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A well prepared business plan is essential throughout the life of your business, not just before you start. You will need it later on to guide your focus, to prepare for expanding the business or to help implement new directions, technologies. or products.
Before starting your business, a business plan will ensure that the business is feasible and there is a well laid out blueprint for action. Further reading: How to Start a Business.
INTRODUCTION
A business plan will include critical business decisions made at the start, such as organizational structure, patents, initial debt, partners, etc. It will be geared to the initial funding or capital requirements from a bank, investor or lender.
Once you are operating, a business plan can help you track your performance. You may need to include new steps in the plan for one-off events such as grants, accreditations, expansion or strategic changes in direction, new markets, products or services, further funding requests to banks for either short or long-term funds, or to attract new investors.
FOUR STEPS IN PREPARING A BUSINESS PLAN
STEP 1: Collect information
Gather information on your business, product, market, industry, economic data and anything else relevant.
STEP 2: MAKE AN ANALYSIS OF INFORMATION COLLECTED
Take all information collected and consider how it will affect the success of the business.
STEP 3: FORM A STRATEGY
Decide how :
- Your business will operate
- The product or service will be marketed, including packaging, selling, advertising, etc. (marketing plan)
- Finances will be arranged, including sales forecasts, budgets, cash flow forecasts, profit-and-loss statements and so on. (financial plan)
- Your business will operate, including supply sources, equipment, materials (operational plan).
STEP 4: PREPARE THE PLAN
Put all the information together into one consolidated business plan. The plan itself should be:
Brief: only use essential and useful information. For instance, if you are trying to secure a loan, tailor the plan to the request.
Clear: use simple but professional language. Use short sentences, tables and diagrams to display your information. Avoid using too many adjectives.
Truthful: your business plan should not exaggerate, as others (for instance your bank) will probably see through the exaggeration and react unfavourably – you need to present a realistic idea.
Logical: the way your business plan is prepared is indicative of how your business will be run.
PREPARING YOUR BUSINESS PLAN
Having determined that your business is feasible after making a Business Feasibility Study and conducted your SWOT Analysis (Strengths, Weaknesses, Opportunities and Threats) and SWOT Action Plan, the next step is to prepare a formal business plan to take you forward.
Contents of the Business Plan
The following is a sample table of contents. Not all the headings will be relevant to your particular business, and more will be more applicable than others.
- Cover Page and Introduction
The cover page should have the following information:
- Trading name of your business
- Period covered by the plan
- Who the plan was prepared for, and the date the plan was prepared.
The introduction sets out the objective of the plan. For instance, if the business plan is for financing, the objective would state how much, the purpose of the funds and benefits to the business.
- Executive Summary: this is a one to two page summary of the plan, written to be read as a complete self-contained section.
Write this last as a stand alone document.
Write it as if this is all the reader is going to read. It should not be more than two pages, and it needs to make the reader want to read further into the business plan.
Include the high points of the plan, important milestones, key factors for success, financial targets and projected results, and a summary from the action plan.
- Mission Statement: this is your well thought out statement of purpose, who or what your business is or wants to be; the ‘flag of the hill’ that you want to march towards. This is important to help sell your business.
A well-considered statement of your purpose and business direction covers what you desire your business to be, where you expect it to go, the achievements along the way in the immediate term (first 12-18 months), medium term (two to three years) and the long term (three to five years).
- Business Description/Background: what is the business, competitive position, the market/niche.
This outlines the springboard from which you will proceed. What you are and what the business opportunity is, the nature of your business and past experiences and lessons.
Describe your business concept and unique features, your competitive advantage, any market niche or features that enable you to boast a unique selling point.
Cover the structure and organization of your business – how it will seize the outlined business opportunity, including an organization chart showing:
- Relationship between departments or key staff
- Main responsibilities of each staff member or department
- Number of staff in each department
- Any planned changes to the organization during the period of the business plan
- Brief résumé of key staff to provide an insight into the quality of management.
- Business Environment: what’s happening in your industry, economy and region.
This is where you address what’s happening in your industry or profession, events and trends, as they are relevant to your business opportunity.
- SWOT Analysis and Action Plan (see How To Write SWOT Analysis and Action Plan)
- Market Analysis: preview your market, where you fit and what you know about your customers and competitors.
- Marketing Plan: your comprehensive guide to marketing ideas and strategies. (see How To Write A Marketing Plan).
- Operations: production, logistics and infrastructure.
The operation section of your business plan is the basic nuts and bolts of what to make and deliver.
It should cover how you intent to operate your business and how you will organize your operating systems, production methods, capacities, quality control, stock management and asset replacement.
- Financials: This section of the business plan is highly important. You will use it describe important factors affecting and contributing to the financial performance and profit you expect to achieve.
This section should cover the following items:
- Key financial performance and results
- Profits or projected profits
- Sensitivity analysis
- Cash flow
- Balance Sheet
- Business ratios (See Business Ratios For Beginners)
- Capital requirements: You must give careful thought to assets and working capital, and the cash flow that will be needed.
- Human Resources/Staffing
The ability of your business to achieve its objectives is linked to the effective management of your people. See Human Resources Checklist
- Business Legalities and Intellectual Property
Are there any particular legal matters relating to your business?
Who owns the intellectual property?
What sort of business structure is the business?
- Key Success Factors: what you must do to achieve success.
You can give your business plan an extra push by including a page of key success factors. This page demonstrates the thoroughness of your plan and the thorough approach you intend to give to all aspects of your business.
INITIAL AND ONGOING BUSINESS PLANNING
Once you have created your plan, you need to keep in mind that business planning is not a one-off exercise, but an ongoing business activity. You need to regularly review (for instance, every six months) and revise your business plan. See Business Plan Review Checklist.
