There’s something scary about creating a business plan. It can feel like you’re stepping into Dragons’ Den – but fear not. There are some simple principles you can follow to make sure your plan is credible and effective.
There are two main purposes of a business plan. First of all, it helps you to work out what you want to do and how you need to perform to be successful. But your plan is also your pitch. It’s what you use to convince other people your idea is worthwhile – and potentially worth investing in.
Unless you’re in the enviable position of being able to start up with no external backing, you’ll need to show people you have a definite idea of what you aim to achieve and how you intend to get there.
Potential readers include your bank, if you need a loan; individual investors who you might want to invest in your business; partners who could help run the business; and future customers or suppliers, who you might want to give you preferential deals.
While you might think of the plan as a document ‘selling’ your idea, you mustn’t get carried away with idealistic projections.
Be realistic. Inflated projections are likely to be spotted by clued-up investors, who will immediately distrust the rest of your plan. And if you do get your venture up and running, you and your team will only be demoralised if you’re always failing to live up to unrealistic expectations.
A good business plan should act as a prototype for your business. It will reveal any flaws or areas you haven’t thought about, so the more accurate it can be, the better.
There are many ways of structuring your plan, but there are a few basic elements that will need to be included:
- Know your finance options. Business credit cards, invoice finance, overdraft facilities, letters of credit and even government grants could help you. Talk to your bank about the possibilities.
- Don’t hang about. Issue invoices promptly and chase them up (or make sure an employee does) when they’re overdue.
- Your strategy – what, how and to whom you’re planning to sell. You’ll need to analyse your competitors in this section too.
- Hire when necessary. You don’t always have to buy equipment. Hire-purchase or leasing may be the better option.
- Your operations – any infrastructure (factories, shops, equipment) that you’ll need or already have, showing what you will require at each stage in your business’s future.
- Financial forecasts – the hard numbers on all of the above.
You might find it easier to break these sections down into smaller subsections, but remember to be concise. Most business plans are too long. A short, powerful pitch is more likely to be convincing than a long, waffling one.
If you want more help in writing your business plan, there’s a useful online tool over on the HSBC Knowledge Network. It walks you through the whole process.
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