A business plan is an unnecessarily time-consuming distraction, dreamed up by banks and management consultants, which will sit on your hard drive and never be looked at again, right?
Wrong. Writing and maintaining a good business plan is an essential part of any business. It will help you to clarify your business idea, target market, long-term objectives and funding requirements. It will be the blueprint for running your business and outline a set of benchmarks for you to check your progress against going forward. You will also need it to convince banks to lend you money.
Ideally, your business plan should include the following information:
- Executive summary. This is a condensed version of the whole proposal.
- Background about the proposed product or service. Why is there a demand for it? How will it stand out? What are its strengths, weaknesses, opportunities and threats?
- Market and competitor analysis. Define your target market and explain which products and services they already get from competitors.
- Sales and marketing strategy. Why will your product or service meet customers' needs? How will you position it? What will you do to sell and promote it?
- Management profiles. Who is the management team and what skills and experience do they have?
- Operating plan. What facilities and suppliers do you need to start out with? Do you need to hire staff or invest in materials for products?
- Financial forecasts. These translate what you have already said about your business into numbers. A realistic sales forecast will form the basis for your other figures while a cash flow forecast shows when, and how much, money you expect to flow into and out of your bank account. A profit and loss (P&L) forecast indicates the profitability of the business moving forward.
- Financial requirements. Outline how much funding your business needs, what it will be used for and how it will be repaid.
- Risk assessment. What are the main risks facing your business and what are your plans to overcome them?
- Appendices. These could include detailed financial forecasts (for example, monthly sales), a set of accounts or CVs of key personnel.
It is important to keep your business plan short and professional. Make sure that it is neatly typed with a cover and a contents page.
Read through the business plan yourself before you present it to anyone else. You could also ask a close friend or trusted adviser to look through it and let you know their thoughts.