Keep It Real When You Write Your Business Plan
By Andrew Pollard
As corporate advisers we have written hundreds of business plans for all types of organisation - start-ups, not for profit, public sector and multi-million-pound firms looking to expand, improve or exit. Each is different, but if you are thinking of writing your own plan here are some thoughts to bear in mind.
1. Write for your audience.
If your plan is written to seek investment or secure a loan then you need to set out your stall in a way that will convince someone who is not an expert in your business. They need to "get it" by just reading your plan. Explain properly what you do, why it is important and how it makes money. If your reader is left uncertain about the business model then they will be “out”.
2. Do proper market research.
That means writing down who your customers are, why they buy from you and who is your competition. A little research on competition goes a long way as you can detail what you do that they don't. Remember that everyone has competitors. Even if your product is unique, there will be alternative ways that customers can meet their needs without your product.
3. Be conservative in your figures.
All businesses are limited in how fast they can grow. You are sure to be constrained by your ability to hire staff, manage the business, sell, reach markets, manufacture or buy supplies. Costs are incurred long before sales revenue and as you grow you'll need more outside support like HR, lawyers and other professionals. Any investment that returns a profit of more than 15% in the first year is just too good to be true. Dial down your plan and let your investors talk up your numbers.
4. Keep it simple.
Start with who you are, what you do, how you do it, your customers and competitors, and your financials. If relevant add in suppliers, partners or anything else that makes you successful. Now your future plan needs to be one of two options. Either you are bringing new products to your existing customers, or you are taking existing products to new markets. If your plan does anything else then it may seem too risky for investors or too complicated to believe in. In your mind you might be thinking "we could do this, but if that happens then we will do something else…” Keep that to yourself. Your audience has no way to put a value to a plan that is full of ifs and buts.
5. Get a professional to read it.
And make sure it is not a partner, mate or someone who had a hand in writing the plan. You need someone who knows what good looks like and has no problem in telling you what needs to change. If you show someone a Business Plan that just isn't good enough then there is no opportunity to go back with a better plan later. You get one shot, so it needs to be perfect.
6. Most readers will decide after reading the executive summary.
It needs to be compelling, believable and pass the acid test of "would I tell my mum about this opportunity". If the reader is bored or thinks your plan is too far-fetched then the rest of the document will remain unread.
7. Be clear on what you are asking for and why.
The investor wants to see that you have asked for enough; if you run out of money before you breakeven then either the investment is lost or more funds are needed. And if the money leaks out of the business through bloated salaries or paying existing debts then it means the investment is not working as hard as it might. At the same time, the investor is unlikely to put money into a venture until it is actually needed so you need to be sensible about when you need the investment by.
The big take-away is that your business plan needs to be as good as it can be and focused on the exact audience because you won't get a second chance.
Andrew Pollard is a Director of Falkirk-based Ahead Business Consulting.