Many potential start-up businesses
are daunted by the prospect of writing a business plan. But it is not a
difficult process - and a good business plan focuses the mind as well as
helping to secure finance and support.
The business plan will clarify your
business idea and define your long-term objectives. It provides a blueprint for
running the business and a series of benchmarks to check your progress against.
It is also vital for convincing your bank - and possibly key customers and
suppliers - to support you.
1. Executive summary
- The executive summary outlines your business proposal. Although it is the last section to be written, it goes on the first page of the business plan. It will be read by people unfamiliar with your business, so avoid jargon.
- The executive summary highlights the most important points and should sum up your product or service and its advantages, opportunity in the market, management team, track record to date, financial projections, funding requirements and expected returns.
2. The business
- Explain the background to your business idea, including the length of time you have been developing the business idea in its present form, work carried out to date, any related experience you have, the proposed ownership structure of the business.
- Explain what your product or service is. Make it clear how it will stand out as different from other products or services, your customers will gain through buying your product or service, the business can be developed to meet customers' changing needs in the future
3. Markets and competitors
- Focus on the segments of the market you plan to target - for example, local customers or a particular age group.
- What are the competing products and who supplies them?
- Unless there is a viable market and you know how you are going to beat the competition, your business will be vulnerable.
- You must show you have done the market research needed to justify what you say in the plan.
4. Sales and marketing
- This section is crucial. It often gives a good indication of the business' chances of success.
- How will your product or service meet your customers' specific needs?
- How will you position your product?
- How will you sell to customers?
- Who will your first customers be?
- How will you promote your product? For example, using advertising, PR, direct mail or via email and a website.
- What contribution to profit will each part of your business make?
5. Management
- People reading the business plan need to be given an idea of why they should have faith in the management of your start-up.
- Outline the management skills within your team.
- How committed are you?
6. Operations
- Explain what facilities the business will have and how it will deliver the product or service to the customer.
- Show the pros and cons of the location.
- Indicate the facilities you will need to start (eg equipment and machinery). Some start-up businesses only need a desk and a phone.
- Provide a list of employee roles you need to fill and the skills required to fill them.
- Show how you selected your suppliers.
7. Financial forecasts
- Your financial forecasts translate what you have already said about your business into numbers.
- A realistic sales forecast forms the basis for all your other figures.
- Your cashflow forecast shows how much money you expect to be flowing into and out of your bank account and when. You must show that your business will have access to enough money to survive.
- Your profit and loss (P&L) forecast gives a clear indication of how the business will move forward. Summarise the annual P&L forecast for each of the first two or three years of trading.
- If you are launching a larger start-up, you will also need projected balance sheets.
- Do not get too protective about your forecasts. You may need to revise them.
8. Financial requirements
- The cashflow forecast will show how much finance the business needs. Your assessment of the risks will determine whether or not you need to arrange contingency financing.
- Say how much finance you will want, when and in what forms.
- State what the finance will be used for.
- Confirm that you will be able to afford it.
9. Assessing the risks
- Look at the business plan and isolate areas where something could go wrong
- Assessing risk will help you minimise problems and help build up your credibility with any investor or bank.
10. Appendices
- Detailed financial forecasts (monthly sales, monthly cashflow, P&L) should usually be put in an appendix.
- You may want to give other relevant information.
11. Presenting the plan
- The more solid information you can gather for your own use, the better the business plan will be. But a banker or other outsider will not have time to read through all the details.
- Keep your business plan short.
- Make it professional.
- Test it.
