Writing a Business Plan
Writing a business plan can be hard to start so let's jump right in to what it's all about.
A business plan is a document that summarises where you want to take your business idea from now and for the next 3 to 5 years, and most importantly, how you are going to achieve your goals.
The actual document is a story describing the journey and essentials about your business. In reality, this is about putting all your ideas down on paper so that you can either review progress over time or a potential investor such as a bank can instantly understand how you are going to achieve your financial projections and to assess the risk of lending you any capital.
The length of your plan should be as long as it takes to describe the following :
- where are you now with your business
- where do you want to take it
- how are you going to get there
These are simple questions but questions that require detailed answers. Most plans that are submitted to a bank should only be around 20 pages because that should be enough to get the important aspects across to your potential lender. Additionally a bank or any other reader will probably only concentrate on 2 elements. Namely, your executive summary and your financial projections.
The summary is simply what it says. It summaries everything from a description about your business, the products, your customers, your management team, a SWOT analysis, your marketing activities and all your financial forecasts.
You can develop your business plan using business plan software such as Business Plan Pro or use readily available sample business plans so you’re not starting from scratch. Your business plan report will then be in the correct format and style that your readers are used to seeing so there’ll be no surprises and awkward questions.
Most new business start ups know they have to write a business plan because they have probably been told that by their bank manager. The main challenge they face is getting finance. The tough part is how to approach banks and what they might be asked before a bank will lend any money.
Once you have developed your plan you will have confidence in your business idea and how it’s going to achieve the objectives you have in mind. If you have ever watched the BBC programme ”Dragons Den” you’ll have a rough idea of what it’s like asking for money. Although going to your bank manager is not going to be such an experience, certainly the question and answer section is similar so you should be prepared.
When asking for money you’ll going to have to sell your business idea and yourself. It’s really a sales exercise. Much like an interview for a new job. A bank wants to know why they should risk lending money to you and your business and in the Dragons Den programme there are so many simple questions asked by the potential investors that the business owners sometimes can’t answer. Questions like -
- “how many sales will you make in year 3″
- “what is your profit margin”
- “how many customers are there in your market”
- “why is your price set at $xx”
When you are developing your business and your plan you will need to write answers to these questions down and when you do you will need to go through some form of decision making process to come to the conclusions. There should always be a reason as to why you write something down.
The reason you arrive at your conclusions will need to be explained to your potential investors. (If you haven’t seen Dragon’s Den then look it up on the BBC or search for it and watch one of the programmes). At the end of the day it all comes down to one document. Your business plan. You need it. Your investors need it.
You should spend time on it to ensure you know your business inside out and use it as a sales document in order to get investment from your bank when you need it. To ensure you have every question answered it might be an idea to get some friends or relatives to play the part of a potential investor. Go through the motions of pitching your idea and see what questions you are asked. Hopefully you’ll be able to answer everything but if you can’t, go back and research your idea and add the answers into your business plan.