Writing a Business Plan
Writing a Business Plan
The fact you have this book in your hands means that you are already aware of the importance of a business plan. With business failing at an alarming rate the need has never been greater to start off on the right foot with a clear understanding of exactly what you hope to achieve and how you will do it. A well thought out and carefully structured business plan is the key to the longterm success of any business. Whether you are just starting a business, buying one already established or perhaps in need of extra finance for expansion you will need a business plan.
UNDERSTANDING THE NEED FOR A BUSINESS PLAN
Reasons for a business plan
Your reason for compiling a plan will be different for each situation:
- If you are starting a new business you will require a plan to clearly assess every aspect of the business and show how it will succeed.
- If you are buying an already established business you will need to identify the strengths and weaknesses of the business to decide if you will be able to make it a success.
- If you are already up and running and in need of extra finance you will need a plan to convince those putting capital into your business that you can and will succeed.
- If you are applying for one of the many grants available.
Who will read your plan?
When you begin to compile a business plan you must always remember who the plan is for. Just as an author must always remember who will read his books so you must remember who will read your business plan.With this in mind you must present your plan in a clear and logical format. This will enable the recipient to achieve a clear understanding of your business and make a decision based on the information you have supplied.
Your business plan will benefit the various types of people who will all be using your plan as a basis for making decisions:
- your bank manager;
- alternative providers of finance;
- business advisory organisations;
- friends and colleagues who will invest in your business;
- yourself and your work colleagues who will be running the business and using the plan on a daily basis.
Launching a new business or buying an existing one is a huge step that shouldn’t be taken lightly. However with the right forethought and careful planning the transition from being a salaried employee to a self-employed worker should be a simple process. But before you take the plunge and tell your boss what he can do with his job, make sure you have the abilities needed to run your own business and that you have chosen a business that will suit your abilities. It is no good considering setting up a business to repair DVD recorders if your only experience of them is to press a few buttons to record your favourite programme.
You must find your business both stimulating and exciting to run, or you will find yourself getting bored and your enthusiasm draining. It does not matter if your friends find your particular business idea uninteresting; it is what makes you satisfied that counts. After all it is you who will be investing time, energy and money in your business, not your friends.
Have you got what it takes?
The dream of owning your own business and becoming your own boss will for many remain just that, a dream. However, for those with the determination and drive to turn their dreams into reality, then anything is possible. As you are reading this book it is assumed you are one of this number ready to take your future into your hands and become your own boss.
In the early days your business will demand your total commitment for very little financial reward. This can put a great strain on both yourself and your family so sacrifices will have to be made. You will probably have to survive on a reduced income whilst the business is getting established. The annual holiday in the sun will be postponed for a while and very few evenings and weekends will be totally free from work. You and your family must believe in your business and be prepared to adapt to the inevitable changes to your lifestyle that a new business brings with it.
Learning to be in charge
All the hard work associated with starting your own business should be outweighed by the many benefits being your own boss will bring. You will no longer be taking orders from someone else, it is you who will be giving them. No longer are you just another number or a face within a workforce, you are the person at the top, the one who makes all the decisions and ultimately it’s you who will be responsible for the success of your business.
You will have to remember though, it is you who will have to put things right when they go wrong, it is you who will have to stand behind your decisions and it is you whom people will turn to for advice and support. If you are ready to accept these challenges with determination and enthusiasm then you are ready to accept the challenge of running your own business.
Ten key questions to ask yourself
Ask yourself these questions to see if you have what it takes to run your own business:
1. Are you hard working and determined to make a success of your new business?
2. Are you totally committed to becoming your own boss?
3. Are you a highly self motivated person who thrives on pressure and new challenges?
4. Can you organise yourself and your business to work efficiently, productively and profitably?
5. Are you prepared for setbacks and ready to accept that things will not always go as planned?
6. Can you make sound decisions and stick by them whatever the consequences?
7. Are you able to learn from your mistakes and ensure they never happen again?
8. Do you have previous experience of your chosen business idea?
9. Have you examined your potential market to ensure you are able to succeed in it?
10. Are your family and friends totally behind you and prepared to make sacrifices?
If you have been able to answer all of these questions with a positive and confident YES then you are well on the way to starting your own business and becoming your own boss.
CHOOSING YOUR BUSINESS
Once you have decided you have the necessary qualities and abilities to run your own business you must next decide on which business idea is right for you. There are many ways to become your own boss, these include:
- Discovering a new niche market and developing a product or service to fill it.
- Developing a product or service of superior quality to that of the competition and then competing with them.
- Buying an already established business, perhaps with unrealised potential.
- Buying a franchise opportunity and using an already proven successful business formula.
- Using the internet to set up an online business.
Whichever method of becoming your own boss you choose it will cost you time, money and energy to get up and running so you will have to make sure you are able to make a success of it.
GATHERING YOUR INFORMATION
It is at this stage you should start to gather information. If you need to write to a government department for help or advice, then do so now. Many organisations, particularly government bodies, are notorious for taking weeks or months to respond to an enquiry. There is nothing more annoying than sitting down to write up a section of your plan only to discover the information you need is not to hand.
The golden rule of information gathering is to collect as much of it as you possibly can. You can never have too much information.
Even something which doesn’t seem to be important now may turn out to be crucial to your business plan at a later date.
COMPILING YOUR BUSINESS PLAN
Just as a book is separated into chapters which follow a logical sequence, so too should be your business plan. Here is an example of the section headings you could use to compile your plan:
The Executive Summary
The Nature of Your Business
Your Product or Service
Your Market and Competitors
Your Marketing Plan
A quick overview
Here is an overview; each heading is explained in detail later in the book:
It is a matter of personal preference whether this follows or precedes your executive summary.
The executive summary
This is a brief yet concise statement which is designed to give your reader an overview about your business by summarising the key points. Here you should describe the following:
-The current position of your business.
- Details about who will be buying your products or services, in what quantities and why.
- Your short-, medium- and long-term objectives and how they will be achieved.
- A summary of your financial forecasts.
- Details of how much money you need
The nature of your business
This section of your plan should give your reader an understanding about who you are, what you do and how you do it. The following points should be covered:
- Your business name, address and contact telephone number.
- The legal status you will trade under.
- Details of your key members of staff including yourself.
- Your location. & Your business objectives and how these will be achieved.
- Your mission statement.
Your market and competitors
This section of your business plan should describe the market you are in. It should highlight who your clients will be, what they will expect from your products or services, and details of who and where your competitors are.
Your marketing plan
Your marketing plan will describe how you will promote and sell your products or services. It will include details of:
- market research;
- your target market;
- the competition;
- marketing methods.
Your operational plan is the nuts and bolts of your business. It will illustrate to your reader the steps you will take to make sure your business will operate both successfully and profitably.
This is themost difficult part of compiling a business plan.Obviously yo uwill feel optimistic, but it is essential to be realistic. Any bank manager who knows his job will be able to see through any proposal based on inflated figures which make the balance sheet look good. The only person you will be fooling is yourself. Your market research will be able to provide you with an accurate sales forecast.
This will go hand in hand with the sales forecast as the sales forecast is presented in the form of cash flow forecasts which in turn lead to profit and loss and balance sheet forecasts.
In the appendices you should include any information which will support and verify any statements and assumptions you have made in other areas of your business plan
DESIGNING YOUR PLAN
There is no set formula for designing a successful business plan. Every plan will differ in length and style depending on the type of business. However there are characteristics which should be apparent in each of them.
Deciding the length
The length of your business plan will vary depending on the nature of the business. As a guideline your plan should be between 25 and 40 pages including the title pages and any appendices. Obviously if you have just invented a new car that runs on fresh air you are going to need a far more detailed document than if you are planning to set up a simple grass-cutting business.
The amount of capital you need to raise will also have an effect on the length of your plan. Generally speaking, the more capital you need, the longer the plan. If you are looking to raise £100,000 then anything less than 25 pages is unlikely to convince your bank manager to lend you money. However, if you only require a few hundred pounds, then a 40-page document is likely to bore the reader and overstate your case.
Choosing the right style
You will develop your own style of writing but you must always retain the interest of the reader and write in a narrative style using everyday terms. There is little point in using technical jargon if the reader cannot understand what you are trying to say. For example if ‘it has a 456 micro buffer enhanced with a 789 extended memory data translator’ means it is a fast and powerful machine, then just say it is a fast and powerful machine. Each sentence should follow on from the last in a logical sequence as should each chapter and sub-heading. Avoid trying to convey too many ideas in one sentence. Remember you are trying to make your business plan easy to read and understand.