Writing A New Business Plan – Every Business Owner’s First Skill
As you step out into a future as a business owner, even if you are not the most organised or logically-minded person in the world, the plan that you write for your business is, simply put, the most important document you could ever write. As both a roadmap for what you are going to do and how you are going to do it AND if you are ever going to need investment, or financial support from a bank or business partner, it will prove to be essential.
There are innumerable templates and suggested contents pages for business plans, but rest assured – your business plan may only need to be a few pages, as long as it contains key information. Moreover, you should look at your business plan as an extension of a mandate that you should already be working to, designed to ensure that you are focused on your ultimate ambition rather than a whole host of other activities..
So, here is our suggested list of contents:
- Objectives - What you want to achieve from your business, including financial outcomes.
- Executive Summary – An overview of what the business will do and how, including its legal structure and roles within the business. The summary should ensure that those reading will decide that the rest of the plan is worth looking at.
- Market analysis – How many businesses already offer this product or service, and size of market.
- Customer / Demand analysis – Who your potential customers are, and how likely they will be to buy from you. Proposed average customer values should be identified, with likelihood of repeat purchases.
- Supply – What your product or service consists of and how you will create these.
- Environmental analysis – An area which has started to become more relevant, even for non-product led businesses, as investors increasingly need to answer questions in terms of carbon costs, and the environmental impact of businesses.
- Competitiveness – How you differentiate or compete in your marketplace, usually with direct comparisons. This also then forms a link between what your message needs to be and how you will execute that in your marketing strategy.
- Sales and Marketing strategy – Product definition, pricing, where and how it will be sold, how you will promote it.
- Success factors – Listing what are the critical success factors which must happen in order for your business to succeed, including how often you will review your business plan.
- Finances – Spreadsheets of your likely costs and predicted revenues, normally for the first three years. Most people underestimate costs and overestimate revenue, but you should be confident to show realistic earnings which, when they are over-achieved, will delight investors, and create better credit opportunities in the future. Take into account unforeseen circumstances such as interest rate rises, late payments, and other issues which may impact upon cash flow.
- Conclusion – Sum up your business plan in a few sentences with the main features and benefits.
Raising Money – How To Finance Your Business
You certainly have a lot more choice available to you than just asking your bank for a loan. By completing your business plan you should have a clear idea of how much money you are going to need at the start of your venture. But DO consider having a professional look over this, such as a bank manager, accountant, or your bookkeeper. Then you can choose the best option for you:
Use your savings: means you are self-reliant, HIGHLY motivated to make the business work, and you don’t Idon’t ddhave huge debts if your business isn’t successful.
Do it part-time: a great, low-risk strategy means that you can still work part-time for someone else.
Grants: check out your eligibility for a grant which could be an interest-free loan, match-funding of other investments, or even be a lump sum e.g. The Prince’s Trust (for under 25’s), regional development agencies, and charities.
Loans: straight unsecured business loans are less available now, and lending with good rates against security such as your house can be more difficult to find.
Overdrafts and credit cards: a feasible way of accessing cash, but an expensive way of borrowing.
Offers of loans from friends or family should be treated cautiously. If there are issues in the business, then important relationships could suffer, or your close investors could expect to have a say in what you do. Ensure any agreements have concrete terms before any loan is accepted, backed up with a legally-binding agreement, and signed by all parties.
Business Angels: Venture Capitalists for the smaller business, Business Angels are usually successful business people themselves, willing to invest their liquid assets (cash) in other businesses which means that they get better and faster returns than in a bank account. Remember that you are effectively handing over part of your business to them and they may want to get directly involved if things don’t go according to plan.
Any investor will want to guarantee as much of a return as possible, as soon as possible for their initial investment, so you will need to amend your financial projections if you can secure, or decide to use options such as Business Angels or loan based grants.
Remember the golden rule of financing your business, as displayed eloquently time and again on Dragons Den – always be prepared to walk away from a potential deal if the offer does not meet up with the valuation you have placed on the business.
Useful links:
http://www.businesslink.gov.uk
