Writing a business plan is an essential step in starting up a business, but it is often delayed or skipped all together by many entrepreneurs.
“Why should I spend so much time writing a business plan when I can be running my business?” “I don’t have time to write a business plan”. “Nobody will read it, so why bother?” These are comments I hear on a daily basis regarding why a business does not have a business plan. The statement that I always reply with is – “so, your business has not been planned and you’re just guessing.” A business plan is more than a pack of papers that have been packaged, and presented professionally.
Why Write a Business Plan?
The purpose of a business plan is to set the direction of your business. Your business plan objectives should be to provide a document that clarifies your ideas, and provides a reference point in times of difficulty or change. Your plan is your business bible, and can help you avoid costly mistakes and ensure long-term success.
Tim Berry’s blog in Bplans, Why Plan Your Business? Look At This Data shows results from a survey carried out by Palo Alto Software. They asked thousands of Business Plan Pro users questions about their business aims, strategy and planning. Almost 3,000 people responded. “Those who finished their business plans were twice as likely to successfully grow their business, get investment, or land a loan than those who didn’t.”
“Failing to plan is planning to fail” – Alan Lakein
The process of creating a plan will help you understand your business in greater depth. So when you’re out promoting your business to potential customers, financiers and partners, you can talk with greater confidence and accuracy. You will have a better understanding of the purpose of your business, and how it operates in its current environment.
A business plan should be a live and flexible document. Many experts say that it should be updated every 8 – 10 months; I don’t believe this is necessary for small start-ups. Every 12 months should be sufficient. But its objectives should be measured and discussed at least monthly to ensure your business is on track. To enable this I always recommend short, sweet and simple business plans that support your business vision. Nobody is going to read a 50-page business plan, not even you.
When you start writing your business plan you should have already carried out your business research, or be in the process of doing so. All you need to do now is roll up your sleeve, and write all that information on paper.
How to Write a Great Business Plan:
These are the steps I carry out when researching, and gathering information for my business, which I then use for my business plan.
• Market Research – Gather information on your future business, and industry, from as many independent sources as possible. The resources available are endless if you look properly e.g. websites, magazines, industry networks, trade fairs and library databases.
• Executive Summary – The business plan is a summary of the business, and the executive summary of a business plan should highlight the important features of the business plan. Keep it short and sharp, and get the reader excited about reading the rest of the plan.
• Business Description
– The business description gives interested people an insight into your company. Within this section you should do the following:
⁃ Describe the industry
⁃ Describe your company
⁃ Write a mission statement
⁃ Set out your current and future aims
• Financial projections – This is arguably the most difficult part of the business plan. It is hard to make financial projections when you are still trying to secure funding. Looking three years in the future may seem a lifetime away. One tip I would give is – get comfortable with Microsoft excel, as this will give you the flexibility to modify and re-forecast your projections.
• Financing & Funding – Where is your money coming from, and how much money do you have readily available? This section can determine whether your idea is viable, if it can be launched, or if it can be sustained in a period of low sales.
• Competitive Analysis – First, you must determine who your competitors are. Once they are identified you must get to know them. Visit their website and store if they have one. Talk to their buyers and suppliers. Find out as much as you can about them, because once you enter the market they will be doing the same to you. You are competitors, so you must aim to gain the competitive advantage.
• Location Analysis – Study your potential customers, and understand where they live or work. If your customer has to come to you, you must make their customer experience hassle free. If your business is online, you must invest in online analytics and marketing. This will help you understand your customer’s online shopping habits. This information should be used for targeted marketing campaigns.
• Data and Record Keeping – This is a very important point, if in the future you plan to apply for financial support from banks and investors. These people care more about past performance, future orders and projected performance than they do your business plan. So you must keep clear records that document this information. Your business plan will also help to support this information.
• Suppliers – Researching and finding suitable suppliers that you can agree the right price, right quantity and right quality will set you on the right path. If you get these elements correct you will have increased profits, reduced inventory, and increased money reserves. Highlight your supply chain strategy in your business plan.
• Operations & Management Plan – This outlines the processes, procedures and functions that will keep the business running. This tends to focus on production, manufacturing, storage, inbound and outbound logistics. The operations plan will highlight the key performance measures of the organisation, and the various responsibilities of the management team to achieve them. This section will focus more on the practical, and less on theory.