If you’re starting or running a business, writing a business plan might not be the most glamorous item on your to-do list. Designing your product or website, or meeting with your first clients might grab more of your attention.
However, there are precious few things more important to your business than a solid business plan (cash flow is one!). After all, there are plenty of brilliant ideas out there, but it takes more than that to make a business.
Why is a business plan so important?
Try not to think of a business plan as something that’s set in stone, but more of a road map for the progression and success of your business. A good plan will outline targets for your business to achieve and set out a path toward achieving them.
Business plans force you to find out crucial information that relates to your operation, such as the market size and what kind of competition your business will face. From this crucial information, potential problems may arise. Now you can plan for them and solve them. That’s a hell of a lot more appealing than running head first into them six months after launch.
Business plans are a necessity if you’re looking for funding in the form of investment or a loan from the bank. There’s just no way you’re going to get what you you’re looking for from them without a business plan.
The part of your business plan that they will be most interested in will probably be your financial projections. How many sales you expect to have at what revenue point and what outgoings you will have are important numbers to outline in your plan.
Cash flow is the life blood of all business. No organisation can survive without it for an extended period of time, whether you’re looking for investment, or a loan, or not. Your cash flow forecast of money coming in and going out should be as comprehensive and realistic as possible to ensure the best chance of success. There’s no point in having the best business idea in the world without the money to pay suppliers for the parts you need.
Remember, there’s no use in a plan that is allowed to go out of date. When your business begins to grow into its next phase, it’s time to write yourself a new roadmap.
What should go into a business plan?
Remember that your business plan should look as professional as possible. A cover, title page and table of contents should all be included. Critical and detailed statistical information should be contained in appendices and referred to throughout the plan. A detailed competitive analysis document, or perhaps a development roadmap are also topics for appendices. In terms of the meat of your plan, the following is what you should prepare.
- Executive Summary
This will be one the first things that is read and needs to grab the attention of the reader. Use clear language to summarise the highlights of the rest of your plan. Write this part last.
- Business Description
What are the basics of your business? You should explain what type of business it is, who owns the business. Outline the idea behind the product or service you provide is and why it is unique.
Don’t be afraid to accurately outline the current position of the business and where it is heading in the future.
Outline the skills and experience of yourself and any other important people in the business. Think of this as a bit like writing a short CV. Include any advisers such as your accountant as well.
- Vision and Strategy
If you fast forward 12 months or 10 years, where do you see the business? How fast will it grow, will it stand head and shoulders above the competition? Will its offering to customers diversify, or will your business grow into the highest quality provider of a niche product?
What is the path that will lead your business from where it is now to where it is going to be? The easiest way to do this is to conduct a SWOT (strength, weaknesses, opportunities, threats) analysis. It’s a simple but powerful tool that can form the base of your strategy.
A company’s competitive advantage is a critical part of your business strategy. What can your business do which your competition would have significant difficulty replicating. How can you use this to reach the vision you have for your business?
- Products and Services
Describe the products or services you are going to sell in this section. How are they provided or manufactured? If there are to be further developments down the road, this is the place to outline them to.
Remember that you will (hopefully) know the ins and outs of what you will be providing. Your reader could be coming across your offering for the first time and your explanation should reflect that.
- Customers and Competition
Who exactly is your ideal customer and what is the market for your product or service and is there demand there? How big is your target market and what segmentations exist within it? Does your market span multiple countries? All of these questions will need to be answered in this section and then some.
How many competitors are there for your business and what market share do they possess? What are their unique selling points (USPs) which set them apart from the pack? This could be where you refer to a detailed analysis in your appendices.
- Marketing and Sales
How do you plan to acquire a profitable market share of your target customers? What are the planks of your marketing strategy to get your brand in front of these people and drive sales. This could be digital marketing, social media campaigns, print ads or even television.
What price point are you entering the market at and will that change over time?
What sales channels will there be? Will you be using an ecommerce store, taking transactions over the phone or through a website or will you have a retail presence. Understanding and outlining this is the first stage to actually receiving revenue. You need to make the sales process as frictionless as possible for your potential customers and that needs to be shown in your business plan.
- Staff and Operations
How is your business going to run on a day to day basis? Taking orders from suppliers and manufacturing your product, or taking bookings from clients and scheduling them for appointments.
What staff will you have now and what roles will you need to fill as you grow to make sure that the business can keeping running properly? What are the responsibilities of these staff members?
Are you aware of your legal responsibilities in relation to hiring and employing staff?
You should outline the process of providing your offering to your customers in this section.
What is the financial status of your business? This is of critical importance when potential investors or lenders or the bank are reading your business plan. You need to show that your business is financially sound.
How are you going to fund getting your business off the ground? Cash flow projections will need to be made, especially for start ups without a source of revenue until they start selling. Sales projections will be important but what’s more important is that these figures are realistic and believable in relation to the size of your business and the size of your target market.
Detail your financial and banking arrangements as they currently stand and any information you have on how they may progress in the coming months.
Your break-even point calculation needs to be included in the finance section, especially for manufacturing businesses. Your cost of customer acquisition should also be included under this heading if you haven’t already outlined it in your marketing strategy.
If things can go wrong they will. That’s probably not entirely through but it doesn’t hurt to plan for a few bad scenarios are how your business can get through them.
Think about what your business may be vulnerable to. Are there new innovations in the market place which could substantially reduce the number of customers you could sell to? What about laws passed by the government or bodies like the EU?
Are you relying on one major supplier, what happens if they put their prices up, or worse, go out of business themselves?
As we mentioned before, you’re going to need to update your business plan every so often. Businesses evolve and grow and your plan will have to reflect the ever changing realities.
Your business plan is your guide. It’s not set in stone but the fact of having something on paper to help steer your decisions can’t be underestimated. At the least it will make you consider important decisions properly, which is never a bad thing. One more thing, remember to use spell checker before you hand it over to that investor you want to come on board.