There are five key elements vital to a successful business plan, says the Royal Agricultural University’s senior lecturer in finance Steve Thomas – and 80% of time should be spent concentrating on them.
Here he gives his advice for each of the elements.
1. Be clear about the product or service
Be clear about how and why your product or service will stand out from the competitors and how your customers will benefit.
Remember business is dynamic and changing, so state how your business will develop to continue to meet customer needs.
2. Market research
Lack of market research is one of the main reasons for business failure. It is important that you focus on the market segment that you wish to satisfy – for example, local customers or a particular age group.
Carry out the most extensive research you can. This is generally done through the use of questionnaires, although not exclusively.
3. Competitor research
Understand who your competitors are and what they offer. If you can find a gap between what the customers need and where this is currently not satisfied you may have found your unique selling point.
You need to explain why the customer will buy from you in the future and not from their established supplier.
Having written the above you are in a position to write the financials. A funder will wish to see three years of profit and loss accounts and three years of cashflow forecasts. The latter should be presented monthly for the first year and quarterly in years two and three.
The cashflow forecast will identify the level of overdraft required. The key here is that the basis for the figures should be clearly explained and must relate to the market research.
If the business is buying fixed assets these would normally be financed through a loan, with the repayment period being no longer than the life of the asset purchased. The working capital funding should be taken through the overdraft.
5. Executive summary
Remember a lender will not be able to read all of the plans but will read the executive summary. It should be concise, show enthusiasm and be written at the end but placed at the beginning.