“If you are failing to plan, you are planning to fail” ~ Tariq Siddique
A clear, concise and convincing business plan is one of the most important things an entrepreneur or SME business owner must do when starting a new business or when planning for growth and succession.
Your business plan outlines your business strategy and what you need to do to achieve your goals. It helps you think through your options, identifying the best opportunities and how to make the most of them. A good business plan also sets out how you expect the business to perform and any funding requirements. It will help you focus and develop ideas, identify priorities, and eliminate any non-critical elements, saving you precious time. And it will act as a benchmark for the performance of the business going forward.
As Entrepreneur notes, it’s “also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road.”
But how do you write a winning business plan?
Business plans should never appear to be produced to a standardised format and should be sure to include the unique selling propositions of the business. For this reason, no checklist can be comprehensive and the following list should be used primarily as an aide-memoire to ensure that no material subjects have been omitted.
The plan should project a balanced view and should include both strengths and weaknesses, with suggested actions to overcome deficiencies. Whilst it should not be over optimistic, it should not lose the opportunity to sell to the potential investor or lender the opportunities which an investment would offer.
By involving key team members in the complete planning process, you will continue to build up a successful, committed team.
Key components of Your Business Plan:
An executive summary is a summary of a business idea or business plan and is designed to give the reader a flavour as to what the larger document is about. This section of the plan typically covers the next one to three years, or sometimes five years. It outlines your objectives and how you will achieve them. Reasons for the approach for funds. Brief synopsis of distinguishing features. Strategy for company. The plan of action.
Don’t go into too much detail, but rather provide a high-level view of your business, giving the reader a quick idea of your business.
This section includes a background on the history or origin of your company or idea. The challenges you have faced to date and the current position of business – the products and position in the market, and your competitive advantage.
Here you will outline the competitive environment, providing research on your industry, market, and competitors – who your competitors are, the total market for relevant products/services, expectation for increases in market (include independent evidence), any threats from potential new technologies, your competitive advantage, and barriers to entry.
Marketing, sales and customers
This entails the 5 P’s of marketing: Product, Price, Place, Promotion, People.
Your approach to market and rationale for increasing sales. Major customers and percentage of sales with comparatives. Investment and staff required to accommodate projected sales. Distribution. Your online and offline sales and marketing strategies.
“Each marketing objective should have several goals (subsets of objectives) and tactics for achieving those goals,” states Entrepreneur.
“In the objectives section of your marketing plan, you focus on the ‘what’ and the ‘why’ of the marketing tasks for the year ahead. In the implementation section, you focus on the practical, sweat-and-calluses areas of who, where, when and how. This is life in the marketing trenches.”
Facilities, premises and production
Here you will provide details of premises and plant (including freehold or leasehold), relevant aspects of production process, suppliers and raw materials, comparison of costs compared to competitors, plans for production in the future, any environmental issues, and compliance with standards.
Organisation and management
This is where you will present your business and management structure.
Introduce the team that is leading your company. Include details of directors and senior management with roles, ages, length of service and salaries. Try to condense this information into a single short paragraph for each member of your team. Also include an organisation chart, share option schemes and other incentives, as well as pensions and training plans.
Financial projection (profit & loss, balance sheet & cash flow)
This section should include a summary of your financial forecasts, balance sheets, income statements and cash flow projections. Current management accounts. Projected results for three to five years and assumptions. Include a sensitivity analysis for those assumptions (or risk factors) which have the greatest effect on the projections, remembering that if sales exceed target more working capital is likely to be required. Consider both internal factors (e.g. timing of sales) and external factors (e.g. interest rates and exchange rates). Break even levels. Key ratios. Comparison to competitors. Taxation. This is also where you cover how much money you will need for next 3 to 5 years.
Make sure you are very thorough, as this section will receive the most scrutiny. Your numbers and financial data must be meticulous and transparent.
Proposed financing structure
Here you will outline your existing shareholding structure, existing debt facilities, proposed financing structure, management investment, equity returns, gearing ratios, and interest cover on debt. You should also use this section to outline your succession plans and exit strategy.
Systems and other noted points
Document your current accounting systems (manual and computing) suited to your business needs.
Outline your intellectual property and patents. Litigation.
Set out a one-page analysis of strengths, weaknesses, opportunities and threats. Strengths might include brand name, quality of product, or management. Weaknesses might be lack of finance, or reliance on just a few customers. Opportunities might be increasing demand or a competitor going bust.
Threats might be a downturn in the economy or a new competitor.
Be honest about your weaknesses and the threats you face. Spell out mitigating circumstances and the defensive actions you are taking.
The appendix of a business plan is usually the last section to appear in the business plan and should hold the entire plan’s supporting documents in a clear, well-organised fashion. It should only include essential information, such as copies of latest accounts, projections (Year 1 Monthly, Years 2 & 3 Quarterly, Years 4 & 5 Annually), curriculum vitae for senior executives, copies of sales literature.
A winning business plan supports the objectives for your business by clearly outlining the opportunities and the strategy towards achieving your goals, whilst still being mindful of risk. It is also adaptable, depending on your audience.
Writing a business plan can be a daunting task, but our business advisers are here to not only help you put together a winning document, but also to take your plans to the next stage.
Beavis Morgan Partner, Paul Ashton, has advised clients from owner managed businesses and small and medium sized entities through to publicly quoted companies, assisting with starting up, fundraising and investment, business growth and development, whilst all the time helping businesses navigate the maze of often complex tax issues.
Together with our partner business BM Structured Finance, Paul has been instrumental in obtaining bank financing and venture capital for a number of startup and growing businesses. He has the skills and experience to know what potential investors are looking for, and can save you time and trouble by critiquing your profit and loss, cashflow forecasts and balance sheet forecasts. Once the numbers are right, he will review your business strategy and help you choose the best course to achieve your aspirations.