Developing a business plan not only helps you sell your ideas to others to secure finance, it also forces you to clarify your ideas and tease out potential pitfalls.
You should have completed significant market and financial research before sitting down to write a plan.
The nub of a business plan is a summary of your business idea, outlining your target market, how much of that market you need to capture to make money, and how you will do it.
This process necessarily involves an analysis of competitors, with strong arguments as to why consumers would choose your business over others.
You will need to breakdown and justify your pricing structure, including all fixed and variable production costs.
Your business plan should also sketch out estimates of your likely start-up and ongoing operating costs (including wages, leases, insurances, etc).
Work out your ‘break even’ point – that is, how many sales you need to turn a profit – then estimate how long it will take you to reach break-even.
It can be daunting, but the internet is awash with templates and ‘how-to’ guides. Tackle it on a step by step basis.
Learning from common business plan mistakes is also important.
Business investors say they avoid plans that:
- Fail to address risk/competitors: Raising potential pitfalls then explaining how you will mitigate against these shows thorough planning, not weakness
- Are too long: You need to be detailed, but ideally keep it under 20 pages
- Do not price fundamentals accurately: Include all expected overheads, no matter how inconvenient
- Are sloppy: While no one will be marking your grammar, a verbose plan littered with spelling and punctuation mistakes does not inspire confidence.
Keep it clear and concise and get someone you trust to proofread the final draft. Finally, consider a ‘lean canvas’.
While you may need some hefty financial data for banks or investors, the lean canvas approach – which advocates distilling a business plan down to one page – helps you and your employees understand your business model and priorities.
Written in a single page in a single day, it covers nine key points, including:
- The ‘problem’ your product aims to address
- Your key resources and unique selling point
- The activities that will drive revenue, your target market and distribution channels.
Once you have research in hand, you can prepare a business plan based on hard data, making quantifiable, confident predictions about your market, your costs, your potential for growth and your profits.
It’s the sort of information lenders and investors want to see. Business plans also need to include strategies for growth and any potential to extend your product range or service.
It is also time to start refining your plans for marketing and branding your business. Again, research will guide you on the best channels to reach your target market. Making yourself stand out from the crowd involves everything from your name up.
