The business plan

Planning to succeed

Setting yourself up in business can call for a significant injection of time and money, so it makes sense to put pen to paper upfront and draft a business plan. This will give you a clear idea of what the business will do, the challenges it faces – and more importantly, how you will succeed.

A business plan is like a road map that provides a guide of where your business is headed. It doesn’t have to be an elaborate document but it should play three key roles. Firstly, it forces you to analyse the viability of your venture; secondly, it provides a well-documented strategy that can be shown to lenders if you need to raise finance, and thirdly, it suggests a strategy and plan of action for you to follow in order to reach your business goals.

There are no universal guidelines on the structure a business plan should follow, though the contents can typically be divided into two main areas.

A description of your business

This part of your business plan should provide a clear description of what your business will do, including a rundown of your product or service, as well as your target market.

Your plan should also identify likely competitors, along with the strategies you will use to build, rather than lose, market share. Remember to outline your own industry experience – it’s your best asset in making the venture work.

Financial analysis

This is the heart of your business plan, which will indicate whether you can turn a good idea into a healthy profit. Resist the temptation to gild the lily as there is little point injecting capital into a venture that has only slim prospects of success.

The two key pieces of information required in your financial details include a profit and loss forecast and a cash flow forecast.  The former will help you assess how long it will take for your business to become profitable, and as this rarely happens overnight, you should identify sources of working capital that will tide you over until the business is operating in the black.

Of course profits don’t always translate into cash in the bank, so a cash flow projection is essential. This will show any timing differences between revenue collection and the payments to creditors. Significant delays could see the business (and you) resorting to high-interest debt, which could erode your profits.

Finally, when approaching financiers or potential partners, present a business plan as professionally as possible. In addition to explaining your venture’s commercial viability, the presentation of your plan will speak volumes about your overall approach to business.