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Business plan content

04 April 2009

As a business coach and mentor working in the Midlands and London, one of the many subjects that we discuss is the Business Plan. The business plan is key to any successful business as it provides a map of the journey the business will take over the coming 12 months. This business plan layout, with accompanying descriptions will take you through the process step by step.

After reading this plan layout, you will:

know exactly what you have to include in your Business Plan
have a good idea of the sort of questions you need to answer to have a good idea of what you will be doing to run your business
understand the need to know about all aspects of the business like Marketing, Sale, HR, Finance, Cash Flow, Budget and Production
be able to discover where the gaps are and where you need to do more research
know that the Business Plan is only the start of an ongoing process that will change as you implement the plan day to day

Business Plan content

The business plan needs to include everything about your idea for a business, which when read by a bank manager, an accountant, a venture capitalist or a business angel they're all able to get a very good picture and understand completely what is involved.
This means describing everything that your team is going to do to build the business to create the vision to fulfil the dream.

It needs to include all of the following and more:

the detail,
all the ideas,
all the research,
all of the numbers,
the costs,
the time frames involved,
the process’s,
the management structure,
where the sales are going to come from
how you're going to market it,
where the finance is going to come from

1. Overview

The overview is normally a few sentences long and summarises the executive summary.

2. Executive summary

This is a summary of the business you want to start. It's vital. Many lenders and investors make judgments about your business based on this section of the plan alone, as this is the only part of the business plan that they have time to read. The main content needs to include the idea, who is involved, the route to market, how the sales are going to be achieved, sales values, gross and net margins, bottom-line profit, capital investment required, growth pattern and exit strategy.

3. Description

The description needs to be succinct. It covers an explanation of the idea and covers where you got the idea from, what is the potential market and why do you think people will buy it in
3.1 You - a few words about yourself, or the group of people involved, with some background information of skills and experience. Full CV’s should be included in the appendices
3.2 Your organisation - a few sentences about the organisation that you have either created to date or will be creating. This will include something about the size, its management structure and the growth pattern for future employees.
3.3 Legal status - here you need to describe what is the legal status of your company and how you reached this conclusion for this particular legal format.

4 History

This involves all of the work you've done to date, market research carried out, the development of the product and the amount of time and money that you have already invested. All of this should be explained against a timeline of how things have progressed.

5 Strategic background

The strategic background outlines where you're aiming for the description of the vision and how you're going to get there with some aims and objectives be dealt in the ordered the logical. It's basically a map of your thinking about how you're going to achieve your dream
5.1 Vision - a single sentence of vision in simple terms as to where and what you see the business achieving. The words need to include things like become the leading…, create a centre of excellence for ….., involve the best brains…, provide a revolutionary…., change the paradigm….
5.2 Aims - this needs to include words such as promote understanding of knowledge, focus, reinforce, stimulate, generate support, open doors, strengthen, form teams, create alliances, empower people, increase confidence, enhance, motivate, study, discover, promote learning, promote minority groups, involve communities, develop ability, create freedom, to validate, strengthen goals, facilitate, introduce the concept of,
5.3 Objectives and Goals – this part is about the actions that will be taking place with verbs like - define, outline, identify, recognise, specify, select, establish, formulate, share, show, demonstrate, perform, practise, participate, respond, suggest, report, record, assess, evaluate, acknowledge

6.0 Marketing

This is probably the most important part of the active “doing” section of the plan, because if you don’t get this part right the rest will not happen. It is absolutely crucial to understand your Market and understand everything about your Customer, how they buy, where they buy, why they buy, how much they spend, what motivates them to buy, when they buy, what adverts they look at, etc
6.1 Market research – absolutely the start, because you might think that there is a market for a particular service or product but it is not until you get out there and ask people if they actually will buy it, will you be able to prove your theory. The saying that comes to mind is “one man’s meat is another man’s poison”. Check it out before you spend your hard earned money discovering otherwise
6.2 Market size – part of the market research will need to show how big your target market is, where it is, whether it is growing or shrinking, whether it is seasonal, or if it is technological based and will therefore be subject to high change, whether there is price sensitivity, lots or little competition, etc.
6.3 Competition – it is crucial to know lots about the competition and what they are doing and will do when you start to take their customers away from them. Ring up the competition, get their leaflets and price lists, look at their marketing material, test their products, visit their shops, factories, website, exhibition stands, in fact know more about them than you know about yourself. It will pay dividends.
6.4 Customers – you need to mention who your target customers are, the socio-economic group(s), ages, where they live, what they do, if it is business to business the sector that you are targeting, how they purchase, what they're looking for, how you are going to find them, what they're using the moment, etc. A lot of this information will come from your market research
6.5 8P’s – Passion, Product, Pricing, Promotion, Place, People, Paperwork, Process – you must have something on all these items.
6.5.1 Passion - what is it that sparked the initial idea of the business and what is your passion for this particular product or service that is going to sustain you through the ups and downs, late-nights and early mornings, that will keep you going through thick and thin and where does it come from
6.5.2 Product - it is very important to describe very accurately the product or service that you are going to offer especially the USP - unique selling point - that is going to mark it apart from all the competition. Because competition is so fierce in all areas of the economy it can be very easy to launch a “me too” product where you only compete on price. Be very clear how you describe the various facets of what you are offering so that the investors and funders are able to get a very clear picture. Be aware of the Porter Principles
6.5.3 Pricing - in a world where so much is given out for free sensitivity to pricing is extremely important. Due to the Internet and pricing flexibility, any increase or decrease in demand automatically changes the prices of airline tickets, theatre tickets, bus tickets, train tickets and society is getting very used to amazingly cheap deals and ridiculously expensive prices for the same thing, with just a different date or time on it. Be very careful of the start-up price syndrome, where many people undercharge dramatically for their time due to working from home but also in an attempt to get into the market. Please remember that price is no indicator of quality or value and there is often absolutely no relationship between cost and price
6.5.4 Promotion - this is one of the most important parts of the marketing mix and you will never have enough and will always want to do more than you can pay for
6.5.4.1 Paid promotion – newspaper, taxis, posters, radio, magazines, buses, Internet, exhibitions, fairs, direct-mail, telephone calls, brochures, cards, letters
6.5.4.2 Semi-free promotion – PR articles, e-zines, newsletters, competitions
6.5.4.3 Free promotion - yourself and your staff (networking), speaking engagements, voluntary committees, journalist sources, radio auctions
6.5.4.4 Gold promotion – your customers, testimonials, referrals, conversation, word of mouth
6.5.5 Place - this is about how you are going to reach your target market and nowadays with so many different routes to market and a huge geometrical increase in the use of the Internet be very careful as to how you intend to place your product and service in the market place. Be very aware that people from around the globe are competing 24/7 for digitisable products and services and at far cheaper prices and you can offer. If you are a local supplier of goods do not forget the ever increasing possibilities of partnerships with often unlikely competitors
6.5.6 People – one of the unsung marketing heroes of any company are the people who work with you and your customers. They need to be used as much as possible to promote and sell your product and service. This of course means you. You and your team and staff need to be marketing and promoting your product and service all the time. It is really important to make sure that all your people are professional at all times, as you never know when you are in front of a prospective customer
6.5.7 Paperwork - very few businesses use a whole variety of newspaper or magazine articles, press releases, e-book's, books, photographs, recommendations, testimonials and referrals that could be used for marketing and yet lie unused in filing cabinets. It is very important to register in the business plan all these hidden gems that people take the granted and yet are often part of the USP of the business
6.5.8 Process - be aware of the necessity to demonstrate an ability to control the processes of your business. Many companies assume that administration is a given, but be assured that a great number of businesses’ processes are far from complete or are satisfactory. It is well worth noting, even if only for your own benefit, to describe how the whole sales processing and delivering system works and how this links into the accounting and financial spreadsheets. Some companies only USP is the fact they get their processes to work right. Both they and their customers know that this is their USP
6.6 Internet effect – due to the massive change brought about by the Internet it is absolutely crucial that a large amount of thinking goes into how you will use the Internet to publicise and market your product and service. Areas to consider with your internet marketing are Brand management, Overall Graphics, Detailed Design, Navigation, Keywords, Adwords, Pay Per Click, Clickbank, Affiliate income, Blogging, Links, Security, Database Management, Back end support, Shopping Cart, Payment processing, Order processing, Logistics, Administration, Technical interface.

7.0 Sales

Without a comprehensive sales strategy, however good your product or service is you will unfortunately not survive. It is very important to have a process that identifies your target customers: where they are geographically, who is the decision maker is, who is the gatherer of information, how they go about buying, etc.
7.1 Sales process – please put something in the plan about how your are going to sell/get orders for your business and how you are going to maintain contacts with your customers (CRM). This will include a process which includes some or all of the following:

Prospecting – who to visit/contact,
Introduction – build rapport,
Qualifying – is there a match,
Buying criteria – what is it & how do they do it,
Demonstrating – fulfilling their needs and wants,
Selection process – who is involved & how is it done,
Decision process – who is involved & how is it done,
Action timetable – what are the order timescales,
Dealing with objections – how to get over them,
Closing – do it in stages

7.2 Sales team - even if you are the business owner and are the only part of the sales team, it is always a good idea to give some idea of your selling experience and how in the past you have been able to get orders and facilitate the sales process
7.2 Sales estimates - another crucial area, because the sales estimates are the top line of the budget and automatically have a massive impact on income and the bottom line. Ensure that there is some relationship between the sales values, the time scales and with the market research that you have carried out. The first six months should be done monthly, followed by two sets of quarterly figures for the first year and then annually for the second and third year

8.0 Operations

This is all about your premises, production facilities, your management information systems and IT. Included in this area are details about how you produce your product or service, whether you be working from an office or at home. It needs to include details about premises are you going to produce your product and service, and how you're going to control the business, administration costs, accounts, IT etc.
8.1 Suppliers – where are you going to get your supplies from, import or UK, how you are going to maintain their quality, logistics,
8.2 Premises – rent, rates, telephone, broadband, utilities, maintenance, insurance, fire regulations,
8.3 Manufacturing facilities – production costs and machinery purchase if any
8.4 Administration – postage, admin staff, stationery, furniture, salaries, product and 3rd party insurance
8.5 Accounts – book-keeping and accountants, controlling the VAT, payments, petty cash,
8.6 Management information systems – names and addresses, telephone numbers of suppliers and customers, staff details, costs, product consumption, KPI’s, Intellectual Property Protection
8.7 IT systems – hardware, software, maintenance, backups, updates, security systems, content, broadband connections, wireless security, networks

9.0 Financials

This section translates everything that has been written about in the sections above into numbers. Invariably depending upon whether you have an extrovert or introverted personality or whether you are a positive or negative thinker you will either overestimate or underestimate the sales and costs of your business. It is important therefore to get the opinion of someone who has experience in business to test out your assumptions and the figures presented in your spreadsheets
9.1 Funding – how much you need for start up , first few months whilst sales are climbing, purchase of equipment, computers, software, travelling to clients, marketing
9.2 Income – sales, affiliate sales, commissions, grants, overdraft facilities, personal investment
9.3 Costs – admin, marketing, sales, premises, IT, salaries,
9.4 Capital expenditure – machinery, premises, equipment, IT. Marketing, including design and exhibitions could be considered capital expenditure if a substantial amount of the investment concerned was involved with brand creation
9.5 Financial viability – gross and net margins, breakeven point, return on investment,
9.6 Sensitivity analysis – a risk assessment needs to be carried out to look at the probability and level of risk on some or all of the following areas - concept, strategy, key people, economic climate, management team, market, sales estimates, the margins, funding, financials, legal situation, technical challenges, R&D implications

10.0 Management and Staff

This area of your management team and personnel is another major area of importance. It is imperative to have a first-class team that works well together and who have similar values and work ethics. The basis of a good management team is without doubt deep respect and honour for each other. These relationships will be documented in a partnership agreement prior to the setting up of your Company. It will include your credentials and those of the people you plan to recruit to work with you and how everybody fits together within a management hierarchy
10.1 Individuals background - include a biography or C. V. in the appendix of the key players
10.2 Recruitment - it is always useful to have a recruitment process even if it is only for your own benefit. This is often included as an appendix and should include some of the following: use of profiling, management structure, job title and job description, advert or talk to agency, interview candidates, make the offer, use of references
10.3 Training - there is sometimes a necessity to include a short article on training especially if you are setting up a new product or service and the people that you need are not readily available in the market
10.4 Health and Safety - with the increasing amount of health and safety legislation this is an area where there are many openings for new businesses. All this means that small businesses must be aware of the implications

11.0 Monitoring and evaluation against KPI’s

Key performance indicators and an easy way of keeping in touch with the business and monitoring the effectiveness of one's time and money invested. Invariably they involve: calls made per month, sales per month, orders delivered per month, products developed, staff turnover, gross margin, and net profit

Appendices

A. Capital expenditure with time scales - will involve a shopping list of items that are needed to be purchased by the company with dates
B. Sales estimates – monthly, quarterly and annually, with assumptions
C. P & L Budget - this will be the foundation for the cash-flow statement
D. Cash-flow statement - prepared on a spreadsheet this will be monthly for the first six months and then quarterly for the next two quarters. It will cover all income from sales, grants, commissions, etc as well as all the relevant costs. Tied into the spreadsheet will be a number of assumptions relating to payment terms given to suppliers and credit terms given to customers. It is better if the latter is kept to a minimum at the beginning to reduce the amount of cash required for the start-up
E. Balance sheet - a more complicated accounting form, which shows a picture in time about how the business is progressing. Invariably it needs to be prepared by an accountant or accomplished bookkeeper once they have been given a budget and cash-flow.