Most people starting a new business will need to develop a formal business plan in order to access finance. But actually it is a very good discipline in itself to have an up to date business plan, whether you are starting a business, or have been trading a while. If you use a good template it will force you to go through the whole rationale for your business, look at every aspect of it, and examine or re-examine it in terms of likely profitability -which for most people is the objective.
Once you have a plan, it is relatively simple, and a good discipline, to review each year and check you are still on track. Your management team can review short, medium and long term objectives. You will also be asked to submit a business plan regularly if you have successfully accessed funding from a bank or investors.
When banks and other financial institutions are considering a loan application, they will be looking for businesses that have good cash flow management, a strong balance sheet, a sound business plan, a well-balanced management team, a good business record, and who are looking to develop and grow. A business plan is a key first step.
Also if you make an application for a grant or any other State Aid, they will inevitably ask to see your business plan. It is always easier to update an existing plan that to start from scratch.
As always there are several different formats, none of which is right or wrong. A good small business plan defines exactly what you want to achieve and how you plan to achieve it.
As a minimum your small business plan should clearly state:
- What your business will do
- The products or services it will provide
- How customers will access your products or services ( e.g. online, by phone, in a high street shop)
- Your approach to pricing
You may also consider including the mission and objectives of a business, development plan, market strategies, competitive analysis, operations and management structure, employee need and financial details.
Many banks will have a template you can use, and there are free templates available on the Internet.
The format I like to use is to have a cover page listing contents, like this example. These are the sections I like to use, you can use what suits you best.
Taking each of these in turn;
Although this will be the first section in your plan, it is easiest to write it last, as with all summaries.
Introduce the company, its geographical location, provide an overview of product and market, legal status and sector
Clarify your vision, objectives and aims.
Mention planned launch date.
Then, depending on the reason for writing the plan, you will probably mention the rationale for the funding you are seeking –whether it is start-up funding, working capital, or for an expansion plan.
Summary of Background
Provide some background. Explain why the business was established, its history to date, what the goals are and how you plan to get there. Are you looking for steady growth or fast expansion? Why do you need to expand, or secure more capital?
- Description of your products and services
- Target customer
- Outline of the business aims (SMART)
- Mention any patent, copyright, design registration
- Legal obligations H&S, licenses, insurance
Start by describing your business — what does it do and what makes it different from rivals? (USP)
- Review your market and competitors -ideally backed up by Research
- Profile of your target market and analysis of demand
- Size of target market, market potential, market trends
- Potential clients, or customers –target demographic
- Proposed Pricing –again ideally backed up by research
- Analysis of your sector.
- Who are your key competitors?
- Assessments of your competitors
- SWOT analysis – showing the strengths, weaknesses, opportunities and threats in your sector and facing your business.
- Information about your management team and resources
- Give details of key personnel and their roles.
- Describe important assets such as premises and equipment.
- Staffing policy –will you hire or outsource?
Go to Market Plan
- Outline your sales and marketing strategy.
- Include information on pricing
- Cost of product
- Market price
- Route to market –internet, store, and phone?
- mention product launch dates , seasonality
- Include details of any start-up investment, made by Directors
- Any bank loans or overdrafts
- Set up costs
- Data on your current financial situation
- How new funding sought will be used
Cash Flow forecast
This should be a spread sheet, covering at least a year, month by month.
It should show;-
- Projected sales (different income streams with their own line of information)
- Cost of sale, Rent, rates, utilities, insurances, fuel, loan repayments, salaries, any other overheads. These should be totalled monthly.
The monthly sales figure, less the costs and overheads, all shown month by month, will form a monthly sales and cash flow forecasts, profit and loss projections and will flag up a funding requirement.