It’s rare these days that a Business Plan gets written or even requested probably because the amount of information (and hence effort) required may be seen as overly onerous. Requests for such a document would typically come from banks, other lending institutions, angel investors or venture capitalists who provide capital to startups and other businesses in exchange for ownership equity or convertible debt, which perhaps give a clue as to their purpose. Business Plans are typically produced to mitigate financial risk so banks and lenders can get some level of confidence that they will indeed get their money back and investors want some evidence that the business knows how to provide a return from their invested funds. Another less common reason for writing a Business Plan is that the business owner wants to establish the business on the right footing and determine a clear direction going forward. A Business Strategy can also serve this purpose and although this will be less detailed it can be created more quickly. Either way, there is tremendous value in capturing this information in documented form since it helps define specific (measurable) targets, set the priorities, determine required resources, enable task tracking and identify clear accountabilities.
So, what should a Business Plan consist of? Documents like these should always contain a front page that introduces the document, describes the context or background, defines the document purpose, clarifies its scope both in terms of timeframe and affected area(s) of the business, references other relevant documents and provides an acronyms list. Doing this not only gives a professional image but, along with a contents list, also enables easy navigation of the Plan itself.
What usually follows is the ‘Executive Summary’ which is a brief but vital summary of the overall document. The thinking behind this section should be: ‘if the reader only had a few minutes to read this document, what is essential that they should know?’. This would therefore include key financial data such as revenue, total costs, profitability, required investments and any major changes, risks or issues. The details behind all of these things should be well covered in the rest of the document.
There should be a brief description of the nature of the business in terms of what it provides and in particular, what makes this business stand out from the competition. Consideration would often be given to the current and anticipated (target) customer base which should lead naturally into marketing considerations in terms of both costs and expected return on investment.
A good Business Plan will necessarily require financials and so the Plan should describe expected income(s), returns, anticipated costs and expenses and ideally provide a high-level budget and cash-flow model. Loan and investment requirements should be clear as should the associated repayment schedule(s). All this information is best presented in charts and tables, not just text.
If the plan is to be used to launch a new product or service, then a standard tool used to assess the business is the SWOT (Strengths, Weaknesses, Opportunities, Threats) matrix. This tried and tested technique simply captures through a simple bullet list perceived strengths and weaknesses (things the business can directly affect) and opportunities and threats (those things it can’t control) and uses these to determine the required key business initiatives
If not already done, specific business goals should be stated using the SMART approach. This provides real clarity regarding the required, measurable outcomes expected through implementation of the Plan itself and hence ways that these goals and targets can be measured and monitored.
It’s not a fashionable document to write these days, but well worth the effort if you can muster it.
Ian Ash ACC, AIECL, AInstIB
Managing Director OrgMent Business Solutions – www.ombs.com.au
