Business Plan Structure
Completing a business plan leads you to estimate, to
the best of your ability, the real figures that your business
is based on.
These include annual figures for:
- Expected revenue from sales
- Total direct costs
- Profit margin
- Overheads
- Break-even point
- Profits
How to compile a business plan
To raise venture capital you must have a sound, well-structured
business plan which gives potential sources of finance
an insight into your current operation and future proposals.
A good business plan is an essential management tool which
allows you to forecast, and hence avoid, many potential
pitfalls. Whether you are expanding an existing operation
or starting a new venture the right plan, well presented,
has a much stronger chance of success in securing the
right funding.
Your plan must cover four basic stages of business development:
- Planning. Management's best estimate of future
operations is set out in a logical, organised way. This
crystallises ideas and identifies any problems and areas
for further analysis.
- Financing. To determine when money is required
and whether it needs to take the form of venture or
loan capital, or other forms of funding.
- Implementation. Which provides management with
guidelines for running the business efficiently.
- Monitoring. The means by which management can
assess and control the company's progress by comparison
with financial projections in the plan.
Putting the plan together
Resist the temptation to ask your accountant to write
the narrative part of the proposal for you. It might seem
to be a good idea for a more professional look, but more
often than not the result will not convey your individual
"spark", your character as an entrepreneur.
In any event lenders and investors will ultimately deal
with you directly. Here we give you the basics and some
points to watch out for in presenting your business plan.
The plan should not be too verbose or too long - not
much larger than 25 pages. Do not attempt to include every
single detail. Be selective and do not bore the reader.
If he wants further information he will ask you.
Arguably, the most important section of the plan is the
introduction, or executive summary. This is the investor's
first insight into your business. If it is not brief and
clear, if it fails to highlight the target information,
your plan will be rejected straight away. The majority
are rejected at this point.
This is what a balanced business plan should contain:
- Cover Page. On the cover page goes the name
of your company, its address and phone number, and the
chief executive's name. That may seem obvious, but it's
amazing how many business plans don't have a cover page
or have an incomplete one. If the plan is going to be
distributed to several bankers or investors, you will
want to number each plan on the cover page--to allow
you to track the plans and to inhibit recipients from
copying or passing around the plan. You should also
have recipients sign a nondisclosure statement.
- Table of Contents. This should include a logical
arrangement of the sections of your business plan, with
page numbers.Once again, this is something that seems
obvious, but many business plans are put together with
content pages and no page numbers.
- Executive Summary. This is the heart of the
business plan. It is important to both the preparation
and final effectiveness of the plan.
- The Company. The business plan must provide
basic information about the company: its past, present,
and future. There should be information about the company's
history or, if it's a start-up, about the evolution
of the market and product concept. Information is necessary
as well about the company's current status. And what
is the company's future strategy?What are its goals
and what actions are required to achieve its goals?
- The Market. This is your assessment of the
customer groups you've targeted, other customer groups
you might pursue, the competition, and marketing efforts
thus far. Is the market growing, how fast is it growing,
and what evidence do you have that it is interested
in your product or service?
- The Product/Service. This is where you describe
your product and/or service and what makes it special.
What are the components of the product/service? How
much do you charge? What services don't you provide?
What kind of warranty do you provide and what are its
particular provisions?
- Sales and Promotion. This is your assessment
of how you intend to carry out your marketing plan--how
you'll reach customers and sell to them. Do you have
an in-house sales force or will you use manufacturer's
representatives, direct mail, or contracted telemarketers
to sell your product/service? What kind of public relations
do you have planned? Will it be done internally or will
you hire a public relations firm?
- Finances. Here is where you detail your past
results, if there are any, and your expectations for
the future. This section should include cash flow projections,
profit-and-loss statements, and balance sheets. All
the figures should be cast in traditional accounting
format.
The order of the subjects listed here is not random;
they are given in order of importance.
