’The starting point for any budding entrepreneur should be a sound, well thought-out and realistic business plan, incorporating a financial budget,’ advises Professor Robin Jarvis, ACCA Head of Small Business. ‘This will indicate how much funding will be needed to start up the business and support it during the first year’s trading.’
Kemi Laniyan, who recently launched her business, Café Camouflage, which focuses on providing food for people with food allergies or intolerances, found her business plan essential to raising finance. It also won her a national award and she was recently presented with the ACCA Award for the Best Financial Plan at the 2005 handbag.com Barclays Business Plan Awards.
‘It was important that the financial element of my business plan was broken down into clear sections, which helped me to secure a grant from the London Development Agency. My business plan will be my bible for the next year as I start trading,’ says Laniyan.
’All the relevant financial statements had been embodied into the plan – most importantly the start-up investment, cash flow forecasts for three years and details of employment costs and pricing,’ explains Jarvis. ‘All these were also supported by a sound discussion about the assumptions underpinning the plan and other supporting information.’
ACCA suggests the following should be included in your business:
- Summary – an introduction to you, your business, product or service and financial overview.
- Management – details of you (and partners) and business experience.
- Product / Service – detail the key points
- Marketing – estimated present and future sales capability, competitors and customer profile
- Sales – your unique selling points and prices, and advertising
- Operational – business location, equipment, stock and staff
- Financial – profit and loss account, balance sheet and cash flow forecast
’Obviously anybody thinking of embarking on a new business should consider seeking help from the outset,’ concludes Jarvis. ‘All potential new businesses need a friendly helping hand – almost an unofficial partner – to unravel all the jargon and regulations.’
Key tips on how to write a small business plan
There are several ways in which you can go about writing your business plan and, to a certain extent, these depend largely on your budget and the confidence you have in your own abilities.
The cheapest way of putting your plan together is to write it yourself. Those less confident in their abilities, and with slightly bigger budgets, should consider buying one of the business plan software packages that are available. These take you through every step of the writing process and, with decent packages selling for around £100, they are relatively inexpensive too. The best packages can help you draw up financial forecasts and tailor your plan for specific audiences. Finally, for a personal service, you could contact specialist business planning services, who will provide you with more hands-on advice on writing a new plan or brushing up an existing one.
To Business Plan Services managing director Jane Khedair, the main benefit of this type of service is that every business has different needs and aspirations. Therefore, adopting a standard formula can be troublesome.
Despite this, Khedair offers a range of general tips that she feels are essential when constructing a business plan. Firstly, urging entrepreneurs to “take into account the needs and demands of your document’s reader and tailor the plan accordingly.”
This is essential, as although the content may remain roughly the same, different funding organisations – for instance banks and business angels – are likely to focus on different things.
Khedair also reckons it is vital to make sure you effectively communicate your product’s “value proposition”; in other words, clearly state why people will want to buy it. “Demonstrate a real understanding of what makes the market tick,” she recommends, illustrate how and why people make money and “beware of equating a large, growing market with ease of gaining share.”
In addition to this, don•t fall into the trap of assuming that the person reading your plan will know anything about your market. Provide explanations of any jargon or technical details you chose to include, “but don’t overburden the reader with excessive detail”.
And be realistic about what can go wrong too. Most business angels and venture capitalists freely admit that in most cases they rarely read past the executive summary and will just assume that you have a great product.
What they are really looking is proof that there is a market and that you have considered all eventualities – it is thus essential to map out how you intend to bring your product to market, what could go wrong and how you would react if it did.
Look at your rivals and “pay particular attention to indirect or evolving competitors”, as they can often be the biggest threat. “Don’t ignore the risks of scaling up your business” and “don’t underestimate the importance of people.” Consider what will happen if a key employee leaves and “be honest about any gaps that exist in your management team.”
Don’t forget that if you are looking for funding you need to spell out how much money you will need and why, but be wary of “proposing a deal in your plan since you may end up shooting yourself in the foot”.
Finally, be sure to demonstrate your vision and passion for the business throughout the plan. Too often, a business plan can become a cold formal document packed with detail but little charisma. “Your business plan shouldn’t just be a fundraising tool – it should be a living, breathing commodity,” Khedair concludes.
For further hints and advice check out: Planuary – How to create a business plan in 4 weeks or Starting Up channel.