How to Write a Business Plan that gets noticed.
Purpose – Who is the business plan for? You may have to adjust the detail according to who is reading whether that be investors, lending institutions, employees or supplier and customers. It is important to define what you are looking for from your audience from the outset.
Content – The main factor is to get your idea across to your audience in a very clear and concise manner and that they are able to understand your idea within a matter of seconds. We feel that a good business plan does not have to be pages and pages of superfluous information, but should contain enough information to have the reader engaged, whilst providing enough information surrounding the business idea.
Market Environment – A number of key questions are often asked within this area.
What is the market you are looking to enter? Is this a crowded market place? Are you the first to market? What are the barriers to entry within the market?
The responses to these types of questions can very often define if a business idea gains investment or not as it can often show if the business has scalability. You have to ask yourself, does my idea fit in with a busy marketplace and do I have unique elements that makes it stand out from competitors?
If you are first to market, is this a good thing or a bad thing? This could be great in that you are the very first to see a gap in the market and you can gain first mover advantage, which can be so crucial in some sectors. If you are looking to be the first to market, is there demand for your product/service? If you are seen to be successful in the marketplace, what barriers are in place to stop someone else entering the market place? Regulation, patents etc all need to be considered.
Showing that you have assessed the market place is a key influencer in investment decisions. It is so important to look at both internal and external factors on what will make the business successful.
Operations and Marketing – There are a number of areas that require consideration within operations and marketing. How will you look to implement your pricing structure? Will you use penetration pricing in order to get into a market place or have a high cost to differentiate yourself?
In terms of market segmentation, can you adapt your product/service to focus on different on potential different markets or is your intention to focus on one specific market segment?
Marketing is often one area that gets overlooked in regards to business plans and the work that needs to go into this prior to launch of a business/product. This can often be a very risky area in that large amounts of capital can be eaten up through forms of marketing prior to getting any revenue back. How will you look to market your service? There are so many different ways that ideas can be brought to market, of which can be very costly and requires in depth analysis in order to formalise a strategy that will work for your specific business.
It is important to undertake a SWOT analysis which highlights the business internal Strengths and Weaknesses as well as the external Opportunities and Threats. Every business will have items within these four areas and it is important that you can use your strengths to open up opportunities whilst also looking to minimise the threats to the business.
Financials Cashflow, P&L, return to investors
Very often this is an area where new business owners (and a number of experienced ones) are very afraid of, but yet form a crucial part of a successful business plan. Investors and lenders will be extremely interested in this area to see when they will receive a return on their investment.
A crucial part of this in the initial stage of a new business is the cash flow forecast. Any new business will likely face great cash flow strain in its infancy, but with in-depth planning and continued analysis can assist greatly in the company ensuring that there are liquid funds available to fund things such as premises, staff, product development, marketing.
Any new business owner should look at their fixed costs (such as premises) which will still be incurred irrelevant of the income level, along with the variable costs, which will move in line with sales volume.
In order to be prudent, it is also crucial to undertake some ‘What If?’ analysis as part of a business plan. What if your sales are 15% lower than forecast? What if your main supplier increases their costs by 10%? These are all things that can heavily impact a new business and the more you can plan for this, whilst ensuring that you have enough working capital to withstand these events, the more likely your business will be successful.
It is often said that investors are investing more in the person behind the business than the product/service itself. It goes without saying that there has to be a viable idea there but without the right person/team there, the idea will only go one way (not the way investors want it to!).
A dynamic, passionate, determined professional individual or team, who know their market place and product is vital to the success of the business. More often than not investors are looking to put their money into different market segments and therefore it is central that the key management team of a new idea have the industry knowledge and passion behind it to give the investors’ confidence that the new business will be a success.
Proof read all of your documents, check for spelling and grammatical errors, as this will be something that can easily look very unprofessional to an investor.
Know your numbers – Any investor is going to scrutinise your financial figures to ensure that they are accurate. Every investor knows that financial forecasts are an estimate of what you anticipate to happen, but you have to know that they are realistic, assessed all fixed and variable costs.
It is certainly recognised that a number of business owners, or people with new business ideas do not possess all of the skills in order to make a business successful. It is crucial to know your weaknesses and obtain expert help to assist in making your dream a reality.
Blog written by Andy Morris, Director at Clever Digit Media Ltd. Specialist online investors www.cleverdigitmedia.co.uk