Failing to plan is planning to fail
Even if you never show it to anyone else, compiling a plan will help to ensure that you have thought through your idea and will definitely increase your chances of success.
Compiling your business plan can be quite daunting but it shouldn’t be an intimidating process – a good business plan can focus the mind as well as assist in securing finance and support.
Going through the exercise of compiling a business plan will clarify your strategy as well as defining your long-term objectives.
The plan itself can provide a ‘blueprint’ for the way that the business will operate with a series of benchmarks to check your progress.
Ideally it should also contain a cash flow forecast, a vital tool for convincing your bank or potential funders – and possibly key customers and suppliers – to support you.
Consider the funding question from the opposite side of the desk — if a friend or family member asked to borrow money from you for this idea, how would you react?
A good place to start is to ask yourself “where do I want to be in 12, 18 and 24 months time”? From here you can begin to formulate your approach to growing and developing your business idea.
The following tips should give you a much clearer idea of what is involved:
I have seen business plans which take up less than one side of A4 paper, some that could rival ‘War and Peace’ and everything in between. Ultimately, there is no perfect ‘one size fits all’ plan, the most important consideration is that the proposition is viable - your plan should be able to prove this. In theory, there is nothing to stop you simply writing a document which outlines your thoughts but I would strongly advise you to use a template which has already been tried and tested as this will make sure that you don’t miss anything vital.
Online templates and guides
There are plenty of excellent websites offering business planning advice and you will be spoilt for choice if you are looking for free or paid for templates.
One of the most important steps but one that is often ignored. This document will provide you with a clear road-map for your business and ensure that you have considered all of the key issues prior to starting up. Essential whether you want to borrow money or not.
Business support agencies, accountants and bank managers
These professional advisors will all tell you how important your business plan will become as your new venture takes shape. Thankfully, they also have the knowledge and experience to assist you with its compilation, and may well have a template that you can use.
Examples/other people’s plans
Do you remember back to school days when you had to look at previous exam papers and answers to help you revise? Adopting a similar principle can also work with your plan. You will find a wide selection online. They should give you ideas for style and structure, but do not be tempted to copy their wording directly.
If you are applying to a lender for funding, they will almost certainly have a template that you can use. In fact, some will insist on it.
Writing Your Plan
Once you have identified what format or which template you are going to use, it is time to start committing ‘thoughts to paper’.
Although the layout is in a set order, you do not have to stick to this when adding information. It is probably best to begin with what you know already and then undertake more research before filling in any gaps or areas of uncertainty.
Strangely, the finished plan usually starts with a section which is best left until last to complete - the executive summary. This is because it should be an ‘easy to read’ summary of all the other sections.
Investors often make an initial judgement on the executive summary alone and only read on if it is strong enough.
This is an overall description of the business, what it offers, to whom, within what area, the aims, ambitions of the business.
How much money it needs to start and where that money will come from.
If it is an existing business what are the previous trading figures?
If applying for funding, how much do you need? How will it be used? What impact will it have?
- Aims and ambitions of the business?
- What are your short term and long term business goals?
- What are your short term and long term financial goals?
- Do you have an exit strategy?
- Market analysis
- What is your market and where does your product or service fit in?
- How big is this market?
- How much money is spent on products or services similar to yours in a year.
- Profile your clients in detail, covering what they like or dislike about your service.
- Who are your competitors and how are you different from them?
- Give your projections in terms of number of customers, contracts obtained, etc.
- Who will be running the business and how are they qualified?
- How will responsibilities be divided?
- Detail any relevant experience that you have. (Including current qualifications).
- Give details of any training you intend to take.
- List details/experience of any partners/directors.
- Supply CV’s for yourself and/or other key members of staff.
- If you need to employ staff, outline their role and the experience they will bring to the business.
- Provide details of the location
- Work from home or business premises?
- How important is location?
- Primary or secondary location?
- Owned or leased and in whose name?
- Has the property got the correct planning consent?
- What are the lease terms, payment frequency?
- Is a deposit required in advance?
- Are there any environmental or hygiene regulations to consider?
- What insurance do you need? Public liability? Income protection?
- Marketing strategy
- How will you get the edge on the competition? Don’t rely on just being cheaper.
- What makes you different from your competitors?
- What promotional tools will you use?
- Do you need to advertise?
- If so, how and where?
- What are you going to offer?
- List some examples of your products/services.
- How much are you going to charge?
- How have you calculated the price?
- Who are your customers?
- Who will buy your product/service?
- Where do they live/work?
- Do they fall within a certain social group?
- What do they need?
- What are the benefits of your product/service that satisfy that need?
- Why will they buy from you? What is your USP?
- Is there any seasonality in the business?
- How much are customers prepared to pay?
- What are your payment terms?
Provide details of any existing or anticipated work or orders.
- What do you know about the competition?
- Who do your customers buy from now?
- Who are your main competitors?
- How do they do business?
- What do you see as their strengths and weaknesses?
- How will you take business from them?
Provide details of orders you have now.
- Market research
- What market research you have undertaken so far.
- What were the results?
- Have you any evidence to back up your findings?
It is important to provide evidence that there are sufficient customers.
- Advertising & promotion
- Can you outline your advertising and promotional plans?
- How will you reach your customers and how will you market to them?
- Why are they the best options?
- How often will you use them?
- What will they cost?
- If you propose to have a website, can you provide details of how it will be used to promote the business?
- How are you going to ensure that your website is found by potential customers?
- Which Social Media activities will you undertake?
- Are these all accounted for in your financial projections?
(Stands for strengths, weaknesses, opportunities, threats)
The SWOT analysis is made up of an assessment of the business’s strengths, weaknesses, the opportunities that exist and potential threats from competition and market trends.
It is normally presented in a grid or quadrant with a portion for each consideration.
Strengths & opportunities - you should detail the main strengths and opportunities, which you believe will make your business successful.
Then detail areas in which you feel you have weaknesses and how you might overcome them.
If completed honestly, the SWOT can be really useful when planning short, medium, and long term strategies.
DID YOU KNOW?
A well respected support agency undertook a survey which identified that more than 90% of the failed businesses questioned admitted that they had not written a business plan.
Personal survival budget
Knowing how much you need each month to live on is essential if you want to be able to concentrate on your business without worrying about paying your personal bills.
A personal survival budget helps you calculate the minimum amount you need to take out of the business as drawings each week/month.
Remember, this is meant to be the lowest figure possible, not how much you would like to earn if everything goes well.
Sadly, money rarely comes in or goes out at the most convenient time, for example you may have to pay for your stock before you can sell it. A cashflow forecast will help you work out roughly what you can expect financially in the future – even though some of the figures will have to be based upon calculated guesswork. This is vital information, particularly if you are planning to borrow money – it is best to plan for the maximum amount that you will need rather than having to keep going back to your lender asking for more!
“Turnover is vanity, profit is sanity”
Not having enough money in the bank when needed is one of the most common reasons why businesses go bust - even those who appear to be successful.
A cashflow forecast is generally designed to cover the next 12 months of trading and is effectively made up of three key elements: money in; money out; and a running total of what effect these have on your bank balance.
- You can download a free cashflow template and step-by-step instructions from: syob.net/free-pack.php
Once you have completed all of the sections, you should have a really clear idea of your target market, what you are going to offer and how you are going to reach potential customers. Income and expenditure will be calculated based on the results of your market research and you will be in a much stronger position to start.
After this, it is important that your Plan becomes a ‘live’ document – it will evolve with your business. You will be able to measure your progress both in terms of market penetration and financial success and prioritise your targets and new opportunities that will undoubtedly arise.
Starting your business is the beginning of a long journey for you, one which will provide you with excitement, independence, success, set backs and ‘freedom from the boss’. Your Business Plan is your route map for this journey. Construct it carefully and you will avoid unnecessary detours and costly errors.