We rarely give value to good business ideas. Since they seemingly come from nowhere while we’re distracted or doing something else, it’s like they’re free. But they’re not – the inspiration that fuels them is priceless.
However, a business idea can be worthless if we don’t pin it down in a business plan. Although a good idea is what gets potential investors interested, a business plan is invaluable in securing financial support because it shows that your idea has direction, structure and can work in the real world.
And even if you have the capital yourself and don’t need financial backing, a business plan is still necessary because it provides a road map for your company.
The audience
Before you start tapping away at your keyboard, you first need to decide the purpose of your business plan and who your audience is. Are you using your business plan to communicate your idea, to secure funding or as an internal document which outlines the growth of your company? Every audience necessitates specific requirements. For instance, if you’re pitching your business plan to potential investors, these will want a detailed explanation of the return on their investment.
Even if the audience is just you, drafting a business plan is still a necessary exercise as it helps you consolidate your vision, strategy and financials.
Research
An integral part of your business plan and future success is knowledge of the market that you will be operating in. Without knowing your market, your idea risks staying grounded.
Such knowledge can only come through research. Before you start working on your business plan, you first need to do some market research and study the market size, its potential growth, and how to best gain access to this market. Good market research will show you whether your business idea is sound and worth pursuing, or whether the market is already well served with businesses similar to yours.
Your research will also help you understand your competition. Is the market you plan to operate in competitive, is there a price leader, and can you compete effectively?
By having the right information in hand, you can make informed decisions on your business set-up, finances and marketing strategy.
The long and short of it
How long should a business plan be? No investor will want to read a long business plan. On the other hand, not providing enough information sends out the message that you didn’t take the time to develop your business idea well.
There is no right and wrong word count for a business plan. What matters is that you should only include information that is essential to your plan. It’s tempting to add a bit of fluff but, even if it sounds nice, it will get you nowhere. Get to the point and quickly.
If your idea is good, then it can stand up on its own. However, you need to clearly describe your unique selling point. Be concise but also informative: if you’re pitching your business plan to potential investors, they will need to know why they should part with their cash and believe in you.
It’s tempting to add a bit of fluff but, even if it sounds nice, it will get you nowhere
Wherever possible, include visuals, graphs and charts: not only do these break up the text but they will also help bring your ideas and plans to life.
Sum it up
Your financials will come under particular scrutiny. Make sure that costs and sales predictions all add up. If your company is new, factor in the costs of setting up and launching a start-up.
Also, outline how you plan to raise the capital that you need: will you be using your own money or will you manage to get finance from a bank, an angel investor or an outside backer? Finally, include a reasonable contingency in case sales and costs are different from those forecasted.
It’s important that the financial information in your business plan is realistic. It is tempting to lower costs and boost sales to make your plan more attractive – however, it’s best to be conservative and realistic.
Review
Once you have finished your first draft, review it until you feel that you’re comfortable pitching it to your audience. Also, make sure that there are no spelling mistakes.
It’s also a good idea to have it independently reviewed by someone who wasn’t involved in the actual process: that way, you can get objective criticism. If the feedback you receive isn’t too positive, don’t be afraid to change your original plan accordingly.
What your business plan should include
• Title page: describes your plan and includes general information on your business.
• Executive summary: a one-page overview of your business plan. You should write this after you have finalised your plan.
• Management plan: includes specific details about your business, including structure, registrations, premises, staff, products and services.
• Marketing plan: this section should include an analysis of the market in which you plan to operate as well as potential customers and competitors. The plan should also include your marketing targets and strategies to reach those targets.
• Financials: the financial plan adds up your costs and financial projections.
• Supporting documentation: any additional information that will help you build and prove your case should be included as an appendix.