The business plan
Got a brilliant idea? Great. Now write a business plan to support it and get your venture off the ground
Considering floating your idea in the sea of big business? Then you’ll need an unsinkable business plan. A business plan is the “why”, “where”, “when”, “how” and “who” of your “what” that will attract investors, including banks, and persuade grant providers, potential partners, suppliers and even customers to support you. And it’s not just a document prepared for everyone else’s reference – a well-prepared business plan will help you flesh out and focus your idea, confirm that you’re ready to take it forward and provide a blueprint for doing so.
So, how to go about writing this cornerstone document? With concision, clarity and credibility, that’s how. Your proposal must be rigorously researched, effortlessly explained and financially sound. All supporting information, such as technical data or market research statistics, should be allocated to the appendices.
Ask your local enterprise centre or university careers service for help with preparing or reviewing your plan. There are numerous generic templates available, too: almost all of the banks offer free business-plan software, and there are rich pickings on the internet, especially from the Microsoft Office website.
You might also gain inspiration from one of the more than 500 sample business plans available from www.bplans.co.uk. Simply choose the industry category that most closely matches that of your own business, then click through to one of the sector specialist plans therein.
Your business plan should consist of the following elements:
Bank managers and venture capitalists are known to make provisional decisions based on this front section alone, so keep it short and snappy, avoiding technical jargon or corporate spin, both of which will undermine a plan’s credibility. If, after perusing your pitch, an investor understands what your proposal is about, the executive summary has done its job.
Quite literally getting down to business, this section sets out the background to your idea. Compose a succinct description of the business opportunity: who you are, what your proposal offers, why, where, how and to whom. Include information on how your idea has developed into its present form; how it will stand out from others in the same sector; what your prospective customers will gain from it; and how the idea might be developed to meet changing and future needs.
Management team and personnel
The skills, commitment and experience of your management team can be an influential variable in investor decision-making, so use this section to parade your credentials and those of anyone you plan to recruit. Include expert advisers, such as accountants, lawyers and other supporters or mentors. Detail relevant achievements and abilities (consigning full CVs to the appendices) and demonstrate the advantages that your team will have over present and potential competitors. Indicate how you’ll tackle weaknesses or omissions in your team, too.
Product, service or technology
What makes your business idea unique or distinct? How does it work? What benefits does it offer? Why will customers buy it? What are the key features of the sector(s) in which you plan to operate? What competition exists? How will your idea be developed? How might you diversify? Summarise any patents, trademarks, intellectual property or design rights that you’ve applied for or already hold.
Customers and competitors
Describe the market for your business idea: What is its size? How fast is it growing? What are the market’s trends and drivers, and why do they exist? How is the market broken down into segments or sectors? In which sector will your idea feature? Which competitors already service this sector? What are their strengths and weaknesses? Why will customers leave them and come to you? Which competitors might service the sector in the future? What is your strategy for the medium and longer term? How are you planning to respond to any anticipated changes in the market? How might your competitors do so?
How will you identify potential customers? How will you pitch your idea? How will you price it? How will you sell it? Who will do the selling? How long will each lead take to line up? What percentage will turn into sales? How long will each sale take to close? How soon can you start selling? How much will you be able to sell? What will be the average sale value? Do you have any customers already lined up? Will there be any minimum order figures? Will there be any repeat sales? Is there scope to increase profit margins or sales? What will be your payment terms? How much income can you expect each month?
How will your eureka moment translate into business practice? Where will your business be based? What are the pros and cons of any premises? Who will be your suppliers? How did you select them? What manufacturing facilities will you require? What equipment? Do you need your own facilities, or would it be cheaper to outsource any manufacturing processes? How will you deliver the product or service to your customers? What is your information-technology strategy? What management-information systems do you have in place for stock control, management accounts and quality control?
Hold tight, this is where you transform everything you’ve claimed in preceding sections into actual numbers. You should provide a summary of your financial forecasts (noting the assumptions behind these projections); a two- to three-year sales forecast; a two-year monthly profit-and-loss forecast; a profit forecast for a further two years; a break-even analysis (noting all assumptions behind it); a two-year monthly cash-flow forecast (noting timings of, for example, salary payments, sales, etc.); a projected balance sheet (opening day to year end); and an indication of any investment you’ll need, noting how you plan to repay any borrowings.
Undertake a SWOT (strengths, weaknesses, opportunities and threats) analysis of your plan, listing all risks that could affect your figures. Finally, consider presenting your personal finances here, too, or at least an outline of how you will support yourself and the business while it’s in its infancy.
What are the qualitative and quantitative objectives of your business idea? How will you measure their achievement? What contingency arrangements do you have in place to overcome risks such as those identified through your SWOT analysis? Will these arrangements be articulated in terms of funding? How much finance will be required? How will you afford it? Will there be any shareholdings? What prospects are there for the investor or lender?
The devil is in the detail, and the detail is in the appendices. Your business proposal must be backed up by hard facts, such as marketing statistics; detailed financial calculations; technical diagrams; product literature; CVs of key personnel; target customer analyses; testimonials from potential customers, suppliers or sponsors; and competitors’ product lists and costings. All such external data will add credibility to your business case.
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