Learning how to write a business plan can make the difference between a successful start-up and a failed venture, but not all business owners and entrepreneurs recognise the importance of having one.
A survey by NAB (National Australia Bank) found that one third of Australian small businesses fail because they don't have a business plan. Despite this, 40% of small businesses don’t have one, and 21% of Australian small business owners say they don’t have time to write one.
Another survey of Palo Alto companies found that business owners with a completed business plan are nearly twice as likely to be successful when securing funding and growing their business.
Even if you end up enlisting the help of a professional business consultant, you’ll still need to be closely involved in the planning and writing process, so here are some of the most important ways a business plan can help you succeed.
You probably already know who you’ll be targeting with your product or service, but without a business plan you won’t fully understand how you fit into the market, what your priorities should be and the challenges you might face.
Writing a business plan requires you to meticulously research the market, which will help you learn more about what your customers really want, how much they’d be willing to pay, how you can attract them, and who your competitors are.
In the early days of a business venture when things are still new and exciting it’s easy to become so passionate about your ideas and plans that you fail to see the potential downsides and put adequate safeguards in place.
Writing a business plan will force you to look at your product or service objectively and understand your strengths as well as your weaknesses.
Any potential investor will want to know what they’re getting themselves into, how their money will be spent and whether or not you will be capable of pulling it off.
“Writing a business plan requires you to meticulously research the market, which will help you learn more about what your customers really want, how much they’d be willing to pay, how you can attract them, and who your competitors are.”
With this in mind, if you plan to raise money to start your business, whether from outside investors or friends and family, it’s important to have a well-researched and compelling business plan that inspires confidence in your ideas as well your abilities.
When starting your own business you’ll probably have a number of partners, investors and employees, and each person may have his or her own idea of how the company should be run and what its goals and objectives should be. Having a business plan will put everyone on the same page and prevent any misunderstandings early on.
A well-written business plan will provide your business with the structure it needs to run smoothly by laying out what your priorities should be and the actions you’ll need to take. It will help you manage everything from cash flow and personnel to marketing and brand awareness. Having things in writing will also make it easier to monitor your company’s performance and identify areas where you might be falling short.
Now that you understand how a business plan can help you succeed, you’re probably wondering where to start, and if you’ve been researching business plan examples, you might be feeling a bit overwhelmed by the sheer amount of information you’ve come across.
As with any big project, it can help to start with a few basics so you’ll have something to build on as you go along. Hank Boyer, executive coach and CEO of Boyer Management Group, notes that most business plans are quite basic to begin with, but tend to evolve and become more detailed over time.
“Creating a business plan is by nature iterative, so most start out on the simple side,” he says. “As Market Analysis assumptions are proven and new information becomes available, the plan evolves. Start-up business plans are highly speculative because the business is unproven.”
On the other hand, a well-established business has the validity of years of experience and can develop a more detailed plan from the start. So how much detail you should include in your business plan may depend on your reasons for writing it.
Here are some of the initial steps to take when writing your business plan.
A business plan can have a number of different purposes, so before you begin writing and researching, you should know why you’re writing it and what you hope to accomplish with it.
“The challenge for most business plans is to clearly and specifically identify what the plan's purpose is and what it is not,” says Boyer. “Without a clear and specific purpose or set of purposes, a business plan has little value.”
For example, is the plan’s purpose to help you raise capital? Or is it to develop a strategic framework to move from points A to point B?
“The principal purpose will dictate what section or sections are most important to your plan,” he says. “It should be clearly spelled out in the Executive Summary at the beginning of the plan.”
Regardless of your business plan’s purpose, you’ll need to research whether your idea is fiscally feasible. Starting a new business is always a bit of a gamble, of course, but during the planning stage it’s better to be realistic than optimistic.
“In my experience, the single largest reason a business plan fails is that those creating the plan under-calculate the time and cost that will be required for the plan to break-even,” says Boyer.
“Many start-ups with great ideas have crashed under the weight of operating expenses that outstripped funding and revenue.”
He suggests using a realistic set of projections and looking at worst case rather than best case scenarios. In fact, he says, you should expect to have months and possibly even years added to how long you think it will take until your plan is self-funding.
Determining your goals and objectives will point your business in the right direction. Goals tell you where you want to take your business and objectives show you how to get there, so in order to determine your objectives, you’ll first need to decide on your goals.
For instance, if one of your goals is to have a certain number of new clients or customers by the end of the year, your objectives might include creating a customer referral program, revamping your website and blog, or hosting an online competition to gain a greater following on social media.
If you want your business to succeed, it’s important to take the time to identify not only its potential and strengths, but its weaknesses too.
“One area in which business plans often fail is in the accuracy of assessing the weaknesses and threats of the plan,” says Boyer. “It's often what you don't know or didn't consider that can doom a plan.”
For example, he points out that while having a correct understanding of the current regulatory environment is important, it’s not as important as the potential impact of pending regulations being considered for the future. “Pending regulations are often driven by the political structure that will be in power a few years from now,” he explains. “They can make or break an industry as well as the businesses in those industries.”
Boyer suggests gathering smart critics and having them tear your plan apart. Once you’ve addressed the issues they’ve brought to light, you can let them have another go at it. You can repeat this process until most of them are confident in your plan.
Once you feel confident that your idea has a good chance of being successful, it’s time to flesh out your ideas and start planning for the future. So here are the most important elements of a simple business plan.
The title page is the first page of your business plan and should include the following:
If you’re new to this process, you can find information on how to register your business name, register for an ABN and obtain any other necessary licenses and registrations here.
The executive summary is a brief overview of the ideas and information you’ve laid out in your business plan. Although it appears at the beginning of your plan, it’s the last section you’ll complete. It should generally be no longer than one page and will provide a compelling description of your business.
Here are some of the points you may want to include:
Relevant owner experience
What qualifies you to run this business? How many years of experience do you have? What are some of your achievements?
Products or services
What services or products will you provide? What is the anticipated demand?
What are your plans for the future? What are your goals and objectives?
Who are your customers? Why will your products or services appeal to them? How do your products or services differ from those of your competitors?
What is your sales forecast? How much money do you need to get started? How much of your own money do you intend to contribute? How much do you need from outside sources? Remember, this is just a summary, so keep each point as brief as possible by leaving out any detailed explanations, and using bullet points and short paragraphs.
Along with a brief vision statement that outlines the purpose of your business and what your goals are, this section will provide details about the history, structure and location of your business.
You’ll need to indicate what type of business it will be, whether wholesale, retail, manufacturing or service-oriented, and list any permits, licenses or domain names you’ve registered. Include the size of your business, whether it’s a sole proprietorship or a partnership and who the owners are.
You should also include information about your main business location, such as the city or town you’ll operate from, whether you’ve purchased or leased a space and why you’ve chosen this specific location.
This section will look at the products and services you intend to provide and should address the following questions:
The market analysis section is one of the most important parts of your business plan as it will help you gain a better understanding of your industry. You’ll need to look at demographics, the target market, market needs, competition, barriers to entry and regulation.
It’s best to gather information on your potential market from as many sources as possible, but a good place to start your search is the Australian Bureau of Statistics, where you can find economic, environmental, industrial, demographic and regional statistics. For specific legal, operational and business requirements check out these industry fact sheets.
Conducting a SWOT analysis is also good way to identify the strengths, weaknesses, opportunities and threats your business may face.
Hank Boyer suggests using the below template to do this (See the SWOT Analysis template included). Because each business has to generate revenue, the template lists the questions that need to be answered in order to develop a realistic assessment and business plan.
To identify the internal strengths and weaknesses that can impact your business, you’ll need to look at your organization honestly and objectively. For the opportunities and threats, you’ll need to look at things that are beyond your control to change, but which nonetheless must be factored into your plan.
“A good way to think of the opportunities and threats is as the wind to a sailboat,” says Boyer. “You can’t change the wind, but you can and should adjust the sails.”
Once you have a better understanding of your customers and competitors, it’s time to create a marketing plan that will help you develop strategies to attract and retain customers.
Your marketing plan should include:
What are your business objectives? For instance, you may want to enhance your web presence or introduce X number of people to your brand.
A distribution plan
How will your customers buy your products? Will they buy directly from your store or website, or through other retailers and distributors?
A pricing and positioning strategy
How do you want to position yourself in the industry and how will your pricing support this position? For instance, if you’re looking to position yourself as an affordable alternative to high-end brands, your pricing will need to reflect this.
Key marketing strategies
What strategies will you employ to reach your objectives? For instance, if you want to enhance your web presence, you might optimise your website for smartphones and tablets or focus on specific SEO strategies.
Your proposed budget
How much of your total budget will you spend on marketing your product or service? How much will you be allocating to each activity?
A timeline and schedule
What objectives will you aim to reach within the next six months or one year? What marketing strategies should be prioritised? How will you measure your progress?
This section looks at how your business or will be or is currently being managed. You can list the names of all the owners and how much involvement each one will have in the running of the business, as well as each person’s strengths and expertise.
Describe other key members of the team too, such as marketing managers, office managers, accountants or other experts, and include details of any openings that still need to be filled.
You can also provide a brief overview of the salaries for each position and how much you might need to spend in order to attract qualified candidates.
The operations section of your business plan will deal with the materials, facilities and processes that are necessary for the running of your business. What sort of information you should include here depends on the nature of your business, but below are a few points you may want to include.
Who are your main suppliers? What exactly will they be supplying? What agreements have been put in place if any?
What equipment will you need to get the job done? For some businesses, equipment might be as basic as a computers and photocopiers, while for other types of businesses such as restaurants or hair salons, it may include a longer list of items such as stoves and kitchen essentials or hairstyling and barber chairs.
What will your normal trading hours be like? What are the expected peak trading times? An online store would likely be able to trade at all hours, whereas a brick and mortar store might operate from 9 to 5.
How will customers be able to contact you when they need assistance or have a complaint? Some options include email, telephone, in store or through 24-hour chat support.
Payment and credit policies
What payment types will you accept? Cash, credit card, debit card, cheques, PayPal? Will customers have the option of paying in instalments?
How will you ensure a consistently high standard of products or services? Who will be in charge of quality control? What procedures will be put in place?
The financial plan is often one of the most challenging sections to complete, especially if you’re starting a business from scratch, so it’s always a good idea to seek advice on how to create a realistic financial forecast and identify any hidden expenses.
You should include two types of expenses in your financial plan; one-time start-up costs and regular monthly expenses. One-time start-up costs may include things like your business license and equipment, while regular monthly expenses include things such as salaries, stock replenishment and marketing.
For more information on start-up costing, cash flow statements and financial calculators, check out the downloadable financial templates available at Business.gov.au.
When it comes to business planning, there’s a lot of general advice out there that can provide prospective business owners with guidance and structure, but since each industry is different and every business will face its own unique set of challenges, your business plan needs to be unique too.
With this in mind, Open Colleges trainer and consultant David Lang has shared some insights on how to use business plan templates and where to get personalised business advice.
David Lang explains that while a template can certainly be useful when writing a business plan, there are a few things that need to be addressed before you get started.
“Before considering the type of template to use, you need to be very clear about the knowledge and experience that you have as a business owner,” he says. “Do you have the skills, knowledge and experience to make it work and are you willing to live this 24 hours a day, 7 days a week? You need to be fully committed because your business will become all consuming.”
When considering what you are going to offer the marketplace you are entering, Lang says the following questions can be a good place to start.
Once you are clear about these things, he says, using a template makes absolute sense, because it provides a simple guide to where you will insert this information to develop the business plan.
If you decide to use a business plan template, Lang says it’s important to make sure that it’s based on the specific business type or industry that you are operating in.
“The plan needs to have relevance to your business objectives and suggest information to include that is applicable to how you will operate. For instance, a restaurateur is wasting time using a business plan for an IT company - they just don't have the same focus.” He adds that it’s important use a simple and easily formatted document so that you don’t end up wasting time getting the business information embedded in the right place.
“I recommend drafting on paper first, but make sure you review what you write as you go,” says Lang. “If you have a good concept you’ll be surprised how rapidly the ideas and notes flow from the pen.”
“Once you have the first draft, I guarantee you will feel a real sense of exhilaration. No longer is your business concept an idea in your head or spoken words floating off to the ether; the visions and expectations are documented clearly and concisely as a working concept. Be proud of this achievement, but remember that you’re still a long way off because you need to conduct plenty of research and put the plan into action.”
Since you need to be careful about your expenditure early on, Lang suggests looking for free sources of information when you first start putting your plan together.
“Websites such as business.gov.au can be utilised to great benefit early on in the business development process,” he says. “The site is managed by the Australian Federal Government and offers business plan templates and other resources, along with links to other government departments and agencies that can provide you with valuable info for starting and running a successful business.”
Talking with state and local government agencies that offer advice and guidance for establishing a business can also be a good idea. Lang suggests doing a Google search for ‘small business’ in your state, region or locality, which will help you find links to business development corporations and business enterprise and resource centres.
He notes that you can also become a member of the professional association that represents the industry you’re working in, as well as the local chamber of commerce and industry. This gives you access to valuable industry insights, advice and support, and professional services are often offered at a subsidised rate.
Even your trusted friends can be a good source of advice. Lang points out that even if you don’t like what they tell you, you can be sure that it’s honest and heartfelt because they want to see you succeed.
“You might have a friend you could use as a mentor or sounding board, or perhaps get them to reach out to their network of friends and business associates,” he says.
“A few crucial words at the right time can be inspiring, provide clarification or even point you down a new path that you hadn't previously considered, so be open to ideas and embrace and value any offerings of wisdom and reason that you receive.”
There are a lot of business consultants offering services, but you need to be very careful to research what you will receive for the fees you pay, says Lang.
If you’re thinking of working with a particular business consultant, he suggests asking about clients they’ve worked with in the past. You can then speak to those clients and get a real feel for the practical support and recommendations they found valuable, and most importantly, whether or not the consultant can be fully trusted.
“One final point that I will put great emphasis on is that you need to give very careful consideration to what information you are willing to share with other people,” Lang adds.
“Your idea might be just what someone else wasn't able to come up with, but they’ll still take it, invest money into it and beat you to market if they’re lacking business and professional ethics.”
So before you share too much of the complex and specialised information on your business, you should consider investing in some solid legal advice and having a detailed and specific confidentiality agreement prepared.
“This agreement will need to be signed by anyone you discuss your business ideas with,” says Lang. “It will become a vital element of your business plan before you share it with other people and will safeguard your professional interests.”
Once you’ve done your research and have all the necessary information in one place, it’s time to polish up the overall presentation and add a few finishing touches.
This is particularly important if your business plan’s purpose is to attract investors, but even if it’s just for you and your team, it can help to go over your first draft to cut out any fluff and tighten things up. So here are a few final considerations.
Research shows that visuals can improve comprehension, transmit messages faster, and are more likely to stick in our long term memory than written information. In fact, one study found that after three days, 65 percent of visual information was retained compared to just 20 percent of written information.
So not only will visuals make your business plan more memorable, but graphs, charts, sketches and photos will also help you avoid lengthy descriptions and get your point across much faster.
For instance, rather than describing the type of food you plan to serve in your restaurant, you could include a menu, and instead of explaining how your product works, you could include a series of images showing what it does.
It’s important to back up any claims you make or projections you present in your business plan with facts, figures and specific examples. This will give your plan more credibility and show potential investors that you’ve done the necessary research.
So for instance, if you’re predicting that sales will increase within the next two years, you’ll need to be able to show why you believe this will happen, and if you include any statistics to emphasise a point, you must always cite your sources.
David Lang points out that most people confuse the business plan with an operations plan, but these are two very different things. “An operations plan must be highly detailed because it is utilised to manage the daily operations of the business, but the aim of the business plan is to provide an overview of your business mission, without being confusing or overly complex,” he says.
“It’s like an elevator pitch – keep it short and sweet so people understand your concept instantly. If people are confused or unsure what you’re offering, you definitely need to refine the concept.”
It’s okay if your business plan isn’t perfect, because the truth is that it probably never will be. William Sahlman, Professor of Business Administration at Harvard Business School and author of ‘How to Write a Great Business Plan,’ says a business plan should be a living document that moves with your business.
Review the plan regularly as your business progresses, and don’t be afraid to revise it if circumstances change or your initial predictions fall flat. The market is constantly changing, so your business plan should too.
A well thought out business plan is an essential part of being prepared to head into the world of commerce. Although it's incredibly important, it doesn't have to be scary. It's key to remember that a business plan can and should evolve over time, and revisiting it will help you narrow in on the right questions as you work towards your goals.
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