24th August, 2016
At the beginning of this month. Tara Gillam, Head of Enterprise at Business West (the Cavendish partner delivering business support in the South West) touched briefly on business plans and validating the content. Here, Mike Gibbs Business Advisor at NBV, reiterates Tara’s sentiments and looks at why the business plan is such an important document.
So, you are all excited about starting your new business when you are asked the question ‘Have you written a business plan?’
And what goes through your mind? “Oh no, that thing, I know I am supposed to have one, but I can’t be bothered.”
You think to yourself “I have all the information I need in my head! What do I need to write it down for?” Very few of us have the ability to completely plan a new business and keep the details stored in the brain, most of us need to get those thoughts onto a piece of paper, the very act of which will trigger all sorts of other ideas you would have missed if left in your head!
And you’re also thinking “My friends and family have told me it’s a great product!” But friends and family will usually tell you what they think you want to hear, not what you need to hear! Showing your business plan to an independent person will give you honest, unbiased feedback, and will potentially give you ideas for improvement.
Always bear in mind that there are two main reasons for writing a business plan:
1) To help you to lay down a plan now and in the future
It is your route map of how you get from today to some other place in the future and all the things that might happen on the way, and what you will do about them, profitably!
Before you start your business 100% of your customer base is in the hands of your competition, and you need to figure out how you are going to break into their market. Think of your potential market place as a picture, a jig saw, and as you gather little bits of information you can start to paint the picture, you will never get all the information, but you need enough to convince yourself that there really is a business to be done! This is the ‘homework’ doing enough research to suck as much risk out of what you are proposing to do to give yourself a better that even chance of success. If you can’t find that evidence then it is probably best to rethink the whole shebang!
2) To show others how sustainable your business idea actually is
You may need someone else to help finance the project, in which case the plan is going to be the only chance you have to persuade them it is a good idea to lend or give you some money.
If you are going to apply for a loan or a grant the first document you will be asked for is a Business Plan. Often you will not get the chance to explain your business in any other format, so the plan is it! It had better be good or your idea will stumble before it has even started. Put yourself in the position of a bank manager. You may see several plans a week, most of which are barely adequate for the job, but if yours stands out you have a better chance of success.
Templates for business plans can be sourced from several organisations such as banks, the Princes Trust, enterprise agencies and commercial software companies to name but a few. They come in all shapes and sizes, but generally speaking they all want the same information; who are you, what is your idea, what is the product or service, who are you competing with, how are you going to talk to customers and what does the money look like? The more thorough you are in preparing the information the more risk you take out of the project, but business is inherently risky, so the better informed you are the less likelihood of costly mistakes.
Just a thought about templates! If you put your information inside my template, to me it looks like my business. You need the content, so lift the headings from the template and create your own document, personalise it, illustrate it, and make it come alive. You have a vision of what your business looks like; your business plan should reflect that. Difficult to do inside someone else’s template. Think of that old bank manager again, another template, how boring!
Don’t be tempted with doing the bare minimum – the headings and details requested in a Business Plan are there for a reason. If you are going to spend time and money and effort into launching a business shouldn’t it be the best it can possibly be?
As an example the number of times I have seen the answer to the question of ‘Who are you customers?’ as ‘Everyone!!’ Dooohhhh!!! You won’t have the resources to market to everyone, so be more focused, who is most likely to buy your product or service and where will you find them?
OK, so now you have written it, the bank has lent you some money, now we can chuck it in the cupboard and forget it! I wouldn’t; it should be a working document that you revisit regularly to check if things are going to plan. The only thing you can be absolutely certain of with a forecast is that it is wrong! The question is by how much and when!
Get into the habit of taking a regular review of the business and update the relevant parts of your plan accordingly. Once the business is underway you will start to get access to the reality of the results; actual sales rather than forecast, so your knowledge bank builds with experience, and this is invaluable for looking further into the future and anticipating things that will command your attention.
Written by Mike Gibbs, Business Advisor at NBV, the Cavendish partner delivering business support in the East Midlands
Under the Start & Grow initiative, the business start up and growth support programme delivered by Cavendish Enterprise partners, new businesses will get help, advice, and guidance in preparing a business plan to the standards required of most financial institutions and other lenders. To join the Start & Grow programme contact the Cavendish partner working in your region.