Anyone who wants to start a business needs to have a good business plan. Not only will a solid business plan attract investors, but it will also provide you with the direction you will need in the coming years. With so much riding on it, you can’t afford to not give it the attention it needs. If you’re going to start a business, start it properly.
So, where do you begin? You need to convince the people reading your business plan that your business is worthy of their consideration. But how much information and how detailed should it be? These questions, along with many others will be discussed in this summary to ensure that you know exactly how to prepare a business plan.
In this summary readers will discover:
- The recipe for a great business plan
- Cash flow forecasts
- Points to consider for retailers
- The importance of addressing your online presence
- What to consider if you are borrowing money
- Keeping it clear, concise and honest is the way to go
Key lesson one: The recipe for a great business plan
Your business plan has the power to make or break your business. Why? Because if you need funding for your business, your business plan will determine the outcome. So, how do you do this?
Your business plan, first and foremost, should have an opening statement about what your business is, how much money you want and what you will use it for. However, this statement should be short – in fact, no more than two sentences. Then you have to give the reader an idea of your target market. Investors need to see that you have done your homework and know exactly who your target audience is that you are going to sell to. Once this is done, you have to include information about yourself, including things like training, qualifications and previous achievements. Think of it as being at an interview and you need the people interviewing you to see how you would be a good fit for the job. Next, briefly describe how your product will benefit your customers. The keyword is briefly – describing your product might be exciting, but you need to make it accurate and concise.
Now, for the final bit, you have to discuss your business’ future. How you see it growing and how it will remain sustainable in the future. There are thee questions you need to answer in this section of your business plan.
- How will I market my products or services?
- Who will manage the day-to-day running of the business?
- Where will I carry out my services or produce my product?
When you answer these questions, be sure you sound confident and sensible. Potential investors need to see that you have thought about these things and made rational choices.
Key lesson two: Cash flow forecasts
A cash flow forecast is a prediction of what your financial activities will look like in the future. As a new entrepreneur, this might seem a bit daunting but it doesn’t have to be a scary process. All you have to do is break down your income and expenses. It’s usually done as a spreadsheet which lists your predicted sales income and your outgoing payments. Payments will include things like overheads, suppliers and salaries.
A cash flow forecast is central to loan negotiations as it shows them how much money you will need and the time period you will need it for. It also allows you to have a basis to negotiate the amount you can borrow and show them how you will repay it. Completing a cash flow forecast also enables you to re-think your expenditure and see if you need to cost-cut before presenting the final forecast to the powers that be. You can even make multiple forecasts with different variations to ensure that you have a solid backup plan.
A crucial thing to remember about cash flow forecasts is that they are still valuable after you have secured funding. You can use it to compare your actual income and expenses to make sure that you are still on track. If things start to go in the wrong direction, you will be able to quickly identify where the problem is.
Key lesson three: Points to consider for retailers
Retailers have to put a little bit more effort into their business plans. Unfortunately, wanting to run a store means that you are entering a highly competitive market with large corporations not sparing a thought for little stores. You need to make your business plan stand out and show investors why it will work.
This involves dedicating a good chunk of your business plan to describing your potential market. Your potential investor will need to know that you have done your research and you know what the potential market for your product is in your store’s area. You also have to describe how much of this market you will have to tap into to make a profit.
An added attraction to your business plan would be to mention the footfall that you would expect at your store. Footfall refers to the number of people that will walk past the store every day. You can also estimate how many of those people would actually come into the store and how much they would have to spend for you to earn a profit.
The next step to your business plan is to set out your buying policy – that is what stock you purchase, how much stock and when. This has to be quite detailed as investors are often critical of buying policies as this is where most retailers fail. They end up with too much stock and not enough income. So be sure to take your time and think everything through, including how you will keep track of stock in your store.
Key lesson four: The importance of addressing your online presence
In this day and age, most businesses have an online presence in some form or the other. But the truth is, even if they have an online presence, most businesses are still figuring out how to use it properly. There are hundreds of online companies that have tried and failed to make it big and it is all because there are common mistakes which they fail to avoid.
You need to be different. You have to do your research and avoid these pitfalls. Many new companies dive straight into building a website and having an online presence without actually knowing what they need. When you design a website you need a few versions which you have to test out to see which has the best functionality and draws the most users. Another common mistake is having a website designed using technology that only the designer has. This means every time you want to change something on your site, the designer has to do it. That’s great for the designer, but means more costs for you. These are points that you need to take into consideration.
If you already have a functioning website then your business plan has to include information regarding it.
These are the questions you should answer in your business plan about your online presence:
- How many visits does your website get each month?
- How much of these visits are repeat visits?
- How do these visitors find your site?
- What is the bounce rate of your website?
- What is your website’s conversion rate?
In order to answer these questions ensure that you are familiar with the language and that your web analytics are up to date. The more accurate and familiar you are with this information, the better your business plan will be.
Key lesson five: What to consider if you are borrowing money
It is possible to start a business without borrowing money, but it is often slow. Not all entrepreneurs are patient. Some want fast growth and to achieve that, they usually need to borrow money. But before you take the leap, you have to first understand what type of borrowing your business requires.
Take, for example, a plumbing business. You need money to buy tools but once work starts coming in, you will be able to quickly pay off what you owe. In this instance, an overdraft makes more sense than a long-term loan. However, if you have just started a manufacturing business and you have contracts lined up, that money won’t come in until you have done a substantial bit of work on the contract. Whilst you begin work, you will need need to pay suppliers and workers. In this instance, you need working capital and to get it you have to secure a long-term loan. And when it comes to long term loans, make sure you negotiate a long holiday period. This is the time between receiving the money and repaying the loan. The longer the holiday period, the more likely you would already have some payments from your customers.
Key lesson six: Keeping it clear, concise and honest is the way to go
The points above all help with the content of your business plan. Now that you know what to include, you have to know how to present it. You need to make your business plan engaging and in order to do so, there are a few things you have to do.
First, ensure that your business plan is written simply and is as clear as possible. Avoid long, wordy sentences and try to keep your words short. Don’t over embellish, they will not be impressed with the span of your vocabulary and truth is, people don’t have time for complicated business plans.
Second, your business plan needs to be concise. Present the facts and figures. If you put too many details into it, the person reading it will lose interest. This does not mean skip the details though, just ensure that you present them in the shortest way. You could also base the length of your business plan on how much money you are asking for. More money equals more details.
Lastly, honesty is the best policy. Avoid exaggerating just because you want it to seem like you will make a lot of money quickly. It will only come back to haunt you later on and might even cost you your business. Facts and figures, once again, are your best options.
The key takeaway from How to Prepare a Business Plan is:
A business plan can make or break the start of your business. You need to ensure that you have all the details you need to provide people with an accurate business plan. If you do the proper research your business plan will not only help you secure funding but will also provide you with valuable information about your business’ future. Keeping your business plan clear, concise and honest is the best approach for everyone involved.
How can I implement the lessons learned in How to Prepare a Business plan:
Do your research. Understand what your business will offer and to who. Understanding your target market and their behaviour will help you gather valuable information for your business plan. Cash flow forecasts will enable you to pinpoint any changes that you will need to make to expenditures and can help you keep track of any problems that will arise once you start your business. Take the time now to do your research to formulate a solid business plan and you will save time later on.
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