Writing a business plan

At Rus­sell & Rus­sell we can pro­vide objec­tive assis­tance with writ­ing a busi­ness plan, based on our expe­ri­ence in help­ing start-ups in the Lanark­shire area. Here are some of the key aspects to con­sid­er…

Cre­at­ing a busi­ness plan is one of the most impor­tant things you will do when start­ing up. It will help deter­mine whether you gain fund­ing from poten­tial investors, and it will help you to clar­i­fy your busi­ness objec­tives and direc­tion.

In this sec­tion we look at how to write an effec­tive plan, the ingre­di­ents it should con­tain, and some of the com­mon pit­falls to avoid.

Before you begin writing

Before you start writ­ing a plan, you will need to con­sid­er what infor­ma­tion you need to assem­ble, the ini­tial deci­sions to be made, and the sales and mar­ket­ing options open to you.

Assess the exper­tise and assis­tance you already have, and decide what addi­tion­al help you will need to pre­pare your plan and har­ness your resources effec­tive­ly. For exam­ple, you might need accoun­tan­cy or mar­ket­ing assis­tance.

Exam­ine your busi­ness ideas crit­i­cal­ly and check these against your ini­tial per­cep­tion of the mar­ket­place. Per­form a ‘SWOT’ analy­sis on your busi­ness: look at its Strengths and Weak­ness­es, and con­sid­er the Oppor­tu­ni­ties open to you, and the Threats you face.

The mar­ket­place is the key to the suc­cess of your busi­ness. You should review the mar­ket for your goods or ser­vices, and the com­pe­ti­tion you face. Use mar­ket seg­men­ta­tion to iden­ti­fy poten­tial cus­tomers, and mar­ket sur­vey meth­ods to char­ac­terise your cus­tomers and their needs.

Presentation

The length of the busi­ness plan will depend on indi­vid­ual cir­cum­stances, but it should be short enough to main­tain the inter­est of any poten­tial investor.

The pre­sen­ta­tion should be pro­fes­sion­al and clear, with graph­ics and charts where appro­pri­ate.

Essential ingredients

Your busi­ness plan should include:

1. A busi­ness descrip­tion and mis­sion state­ment.

Every busi­ness needs a clear dec­la­ra­tion of why it exists, and a basic descrip­tion of how it intends to meet its pri­ma­ry objec­tive.

If you look at a good com­pa­ny web­site, it will often include ele­ments of the mis­sion state­ment in an ‘About Us’ sec­tion. It need only be a few sen­tences, and might be some­thing like “Our com­pa­ny aims to pro­vide out­stand­ing solu­tions and ser­vice to the x indus­try in and around the area of y”. Think of your mis­sion state­ment as the heart of your busi­ness plan. All your goals and activ­i­ties should flow from it.

Hav­ing pre­pared your mis­sion state­ment, you next need to com­pre­hen­sive­ly describe your busi­ness. Pro­vide a brief his­to­ry and then explain what it does, iden­ti­fy the mar­ket­place niche it fills and assert why you and the busi­ness will suc­ceed. You may also wish to reveal why your busi­ness chose its loca­tion and how you will ben­e­fit the local com­mu­ni­ty.

2. Man­age­ment and peo­ple pro­files

In busi­ness, as in any walk of life, peo­ple mat­ter. Poten­tial investors, lenders and even employ­ees are not inter­est­ed in a face­less, soul­less cor­po­rate enti­ty. They need to know that com­pe­tent, expe­ri­enced peo­ple are steer­ing the ship.

Pro­vide an out­line of your organ­i­sa­tion­al struc­ture and man­age­ment team, giv­ing sol­id rea­sons why you and any col­leagues are com­pe­tent and can deliv­er results.

3. A finan­cial por­trait and strat­e­gy

Prospec­tive investors and lenders need a good idea of the finan­cial aspects and poten­tial of your busi­ness. Include pro­jec­tions of basic data such as a pro­ject­ed bal­ance sheet, a prof­it and loss account and an analy­sis of cash flow. It is impor­tant to be as accu­rate as pos­si­ble. Do ask for our assis­tance with this.

Above all, make sure your num­bers demon­strate that you and your man­age­ment team have con­sid­ered the key ‘dri­vers’ that will deter­mine your suc­cess or fail­ure. Don’t fill the busi­ness plan with over­ly opti­mistic finan­cial pro­jec­tions that could ulti­mate­ly depict your busi­ness in a bad light.

4. Sales and mar­ket­ing objec­tives

Exper­tise and past suc­cess mean lit­tle with­out an up-to-date strat­e­gy for bring­ing your prod­ucts or ser­vices to mar­ket. Describe your intend­ed mar­ket, giv­ing spe­cif­ic details on its size and how much of it you intend to serve. What is your mar­ket’s growth poten­tial? What spe­cif­ic geo­graph­ic and eco­nom­ic fac­tors play a role?

Com­peti­tor intel­li­gence is anoth­er cru­cial fac­tor. Name your largest com­peti­tors and explain why you can serve your mar­ket bet­ter than these rivals. Do not con­ceal your weak­ness­es: recog­nis­ing the chal­lenges you must over­come shows that you are real­is­tic.

5. An exec­u­tive sum­ma­ry

The like­li­hood is that many poten­tial lenders will ini­tial­ly only read an exec­u­tive sum­ma­ry. That’s not to say they’ll nev­er read your entire busi­ness plan — but it does mean that a con­cise, read­able exec­u­tive sum­ma­ry may be nec­es­sary to get your ‘foot in the door’.

An exec­u­tive sum­ma­ry should show the high­lights of each sec­tion of the busi­ness plan, pro­vid­ing a clear syn­op­sis of who you are, what you do and where you’re head­ing.

Avoid some common pitfalls

Here are some busi­ness plan traps which you should be care­ful to avoid.

1. Over-opti­mism

Most busi­ness plans are over-opti­mistic, espe­cial­ly as regards pre­dict­ed sales, often mas­sive­ly over­es­ti­mat­ing the size of the mar­ket. Research your mar­ket thor­ough­ly. Too many busi­ness plans include a SWOT analy­sis, but con­cen­trate on the strengths and oppor­tu­ni­ties and ignore the threats and weak­ness­es.

2. Ignor­ing the com­pe­ti­tion

Busi­ness plans com­mon­ly assume that the com­pe­ti­tion will make no com­pet­i­tive response or indeed, will have no new ini­tia­tives of their own. Study your com­peti­tors and try to antic­i­pate their plans.

3. Ignor­ing risk

What are the risks attached to the plan? Think through these and con­sid­er the costs of fail­ure as well as the rewards of suc­cess.

An ongoing process

Like keep­ing a ‘To Do’ list, writ­ing a busi­ness plan is an ongo­ing process. Don’t make the mis­take of aban­don­ing or for­get­ting about your busi­ness plan after you’ve pre­sent­ed it to investors. The plan should adapt to changes in your com­pa­ny, its mar­ket and the econ­o­my — and that means reg­u­lar review­ing and updat­ing.

Cre­at­ing your plan will open your eyes to the real­i­ties of your busi­ness. Keep­ing it updat­ed will help you stay on the right track.

Start-ups and estab­lished busi­ness­es in the Lanark­shire area look­ing for help with writ­ing a busi­ness plan should con­tact Rus­sell & Rus­sell for more help and advice.