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Business Plan

A business plan is a document describing a business and its objectives, and outlines the plan to reach those goals. It can be used internally or externally in a business. For profit companies can formulate business plans to outline immediate goals or significant changes in the business for investors and customers. A business plan is also a sales tool used by an entrepreneur or company with the aim to raise funds to start a business, to maintain a business in early stages. A clear and professional plan is crucial for any business as it is the main selling tool in the fundraising process. It must have immediate impact to gain interest and follow-up, as potential investors can be inundated with proposals. The audience for a business plan could a bank manager, angel investors or venture capitalists, and therefore the plan needs to be tailored to suit the correct audience. A business plan can also be used as a tool to recruit a management team, or to illustrate the business to potential partners.

A consultant must work closely with the entrepreneur or CEO of the company in preparing a business plan. It must clearly articulate the business model and cover the key aspects of the market, the management team, and financial projections. There is no agreed format for a business plan, and there are many publications, books and online tools to aid in preparing such a plan. Below is a suggested outline:

1) Executive Summary
2) Concept
3) Market Overview (analysis, competition)
4) Business Strategy
5) Operational Strategy
6) Management and Organisation
7) Financial Summary
8) Future Prospects
9) Funding Requirements
10) Appendices

The executive summary is often the most important part of the business plan, as it needs to gain the attention of the investor. It should be no more than two pages, and provide a synopsis of the key points in the remainder of the document. The concept section should describe your product or services, defining what makes it different, its benefits and whether you hold any patents or trade marks. The market analysis component is also of critical importance. The investor needs to be convinced there is a real commercial opportunity, and market research data should be used to back up claims. If the business plan is used to seek external funding, the management team can be a decisive factor. Include any advisers the company has. Investors will also want to be convinced that the team is fully committed so outlining out how much time and money each person will or has contributed to the business can help.

The financial summary of the business plan is crucial as it determines whether or not the business is viable. The level of detail is dependent upon the stage of the business. It should forecast for the next three to five years, however the first 12 months can be the most detailed. Include the three financial statements, the Income Statement, Cash Flow projections, and the Balance Sheet. Also include underlying assumptions. For new businesses, build projections from the ground up, not top down. It is difficult to forecast future cash flows and sales projections for a new business, and investors are usually aware projections are optimistic, so will therefore look closely at underlying assumptions. This section will lead into the funding requirements. Be specific about the amount of money sought, what it will be used for, how this money will improve the business and possible exit strategies.

It is important to remember that a business plan is a fluid document that helps to monitor the company's performance and development, and will therefore require updating and changing as the business grows.