Preparing a Business Plan

Beyond the ‘back of envelope’: This is usually associated with setting up new businesses, business plans now have an acknowledged use and place for new products, new projects, in fact any initiative that requires new investment. Yet often those who hold the purse strings can be left unconvinced by precious little analysis or documentation. So how best to commit the plan to paper?

Two models worth considering are the Business Canvas and the ANABC

Much has been written on both, so here is the shortcut to understanding: –

The Business Canvas (YouTube video)

ANABC A video…

Why do a business plan?

Reasons include:

• weaknesses and mistakes can be spotted on paper – rather than in practice
• can serve as a confidence booster -; those you are trying to convince are left reassured that you have done your homework
• a possible lack of experience on your part will be compensated for by presenting a workable proposition which displays exciting business possibilities

Planning goes awry at Barclays
In a faraway place and a long time ago: One of the rows that reportedly led Martin Taylor to resign as head of Barclays Bank in 1998 was over his (lack of) plan, revealed to the board in October, to demerge the group. The proposal was not backed up by a single piece of research, Taylor had not prepared the ground with his colleagues, and it was dismissed.

What to include
There are no hard and fast rules about what constitutes the perfect business plan, as requirements will vary according to the individual business; however, the guide below (based on Grampian Enterprise Ltd) covers everything that is essential – as well as a few extra items:

1. Executive Summary
   1. what: should summarise the pertinent points from each chapter of the business plan
   2. why: the reader is left with a full understanding of the proposal
      1. Introduction & Nature of Busines
      2. what: should introduce the company or department, giving background to the kind of work it undertakes, details of products developed etc; should also include why the plan has been prepared
      3. why: sets the business plan in context
2. Project Justification
   1. what: should explain the proposed project -; where it has come from , and how it fits with the departmental/corporate strategy
   2. why: to show strategic benefit to the company/department
3. Market & Competition
   1. what: should include a detailed summary of the context, eg if the plan is for a new product, then explain the marketplace and the competition it faces, and the gap/niche it aims to fill
   2. why: to pinpoint the market risks associated with the project, the niche/gap which the product/project/service aims to fill
4. Management & Personnel/Training
   1. what: should summarise the business experience of all key employees involved, as well as outlining their previous achievements
   2. why: to show relevant experience of those to be involved in the project to show improved chance of success
5. Environmental Strategy
   1. what: should identify relevant environmental regulations which may impact the proposed project; state the level of compliance with environmental regulations
   2. why: to account for any legal restrictions, ie by setting out how the company will work around or within them
6.  Finance
   1. what: should detail:
      1. the financial outlay of the proposal, eg the cost of any new equipment/machinery/resources
      2. the proposed sources of funding
      3. the expected payback
      4. all financial assumptions eg rates of return, inflation rates, payback period, profit margin threshold
      5. why: just to prove it will in fact make money
7.  Appendices
   1. what: should typically include
      1. x year forecasts
      2. projected profit & loss accounts
      3. balance sheets & cashflow forecasts
      4. turnover & break-even analysis
      5. audited and management accounts ( if a going concern)
   2. why: to give it cred

But the best business plan in the world still won’t help a bad idea …

 People matter

“I invest in people, not ideas. If you can find good people, if they’re wrong about the product, they’ll make a switch, so what good is it to understand the product that they’re talking about in the first place?” —Arthur Rock, Venture capitalist associated with the set-up of Intel and Apple.