Writing a Business Plan
The Business Plan is basically split into four parts: the business; marketing; finance and the management team.
The business
It should start with the basics of your business. A cover sheet should outline the company name, address and current owners. Start by outlining the legal structure of your business and who owns it. Keep this brief as an investor is more concerned about how the business will operate in the future.
Then describe your business and the product or service that you provide. Explain why the product will be profitable and why your customers will buy it, whether your product is unique or simply better than other products on the market.
Try to give a break down of the market sector and its potential. You can use competitors to show how big the market is and what percentage of sales you think you can capture.
All of these will tie into your goals and objectives for the business. The eventual aim for the business and how you expect to achieve that.
Marketing
The key to marketing is understanding your customers. You must be able to profile your target customer and their likes and dislikes accurately. This will help you understand how to position the product in the marketplace and how to price the product. You must also be aware of how your customer base is likely to change over time, whether it is declining or growing.
It should offer the reader a combination of clear description and analysis, include a realistic SWOT (strengths, weaknesses, opportunities and threats) analysis of each area. Examples include:
- Market demand for your products/services
- Your competitors
- Your financial resources
- The skills within your company
The SWOT will demonstrate that management is realistic about the company’s prospects.
STEP Analysis
Consider the 4 areas of activity in relation to any impact (positive of negative) they may have on your business, now or in the foreseeable future. As well as local implications, consider any movement in national, European and international situations, including future legislation, that may filter down to affect the business.
- SOCIAL – trends, changes in social acceptability, the changing needs of your customers.
- TECHNICAL – impact of technology on your business, your products and your customers
- ECONOMIC – employment trends, trading conditions, taxes
- POLITICAL – health and safety practices, employment legislation, trading legislation, licensing
Finance
This should include all the financial data on your business. Include any previous year’s accounts, up to three years if you can, as well as details of any outstanding loans or assets. Also include the current management accounts, cashflow forecasts and a breakeven analysis.
Make sure that realistic financial projections are outlined and that you provide different scenarios for sales, costs and cash flows for both the long and short term. Don’t be tempted to dress up the figures. Sales figures growing ever steadily will not impress a seasoned investor. Similarly, be realistic about your costs. Consumer products, particularly those on the internet, will need to plan for a large upfront marketing budget.
Pre-Start up Costs
Insert the items of expenditure required before the business can start trading, such as
- Capital equipment – vehicles, machinery, equipment, furniture, tools
- Raw materials or stock
- Premises – lease, rent, purchase
- Promotional materials – business cards, flyers, adverts
- Fees – legal, professional, licensing
- Owners’ capital
- Commercial funding – bank loan, private loan
- Start-Up Grant
- Other source
Projected Operating Costs
From your market research, insert your estimated annual costs involved in operating your business, providing as much detail as you can, such as
Direct Costs
- Material
- Stock
- etc
Indirect Costs (Overheads)
- Employee costs (wages, salaries, NIC, pension contributions etc)
- Planned capital expenditure
- Commercial rent and rates
- Premises – Heat and Light
- Machinery/equipment
- Insurance
- Advertising/Promotion
- Telephone
- Postage and stationery
- Professional fees a nd subscriptions
- Interest – Bank
- Finance repayments
- VAT
- Other expenses
Cash Flow Predictions
The Cash Flow Forecast containes the same information as you would expectto see in a bank statement. The Cash Flow Forecast, does not show gain or loss in the value of assets, it shows only cash going in to and out of the business, with an opening balance at the begining of the month and a closing balance at the end. In compiling this forecast, all you are doing is preparing a bank statement in advance.
The management
This section should outline all background and experience of all the key members of the management team. You should attach CV’s for each individual and outline the strengths and weaknesses of the team as a whole.
The Executive Summary
The last thing written is the first thing that appears in the business plan – the executive summary. This is the most important section and summarises in two pages what is written in detail in 10 or 15.
This is where, among other things, you state the company’s mission statement – a few sentences stating what the business does for what type of clients, your aims for the company and what gives it its competitive edge.
The mission statement should combine the company’s business’ current situation with your aspirations.
Just as the business plan, the executive summary should be clearly written and be persuasive, yet it should balance sales talk with realism in order to be convincing. It should be no more than 1,000 words.
You should make the Executive Summary count, always think of the elevator test, if you are presenting your Business case/Business Plan to investors. If you can’t convince an investor of how good your business is in the time in the lift between the ground floor and whatever floor you exit on, you may have missed your opportunity.
See other information in this section including: Writing a business plan, Choose a company name, Forming a Ltd company, How to set up as a Sole Trader, 10 reasons to start up a business
