Planning – basic structure and foundations of a good business plan
Planning – why and how?
Having the right finances in place and planning for financial matters before they reach crisis point are vital for any successful business.
Yet research shows that only one in three businesses have a business plan. Even fewer regularly use those plans and for many it is a static document which is only used when finance is needed. However, when used successfully, a business plan will reduce costs, identify opportunities, minimise risks and help the business to succeed.
The business plan should be relatively short, easy to use, professional and well-presented. It should also be an active document - not one which is filed away.
So what provides the basic structure and foundations of a good business plan?
The following headings represent a typical structure. However, good plans are those which are tailored and adapted to meet the specific needs of the owner and the business. They can easily be used for other requirements such as financing.
Typical areas which should be addressed in a business plan include:
• About your business
• Market/Competitor analysis
• Marketing and sales
• Your operations
• Financial forecasts
• Financial requirements
Where to start?
All of the above areas can be developed, but always start with the information you have readily to hand.
About your business
‘About your business’ is a good starting point for many owners. It also provides a good opportunity to consider key questions, such as “What makes the business unique?” and “What do I need to do to make it unique?”
Use this section to explain the business in more detail and include the following information:
• Business background
• Your business – products and services, trends and description
• Details of what makes the business unique
• Selling the benefits of your products
• Timeframe over which the business has developed
• Summary of the experience/pedigree of key personnel
• The business structure, ownership and any proposals to change this
• Sales templates
• Group structure
Many owners then find it helpful to consider the market, their competitors and day to day running of their business. Typically, owners would consider the following:
This is usually an externally focused Strengths Weaknesses Opportunities and Threats (SWOT) analysis for the business. It is important to consider the market in which the business operates. This section might also cover:
• A total analysis of all markets and how each market is changing and developing
• Trend analysis of these markets
• Purchasing habits
• Pipeline customers
This covers the operational capacity of the business, with an emphasis on its day to day running. It is important to note any opportunities to utilise spare capacity and to highlight any proposals to increase current operational capacity.
This also provides a good opportunity to demonstrate how a business can cope with the demand it is forecasting. An analysis of ‘Your Operations’ often includes:
• Current operational capacity
• Staff shortages
• Current suppliers
Marketing and Sales
Having looked at the business, its operations, its market and competitors, the plan can naturally move on to how the business will develop its marketing and sales strategy. The areas to consider are:
• Marketing mix (product, place, pricing, promotion)
• How your products/services meet the needs of your customers/clients
• Your market position, including product pricing/order details
• Your sales method - telesales, internet, face to face
• A breakdown of products and their scope for development
• How customers will be acquired and retained
• Target market
This can then be used to develop branding, product, pricing, distribution, promotional and marketing strategies.
It is important to show the structure and demonstrate that the business has the best management/ownership structure in place. This section should highlight:
• Background and roles of the key people involved, including the owners
• Key management roles
This is pivotal and must reflect the rest of the business plan. The forecast must demonstrate the business’s realistic ambition for the future and must be backed up by all areas of the business plan. This section often contains details of a risk assessment. The forecasts must be realistic and achievable. This section often includes 12 month, 2-5 year and 5 year plus forecasts and also includes:
• Monthly cash flows
• Prior period financial statements
• Current and projected profit and loss accounts and balance sheets
• Monthly sales figures
• Assumptions used in the business plan and any supporting documentation
It will have also included consideration of variations with some plans showing best and worst case scenarios. For example, sales predictions with possible allowance for sales price variations.
It is important to plan ahead and understand the future financial requirements of the business. This will allow the business to consider its financing options and ensure that it opts for the right type and mix of finance. Typically the section will explain why the business needs the money, how it will be utilised and how it will make repayments. Financial requirements often include:
• What type of finance is needed and when
• What the finance will be used for
• Repayment plans, showing how the business will finance its repayments
Finally, if it helps you or helps another user, summarise the main points of the plan and put these into an executive summary. Always remember the business plan should be relatively short, easy to use, professional and well-presented. To give the business the best chance to succeed it should also be an active document - not one which is filed away.
You can find resources and assistance on business finance here. These are resources you can take and use.