How to write a business plan

Every business should have a realistic and working business plan which should not only be prepared when the business is starting up or at a time when finance is being sought.

A business plan is like a road map for the business and is a set of directions to help it get to where it plans on going. A business might well get to where is wants to go without a business plan, but it will likely take a lot longer and there is always the danger that it will get lost along the way. Think about it this way – if someone asked you to navigate to a place you had never been before without a map or the modern Satnav, you would be able to get there, but it would take you a lot longer without the map.

So in short a business plan is a written document setting out the businesses short to long-term goals and objectives. The plan should include a description of the business together with details of the people behind the company. It should also include profit and cash flow forecasts and details about the market the business operates within together with details of and an understanding of its competitors.

Having said previously that a business plan should not only be prepared at a time when the business is looking for financial help, if you are preparing the plan for this purpose, then the plan might need to take this into consideration in how it is prepared. So the plan will need to be adapted and altered to suite the audience it is being presented to.

There are many benefits to creating a business plan from an in-house view point, which are:

• Focus your attention on the marketing and development of the business.
• It will help you to make sure your business is run efficiently.
• Provide you with a plan of your finances both in terms of profit/loss and cash flows.
• Help you to keep focused on growing the business.
• To keep your attention on the time-lines and keep you to the “Path” you have set for the business.
• Help you to avoid problems and potential pitfalls.

So what should you include in the business plan?

An executive summary

I suggest in this section you explain to your audience the fundamentals of the business – imagine if you would that you were in a lift with someone that has just asked you to explain your business between stops. What would you say to this person to get the message across in a compelling yet clear and concise way so that this person is under no illusions about what your business is about.

If your audience is a bank then I would advise you to include in this section how much money you are looking to borrow and what this money will be used for, but more importantly what this money will do for the business meaning that the money will be repaid.

General company description

In this you need to include details about the type of company you have and owe owns it, who are the directors, if it is a limited company. Give the reader a bit of the company history, like when the company was established, how many employees it has and any significant milestones that would show your company off in the best light.

Your products and services

Describe your core products and services and how each of these contribute to the company. Explain the split of the income between your services and/or products and how profitable each one is. Explain how you intend to expand the business and which of your lines will be expanded and whether you intend to add any new products or services to capitalise on your existing client base.

Your marketing plan

Take time to think about how best to market your business and look at new ways in which you could exploit existing and potential customers. Brain storm some ideas within the company and then crystallise those ideas within this plan. Consider doing some market research and convert the information you have found into meaningful information for the business and how this can be used to the benefit of the services your provide and products you sell.

Knowing your total market size can really help you to know how much you can expand your business – there is no point in having massive expansion plans for a business that is in a market where there is no such potential or if the market is in decline.

Consider what your company’s strengths are and how these can be used to your advantage against your competition. If you have not already done so work out what your company’s USP (unique selling proposition) is and if you don’t know or don’t have one, then this is the time to work this out. What you are looking for is to be able to answer the question asked by a potential customer “why should I buy from your company and not from Joe Blogs down the road?”. Do not get drawn into a price war or the all too easy answer to say “we are cheaper than them”, because if you simply compete on price and your competitors match your prices, then this will leave you no room to move other than reducing your prices still further!

Operational plan

Expand the information on how the business runs, the premises and whether you own it or not, the length of the lease if it is leased. Details about your staff and how many are in each department and how this will change over the next 12-months and into the future as the business expands.

What systems does your business have in place to help make the business run smoothly and are these systems to be up-dated or modified. Include in these details about your IT systems and your operational systems like stock control, production control, quality control and so on.

Consider your company’s KPIs (key performance indicators) which are financial and non-financial measures used to help an organisation define and evaluate how successful it is. A KPI is something you can look at to see how well you are doing on a particular area of your business and it is like have a rev-counter in your car. KPI’s are used to monitor how you are doing and whether the key areas of your business are moving in the right director or not.

The financial plan

Your plan should include a summary of the financials affecting the business over the next 3-5 years. In the body of the report include key figures like your company’s turnover, gross profit and net profit figures over the following 3-5 years. Also include key balance sheet figures like your cash balance, debtors, creditors, fixed assets etc., which any good cash flow forecast should include.

The full cash and profit forecasts should be included in the annex to the business plan so that the reader of the report will be able to see how your cash flows pan out over the next few years, and in the event you are seeking finance, the lender will be able to see how the loan is used and how this will impact on the business going forward.

So if you do not already have a business plan for your business then I suggest you think about doing so.