Five essential ingredients of your business plan
Some people believe that only business start-ups need funding and that only large companies need business plans. But the truth is that every business needs a 'blueprint' - not just for the benefit of potential investors, but so that the people who work in the business can have a clear idea of its direction, and can commit to a plan.
A good business plan serves various functions, but it must have a practical structure. Here are five essential ingredients:
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 company. 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. A management profile
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 your staff are competent to succeed. A chart illustrating the roles and relationships of key employees can work particularly well, and if you are a small company you may even be able to include every single employee.
3. A financial portrait and strategy
Prospective investors and lenders need a good idea of the financial aspects of your business. Include basic data such as current and projected balance sheet, a profit and loss account and an analysis of cash flow. If you are a start-up, project this information as accurately as possible. It is important not to cut corners with these calculations and 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 company 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 five 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.
An Ongoing Process
Like keeping a 'To Do' list, writing a business plan is an ongoing process. Yours must adapt to changes in your company, its market and the economy - and that means regular reviewing and updating.