It’s not just Dragons’ Den contestants who need to demonstrate a credible product idea before getting a grilling. Here Alan Gleeson, manager of Palo Alto Software, gives his top ten tips on how to create a winning business plan.
Know your audience
The starting point for any business plan should be the perspective of the audience. What is the purpose of the plan? Is it to secure funding, or to communicate the future plans for the company? The writer should tailor the plan to the audience’s specific requirements. Potential investors will seek clear explanations detailing the proposed return on their investment and time frames for getting their money back.
Do your homework
Without market research, no one is going to take your plan seriously. You will need to ensure that the plan includes reference to the market size, its predicted growth path and how they will gain access to this market. For example, a plan for an internet café will consider the local population, internet penetration rates, predictions about whether it is likely to grow or decline, concluding with a review of the competitive environment.
Looking over your shoulder
An integral component to understanding any business environment is knowing the competition. So you will need to think about how the incumbents are competing and whether there is a price leader. Then you should include details of how you can you compete effectively with the existing players.
Attention to detail
Make the plan concise, but include enough detail to ensure the reader has sufficient information to make informed decisions. Given that the plan’s writer usually has a significant role to play in the running of the business, the plan should reflect a sense of professionalism, with no spelling mistakes, realistic assumptions, credible projections and accurate content. The writer should also consider the format of the plan. If a business plan presentation is required, a back-up PowerPoint presentation should be created.
If you are seeking investment in your business, it is important to clearly describe the investment opportunity. Why would the investor be better off putting their money into your business, rather than leaving money in a bank account, shares, or investing in another business? What is the Unique Selling Proposition (USP) for the business? Why will people part with their cash to buy from you?
Cover all areas
Undertake research on what a business plan should contain. Good starting points are Business Link and Bplans. Sections which need to be covered include: product/service, market, competition, management team, marketing, operations and financials. You will also need some simple colour charts and spreadsheets to illustrate some of these areas.
Do the sums
The numbers will be subject to particular scrutiny. 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. If you are not particularly comfortable with maths, have someone assist you in preparing a simple cash flow and break-even chart. This will help the reader understand how many sales you must make to cover your costs, and also how much financing you must raise to start up successfully.
Arguably the most important component of the plan is the Executive Summary. This is a summary of the entire plan and is usually contained at the start of the beginning. It also tends to act as a key qualifier for time-pressed investors – if they like it, they will read on, if not they will go no further. It should be completed at the very end of the business planning process and should have a ‘wow factor’ that entices them to read further. In tandem with this, the writer should also prepare a short ‘elevator pitch’ – a five-minute overview of the key benefits of the new product/service.
Once you have completed your plan, have it independently reviewed. Select someone detached from the process who can offer constructive criticism on all aspects of the plan. Your local Business Link or Enterprise Agency should be able to assist with this. This review should prompt further questions that will need to be addressed in a revised draft.
The winning formula
Finally, a plan should always be viewed as a living document and contain specifics regarding dates, deadlines and responsibilities. It should be constantly reviewed and updated, as well as being used in regular ‘plan versus actual’ discussions. Business relies heavily on people taking actions and being accountable for them. A winning business plan will help to ensure that the business is fully focused on what is required to achieve the company’s goals.
See also: Business plan creation advice and tips