various advertising and
sales methods. You need to be clear regarding the revenue objectives for marketing
plans so that you have a way of measuring the plan’s success or failure.
Costs
You need to include “projected costs” in your plan. The projected costs are made up
of the items such as the possible manufacture and distribution of the product
including material costs, delivery costs and personnel costs.
Part and parcel of this part of the business plan is so that you can track these costs
and remain flexible with your costing.
Profit
This is a significant part of the revenue projections in business plan, and profit is also
monitored just as closely as revenue. Profit is not just a function of how low the
company can get the cost to deliver product, it is also based on how much the
company can raise the asking price. Prices are constantly altered and changed in
various target markets until the projected profit margin is attained.
3.5.1 Include a marketing plan in the business plan

Refer to your handout “119670 Handout Marketing Plan” for additional specific
information about how to create a marketing plan for your new venture.
The following points you need to keep for your marketing plan are as follows:
Customers
Identify your targeted customers, their characteristics, and their geographic locations,
otherwise known as their demographics. The description will be completely different
depending on whether you plan to sell to other businesses or directly to consumers.
If you sell a consumer product, but sell it through a channel of distributors,
wholesalers, and retailers, you must carefully analyse both the end consumer and
the middleman businesses to which you sell. You may have more than one customer
group. Identify the most important groups.

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Then, for each customer group, construct what is called a demographic profile; i.e.:
 Age
 Gender
 Location
 Income level
 Social class and occupation
 Education
For business customers, the demographic factors might be:

 Industry (or portion of an industry)
 Location
 Size of firm
 Quality, technology, and price preferences
 Other (specific to your industry)
 Other (specific to your industry)
Advertising
 How will you get the word out to customers?
 What media should you use to advertise, why, and how often? Why this mix
and not some other?
 Have you identified low-cost methods to get the most out of your promotional
budget?
 Will you use methods other than paid advertising, such as trade shows,
catalogues, dealer incentives, word of mouth (how will you stimulate it?), and
network of friends or professionals?
 What image do you want to project? How do you want customers to see you?
In addition to advertising, what plans do you have for graphic image support? This
includes things like logo design, cards and letterhead, brochures, signage, and
interior design (if customers come to your place of business).
Promotional Budget
How much will you spend on the items listed above:
 Before start-up? (These numbers will go into your start-up budget.)
 Ongoing? (These numbers will go into your operating plan budget.
Place
Probably you do not have a precise location picked out yet. This is the time to think
about what you want and need in a location. Many start-ups run successfully from
home for a while.

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You will describe your physical needs later, in the Operational Plan section. Here,
analyse your location criteria as this might affect your customers:
 Is your location important to your customers? If yes, how?
 If customers come to your place of business:
 Is it convenient? Parking? Interior spaces? Not out of the way?
 Is it consistent with your image?
 Is it what customers want and expect?
 Where is the competition located? Is it better for you to be near them (like car
dealers or fast-food restaurants) or distant (like convenience-food stores)?
Distribution Channels
How do you sell your products or services?
 Retail
 Direct (mail order, Web, catalogue)
 Wholesale
 Your own sales force
 Agents
 Independent representatives
Price
Explain your method or methods of setting prices. For most small businesses, having
the lowest price is not a good policy. It robs you of much needed profit margin;
customers may not care as much about price as you think; and large competitors can
under-price you anyway.
Usually you will do better to have average prices and compete on quality and service.
Compare your prices with those of the competition. Are they higher, lower, the same?
Why? How important is price as a competitive factor? Do your intended customers
really make their purchase decisions mostly on price? What will be your customer
service and credit policies?
3.5.2 Include a cash flow plan in the business plan

Refer to your handout “119670 Handout Financial and Cash Flow Requirements” for
additional specific information about how to create a marketing plan for your new
venture.
This is the element of the plan that will require the most research and time from you.
This element forms the backbone of your plan and your business. This section
should consist of financial forecasts and projections for the entire organisation. This
is basically the business plan as told by numbers.

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Module 3
Financial/Start-up Requirements
Fixed and Working capital to start the business. You will need to say how your
venture is going to be financed. Financiers like a low gearing ratio meaning you might
need to put own unencumbered cash.
Statement of Financial Performance (Income Statement)

This statement is also known as Profit & Loss Statement. This statement thus
measures the profitability of the venture. It will thus comprise of revenue and other
income, the cost of sales as well as operating expenses. Finance Charges and
taxation (Income Tax) will also be dealt with in this statement
Cash Flow Statement

The statement is concerned with cash movements in the organisation. Cash
movements will be as a result of receipts from customers and other income, cash
paid to suppliers and employees, financing activities as well as investing activities. It
asks: what are the cash and cash equivalents at the beginning of the period. What
are the cash movements for the period and what the cash is at the end of the period?
Statement of Changes in Equity

Equity changes from time to time and must thus be reflected in the statement of
changes in equity. Information from the statement gets to the Balance Sheet under
equity and reserves. Reflected in the statement is the share capital, share premium
(if applicable), posting of accumulated profits and reserves.
Statement of Financial Position (Balance Sheet)

This statement tells enables us to determine the net worth of the business at a given
period. This statement is about what we own and what we owe.
In this statement we put items such as:
Assets
Non-Current Assets e.g. Property Plan and Equipment, Long term investments
Current Assets e.g. inventory, debtors and cash and cash equivalents (short-term
investments, prepaid amounts
Owners’ Equity e.g. share capital/owners contribution, retained earnings, reserves

and accumulated profits/losses
Liabilities
Non-Current Liabilities e.g. mortgage loan, long term loan, debentures, redeemable
preference shares (not redeemable within 12 months)
Current Liabilities e.g. trade payables, SARS (tax), short term loans
Financial Analysis
It is in this sub-section that we quickly give meaning to the financial statements. We
may explain some policies used and some assumptions made while compiling the
financial statements. We may include some notes to items such as Property, Plant
and Equipment, Loan Amortisation to mention just a few.

Module 3
Class Activity 4: Compile a business plan

Reflection
Individually, complete the formative activity in your Learner Workbook
Facilitator Observation Checklist

The facilitator will provide you with feedback about your participation
during the class activities in your Learner Workbook

Summative Assessment Guidelines
Summative Assessment
You are required to complete a number of summative assessment activities in your
Learner Portfolio of Evidence Guide. The Learner Portfolio of Evidence Guide will
guide you as to what you are required to do:
 Complete all the required administration documents and submit all the
required documentation, such as a certified copy of your ID, a copy of your
CV and relevant certificates of achievement:
 Learner personal information form
 Pre-assessment preparation sheet
 Assessment plan document
 Declaration of authenticity form
 Appeals procedure declaration form
 Place your complete Learner Workbook (with the completed Class Activities)
in the specified place in the Learner Portfolio of Evidence Guide.
 Complete the other summative assessment activities in your workplace:
Knowledge Questions
Individually, complete this summative activity in your Learner Portfolio of
Evidence Guide
Practical Activities
Evidence Guide
Witness Testimony
Evidence Guide
Logbook
Evidence Guide
Once you have completed all the summative activities in your Learner Portfolio of
Evidence Guide, complete the Assessment Activities Checklist to ensure that you
have submitted all the required evidence for your portfolio, before submitting your
portfolio for assessment.

References
References and Further Reading

 Cash flow picture retrieved from: sustainablelifeblog.com
 “It’s my Franchise” business course run by The Sunday Times
 http://www.investopedia.com
 http://tutor2u.net/economics/revision-notes/a2-micro-profits.html
 http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/apa7057
 http://www.ilo.org/public/english/employment/recon/eiip/download/
waste_recycle/business_manual.pdf
 http://www.businesstown.com/accounting/basic-terms.asp
 https://www.alliance-leicestercommercialbank.co.uk/bizguides/full/hairdresser/
index.asp
 http://smallbusiness.chron.com/estimate-income-starting-new-business-
19310.html
 http://www.sba.gov/content/determining-your-financing-needs
 http://smallbusinessfriends.com/business-startup/risks-involved-with-start-up-
funding-and-new-business-ventures
 http://www.businessdictionary.com/definition/startup-costs.html#ixzz2Q3V0uXS3
 http://businesscasestudies.co.uk/nfte-uk/developing-enterprise-skills/
costs.html#ixzz2Q3WWUvay

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Learner Guide

Produce a Business Plan

Version 1 Learner Guide 1

Version 1 Learner Guide 2

Version 1 Learner Guide 3

Programme Produce a Business Plan

Programme entry level requirements

Module 1: Module 2: Module 3:

 Understand the planning  Compile an organisation  Design the structure and

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examples  Include marketing plans in

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Both formative and summative assessment is used as part of this outcomes-based

Learning map (delivery structure)

notional learning 21 hours 3 hours 48 hours 8 hours

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Understand the elements of a business plan

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Coffee Shop Business Plan example

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2.1 Company Ownership

2.2 Company Locations and Facilities

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can read inside the coffee bar.

3.1 Product Description

3.2 Sales Literature

Market Analysis Summary

4.1 Market Segmentation

4.2 Target Market Segment Strategy

4.2.1 Market Needs

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4.3 Industry Analysis

4.3.1 Competition and Buying Patterns

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To compile a good business plan, you need to be able to think strategically,

1.1 A business plan in terms of business, financial, marketing and

The five main areas of a business plan

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Step 1: Think and Strategise

Step 2: Test your ideas through research

Step 3: Analyse and draw conclusions

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Your strategic focus

The marketing plan

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 Collect demographic statistics (from municipalities, Statistics South Africa,

The Operational plan

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Research methods for operations and stock control:

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The principles of researching and compiling a business plan

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A Business Plan form

1.2 The codes of ethics pertaining to a business plan