Creating a Winning Business Plan

You can't start too early creating your plan for achievement. Start now. Don't even wait until you've settled on an idea. That may take a little time and no bad thing either but best to get it right from the beginning. `But how can I start writing a plan for my business when I'm not absolutely sure yet what I'm going to be doing?' Fair comment, but what you can do is to plan for your Plan.

PLANNING AHEAD

No one really likes writing reports, and that basically is what your business plan will be, a report. It will be a report to keep you focused on your goal, a report which will gradually shape up as the means of impressing investors, raising the necessary capital and turning your idea into reality. The first thing is to learn how to create a winning plan, a plan that is well researched and grows in value each time you work on it.

Get all the help you can in the beginning. There are some very good books on the subject. If you've never written a business plan for yourself before, I would recommend you invest in a copy of The 24 Hour Business Plan by Ron Johnson, published by Hutchinson Business Books at just under £20. It is excellent value, but I'm not suggesting you attempt to write your plan in 24 hours, and neither does the author. Read the book through once and then use it as a constant reference manual as you progress your own plan. It will lead you gently through the intricacies of composing a winning plan and give you a grounding in the structure required. If you would rather use a paperback, see Matthew Record's Preparing a Business Plan (How To Books).

Focusing on the end result

Developing your business plan should be fun. It will get the creative juices flowing and keep your mind focused on the ultimate goal: turning your idea into a practical, profitable enterprise of your own. Even if you haven't finally settled on an idea yet, you'll find that as your learning curve accelerates so too will a decision on the idea that will change your life for the better. The inspiration will soon flow.

A winning plan calls for a high degree of introspection. As you progress you'll find yourself facing up to reality quite readily. When you start committing your thoughts to paper the good, the bad and the ugly aspects of any business idea come to light fairly quickly. This can prove unsettling at first but you'll soon find that you are addressing the negative factors with increasing confidence and vigor. Certain aspects will call for an immediate re-think, further research or perhaps total rejection. Now's the time to find out and put matters right. There will be no scope for dummy runs once you begin trading. Basically, that's what will make your plan a winner: examining, honing and polishing all the components before you fix them firmly into place.

Remember, if you're less than 100 per cent convinced about the finished article, what chance will you have of impressing potential investors?

Example: Focus Publishing International

For the record, I started to put my business plan together the very day I was made redundant and worked solidly on it every day for seven months. Although I'm no accountant I provided initial projections for cash flow and profit & loss spanning three successive years. It will really pay you to do this even though you are rather unsure of many of the figures. Use trial and error. Practice makes perfect, and you can always call on professional help later on.

When I applied to join the `Entrepreneurship Program' I did so with three key aims in mind:

ü      To brush up my entrepreneurial skills

ü      To discover a route to public sector funding

ü      To find a management accountant to be a partner and shareholder in my enterprise.

I was successful in all three of my aims and it was my partner-to-be who restructured my rough financial projections into a meaningful, attractive proposition for potential investors. But he had the initial raw material to work on and only I could have produced that. I knew the business.

MAKING SURE THE PLAN IS YOURS

Whatever shape your winning plan eventually takes, make sure it's got your hand on it. You may need help with the overall structure and that's OK but don't be tempted (even if you have the money) to rush out and assign all this hard work to a management accountancy practice specializing in the preparation of business plans (not unless your idea has enormous investment potential). If not, you're liable to get a pull-down menu version adjusted to suit the profile of your idea -- and you won't get much change out of £2,000. It's your baby and you must see it through all the way. It's you and your team who will one day have to put the plan into practical effect: not a professional adviser.

YOUR BLUEPRINT FOR SUCCESS

The plan you are conceiving for your business is your blueprint for success. Plans are great things. They show you where you're going, what to do and how to do it when you get there. Make no mistake, your business plan isn't just designed to get you started and raise some working capital. It's going to be around for a long time and you'll want to review and update it regularly to take account of the unexpected twists and turns along the way. That's the beauty of it. When you have a plan, you can legislate for change. Without one you're sunk. You'll be an explorer in a jungle without a map.

While no two business plans are alike, they all have similarities in structure. The temptation can be strong (you'll find this out very quickly) to crash on and produce a tome as thick as War and Peace. Avoid this temptation. The fewer the pages in your final document the better. A dozen or so may suffice. Quantity will never impress an investor, it's the quality of the idea they measure together with their conception of how likely you will be to turn it into a reality.

The format you must work to is simplicity itself. You deal in turn with each of the component parts in a logical and progressive manner, much as you will do when you're actually putting them all together at the outset of your enterprise.

Putting the pieces together

Here's your initial scheme. Ironically, it begins with the one exception to the advice in the paragraph immediately above.

Structuring the executive summary

You will write this only on completion of the entire plan but it must appear at the very beginning. Why? Because potential investors are unlikely to progress further in their reading unless you give them an immediate `handle' on what you and your idea are all about. This is also the most difficult section to write and usually takes a few attempts before you can satisfactorily mould it. It shouldn't be any longer than a couple of pages so a great deal of thought has to go into what headings stay in and what ones are left out. No one knows the subject matter better than you. Only you can write it.

Your management team expertise

If you're going to use your plan to raise capital, you'll need to give details of the status, qualifications and experience of your key personnel. It is extremely difficult to attract mainstream investment nowadays for a one-man band. It's possible, but the conditions are restrictive. However, don't be put off. Your initial team could acceptably comprise yourself and one other person: spouse, partner, boyfriend, girlfriend, son, daughter, niece, nephew or as in my own case, an equity partner.

Your concept

You understand your business idea inside out but does anyone else have a clue what it's all about? Summarize your concept in writing on just one page. Explain in detail exactly what it is. Leave emotion out of it. Stick to the facts.

How your concept works

Many good business ideas fail to get past the starting gate simply because the originator can't or won't elaborate on how the idea works in practice. Once again a single page will suffice, but be precise. In my experience, the inclusion of a simple diagram or flowchart works wonders.

Your business objectives

Your objectives must be detailed, well thought out and thoroughly researched. They should include not only the objectives for your embryo enterprise but also your own personal aspirations for the venture and how you plan to achieve the goals you've set. You'll want to list them as they apply to the short, medium and long term. There's nothing difficult or mysterious about any of this, it's simply a matter of doing it.

What do you know about the market?

You'll need to do some research before you pen this section (even though you reckon you know all there is to know about your market). Markets and market trends change constantly and rapidly, sometimes overnight. Into which sector or sub-sector of the market will your product/service fit? Will it be sold on through conventional channels or will it require specialized distribution? These are just some of the questions you'll be answering.

Researching the competition

There's no show without Punch and where there's no competition, there's unlikely to be any business around either. Find out who your competitors are. Which of them are the strongest in your catchment area? Discover all you can about them and record it faithfully in your plan -- even if some of it scares you.

Describe your product

Describe in detail -- in not more than one page -- exactly what your product or service is. Summarize where it differs from similar propositions, what the benefits are to the end consumer, and why you believe you're on a winner.

Packaging your proposition

Here's where you wrap `Concept', `Methodology' and `Product/Service' into the unique package you'll be offering your customers. Even one slight improvement on what the competition offers might be sufficient to give you an early edge. Will it be discounting, overall pricing policy, unique marketing, or what?

Evolving your sales policy

The marketing plan for your idea will determine your sales policy and whether you require to invest in a sales force. Will you be selling through wholesalers, agents, retailers, off-the-page or door-to-door?

Marketing your business

A great deal of rubbish is spouted about this key business function and usually by people who should know better (see Chapter 6). Suffice to say, keep your marketing simple and relevant to your idea. There's no mystique about the subject.

Your unit production/sales forecast

Whether you're planning to manufacture or to provide a service, you'll still want to complete this section: the number of knobblewockers you intend to knock out weekly -- or the number of assignments you are forecasting to complete.

Your production costs

Again, whether manufacturing or supplying a service, you'll be incurring production costs and, before you get to your bottom line, you'll have to make estimates for them.

The strengths and weaknesses of your idea

Even though you believe you're on a winner, you may just have re-invented the wheel. There are bound to be some weaknesses in any proposed new operation. Jot them down as well as the strengths. If you don't do it now, some potential investor will do it for you just when you least expect it.

Useful appendix/appendices

A very useful section into which you can house all the other pieces of back-up information that don't seem to fit in too well elsewhere (CVs, price lists, budget workings etc).

GETTING HELP FROM THE PUBLIC SECTOR

Wherever you live in the world there’s ample assistance available from government sources. When you get around to seeking financial backing for your project, you'll be asked to make out a case for it. Here's just the place to start.

• Will you be creating additional jobs in your area?

• Would you be prepared to recruit unemployed labor?

• Would you offer training?

• Do you envisage doing business outwith your local economy?

If you can answer `Yes' to these four questions, you'll be a prime candidate for public sector assistance by way of grants and/or `soft' loans. More of this in Chapter 4.

Funding your enterprise

You will be demonstrating projections over three successive years for cash flow, profit & loss and balance sheet. If you're not an accountant, call in some expert help. Whatever, be honest and practical. Don't delude yourself or tell fibs. Why funders require fantasy forecasting for years two and three, I'll never know but they insist on it.

GETTING HELP FROM THE BANKS

Contact the Small Business Adviser at your nearest main clearing bank branch and request a copy of their respective Business Start up Packs. Barclays and Natwest are particularly good. I cannot recommend these superbly constructed documents too highly. Study the contents assiduously and they will provide you with an easily digestible insight into all you need to know before putting your plan together. They approach the exercise from different angles and by reading both you'll benefit from two sets of expertise. It's a pity they're not always so forthcoming at handing out the cash but more on that subject later and how to deal with it.

It sounds like a great deal of hard work, this blueprint for success. It is but there's no other way. Once you get started, you'll find your imagination taking off; all sorts of things that didn't make too much sense before will now start falling into place. Try it and you'll be surprised how good you will become at it.

CHECKLIST

• Plan ahead for your business plan.

• Focus on the end result.

• Write the plan all by yourself.

• Summarize the content and position it accordingly.

• Explain exactly how your business idea works in practice.

• Describe your business objectives.

• Define the marketplace.

• Research the competition.

• Produce a clear description of your product or service.

• Describe the key elements of your sales policy.

• Develop a plan to market your enterprise.

• Summarize both the strengths and weaknesses of your idea.

• Make out a case for public sector assistance.

• Show how you will fund your business.

• Describe the market, its characteristics and current trends.

• Show precisely where your product or service fits in.

• If it slots into a particular niche, describe this sub-sector.

CONSTRUCTING YOUR `BLUEPRINT FOR SUCCESS'

You can't start too soon preparing the business plan that will crystallize your thoughts and bring your idea to the attention of potential investors. Imagine the overall template as the trunk of a pine tree with the bold headings as branches and the bullet points as pine needles. Here's how it works:

Executive summary

• Brief description of the business.
• Target market segment.
• What makes your enterprise different from competitors?
• Why should anyone invest in it? (credibility factors: track record, management team's expertise etc).
• How much finance is required?
• Nature of funding (loans, grants, equity participation)?

Management team expertise

• Experience, qualifications, specialist knowledge of each of the founding members. Summarize to meet the requirements of your particular venture.

The concept

• Just what is your idea?
• Explain it fully but briefly.
• If it's brand new, prove its practicality.
• If it's been around for years, who else is doing it?
• What's different about your idea?
• Is there a gap in the market for it?

Methodology

• Describe on just one page exactly how your idea works in practice, step by step.
• Use a simple schematic to illustrate this.

Objectives

• List your objectives for the enterprise: personal and business, long and short term.
• Now show how you intend to realize these objectives.

Market

• Even though you think you know your market inside out, research it again fully before committing this section to paper.
• Describe the market, its characteristics and current trends.
• Show precisely where your product or service fits in.
• If it slots into a particular niche, describe this sub-sector.

Competition

• List the main competitors in your immediate catchment area.
• Detail their product ranges and illustrate where they differ from yours. If they are superior, say so; if they're not, explain why not.
• Give a breakdown of current competitive market shares.
• If you perceive a gap in the market for your particular product or service, guesstimate how you think the competition will react on your entry into the market.

The product

Some schools of thought have this section appearing before `Market' and `Competition' but I think it's best unveiled after you've talked about these aspects.

• Devote just one concise page to its description.
• If it's different from competitive alternatives, say so.
• If it's superior, say so.
• If it's inferior, say so and then explain why you believe there's still a market for it.
• List the benefits to the end consumer.

Packaging the proposition

• Wrap concept, methodology and product into the benefits package you'll be offering your customers.
• One slight difference makes all the difference.
• Will it be discounting?
• Will it be incentive marketing?
• Will it be added value service?

Marketing your business

• Keep your marketing simple and relevant to your product or service.
• Avoid a convoluted approach.
• You should be planning a launch brochure.
• Think carefully before allocating monies for advertising.
• Plan for cost-free PR exposure.

Evolving the sales policy

• Your marketing strategy will determine the sales policy.
• Will you require a sales force?
• Will you engage the services of a major wholesaler?
• Will you be selling off-the-page?
• Will you sell by direct mail?

Units forecast

• If you're manufacturing, this is essential.
• Even if you're not, you'll still want to record the assignments or projects you are forecasting to complete.

Production costs

• Whether manufacturing or supplying a service, you'll be incurring production costs.
• Record your monthly forecasts.
• Will you be buying from only the one source?
• Will you be using several suppliers?
• Do you anticipate special terms with some of these suppliers?
• Make sure you record everything before you get to the bottom line.

Strengths and weaknesses

• Elaborate on the strengths of your scheme.
• No matter how brilliant, there are some weaknesses. Jot them down faithfully before someone else does it for you.

The case for public sector assistance

• If you feel you may have a case, here's the place to state it.
• Will you be employing local labor?
• Would you employ and train unemployed people?
• Is your business manufacturing based?
• Would you be interested in a local authority nest unit?
• Will you be trading outwith the local economy? (If you can answer yes to these questions, you'll be in line for public sector assistance).

Financial projections

Be precise in both your forecasting and your funding requirements:

• Profit & loss over 2/3 years.
• Cash flow over 2/3 years.
• Balance sheet for years 1, 2 (and 3).
• Start up funding requirement.

You'll need some help with this. Make sure you ask for it.

Appendix

• CVs for yourself and your partner(s).
• Orders or written `promises'.
• Anything else of relevance that doesn't fit in elsewhere.

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