By Stephen Pegge, Head Of External Affairs, Lloyds TSB Commercial
Many businesses fail because they don’t have a clear strategy and objectives. Writing a business plan forces you to address the details of your own business proposal and clarify exactly what you have to do to make it a reality.
Any shortcomings or potential problems will soon become obvious if you take the time to look at your business idea objectively. In this way you make your mistakes on paper rather than in reality. A good business plan will:
- Give you a sense of direction and an action plan.
- Keep you and your staff focused.
- Demonstrate the seriousness of your intentions to banks, investors, colleagues and employees.
- Enable you to identify problems early on and take appropriate action.
- Set targets and measure your success.
- Help you recruit better, higher-level employees.
A business plan is not only for business start-ups. It is an evolving document that should be reviewed regularly. It will always be a useful tool to persuade others to invest time, money and effort in your business.
What should be included?
A good business plan answers four simple questions:
1.Why does your business exist? (purpose or mission statement)
2.Where do you want to take it? (objectives)
3.How will it get there? (strategy)
4.What will it cost? (budget)
You should be able to sum up your purpose in a couple of sentences. It should clarify what you want your business to achieve, beyond making a profit.
While purpose is general, objectives should be SMART:
You may have a number of different objectives, but they should complement each other and be prioritised. While your strategy may be flexible, it should always be grounded in thorough market research. You should investigate:
- Potential customers and competitors.
- Economic and market conditions.
- How trade works in your chosen sector.
- Who the suppliers are.
- The staff, facilities and equipment required.
- Trends and emerging technologies that could transform the marketplace.
Include a SWOT analysis, listing your business’ strengths and weaknesses and then the opportunities and threats to your business from the outside world. This will help you make sense of your research. You should then be able to answer the following questions:
- Who will buy from me?
- Why should they buy from me?
- How will I supply what they buy?
- What makes me different from my competitors? What is my unique selling point (USP)?
The success or failure of your business rests on its ability to make a profit and anyone thinking of investing in your business will scrutinise your budget closely.
Work to a 12-month cashflow and estimated two-year profit projection, breaking down your budgets into monthly figures, showing the main areas of expenditure and income.
Remember to include contingencies in every area to cover unexpected costs. While you need to show confidence in your business, unrealistic projections are likely to do more harm than good. It’s safer to be pessimistic than wildly optimistic. It’s not essential, but including details of any proposed exit strategy demonstrates the thoroughness of your planning.
Start your business plan with an executive summary to provide readers with a quick overview of the whole report. This is best written last. A good business plan should be:
- Clear and concise.
- Free of jargon.
Don’t be put off if you don’t have all the information you need from the start. A basic outline can be filled out as more details become available and even a simple financial forecast can highlight any shortcomings in your proposal.
You may find that a more detailed plan is necessary, but avoid including very detailed figures as these will be more likely to change and your plan will become out of date.
Download a free copy of Sage Planning for Business by visiting www.lloydstsb.com/sage
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