A NEW YEAR/ RENEWED ASPIRATIONS/ WRITING A BUSINESS PLAN

REASONS FOR PREPARING A BUSINESS PLAN

• It is a valuable tool  for the development, expansion and ongoing operation of a  business, whatever the sector the business may be in
• It helps the business to work smarter, not harder
• It will be necessary when you are selling the business to investors and lenders
• It specifies the objectives of the business and how these are to be performed  
• It enables you to think through your ideas and exposes possible shortcomings (such as lack of sufficient market research) that you need to address.
• It forecasts  the assets that will be required by the business to achieve these objectives (plant, vehicles, buildings, staff, cash)
• It enables the businessman to establish what commitment he is prepared to make to the business.  
• It helps build commitment because you have publicly named your objectives.
• It gives your business a sense of direction and action timelines to reach desired targets.
• Acts as a measure against which actual results can be measured and appropriate steps taken for variances .  
• It allows you and your staff to measure progress towards targets, which leads to a shared sense of achievement (and makes recruiting more good staff easier)
• It builds credibility and convinces others (including lenders) that you know what your doing and where the business is heading.
• Planning significantly increases chances of success.   It enables you to perform better than you would without a plan.   Research shows that businesses that undertake regular business planning have higher profit margins than those that do not. 

MAIN COMPONENTS OF A COMPREHENSIVE BUSINESS PLAN

Cover Sheet

• Identifying information e.g. business name, address, principals  

Executive Summary

• Outlines the business plan, its major objectives, how these objectives will be accomplished and the expected results
• It is just a summary so should be reasonably short

 Table of Contents

• Gives headings and page numbers for contents of the plan

History of Business

• History of business

People

• Information about the principals- their positions, experience, skills, qualifications
• Numbers to be employed and in which job functions

Location

• Location
• Premises
• Will premises be sufficient for business plan
• Details of lease agreement if applicable

Product

• Listing of its products and services.
• Any trade marks, patents held
• Past and future development of the product or service.
• Major suppliers of raw materials

Marketing

• Target trading area and customers.
• Promotion strategy
• Distribution strategy
• Price strategy
• Competitors- who they are, their strengths and weaknesses

Financial

• Indicate the expected cash flow, profit and loss and balance sheets, financial ratios
• Project asset purchase requirements, funding required
• Should show prospective investors and lenders why they should provide funds, when they can expect a return, and what the expected rate of return on their money is.

Appendixes

• Organisational charts
• Resumes of the key staff and directors
• News items
• Letters of recommendation.

RELOCATION/ OVERTIME MEAL/ SUSTENANCE ALLOWANCES

RELOCATION PAYMENTS

Work-related relocation payments made to employees by employers, when relocating employees, are exempt income of the employee provided all of the following conditions are met:

• The employee's relocation is required as the result of:
  • taking up new employment with a new employer, or
  • taking up new duties at a new location with their existing employer, or
  • continuing in their current position but at a new location.
• The employee's existing home is not within reasonable daily travelling distance of the new workplace (unless accommodation is provided as an integral part of the job).
• The expense is on the list of eligible relocation expenses.
• The payment reflects actual expenditure incurred.
• The expenditure is incurred before the end of the tax year following that in which the employee relocates.

OVERTIME MEAL ALLOWANCES

For these payments to be exempt income of the employee, all of the following conditions must be met:

• Either the employee's employment contract must specify that the employee is eligible for a payment in relation to overtime hours worked, or an employer must have a policy or practice of paying an overtime meal allowance.
• The amount paid must be the actual cost incurred by the employee, with receipts/invoices for amounts over $20 per meal, or a reasonable estimate of the expenditure likely to be incurred by the employee.
• The employee is required to have worked at least 2 hours overtime on the day of the meal.

SUSTENANCE ALLOWANCES

For sustenance allowances to be exempt income of the employee, all of the following conditions must be met:

• The employer has an established policy or practice of paying sustenance allowances.
• The employee must work a minimum of 7 hours on the day.
• Their employment requires them to:
  • work outdoors and away from their employment base for most of the day, and
  • undertake a long period of physical activity in travelling through a neighbourhood or district on foot or by bicycle.
• It's not practicable for the employer to provide sufficient sustenance on the day for the period when the employee is working outdoors.
• The allowance recognises:
  • the demanding physical nature of the employee's work as described above, and
  • the employer would normally provide tea, coffee, water, or similar refreshments at the employment base in the course of their business.

If you have taxed payments of relocation payments, overtime meal allowances or sustenance allowances that meet all the requirements as above anytime from the 2002-2003 income year, you may be entitled to a credit for overpaid PAYE. Similarly, an adjustment to your corresponding income tax return may be necessary as you would have claimed these PAYE payments as an expense to your business.

To make the PAYE adjustment you'll need to complete an Employer Monthly Schedule Amendments (IR344) form for the affected return periods. You'll also need to advise IRD in writing about any adjustments required to your income tax returns where you may have claimed these payments or allowances as an expense.

OFFICE SPACE REQUIRED- LEASE OR BUY?