Knowing how to write a business plan is an essential part of thriving in an industry that is already a hugely overcrowded place.
Just like most things in life, it really is not a good idea to ‘wing it’ and instead, the better approach is to plan ahead intelligently. Failing to have any over-arching goal is the reason why so many businesses, especially SME’s, fail. Running a business day to day works for the short term, but everything needs to contribute to the bigger picture.
Having a firm business plan in place is great for many reasons. Firstly, it can help owners, shareholders and higher management understand the fundamental needs of a business. It will be hard for a business to meet all of its strategic goals without a solid business plan, but there are other benefits of taking the time to write one too.
If at any point a business decides to try access external funding, the financial lender will require access to various documents, including profit and loss statements, bank statements and a recently updated business plan.
Additionally, a business plan will also enable a company to maintain a healthy cash flow. This is a fundamental part of any successful business venture and the ones that fail to plan ahead are often the ones that become insolvent.
The Key Elements Expected from A Business Plan
Whilst it can be approached in various ways, there are still some fundamental parts that must be present in every single business plan. To have a business plan that succeeds in attracting financial support, it needs to tick numerous boxes, which include:
1. An executive summary
2. A description of your business
3. Extensive market analysis
4. Accurate financial projections
Whilst it is tempting to go overboard with descriptions, simplicity is actually key when it comes to putting together a good business plan. The plan itself needs to be tailored towards a specific target audience and it is essentially a more extensive version of an elevator pitch.
Do not waffle on. Keep it short, concise and to the point, as there will be plenty of opportunities to elaborate at a later stage. The point of a business plan is that it can be referred to on a regular basis – if it is too lengthy and drawn out, the reality is that no one will want to read it, meaning it inevitably becomes a waste of time and resources.
If there is a need for more detailed information, it is best to include this in an appendix. For example, for companies who are trying to seek external funding, lenders may expect to see some extra evidence as to why the business requires financial support.
Be Honest and Realistic
Whilst an over-exaggerated business plan might look attractive to shareholders, it ultimately becomes void if it is not an accurate representation of what has been and what can be achieved.
Do not aim to be overly optimistic with sales forecasts as this will only end badly. A business may end up becoming stuck in a financial rut with a disastrous cash flow problem, all because financial projections were over ambitious.
Identify any potential threats and openly discuss weaknesses. This will only help a business to thrive and overcome any challenges, because they are being addressed head on, rather than being buried in the sand, only for them to rear their ugly heads again at a later point.
Discuss the Business – Provide A Brief History
Writing a business plan that is prevalent with industry specific jargon will do no one any favours. Keep it simple and comprehensive so that it can be easily understood by individuals that are not necessarily familiar with that particular industry.
Including a history of the business is a good place to start. It does not have to be too detailed – just outline when trading first began and what progress it has made since then. If there has been a change in ownership, mention that. And to conclude, summarise the current ownership structure so that readers fully understand the current situation.
Then it is time to address the business directly – this means discussing its Unique Selling Point (USP). What makes this service or product different to all of the others out there? Why should customers, investors, lenders etc. choose to engage with this business?
Also, include a list of both the advantages and disadvantages. Remember – honesty is key!
Every good business owner knows that the key to standing out from the competition is to understand the competition. Any business that is at the top of their game has remained that way because they constantly assess the market and take the time to understand what their competition are doing well, so that they can do it better.
In a business plan, you need to take a step back first. Before you fully address the competition, it is important to first outline the market and more specifically, what part of the market the business best serves.
Once this has been addressed, it is then best practice to discuss what market share the business has. Are there any obstacles in the way that could potentially harm the future of the business? Are there any trends that are set to make huge waves within the industry? If so, a business plan should state how the business is going to ride this wave, rather than succumb to it.
Get to Grips with The Financial Aspects of The Business
This is arguably the most important part of a solid business plan. The finance section needs to be spot on as any business will inevitably fail if it is not clear about how it intends to make a profit.
Whilst it might take a little time and effort to perfect, it will be worth it in the long run as securing investment opportunities and external finance will be a lot easier.
Below is a checklist containing the top 10 things we at Nucleus Commercial Finance like to see in a well-formed, solid business plan:
1. Executive summary
2. A mission statement
3. Outline of ownership and location
4. An external analysis
5. SWOT analysis
6. Well researched objectives
7. Key action plans
8. A profit and loss account
9. A cash flow forecast
10. A balance sheet