Putting Together a Great Business Plan
Many new owner-managers write business plans with the sole purpose of convincing a financier to lend them money for starting up. However, a good business plan does much more than that: it helps you build a strong foundation for your business. Your plan must be a coherent description of how your business will move from where it is now to where you want it to be in the future.
In addition to meeting the requirements of financial backers, you should have a written plan to help you clarify your business purposes to your partners, your employees, and—most important—to yourself. Writing your plan can help you identify specific goals and objectives and understand possible threats to your business plan so you can address them early in the process.
Be as specific as possible about the kind of business that you are starting. Describe your business in terms of a mission statement or executive summary that clearly summarizes its purpose and is easily understood by you, your staff, potential investors, suppliers, and customers. Envision and describe where you want your business to be in 5 and 10 years' time; for example, as a market leader, innovator, specialist, good employer, and/or supplier of superior quality. If you cannot describe your business in these specific terms, rethink your business idea. Focus on the core activities and direction.
For your business to succeed, you'll need a thorough understanding of your market environment, including its size and the share that you can realistically achieve. The size of your market share will depend on:
- market trends—find out what influences your target market now and how your product can take advantage of the trends
- target customers—describe who your target customers are, how many there are, whether this group is growing or shrinking, what number of them you think will buy your product, and why you think the number is realistic
- competition—list your competitors, describe their products, and explain why your product is better.
Define the characteristics of the target groups of customers that could buy from your business—and explain what benefits they'll receive from your product. For individuals, describe them in terms of characteristics such as age, income, location, lifestyle, and marital status. For businesses, consider location, numbers of employees, public or private sector, industry segment, and how much they currently spend on products like yours.
Competitors may be in the same (direct competition) or similar (indirect competition) business to you. Your competitive position will be determined by how many competitors there are and by these factors for each competitor:
- Products: are their products and services the same as yours? Do your competitors provide something that you don't?
- Customers: are your competitors targeting the same customer segments as your business?
- Share of the market: how large is it, and could you take some of it?
- Strategies: how they grow, market themselves, and price their products. Can you learn from how they conduct business, or do it better?
- Operations and facilities: what levels of service are customers demanding?
Based on your market research, describe your marketing strategy. Specify your sales targets for different market segments and how you intend to achieve those targets. Ask yourself, for example:
- Who are your initial marketing targets?
- Why are you choosing these markets first?
- What products, services, or particular deals will you be offering?
- Is there a specific volume, value, or share of these markets that you hope to achieve?
- When do you hope to achieve these targets?
- Who will you target in the coming six months? In the coming year – or 5 to 10 years?
Your marketing plan must now detail how you will achieve the targets you've set, including:
- the methods you will use for each target segment
- who will take what specific actions
- a timetable for each marketing activity
- the estimated costs of particular marketing activities
- how you will monitor and review progress
- how you will monitor and manage costs
- how you will handle the response to your marketing and readjust as needed.
Your marketing plan needs to be converted in the hard numbers of sales revenue. Set out your forecasts in terms of sales of different product types by volume and value, sales to different customer groups, and sales through different distribution channels.
You will need to describe your operations so you can make appropriate plans and estimate costs. Outline your plans for premises, equipment, staff, suppliers, regulatory compliance, licensing, etc., and make realistic cost estimates.
Your business plan should include a breakdown of your financial requirements, the sources of financing you have available to you, and any additional amount that you may need. This breakdown should include:
- the cost of starting your business
- details of your personal finances that you intend to invest, as well as of additional financing
- a detailed cash-flow forecast that will help to estimate how much available cash you will have in any particular month
- a profit and loss forecast to help estimate when your business will start to make a profit (which will be essential to your medium-term success)
- a balance sheet forecast to provide you with a snapshot of the trading position of your business, identifying what your business will owe, what it will own, and how financially strong it will be at a particular point in the future.
Even if you are the only person involved in your business, it is still important to consider your key skills, responsibilities, and other components of your management processes. Think about:
- Management team—outline skills and experience
- Key staff and responsibilities—summarize roles and contribution to the business. Be sure to cover marketing and sales, financing, recruitment, product development, general management, and administration
- Monitoring and coordination—set out how you plan to monitor performance (against objectives and targets), and to coordinate the key roles in the business.
Your plan should include a realistic awareness of the risks involved, as well as how you plan to minimize them. Consider which of the following risks are relevant to your businesses:
lack of management experience
- no trading history
- economic uncertainties
- reliance on a few key staff
- reliance on a few suppliers
- reliance on a small customer base
- customer bad debts
- partnership difficulties
- increased competition
- burglary and loss and
- failure to meet your sales targets.
Demonstrate in your plan that you have thought about these issues and have contingency plans in place.
When you have your written plan in final form, with the sections in logical order, produce a simple, attractive cover that includes the business name, your address, your phone numbers, e-mail address, and the date. When the plan and cover have been carefully proofread and any mistakes corrected, print the final copies using a good quality printer and paper and bind them neatly.
Your sales forecasts should include both a realistic assessment and a worst-case scenario, so you can plan for the worst case should it occur. If you are over-optimistic in forecasting sales, you may not be prepared to meet your financial obligations. .Also, make sure that any market research is comprehensive enough to give you realistic sales targets.
To ensure that you make a favorable impression on potential financial backers and other important parties, it must be accurate and mistake-free. Ask two other people, preferably people who can offer a fresh and objective look, to read it thoroughly to check that nothing has gone awry.
McKeever, Mike P.
Pinson, Linda.
Business Plan Software: www.brs-inc.com
Business Plan Software and Sample Business Plans: www.bplans.com