Writing a Business Plan?
David Fairweather, Business Development Director of Experience Business Solutions Ltd. offers his read on the right way to do it!
“I have been fortunate to have been involved in both private (angel) and venture capital (VC) funding in the past, and a well-written and detailed business plan was always essential in opening doors. However, it always surprises me how many start-ups don’t actually have a business plan.”
In some cases where budding entrepreneurs have great ideas, they may not have the experience or background to know exactly what is needed to put together a sound business plan.
To many, creating a winning business plan can often seem like an off putting or daunting task for those that haven’t done it before, in some cases resulting in them abandoning their idea for a new business and maybe missing what could have been a great business opportunity!
In essence, your business plan should be the first thing you create – before websites, before a profit and loss (P&L) sheet, and before anything else with the exception perhaps of some sound research. However, your business plan should not be written purely for the purpose of raising outside investment.
The plan defines, charts and details your business strategy, and should be used as the document that you and (if applicable) your business partners refer to in order to ensure you’re on the right track, as well as becoming the document you update when and if you need to change course. In other words it should be used in effect as a continual road map, charting your journey and how you will get to your eventual destination.
In general, the more detailed the plan, the easier it is to execute and measure its success across all of the important parameters.
In my view it is good practice to break down all of the components which make up the business plan and work on them individually on a one-by-one basis before bringing it all together into a single document. I find this approach useful for shaping and re-evaluating the plan as I go along; plus it’s always useful to have the different elements stored as separate files for future use.
So…How to write a Business Plan!
The key structure of a business plan should be:
• What is it? It may sound unnecessary, but start by telling your audience what the document is!
• What is its purpose/what inefficiency does it solve?
• Market opportunity – is there one and what is it?
• Key business objectives/definitions and milestones
• Product differentiation – why is your product or service different?
• Market conditions – Is it a good time, economically, socially, politically etc.?
• Competition – Who are they, how do they compare, assess competitive advantage potential?
• Customer Focus – Who is your target market and why?
• Revenue models – Where will revenue come from and how?
• Marketing and PR – What will you require, how will it be deployed?
• Key people and headcount – What resources will you need, what skills, timing etc.?
• Top line three to five year financials – Profit and Loss, Cash Flow projections
Here are a few steps I take when creating my business plan:
1 Start with an Interest Benefit Statement (IBS). You need to articulate your entire proposition in a single sentence so it is clear and obvious to everyone what it is that you do.
2 Use a single page to highlight your key milestones for the next three to five years: engagement/users and revenue/target number of customers, i.e. a snapshot of your P&L.
3 Create an Executive Summary. This is typically one or two A4 pages which starts with your IBS statement and highlights every facet of the business. The important points to cover are: business purpose, market opportunity, key business drivers and milestones, revenue, and P&L.
4 Write a detailed section on your vision. What does your business look like today, next year and by year five? How large can the business become? How will you realise your vision?
5. Your product/service. What are your competitive advantages? What IP have you created or what proprietary technology have you developed? List the five key features of your product or service that will win adoption for you.
6 Marketing & PR. How will you take the product/service to market? Demonstrate how you can get traction in your chosen market(s), what channels you will use and what your customer and user acquisition strategy involves. How will marketing support your financial strategy? PR is also important and is required for building and maintaining relationships and growth.
7 Revenue. How will you make money? What are your revenue streams? Don’t fictionalise this. Forecast numbers that will challenge you but you are genuinely confident of delivering. Never forecast based on what you think investors want to see. That is a sure-fire way to kill your business.
8 Management/founding team. Investors will almost always be sold on you and your founding team before they buy into your business idea. A concise, well-articulated, detailed business plan with accurate revenue projections is the first step to demonstrating you are intelligent and understand your business and marketplace. However, a one-pager on you and key members of the team is important. Display work history/education but don’t make this boring. You all have personalities, show this off too.
9 Exit. Finish on how you think you’ll achieve a return on investment for your investors, when it’s likely to happen and what it looks like (in terms of the return) when you do.
Remember, investors do not like lifestyle businesses. They want a return, usually with a multiple of at least several times what they commit. Show them how they can achieve this.
10 Profit and Loss. This isn’t a business plan, but a budget. Formulate a detailed three to five-year budget outlining your income and expenditure forecasts. This should also cover cashflow based on you receiving investment too, so an investor can clearly see when you break even, or run out of cash. Be realistic with it and attach this to the business plan.
Is this the formula to a winning business plan? That depends on you. No matter how good a business plan is, investors buy people. A solid, defensible business plan helps and should be used as your business manual and point of reference when executing the strategy.
Experience Business Solutions provides advice on all aspects of Business Start Ups, Business Planning and Strategy, Business Development and Business Management.
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