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Why bother to write a business plan? Is it really that important?
Often start up businesses cannot see how important it is
to write a business plan - and many a “business adviser� is to blame for this perception! However, try this for a sobering statistic – over 90% of businesses that fail DIDN’T have a business plan.
Naturally, we are converts the simple concept of business planning and that is because we see plenty of businesses succeed, by just asking themselves some very simple questions – and answering them honestly.
Unfortunately, too many start up businesses are put through a business planning process (by those that should know better - there we go having another dig!) that is irrelevant, ponderous and stifles the creative
process of business start up.
One of our favourite business writers (Geoff Burch - see Books Section has likened the writing of your first business plan to trying to pin a jelly to a ceiling! Yup, that can sum it up sometimes - encouraging isn’t it? Your business plan will clarify your thoughts and help you to identify elements you need to consider - in short help to set your jelly.Once you have been in business for a couple of months you can then measure your actual figures against those you projected in your plan. This will allow you to adjust and spot any potential problems – and hopefully avoiding adding yourself to the failure statistic!
Business Plan Contents
One of the most important elements to get in your first
business plan is the ‘WOW’ factor. Business bank managers and grant awarding people see loads of business plans, often produced by an accountant or some other third party - who incidentally will usually add
their disclaimer to the plan - so write your own! Whilst the plan will have all the right components it won’t have the ‘WOW’ factor, only you can provide that. So, if you choose to employ a third party
to write your plan make sure you understand what they have produced for you and at least attempt to write the ‘selling you’ bits. After all, that’s what your first plan is – a sales tool possibly to persuade
a bank manager to part with his money. And even if you do not require funding to start, still write a plan because this document is going to be one of the most important things you ever write.
A typical business plan will contain the following:
Objectives:
What will this business
do?
What do you hope to achieve in the first year? What is your target by year two and three?
These need to be clear and simple aims, a bank manager
will see through waffle. Make sure you set yourself objectives and keep reminding yourself just why you are doing this!
Personal Background:
C.V. or Personal Profile
of all key people - and what skills they bring to the business. S.W.O.T. analyses
This is where you can really sell yourself. Point out the
things you are really good at and how they will be important to your business. At the same time check your S.W.O.T. analyses and be honest with your Strengths,Weaknesses, and compare them to the Opportunities you
are looking at but bear in mind any Threats, such as legislation that might affect your business. Also, consider your health and check your health insurance. The bank manager will prompt you on this one. Be warned -
one of the major contributors to business failure is ‘poor health’, so look after yourself!
Suppliers:
Who are they and
what trading terms do they offer you?
This will influence your cash-flow, for better or worse.
The Market:
What research have
you done?
Who will be your typical customer? Have you done a S.W.O.T analysis on your competitors? Is your business seasonal? Why will customers come to you rather than your competitors? How do you plan to promote your business?
Some very hard questions here, often skipped over by start ups - DON’T!
Financial projections:
What will your sales
be each month/quarter/year?
What will your gross profit be? Have you calculated your gross profit margin? What are your annual overheads? What is your break - even point? What is your estimated profit? Have you double checked your survival income? The cash-flow forecast, does it tally? What will it cost to start and where is the funding coming from?
The dry stuff now - sorry! But absolutely essential.
Now your first financial plan will be tricky, those darned financial projections - but help is at hand!
Premises/Equipment:
Itemise the
equipment needed and already got?
Where will you operate from, if from home, will the rest of the family be a nuisance?
Legal issues:
What form of trading
will you take - sole trader, partnership or limited company?
Have you checked about health and safety, etc? Can you use that stunning business name you have come up with? What insurance cover will you need?
Key people:
Not just you, but solicitors, accountants, advisers - who has helped you, name them?
Big tip!
If you are seeing a bank manager to discuss
your plan, (for a loan or not), get your plan to them a few days prior to your meeting. This will give him/her chance to read it in advance, and do your plan justice. You may have spent months producing this plan
and the decision to lend or not might hinge or something missed if the plan has to be read in a hurry.
When you purchase our exclusive Business
Resources Kit you can download an Outline Business Plan and Cash Flow spreadsheet plus accompanying fact sheets to help compile a plan. For more details CLICK HERE
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