| 1. Why write a business plan? | | | | environment. This includes the relative power of both |
| You might start writing a business plan because | | | | buyers and suppliers in framing pricing or market |
| you’ve been told that’s what you should do. | | | | activity, the potential for new entrants and the likely |
| Or your motivation might be to please the bank, a | | | | future impact of technology or product development to |
| potential investor or someone else. All valid reasons, | | | | alter the way the market operates. |
| but none of them is the right one. The real reason for | | | | 7. Marketing plans |
| preparing a business plan is to develop a thorough and | | | | Marketing covers more than just sales and advertising. |
| detailed knowledge of your business and all its | | | | You need to demonstrate how you will compete and |
| idiosyncracies. | | | | be more successful than others. |
| Writing a winning business plan is not easy, you need | | | | You should provide detail on your product strategies |
| to be very honest and thoughtful about all aspects of | | | | – including things such as features and benefits, |
| your business, how it operates and your competition. | | | | how these target selected niches, your new product |
| The insights you gain from this process will hold you in | | | | development schedules and so on. |
| good stead as your business grows and matures. You | | | | What is your pricing strategy - high end exclusive, |
| will be better prepared to handle all the issues that will | | | | middle of the road, value, low budget, are you full |
| emerge on your journey. | | | | service or bare bones? How often and when will you |
| 2. Use different versions for specific audiences | | | | discount, and why? |
| A well thought out business plan becomes an | | | | How are you going to promote the business and who |
| invaluable document which can be adapted to many | | | | to? What mix of advertising, public relations, and direct |
| purposes. I suggest different versions to meet the | | | | sales will you use to stimulate interest or create desire. |
| different emphasis and information needs of different | | | | What internet or e-business strategies will you |
| audiences: | | | | adopt? |
| - lenders are interested in cash flow and an assurance | | | | What sales distribution strategy are you adopting? – |
| that loans can be repaid; | | | | product licensing, franchising, distribution network, direct |
| - investors need confidence that the business can | | | | sales and so on. |
| grow significantly and they will receive a high return; | | | | 8. Risk & contingency planning |
| - the marketing plan provides useful direction to | | | | Risk is a part of every business. Don’t ignore it or |
| advertising agencies, PR firms and others responsible | | | | gloss over it when preparing your plan. Recognise it |
| for ensuring a consistent image; and | | | | and address it – where possible develop strategies |
| - employees and management need to remain | | | | to adopt should certain circumstances eventuate. |
| focused and working towards a common goal. | | | | Expect the unexpected. Some people say it’s not |
| 3. Vision & business opportunity | | | | worth planning because things don’t often work out |
| Just what is it you propose doing? Investors in | | | | the way they’ve planned. The whole point is to be |
| particular need a clear statement of the business | | | | prepared, so that when things change, you are ready |
| opportunity you are pursuing and why it is so exciting. | | | | for it because you have the depth of knowledge to |
| Be clear about why are you doing it and what you | | | | support a change in direction. |
| expect to get out of it, and what others will get. | | | | 9. People |
| You have to be able to annunciate where you are | | | | Does your team have the leadership, skills and |
| going – it makes it a hell of a lot easier to others | | | | experience required? Investors look to a proven |
| with you if they know where they are headed, and | | | | track record of success in building a business – |
| with everyone pulling in the same direction, you’ve | | | | it’s a different set of expertise4 than managing a |
| got a lot more horsepower than if they are all pulling in | | | | steady state enterprise. Investors invest in people as |
| different directions. | | | | much if not more than they invest in product, ideas or |
| Don’t be afraid to think big – small ambition | | | | business models. |
| achieves small results! Be realistic though – if it just | | | | How committed are your people and how will you |
| doesn’t make sense very few will want to join you. | | | | keep them and reward them? |
| 4. Business personality | | | | 10. Financial plans |
| Every business has a personality, just as every person | | | | Many businesses fail because they are |
| has one. Think about what you want your business | | | | undercapitalized or because they are poor money |
| personality to be, and how your customers, suppliers | | | | managers. Note that a budget is not a plan. It is |
| and employees think about the business. | | | | important to be realistic whilst erring on the side of |
| This includes concepts such as broad market | | | | conservatism. |
| positioning and business values. Aspects of your | | | | Make sure that the numbers add up and are |
| personality should permeate throughout the plan, as | | | | consistent with all aspects of the plan – they should |
| this is often the unseen glue that holds everything | | | | come from the plan, not be prepared as a separate |
| together. Watch for any inconsistencies. | | | | exercise. |
| A good place to start this is to look at your own | | | | Include a Cash Flow statement as well as Profit |
| personality – have a frank discussion with people | | | | & Loss and Balance Sheets. Be clear about |
| close to you about how you are seen. This may not | | | | how much funding you need, when you need it and |
| be completely comfortable but will generate powerful | | | | what the money will be spent on. |
| insights about how best to run your business. | | | | 11. Exit |
| 5. Competitive advantage & sustainability | | | | If you are looking for investors, they will want an exit |
| There many aspects to this, but the fundamental | | | | point to allow them to realize the gains they make on |
| element of each is “why should customers buy our | | | | their investment. Dividend streams are rarely sufficient |
| product or service?” | | | | enticement to investors, who want heir capital back. |
| Every business no matter how big or how small | | | | Be clear about the exit event – public listing or trade |
| attracts customers for one reason or another – | | | | sale are the 2 most common, but there may be a |
| price, convenience, location, product features or | | | | share buy-back provision as well. |
| benefits, personality, ego and so on. The more you | | | | 12. Attention to detail |
| understand about why it is that customers do business | | | | Make the plan concise – most potential investors will |
| with you, the better able you are to entice more of | | | | read the executive summary and skim the rest. A 200 |
| them to you. It helps you promote the business, build | | | | page monster simply won’t be read. You need |
| systems and management disciplines that reinforce | | | | the detail to support your statements, but this is best |
| these reasons and build stronger loyalty. | | | | done at an investor presentation. |
| Be brutally honest with yourself about comparing your | | | | 13. Review (get a 2nd or 3rd opinion) |
| products or services with those of your competition | | | | The most experienced entrepreneur can still benefit |
| and about how well they fill customer’s needs. | | | | from a different point of view. Even if you're the only |
| Advantage can come from a number of different | | | | person involved in your business, find someone who |
| sources, amongst them being technology, the business | | | | can study your plan objectively and point out possible |
| model, a new way of doing things or size. It’s also | | | | weaknesses you might have missed. |
| important that you can demonstrate how you can | | | | 14. Implementation Plan |
| keep this advantage and not let others over-ride it or | | | | It is said that a poor plan executed well is superior to |
| match it. | | | | an excellent plan poorly executed. The key to |
| Note that all business strategies can be classified as | | | | successful planning is to think through all aspects of |
| being one of three types – cost (pricing power, | | | | your business and how you will compete most |
| typically a result of size but can be alternate product | | | | effectively. |
| form), differentiation (product features and benefits) or | | | | The key to real success is action – the planning |
| focus (appealing to a specific niche in the wider | | | | process should give you the knowledge to react to |
| market). | | | | changing circumstances and be more savvy than your |
| Investors in particular are looking for a unique source | | | | competitors, but this knowledge is worth little if you |
| of competitive advantage which can be leveraged up | | | | don’t get on with it! |
| into a much larger business – this is how their | | | | 15. Plan Contents |
| investment will generate the returns they seek. | | | | - Exec Summary (1 page) |
| 6. Research | | | | - Business Description or Company Overview (1-2 |
| Your plans have to be based on realty not perception. | | | | pages) |
| Often business owners don’t truly understand the | | | | - Products & services (1-2 pages) |
| reasoning behind customers buying their product or | | | | - Marketing & Industry Analysis (2 -3 pages) |
| service. What is the basic need being met, and what | | | | - Marketing Plan (3 – 4 pages) |
| other ways can this be met? For instance a bus | | | | - Operational Plan (1-2 pages) |
| company doesn’t only compete with other bus | | | | - Management (1-2 pages) |
| companies, it competes with all forms of transport | | | | - Financial Plan (1 - 3 pages) |
| from trains, planes, cars, bicycles, walking and not | | | | - Capital & Cost Analysis (1 page) |
| taking the trip at all. | | | | - Appendices (15 – 20 pages) |
| You should have a solid understanding of how big the | | | | - 5 year Profit & Loss forecasts |
| potential market is and whether it is a mature market | | | | - 5 year Balance Sheet forecasts |
| or one with plenty of growth left. You should know | | | | - 5 year Cash Flow forecasts (monthly & |
| what segments or niches exist, and which ones you | | | | quarterly) |
| compete in, together with what share of the market | | | | - Resumes of founders & key personnel |
| you have. | | | | |
| Ideally you should have detailed knowledge of all of | | | | Written by David Shelton Principal of Transition Capital. |
| your direct competitors and their strengths and | | | | |
| weaknesses. The first aim of the game is to beat | | | | Transition Capital assists emerging high growth |
| them, and the more you know about them, the better | | | | businesses to raise the capital needed to fund |
| off you will be. | | | | growth. It also provides management support to |
| You also need to have a sound understanding of the | | | | develop more effective and powerful enterprises. |
| indirect competitive forces that shape your trading | | | | |