Why you need a business plan
A business plan is a written document that describes your business. It covers objectives, strategies, sales, marketing and financial forecasts. A business plan helps you to:
- clarify your business idea
- spot potential problems
- set out your goals
- measure your progress
You'll need a business plan if you want to secure investment or a loan from a bank. It can also help to convince customers, suppliers and potential employees to support you.
Write a Business Plan
A well-researched and written business plan is an essential tool. And its benefits go far beyond its role as a document that enables you to attract funding.
The benefits of business planning
Producing a business plan means focusing your thinking and communicating your vision to others. You also get the chance to provide evidence that your business idea is financially viable.
Writing a business plan requires explaining the opportunity, what products or services you will sell, how they'll be marketed and sold,which customers you'll target and what competition you face. The key points of a business plan are detailed within an executive summary.
How viable is your business idea?
Writing a start-up business plan can expose flaws in your thinking,which enables you to make changes before you go ahead and launch your business.Alternatively, your plan can help prove the viability of your business idea (on paper, at least).
A business plan should showcase your vision. The reader should know where you want to take your business (i.e. your goals) and how you plan to get there (i.e. your development strategy).
If your business plan is to tell a convincing story, it must be underpinned with sound financial information.If your figures don't stack up, your plan, your business and ultimately you will lack credibility. Financial forecasts provide benchmarks against which the progress of your business can be judged enabling you to change tack if necessary.
Essential business management tool
Don't produce your business plan solely with your bank manager in mind.You must also write your plan for yourself, that way it can be a useful tool that can help you run your new business more effectively.
Keep your business plan short (i.e. 10-15 pages) and make sure it looks professional (type-written, no spelling or grammatical errors). Keep the language simple (avoid jargon) and concise, yet sufficiently explanatory.
The information you include should be factual, honest and realistic.Don't make too many assumptions, but use facts to back those you do make.Pragmatic forecasting, based on solid evidence, has much more credibility than overly ambitious finger-in-the-air guesswork.
Don't be overly optimistic with your sales or cashflow forecasts. Your business plan will benefit greatly from showing you've considered worst-case scenarios. And don't be afraid to document your weaknesses as long as you show how you will overcome them.
Once completed, show your start-up business plan to reliable advisers and make changes if they tell you to.
Updating your business plan
Things change in business - sometimes quickly, often considerably.That's why, if you're to maximise its value and remain focused on your objectives, you should regularly update your business plan. At least once a month is advisable, with more major reviews every six months (or when your circumstances change considerably).
Financial data is most likely to change, and inputting actual figures enables you to adjust your forecasts and run your business on a more accurate basis. Looking at your business plan regularly also allows you to judge how well your business is performing. Then you can change your strategy accordingly or confirm you're performing as well or even better than you'd expected.