One of the first steps a successful entrepreneur takes when setting out on the journey to create a company is to develop a business plan. A business plan serves to provide a comprehensive road map for the company to management, investors, employees and customers alike, outlining the strategic rationale for undertaking the venture. Let's face it: start ups are not for the faint-hearted, so any type of document that acts as a guide should be very much welcomed by all parties involved. Sure, things change along the way, but the basic business premises shouldn't. As such, companies need to make sure that they know what they want at any given point in time and especially when they are raising finance. Here is a brief outline of the sections that should be included:
1) Executive Summary:
As mentioned in my previous blog "10 things to consider when writing a business plan", the executive summary is a one-page sheet that presents the plan's important highlights and conclusions for readers that are pressed for time. On that page the business needs to be summarised, the market opportunity quantified, the financial projections presented and the funding requirement clearly stated.
2) Business Overview:
This section includes the company's ownership type (e.g. whether it is a partnership or a sole proprietorship), the history of the organisation, the company's objectives and the mission statement. Attention should be given to how the company is structured particularly when investment is being sought. For example, a Seed Enterprise Investment Scheme ("SEIS") may be beneficial to be established in order to attract private investors. (For more information on this topic, download our free eBook "The Entrepreneurs Guide to Seed Enterprise Investment Schemes".)
3) Project Overview:
The third section of the plan focuses on what it is that the company is selling or trying to achieve. It will describe how the company will make money and what is its competitive advantage or core strength.
The Markets section is the section where the market opportunity is quantified and the market is described. This very important section has to be researched thoroughly in order to address areas such as market size, structure, future growth prospects, trends and sales potential of the product or service on offer. The pricing strategy is also presented here as well as the promotional plan with its associated cost and benefits. Sales projections are typically shown here for a period of three years. A SWOT matrix (strengths, weaknesses, opportunities, threats) highlighting the economic factors impacting the business is presented within this section as well.
This section can have different names but it basically presents the responsibilities of the members of the management team and milestones set to be achieved over the period that the plan covers. Gantt charts should be included, if at all possible, which clearly outline the steps to be taken in order to achieve any product, market and organisational goals. An organisational chart outlining the company hierarchy and the divisions should also be provided.
The financials section presents any historical trading results as well as the financial projections which are typically done for a three year period. The funding requirement is also highlighted in this section.
7) Risks and Mitigations:
This is an optional section which can be included in the plan and which provides the reader with proof that the plan has been thoroughly thought out and that management is aware of the plan's sensitivities. A brief description of the main risks on the achievability of the financial projections is presented here, along with any applicable scenario analyses and any ideas as to how to mitigate these risks.
The last section of the plan should include the assumptions to the financial projections, any pictures of premises or screen shots of web interfaces, and any legal contracts underpinning any of the plan's main assumptions.
Writing a business plan doesn't have to be an onerous task. With the right attitude towards preparing it, management can develop a powerful tool for their business that will help them get to the next stage of development.