The Forum Guide to Writing a Business Plan
MGBP001 MAR2016 Forum of PrivateBusiness
www.fpb.org Visit fpb.org
The Forum Guide to Writing a Business Plan A business plan will be one of the most important documents a new business owner will have. The business plan will show your ideas, targets and plans for the future for your business and it will certainly show if your business idea is a realistic and workable one. Having the business plan will enable you to work towards securing possible funding if required to get you started. It is a dynamic document that should be reviewed regular to measure the performance of your business. The Forums mini guide will give you some of the basic elements that you need to be considering for your business plan, how do you go about writing it and what you will achieve by having one? Our guide is aimed at business start-ups that need to maybe raise funding for a business but the guide is also useful for businesses who want to grow.
Why do you need a business plan? A business plan is a starting point for a business and the owner of any business will use this to establish and grow over time. Within the plan will be key objectives that a business will need: •
Ideas and research.
•
Making the business viable.
•
The purpose of the business and how the business will communicate.
•
Future predictions and can they be looked at before they happen in order to secure the future of the business.
•
Clear strategy including the marketing strategy, setting targets and objectives to be achieved, with a clear strategy of growth over a period of time.
Where to start? The first thing is to think about how you, as a business owner, are going to use this document. Is the document going to be used for investors or lenders to support the business or is it a document to understand the objectives of the business so that you can plan? The business plan should read easily, being comprehensive and concise with your predictions but without any contradiction. For example, if you are displaying figures for expenditure and planning forecasts, check and check again that they are correct. Be comprehensive yet concise and without any contradiction. For example, figures included in the plan for expenditure on equipment must match those that appear in the plan’s financial forecasts. All too often they do not match and the business plan loses credibility.
Forum of PrivateBusiness
Visit fpb.org
Try to identify early on in your business plan what any of your potential investors need to know in order for them to be attracted to invest in the business. You may need tobe stating why you chose your business location, and why you decided to pursue a particular product and industry. All too often, these issues are not addressed. Be realistic and convince investors that the business can be successful.
What should be included in the plan? Every business, and situation/ flow of a business plan will be different but the following headings we have included; we think will cover the essential elements that should be included in a logical order for any business plan. Ensuring that the plan addresses the most important issues which an investor, bank or other funding body will need.
Table of Contents This will be one of the last pages that you finalise for the plan but a table of contents will be required to list all the main sections and page numbers. Remember, making it easy for someone to find the information they need to read is what you have to achieve.
Executive Summary Again, this is also one of the very last pages that you will write once the plan has been written and you are happy with it. The Executive Summary is no more than two pages long and will give a synopsis of the plan. It will be the first page that an investor or a bank will read so it needs to be clear and concise to ensure that your plan stands out from any other plans that the investor or bank may read that day. Key questions to be included within the summary are: •
What makes the business idea, product, service or approach to the market unique or original?
•
What gives the proposed business an edge over similar businesses and products?
•
What experience do you, the owner of the business, have in their target market stated within the plan, or will the business be online only? (This is where the capabilities and knowledge need to be displayed).
•
Are the financial elements of the plan correct and are they viable as well and profitable over the plan period?
•
If you are looking for investors to the business has it been shown?
•
How and when they will get their money back?
•
What are your plans to display an exit strategy with an attractive ROI?
The executive summary should also include: •
Details of a trading name of the business, its owners and its address.
•
Details of the products and services that are going to be sold.
•
A summary of the target market and competition.
•
The amount of finance needed, for what purpose and over what term.
•
The amount of money the business owners are investing.
Forum of PrivateBusiness
Visit fpb.org
Aims, Objectives and Vision People start a business to become successful and to provide a degree of personal and financial independence away from working for others. There is also the opportunity to generate a good income whilst working in a field that a business owner is passionate about. For some, starting a lifestyle business, to suit their work-life balance or to develop a hobby, to generate a further income also suits. From starting a business, ambitions grow and business owners then want to expand and become a bigger business and create more personal wealth. Displaying motivations for where you want to take the business will also give further creditability to an investor or bank. Consider: •
Why are you starting a business?
•
Is the business a supplement or replacement of the household’s main income?
•
Is the business being started as an investment to sell as soon as possible?
•
Will the business provide jobs for family members?
•
Where will the business be in 5 years’ time?
Questions like the above will display the aims and development strategy of the business for example, if someone is starting a business as an investment, the focus of planning will also be a lead to the exit strategy for when the business is sold. Therefore the strategy put in place will need to focus on building a business up as quickly as possible in order to sell for the best price valuation. -Show a clear demonstration of business planning for long or short term to gain the best ROI. Defining the vision for the business will help with the identification of clear and challenging objectives and determine how these goals will be pursued as the venture evolves.
Business Description & Purpose What is the business description and what will the business do? The business plan should be as tailored as possible to the type of business. If the business is a restaurant, will it be a family restaurant? Will it be only service local produce? What will the environment of the restaurant be? Will you have an alcohol licence? Or will the restaurant be more upmarket and trendy serving a la carte, gourmet dishes and a unique dining experience with intimate settings? Look at the competitors around the location you want to build your business and see what products and services they are offering to compare against. Then, take these actions and think why customers would move away from other businesses and come to yours. What is going to be unique about your business to entice them to come to you? What will be your unique selling point (USP)? A business description can be written similar to a mission statement and will reflect clearly a summary of the purpose of the business. It also needs to be written so it is easily understood by all, from customers to potential investors. If you cannot describe your business easily, the business idea may be too complicated and may need to be looked at again to focus on the businesses purpose, target audience and mission.
Forum of PrivateBusiness
Visit fpb.org
Legal Structure and Licences What legal structure will your business have? Will it be a sole trader business or become part of a partnership or private limited company or will you be trading as social enterprise (CIC). All of these decisions will have an effect on the tax liabilities for the business owner and this will form part of the amount of tax that will paid. This will then have an impact on the cash flow. Any investor in a business will also display concern about the legal structure of a business so right at the beginning, you need to be looking at and choosing the right structure to enable the future needs of the business. Depending on the business type will determine in licences are need to trade so again this needs to demonstrated within the business plan of how you will have taken steps to obtain the licences. For example, if the business is within food, childcare or pet care sectors then licences will be required so consider the time this will take to obtain and any costs that will be incurred. If the business will be trading from a home base, planning permission or building regulations approval may be needed.
Management Processes Having management processes in place right at the start of a business will make the business run more efficiently and smoothly, even if the business is based on sole trading. Consider the following management functions: •
Marketing and sales.
•
Finance.
•
Recruitment and staffing.
•
Product development or product sourcing.
•
Legal compliance.
•
Administration.
The plan must also demonstrate how the performance of the business will be monitored and measured against smart objectives and targets. How will the roles of each key member of staff be monitored too?
Marketing Strategy This most important part of a business is the marketing strategy and is required to make the business a success. A thorough understanding of the businesses target market is needed, including its size and market share that can be achieved. Outline the market in terms of location, groups of prospective customers and their profiles, who are potential competitors are and what the trends and influencing factors are. Once this is put together, the overall marketing strategy will be clear. The next key point will be to break the marketing strategy down into key objectives and with targets, being realistic and smart with the objectives.
Forum of PrivateBusiness
Visit fpb.org
For example: •
Who are the initial marketing targets (specific groups or market segments)?
•
What products, services or particular deals will the business offer to them?
•
What is the unique selling proposition (USP) of the business and how does this differentiate from its competitors?
•
Is there a specific volume, value or share of these market segments that the business needs to achieve?
•
When will these targets be achieved?
•
Why are these market segments being targeted first?
•
Who will the business target next, for instance in six months’ or a year’s time?
Marketing Plan How will the marketing be carried out? Once a clear marketing strategy has been put into place, there needs to be confirmation of how this will be executed. A marketing plan will need to explain how each of the marketing objective targets is defined in the marketing strategy to be achieved. This can then be broken down into statements about each target market to be carried out separate marketing campaigns or they can be deployed both at the same time. A marketing plan will include some or all of the following: •
The marketing methods employed for each of the target market segments.
•
The specific actions needed to reach each segment.
•
A realistic timescale for each marketing activity.
•
The people or organisations that are going to carry out the marketing.
•
Estimated costs to undertake the marketing activities with the marketing budget.
•
Monitoring of the campaigns.
•
How the responses received to marketing activities will be handled.
It is also important to identify how the overall marketing plan will be managed, including aspects such as: ensuring that the entire budget is not spent too early; monitoring results; adjusting the plan; and introducing new tactics and activities as required.
Targets and Objectives The most important business goal of the marketing plan is the sales revenue targets. Sales forecasts should be set out in terms of: •
Sales of different product or service types by volume and value.
•
Sales from different customer groups or territories.
•
Sales from different distributions or advertising channels.
Forum of PrivateBusiness
Visit fpb.org
Financial Requirements and Financial Forecasts Financials are important and this should include a breakdown of all requirements, the source of the finance that is available along with financial requirements. This should include: •
The costs of starting the business, for example the capital expenditure required for the purchase of equipment and working capital requirements for cash flow purposes while the enterprise becomes established and generates and receives sales income.
•
If a personal budget is available - often known as a ‘personal survival budget’. This is typically required by funders when considering applications for publicly funded business loans such as Start-Up loans or applications for loans under the New Enterprise Allowance (NEA) scheme. A personal survival budget should set out the business owners’ personal living expenses and indicates how much income they will need to derive from the business in order to survive.
•
Details about the personal finances that the business owners intend to invest.
•
Details about any additional finance that has been secured.
•
A table showing what the finance will be spent on, with details of each piece of equipment or service that will be purchased and its cost.
•
A break-even analysis and timing calculation giving details of how much of the product or service must be sold at a given price to cover all the costs and contribute towards the profit and when this break-even point will be reached.
•
A detailed cash flow forecast estimating how much cash will be available in any particular future month.
•
A profit and loss forecast estimating when the business will start to make a profit which will be essential for long-term success.
•
A balance sheet forecast giving a snapshot of the trading position of the business at a particular point in the future, identifying what the business will owe, what it will own and how strong it will be financially.
Operational Requirements Details about the operational requirements will be essential when preparing financial forecasts. Basic operational planning should cover the following aspects of the business and include an estimate of their costs: •
Premises - details of the premises and a sketch plan of the layout.
•
Equipment - a list of necessary equipment and the price of each item.
•
Staff - details of what roles need to be filled, including job descriptions.
•
Suppliers - details of various suppliers and the credit terms they will offer.
•
Compliance - details of regulations regarding health and safety at work and any other regulations specific to the business or sector, together with a demonstration of how these will be complied with.
Forum of PrivateBusiness
Visit fpb.org
•
Licensing - details of any licences or permits that are needed to trade in the proposed line of business.
•
Insurance - a statement of what insurance cover is required, including details of relevant policies.
Training Needs If the business is going to have staff, have the skill gaps been identified? This is where a fact finding prompt to obtain information about training providers and the funding are needed for this. It will also assist in budgeting for training costs in the cash flow forecast.
Business Risks What could go wrong and what will need to be done if the worst happens? The plan should include an honest assessment of the risks involved in the business as well as how these will be minimised. All possible outcomes should be considered and planned for. Risk assessments of the situation need to have been recognised. Which of the following risks are relevant to the business? •
Lack of management experience. This risk can be addressed by getting support and you can speak to our membership helpline about this on 01565 626001.
•
No trading history. This will make it difficult to borrow money or obtain credit so it might be necessary to make other plans to finance the business initially.
•
Economic uncertainties. For example, if money has been borrowed and the loan is subject to interest, it will be necessary to make contingency plans for interest rate increases.
•
Over-reliance on key staff, key suppliers and on a small customer base.
•
Customer bad debts leading to cash flow problems.
•
Partnership difficulties arise in the future.
•
A sudden increase in competition.
•
Security issues.
•
Failure to meet sales targets.
•
Lack of resources at key stages of development.
PEST Analysis PEST is an acronym for ‘political, economic, social and technological’, and by completing a PEST for your business plan will provide a framework for reviewing the business in the light of external factors that may affect it in the future. Being continuously aware of trends and changes to the changing business environment, having a competitive edge will continue to be gained, making your business a success. A business plan displaying a PEST analysis will demonstrate that the overall bigger, long-term picture has been taken into consideration. This analysis can also become a knowledge bank for raising new ideas and possible alerts where danger could arise from target markets.
Forum of PrivateBusiness
Visit fpb.org
SWOT analysis A ‘strengths, weaknesses, opportunities and threats’ analysis helps to give a focus on the internal strengths and weaknesses of the business, including those of its owners, staff, products/services and processes. Examination of external factors and opportunities but sowing the threats to the business such as: trends with consumer buying habits, competitor activities, changes in technology, legislation and financial impacts. A SWOT analysis for an example is displayed below for an ‘example’ business:
Internal
Strengths • Industry experts.
• Brand awareness.
• Sustained commitment, informed and knowledgeable sales consultants.
• Connecting with customers and creating dialogue.
• Current database of customers and prospects – growing.
• Website needs to be more informative and engaging.
• Trust, trading for over 10 years.
• Do people know what we can do.
• Newsletter. • SME.
• Continuous marketing campaign development.
• Email campaigns.
• Blog development and guest writing.
Opportunities
External
Weaknesses
• Keeping in touch with our customers.
Threats
• Website, PPC, SEO, resources, email marketing campaigns.
• Competitive business against our competitors.
• Development of customer insight customer feedback.
• More informative websites and knowledge centres.
• Downloadable content.
• Competitive social media.
• Social media development.
• Marketing initiatives.
• Mobile and SMS development.
• Stronger web presence of competitors.
• Brand guidelines and tone of voice.
Appendices Appendices should include all the documents that support the plan, for example: •
The CVs of the proprietors and key employees.
•
Certificates for any qualifications or relevant training courses.
•
Copies of the lease for any rented business premises.
•
Market research data.
Forum of PrivateBusiness
Visit fpb.org
•
Financial forecasts.
•
Details of any professional advisers, key suppliers or insurance providers that have been engaged with, if applicable.
The first page of the appendix should list all the documents it includes so they can be found easily by anyone reading the plan. The documents and their location in the appendix should also be referenced in the main body of the business plan. It may be easier to index and number each document and file them in a logical order in a ring-binder file.
Tips to Help You •
There are software packages available to help with writing a business plan. Some high street banks also offer their own business planning software free of charge to customers who are planning to start up in business. However, check what you are getting from high street bank packages as they do tend to focus on the financial aspects and usually provide very little space in which to set out the practical and operational parts of a business plan.
•
Presentation matters. A front cover should clearly identify the contact details of the business owner(s) to make the plan look professional. White space, illustrations and short sentences in the plan make the content much easier to read.
•
Someone who has not been involved in writing the plan should be asked to proofread it, checking for grammatical errors, spelling mistakes and inconsistencies.
•
Business plans can be discussed with an independent business adviser or accountant. Advice can also be sought from an adviser at a local enterprise agency or similar business support organisation or from a bank. Contact our helpline (01565 626001) for more information.
For full list of services and membership packages, visit www.fpb.org/join-us or call 01565 626001.
Be part of a growing business community Keep in touch with the Forum to stay up to date with the latest business advice, opinion and news.
Get social To keep in touch with the Forum,and stay up to date with the latest business advice, opinion and news, follow us at:
the_fpb forumofprivatebusiness Forum of Private Business
Forum of PrivateBusiness
Visit fpb.org
Our expertise is your expertise For more information on how we can help your business with simply contact our helpline team on 01565 626001, visit our website www.fpb.org or email us marketing@fpb.org
Forum of Private Business Limited Ruskin Chambers, Drury Lane Knutsford, Cheshire WA16 6HA Forum of Private Business Registered in England and Wales: 01329000
Visit fpb.org