Business Planning
Business Planning has different purposes at different stages of business development, so before starting to write a business plan it is helpful to first identify which stage your business is at.
Pre-start up
- Understand, explore, and develop the business idea
Start Up
- Attract investment or other funding
Established business
- Develop operational plans to execute your chosen strategy
While there is no universal definition of a “start-up” it is usually taken to mean an early stage business, which while incorporated, may not be, trading, is probably not financially self-sustaining and does not have fully developed plans or processes.
Regardless of the stage of your business, a good business plan is an invaluable tool and can help to direct your strategic and tactical decisions.
Business Planning for Pre-start ups
At the very early stages the purpose of business planning is for you to understand, explore, and develop your business idea, in order to test its likely viability and identify the gaps where some attention is needed. The primary audience is you and the others directly involved.
Science City York has developed a guide for writing an Early Stage Business Plan, and this is further expanded on in How to Get Started, which provides guidance on the planning steps that Pre-start up businesses may need to consider.
Business Planning for Start Up Businesses
For new or start-up businesses, often the purpose of a business plan is as a means to attract investment or other funding. As such the audience is external people and/or organisations with access to funds e.g. banks, business angels, venture capitalists, etc.
While your business plan alone will not get you funding, a well-written credible business plan can generate sufficient interest with the reader that they want to meet you and find out more about your business – which can be the first step on the road to funding!
Business Planning for Established Businesses
For established businesses, the business plan is used to define the strategic direction – and to explain in a coherent manner how the business will move from where it is now to where you want it to be. Although extremely useful at any time, it is especially valuable in preparation for a major event such as expansion or consolidation, re-financing, a merger or an acquisition.
The audience can be diverse and might include the board of directors, shareholders, staff, partners, funders and even clients.
BUSINESS PLAN CONTENTS
Providing it presents the necessary information in a lucid and logical format, there are no hard and fast rules for writing a good business plan. However most business plans will contain the following sections:
Executive summary
- Make it clear, comprehensive, compelling but concise
- No more than two pages and ideally closer to one
- It’s the hook to convince the reader to carry on reading!
History
- Background information on you and the business
The product or service
- What is the offering?
- Avoid jargon and uncommon acronyms
- Remember the reader won’t be an expert
- Is there any IP?
The market
- Demonstrate research and understanding of
Size
Value
Growth
Sectors
Geography
Dynamics
Structural issues - Who are the players?
- (Potential) Partners & Competition
- How is the market serviced?
- How will you service the market?
Commercial proposition
- Built on market understanding
- Business model
- Who will you engage with and how?
- Pricing and costs
- Alternative approaches (show you’ve considered them)
Management
- Crucial element
- Foremost in investor’s mind
- Composition
Current individuals must be relevant and credible
Any significant gaps in the team?
Non-Executive Directors - Flexibility
Financials
- Funding Plan
Overall requirement?
Cashflow projections (current/future burn)?
Sources?
Milestones to demonstrate progress and/or successes
Any additional requirements before business is self-sustaining? - Projections
Realistic
Sensitivities - Exit
KEEP IT CURRENT
A common mistake is to spend a large amount of time and effort writing a first class business plan and then fail to keep it up to date as an accurate reflection of the current state of and future plans for your business.
Even if the business plan is for a single specific purpose, like raising finance, it is not unusual for the process to take a significant amount of time (6-9 months is typical). For most businesses, there will be advances and changes in circumstances over this sort of timeframe that will require the plan to be updated.
Reviewing and updating your plan at least quarterly and ideally monthly is a good discipline – and will ensure that it is always a valuable and useful tool.
