How to write a business plan
Like a military operation, the success of any business comes down to good planning and execution. Things rarely just fall into place and, if they do, in all honesty you’ve probably just been riding your luck. Luck that will, of course, eventually run out. But if you’re serious about starting a new business, or even buying an existing business for sale, at some point you’ll need to get organised and prepared. And that means you’ll need to learn how to write a business plan.
How to write a business plan to raise finance
If you need to raise funding for your new venture, then learning how to write a business plan will set you in good stead when you sit down in front of a bank manager. If your plan is scratched out on a beer mat, then, it will obviously get short shrift from a lender of any calibre. But take your time, do your research and choose a format that is both easily presentable and understood, then you stand a better chance of getting the green light from your lender.
A bank manager, or whoever you’re approaching for start-up finance, will want to see a strong business case; to know that you understand your market place, that you’ve spotted a clear opportunity, and that you’re aware of any competition and any threats. They’ll also want to see a financial model that outlines the monetary investment required, the working capital, how the sales and cashflow forecasts have been estimated and where the profit lies downstream. And, of course, they’ll want to know how you’ll be able to pay back your borrowings as well.
How to write a business plan to plot your journey
You’ll have heard plenty of entrepreneurs, business coaches and captains of industry talk about the importance of goal setting. And the same applies when considering how to write a business plan. It sets you milestones that map the trajectory of your new business, identifies where and when investment is required and, importantly, shows you where any financial pitfalls might lie. If you don’t plan, then you don’t know where you’re going, never mind where you’ve come from. And it makes it impossible to track where you should be in your new business journey.
It’s no good setting off on a new business venture on a wing and a prayer. If you make a success of it without any serious business planning, then you really have struck it lucky and bucked the trend. It’s a sad statistic that more new business ventures fail than succeed, and of those that don’t make it, you can bet the business plan fell short.
How to write a business plan and keep it real
In many cases, new business start-ups just don’t factor in enough working capital to cover the early foundation periods. They find cashflow gets tight and, in short, they run out of money. So, when thinking about how to write a business plan, you need to consider a worst-case scenario. It’s perhaps counterintuitive for an entrepreneurial minded person, but you’ve got to be somewhat pessimistic, rather than bullish, in your cashflow forecasts. Factor in a slow start, be realistic in your assumptions, consider that, in the real world, what might go wrong possibly will, and make sure you have enough funds to cover those dips.
How to write a business plan at the right time
The question isn’t just how to write a business plan, but it’s also when you need to write one too. Of course, you need to write a business plan before you even start your business. It’s your opportunity to test various aspects to see whether your new venture is a pipe dream or really has some legs. If it doesn’t pass scrutiny at this stage, then you’re best just walking away. But a business plan is something that should evolve too, changing shape through the lifecycle of your business.
When you first work out how to write a business plan, it might be to establish whether there is an opportunity worth exploring. The second stage might be to source funding. But, as your business develops, there will be more growth opportunities, additional investments in capital equipment, premises or staff. And, when you come to exit your business, whether that’s through a sale or succession plan, then guess what – you’ll need to know how to write a business plan for that eventuality too.
Learning how to write a business plan isn’t optional if you are to achieve your professional goals. Start out without one and you’ll be floundering in the dark. Imagine buying someone a Lego set for their birthday. Possibly one of the more complex builds that requires adult intervention. Then, before starting out on the build, tear up the instructions. For a start you wouldn’t be very popular, and second of all, you’ll have a seriously difficult time completing the construction before next year’s birthday! The same applies in business planning. If you have no instruction manual – no guide to determine what steps you need to take – then you really have little hope of getting the results you want at the end.
Enjoyed this article? Learn how to raise finance for your business here>>