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Every successful company, regardless of industry, should be backed by a smart business plan. With the rise in ecommerce ventures and start-ups, business plans are as prevalent as ever, and understanding how they work and the importance of them is key. Here we take a look at how you can create a business plan and how best to present it to get the results you desire.
A business plan is your recipe for success. Just like a recipe in the culinary world, it is fundamental to a good outcome. If you research your ingredients and follow the recipe meticulously, you will get the results that you desire. Wing it with a gung-ho approach and you’ll end up with a disaster.
Ok, so the outcome in business is likely to be far more severe than that of a failed dish, but the method is the same – you need a formula that encompasses the right elements to arrive at the predicted outcome.
Generally speaking, a business plan sets out your company objectives for the coming 1-3 years and highlights the varying strategies that are required to meet them. It needs to factor in risk, financial backing and investment (if any), sales forecasting, marketing plans and any partnerships or sponsorship.
A good business plan will be based on the foundations of a realistic and achievable business model. This model needs to be solid and scalable, with the ability to demonstrate growth under varying conditions, and resilience to significant loss if there is a major change, such as an economic downturn.
Financially the business plan incorporates information on breakeven point – the point at which your business has covered its costs and can start becoming profitable.What is a business plan?
First and foremost you need to make sure your business idea is realistic. If in doubt, ask a few entrepreneurial types to get their stance. Obviously you need to be careful here not to give away your idea to someone who could potentially beat you to it, so seek the advice of people you know and trust. When you are confident your idea is viable, back it up with a business plan. Be methodical in your approach and follow these key steps:
1. Set your objectives
Ask yourself what it is you want to achieve. What are the milestones that you expect? What are your measures of success? What targets do you need to meet to be financially viable as a business? These objectives will be based on what funds you are starting out with, what investment you might have and where you plan to source things like your products materials and staff from.
2. Keep it simple
Your business plan needs to clearly convey who you are, what you are doing and how you intend to do it. Rarely is a business plan solely for the eyes of the business owner, so keep it as clear and concise as possible. Avoid “waffle” and unnecessary detail. Include the three Fs – Facts, Figures and Forecasts.
3. Do your research
Creating the business plan is all well and good, but it needs to have perspective in the marketplace to show that your business has the ability to succeed. You could have the smartest idea, but if the market is saturated with companies doing the same, it will take a lot more effort to perform well. Include market research data and competitor analyses to show you understand current demand and how you can meet that demand. What does your product or service do differently? What is the Unique Selling Point?
4. Include evidence
If there is even the faintest whiff of assumption, your business plan won’t stand up. Base everything on fact and clearly demonstrate the facts with statistics, insights and quotes that back up what you are saying. If your foundations are based on clear evidence then your plan is much more believable and you can adjust your strategies accordingly.
5. Show forecasting
One of the key pieces of information in your business plan is how much you expect to sell. This will be based on the competitor analysis and market research you do. If you know what your fixed and variable costs are, include these so you know how much you need to sell to meet the breakeven point.
A business plan is the first thing any start up needs to do, before they can even consider getting off the ground. This will be your guide that you will come back to time and time again to benchmark where you are. It’s an indicator of your performance and highlights any gaps or areas of weakness that need to be addressed.
If you have a team behind your business, your business plan should be shared around the key players that head up areas such as sales, marketing and business development, so that they are all singing from the same hymn sheet. It will be the document that drives the sales forecasting, business development and marketing strategies.
The business plan is a mandatory document you must present when trying to attract funding or backing from banks or potential investors. Without this, a decision will not be made. Whilst your business plan is not a document that’s available to the public, be prepared to show your business plan if you want investors or partners to come on board.
Like any business document, the business plan should be attractive and easily digestible. You may have just seconds to capture the attention of an investor or a bank manager, so make it stand out. Here are some tips on how to present your plan:
1. Include a cover
Give your document a front page that is branded with your company name and logo (if you have one), dated and titled ‘Business Plan’.
2. Have a contents page that corresponds to numbered pages/sections
It sounds obvious but being a hefty document, it’s important to be able to find key sections of the document without having to flick through everything.
3. Include an executive summary at the beginning
This gives a concise synopsis of who you are, what you do and what you are trying to achieve. The rest of the document should then answer those questions.
4. Provide some history of the company
Keep this brief. It’s really just to give the reader a quick understanding of who you are, how long you might have been operating and what your objectives are.
5. Describe your market and current consumer behaviour
Provide answers to these key questions: who is buying? What do they buy? Why do they buy it? Who are they buying from currently?
6. List your main competitors
Again ask questions: who are they? How big are they? Who is their target market? What are their strategies?
7. Provide financials
Financial information is probably the most important inclusion, as profit and loss is what people are really interested in. Include income statements, balance sheets, cash flow statements and budget information as well as any sales forecasts.
8. List strategies
You needn’t go into too much information here, but it’s useful to include the types of strategies you plan to execute to meet your objectives, whether this be digital marketing, business development or other.
9. Highlight areas of expertise
Include a brief snapshot of the key players in your business and the skills they bring to the table so that investors can see how adept you are likely to be in meeting your objectives.
If the success of your business is hinged upon investment then a business plan is essential. However, even without the need for investment, it’s good practice to ensure you have something you can refer to, to benchmark where you are and understand the key performance indicators that will drive your business to success.
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