How to write the right kind of business plan

How to write the right kind of business plan

I’ve recently read through oodles of business plans, with a sample of ten showing me that: 4 were applying for growth funding; 2 were applying for innovation funding; 2 were looking to fund operations; 1 was looking to fund their business through a share acquisition strategy, and 1 was looking for acquisition funding.

But what makes a business plan truly effective, and just how important are they? For funders and interested stakeholders, business plans are important for evaluating a business’ investment potential. But, unless a business plan has right kind of components; is implemented in the right kind of way, that’s customized to be relevant to its purpose and is – always – a working document, it’s useless. Your business plan should be an introductory document, that invites potential funders and investors into a conversation with you, whether that be a casual meetup or a more formal meeting. It’s an important document, so don’t rely on templates or external specialists to write it for you. The reality of a business plan is that it won’t roll out in real life, but it will serve as a working guideline. On this week’s The Money Show with Bruce Whitfield, we considered what goes into writing the right kind of business plan:

Writing a business plan for funding

Writing a business plan when you’re approaching funders is a significantly unique and essential process. Don’t fall into the trap of writing too much (I recently ploughed through an 89-page business plan, that should have been a 6-page document) and remember – this is a working document, or a starting point for discussion: treat it as one.

Start-Up Funding

If you’re a start-up in search of funding, here’s what your six-page business plan should include:

  • One page devoted to your product and service, including a brief description of what it is; who will buy it; what problem it will solve for your customers, and what evidence you have of it being an effective solution.
  • One page that showcases your business model, including information on your suppliers; your first 5 customers; what your break-even point is and, the all-important aspect of differentiation: how are you different to your competitors? Tip: be relevant in pitting yourself against your competitors – you’re not about to take on Google or Facebook.
  • A page devoted to you and your team, including your qualifications; references and endorsements, and how your team has performed thus far.
  • A page devoted to the numbers of your business. When creating this, focus on creating cash flow forecasts, rather than a straight-forward growth plan. At most, you should project your cash flow for a period of up to 24 months, as anything beyond then would appear to be disingenuous and unable to adequately cater for changes in your business environment. Make sure to support each of your listed line items with detailed assumptions about your business operations and growth. This is an important element of your business plan, as it shows your potential funder how you envision the growth and evolution of your business.
  • Outline the true risks of operating your business. Leave the SWOT analysis aside, and get real about the kinds of risk your business will be vulnerable to. More importantly, outline how you intend to plan for, and mitigate those risks.
  • Set out an exit and return strategy for your funder. Showcase a proposed exit strategy for them to consider, and make sure you’re clear about what returns they can expect, from investing in your business.

An Established Business

Writing a business plan isn’t solely the domain of the start-up entrepreneur. For established businesses, a business plan can help with seeking out additional capital funding, or attracting innovation funding. Here’s what that six-page business plan should include:

  • One page devoted to your product and service, including a brief description of what it is; who buys it, and how your product or service solves your customers’ problems.
  • A short overview of who you and your team are, and how you’ve evolved with your business.
  • A page devoted to your business’ past performance.
  • One page that highlights the funding you need, and what it’ll be used for. Be sure to include information on how your funder can exit your business, and what type of return they can expect on their investment.
  • Don’t forget to include projection figures, and make sure to support each of your listed line items with detailed assumptions about your business operations and growth. This is an important element of your business plan, as it shows your potential funder how you envision the growth and evolution of your business, beyond your initial stages.
  • A short overview of who you are, and what you offer to a potential funder.

The Entrepreneur’s Business Plan

As an entrepreneur, you know and understand that the nature of your business is one that evolves over time – your business plan must reflect that, and it should be a working document. Update it on a regular basis (I’d recommend at least once every 6 months) and turn it into an operational plan, over time. As your business evolves, your business model will become a manual for operations, and your forecast figures become targets. For an entrepreneur, a business plan can be a key tool for setting growth objectives, and monitoring business growth.

Don’t get befuddled by the business plan. Let our team at Aurik help, and we’ll guide you through building your business into an asset of value.

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