How to Business Plan
How many times have you said “I’ve got a plan, but its in my head”. I’ll tell you, I’ve heard that many times. Having a written business plan is useful because it forces you to formally think through your short, medium and long term plans. This enables you to translate those thoughts in to a logical set of actions.
Why have a business plan?
This is a business plan that will help you drive growth. You’ll have considered your market proposition, what markets you’re targeting and how you intend to reach them (in terms of resources and actions). Once you’ve determined this, you can define your business objectives, set milestones and who you’ll need to reach them. Subsequently, you can measure your success. We would suggest a 12 week year approach. To find out more about this, contact us
A business plan is a must if you’re seeking funding and investment. Without one, your funder will not have a clear idea of your proposition and more importantly, how you’re going to generate a return. Since the recession, funding has become much more competitive, and not having a plan will put you at a disadvantage from an applicant that has.
What to include in a business plan
The key elements in a business plan are as follows:
Executive Summary
Write this last. It summarises the whole plan, sets out your primary objectives and milestones. If its a plan supporting a funding application, it will set out how much you want and how long you want it for.
Company Description
Set out a description of what you do, what customers you serve and what makes you different from others in the market – particularly what makes you the best. Its useful here to set out a mission statement (the purpose of your company) and a vision (which I translate in to what you’re trying to achieve over the period of the business plan.)
It might be appropriate here to present a SWOT analysis (strengths, weaknesses, opportunities and threats). This will make it easier for the reader to assess the level of risk in the plan.
Length of plan
How far in to the future your plan goes depends on individual circumstances. If you’re looking for investment, many investors look to invest and then exit after 5 years or so. So a 5 year plan would be appropriate. If its a plan for you and existing shareholders, a 3 year plan might be sufficient. If, on the other hand, your business deals with long term contracts, a plan covering the duration of the contract may be best. Generally, unless your business is highly predictable, a 3-5 year plan is probably best. Anything beyond this is likely to be guesswork – which is a waste of your time and will bore the reader!
Analyse your market(s)
Understanding your market, how big it is and what section of it your plan is striving to secure will help you allocate the resource necessary to win the business. It will also help you with your pitch. Any market analysis will involve a systematic understanding of the main competitors in the market, what their strengths and weaknesses are and how your business differentiates itself from everyone else.
Sales Strategy
Having understood your competitiors and your differentiating features, its now time to set out exactly how you’re going to win those customers and drive growth. There may be a large element of marketing to increase awareness and then a direct approach with a sales force. Or there may be a way to build a big email list and drive traffic to a sales funnel and eventual conversion.
Understanding the sales strategy will help you calculate the cost of sale for each strategy and thus each conversion. When you have done this, you can set out what you consider to be the “best” routes to market.
Resources
Most businesses highest cost resource is the people cost. So it makes sense to focus on people in terms of why they are in the business plan, what they contribute and how much they cost. Its difficult, but try not to put names in to the business plan – certainly the early drafts. Work out what the skill set requirement is to achieve the objectives. Only then consider who in the business has those skills and allocate them to the role that requires the skill set. If you start off with names, you could well end up with a plan that is right for the people but not necessarily “right for the business”.
Profit and Loss, forecast cashflow and balance sheet
Financial projections will demonstrate what the cash requirement is in a business and at what point it becomes self funding. It will help prospective investors work out what return on investment to expect and when the business is at its weakest cash position (and thus when their investment is at risk the most).
As a minimum, we would suggest a financial model is prepared and that projections are monthly. If you have monthly forecasts you can then measure actuals against the forecast and conclude how your business is doing against plan. If cash is very tight, we would also suggest a weekly cashflow forecast is implemented in the business. A 13 week forecast will give you a 3 month window to anticipate problems and take action to mitigate the risks arising.
The numbers are not the be all and end all – but all is much more likely to end if you don’t stay on top of them and having an appropriate forecasting regime in your business will reduce the risk of failure.
Help with your business plan
Doing a business plan need not be a daunting task. At QR3 we have over 100 senior finance professionals with the experience and expertise to hold your hand through the planning process. If you’d like to know how much they cost, just complete the form on this page and we’ll be happy to share our price list with you.
