Composing and producing a business plan can be a daunting prospect for a start-up business. Here at MarketInvoice, we still remember when we were working in the co-founders' kitchen, and as I'm sure you can imagine, writing a business plan for a unique online finance business was pretty stressful... We thought we'd break from financial help this week, and instead offer some tips to help start-ups fulfill their business plan potential.
A business plan is integral to creating your company. The planning process itself is worth the time and effort, as it will teach you about your business and the opportunity laid before you. Business plans are decision-making tools. There is no fixed content for a business plan; it is all subject to goals and audience. A business plan represents all aspects of the planning process; declaring vision and strategy alongside sub-plans to cover marketing, finance, operations, human resources and legal plan when required.
Externally focussed business plans target goals that are important to external stakeholders, particularly financial stakeholders. They also contain detailed information about the team and company. A bank won’t look twice at a loan application if you don’t have a business plan.
Below are some useful ideas to keep in mind when writing your business plan:
Target your audience
Like a CV one must consider who your business plan is aimed at and furthermore; what the purpose is of it. One of the main reasons for producing a plan is to help you secure funding for your start-up. If you are pitching a plan to potential investors, they will want to see what’s in it for them. You need to communicate the future plans of the firm as well as focus on return on investment time frames for getting money back. Tailor your plan to different audiences; use it as a method of communicating your firm’s vision, mission values and goals to stakeholders. Make it credible, understandable, and attractive to someone who is unfamiliar with the business.
What is your market? Do your homework
It can’t be more heartily stressed; do your homework and thoroughly research the market you are entering. You will need to consider the size of the market and how you will gain access to it. Potential stakeholders will also want to know the state of the market and its predicted growth to see whether it is worth investing time, capital and effort.
Who is your competition?
An integral part of the business environment is understanding the competition. How competitive is your market? Who are the key players? How are they competing? These are all points that need to be pondered. Your strategy will to show how you are planning on competing with the competition e.g. on price etc. Set out a battle plan, covering the areas you are going to challenge.
Attention to detail
Be concise but ensure that the reader can make an informed decision. Ensure your business plan looks professional and that there are no spelling mistakes (unforgiveable if you get wrong). Make realistic assumptions and back it up with accurate content and credible projections. Format should be considered, for example if you are using a PowerPoint presentation make sure you have a back-up copy on a USB. You never know when you’ll get a gremlin in the system!
A clear opportunity
If you are seeking investment in your start-up, it is important to clearly describe the investment opportunity. Why would the investor be better off investing in your business rather than leaving money in a bank account, shares, or investing in another business? What is your Unique Selling Proposition (USP) for the business? Sell your business well and tell people why they should part with their cash to buy from you.
Do the maths
As has been illustrated on Dragon’s Den countless times your figures will be subject to particular scrutiny so make sure they are correct! Costs should be documented in full and sales predictions should be both conservative and realistic. While costs are more certain and predictable, a crucial factor in the success or failure of the business will be the level of sales (make credible projections and be prepared to defend them.) Ask for help if you aren’t confident with maths. Remember, at the beginning, there are a lot of start-up expenses in a period of uncertain sales volumes. If sales are on credit (including via credit card) it may take up to four weeks for you to receive the cash.
Everyone loves a summary
The executive summary is arguably one of the most important components for any business plan. It is a summary of the entire plan, a time-saver for investors if they are unable to read the whole document. An executive summary is the first interaction between the writers of the report and their target readers. It is said that a business leader’s decision to continue reading a certain report often depends on the impression the executive summary gives. The summary should be completed at the very end of the business planning process and should have a “wow factor” that entices them to read further.
A business plan is very important - particularly for when applying for bank loans - but it's worth bearing in mind there are alternatives to traditional bank finance that SMEs can apply for and use in order to raise working capital and manage their cash flow.
You'll still need your business plan, but there are many relatively young tech start-ups offering options that are different from traditional bank products, for new entrants to the market -everything from crowd-sourced equity providers, peer-to-peer lending, as well as invoice finance (of course!) . It's worth considering what these young companies offer startups - and even better once your startup joins the ranks of SMEs.