Business planning is a fundamental building block of business success. Successful businesses get into planning early and aren’t frugal with money when it comes to buying the services of experts – accountants, lawyers, bankers and business advisers.
While many people prepare a business plan to raise finance, the plan is more than just a tool to raise capital: it is a blueprint for the business’ future and a way to check the viability of the business itself.
Before you start
If you choose to use a business plan to raise finance, it’s a good idea to get professional help from an accountant or business adviser, especially in areas such as profit and loss statements and projected balance sheets.
After you have consulted an adviser, set aside some time to think. If you don’t have time for this step, you won’t have time to do your books, market the business properly or train your staff.
Before you start writing, ask yourself: What experience do I bring to my business? Do I have skills in any of the following areas?
• Customer relations
• Money matters (budgets, cash flow, etc.)
• Digital/social media
• Admin (record-keeping, etc.)
• Legal and compliance
• Human resources
It would be beneficial to perform a SWOT test on yourself – look at your own strengths, weaknesses, opportunities and threats for an overall picture of where you are in the business stakes.
Think about the business you want to start or the one you’re in the thick of that needs direction. Describe the business in detail in writing, and note the markets you want to target in point form.
Now to the plan
Read on for a comprehensive overview of the sections to include in your business plan.
1. A table of contents
Your plan should be organised and clear, for ease of reference.
2. A mission statement
Make it simple. For example: “Within the next 18 months, we will provide a cost-effective customer service training program for the small retail sector.”
The mission statement determines the direction of the business. Defining a mission and having a long-term objective are important because when trivial problems erupt, you can revisit the statement and goals and then put out the small fires to achieve your long-term wants.
3. Your target market
Define your customer. Find out as much as you can about them. This will help you tailor your product or service to match their specific requirements, to encourage loyalty to your brand and word-of-mouth referrals. Perform market research to gauge:
• Where customers live
• Average age
• Level of education
• Where they buy (spending patterns)
4. Your competition
• What will your point of difference be?
• Perform a SWOT test on your business idea. Work out the main competitive advantage you have over competitors in order to be able to communicate this to future customers.
5. What brand-building activities you will undertake
These may come in the form of:
• Creating a social media presence
• Mail drop
• Public relations
Estimate costs, including the cost of your time.
6. Your business goals
What do you want to achieve? Where do you want the business to be in six months, in two years, in five years? Include any jobs you intend to undertake, your estimated income, when you want to move to commercial premises – even what car you plan to drive. The more specific you are in defining goals, the greater the chance of success.
Plan how to achieve each step. Write down a point-by-point action plan for each goal.
7. The financials
a) Return on your investment
Try to assess your business idea critically and objectively. After all, you are going into business to make money. Think of a percentage of income you’d like to receive once all your expenses have been met.
Do conservative projections show this can be achieved? How does this rate of return compare to other forms of investment? Realistically, you should expect to be returning a higher rate to account for the time and effort you invest and the risk involved in running your own business.
b) Your break-even point
“Break even” is where income covers costs. This means your profit will be zero. You must sell more than this to make a profit. How many sales do you need to achieve your desired profit level? How long will this take to achieve when you first start out?
c) Cash flow projections
Record all cash you expect to receive on a month-by-month basis for your first 12 months in operation. Include all the cash you expect to receive from your business operations and then add other cash from one of the activities, such as selling a car or putting your personal (or borrowed) money into the business.
d) Financial forecasts
Financial forecasts predict your income and expenses to work out the expected profit. Have an accountant help you prepare your financial statement (profit/loss report).
e) Balance sheet
The balance sheet lists your business assets and their value, including what you own, owe and are owed as well as the amount of money you have invested in the business.
In this section include everything about how your business operates, from production techniques, quality measures, staff, premises and equipment/use of technology to policies and procedures.
Describe operational procedures, manufacturing equipment, the level of production required, locations, international arrangements, licensing arrangements and any other aspects related to providing the product or service.
Answer the following questions:
• If you want to have 20 per cent of the market, how many businesses must you service?
• How many hours a day will you work?
• How many people, computers, cars, do you need?
• How much office space?
9. Your employees
Ensure you include the following information on your staff:
• Who they report to
Allow for additional employees as your business grows.
Include graphs, charts, resumes, etc.
• Keep your plan clear and concise and relevant
• Use evidence to support your projections
• Get help with the financial section if you need it
• Read and review the plan frequently. Use it to compare your actual business performance and make adjustments where necessary.