Business Planning

The business plan  has three primary purposes, first to convince the writer of the plan that the business venture is financially sound and not merely a pipe dream with little, if any chance of success.  Secondly, as most plans require additional financial capital beyond the resources of the business owner, the plan is to convince potential lenders of the viability of their investment.  Having passed those two hurdles the plan provides the business management with 'bench marks' to judge the business' actual  progress against the planned progress.

The depth of planning required will, of course depend on the complexity of the business but a plan based on the following suggested layout should satisfy most lenders.
 

1    Summary

It is important for you to provide a logical summary describing how you intend to manage, finance and run your business.  The summary should be written after the business plan has been finished.  A well written summary is the key to establishing the reader’s interest. This should also include your Mission Statement and your personal and business objectives for your first year in business.  You should also state the intended format of the business, i.e. sole trader / partnership / limited company etc.  Limited companies should state details of ownership, shareholding, share capital etc.

2    Business Description

a.   Type of Business
In a few words describe the product or service you will be providing.  (No more than 20 words)

b.   Principal Activities of the Business
Describe your principal activities in more detail so the reader understands precisely what you are offering.  Existing businesses should describe the business to date.

c.   Competition
Who are your major competitors?  What features of their product or service enable them to compete successfully with you?

d.   Product Advantage
What are the major strengths of you and your product or service?  Why will people come to you rather than to your competitor?

e.   Marketing & Sales Promotion
By what method do you propose to sell your product?       (Advertising, cold calling, mail shots, leaflet drops, etc., and have you established the cost of your promotional activities.)   Do you have any orders arranged?

f.   Method of Distribution
Describe method and cost.

g.   Sales
What level of sales do you anticipate in the first 12 months?  What makes you certain of achieving these sales?  Are there any seasonal trends to take into account?

3    Management

Give details of the background (in detail) age, experience and family circumstances of the key management of the business. Discuss the primary duties and responsibilities of each key manager.  This will need to be a comprehensive account of what roles each manager will play in the operation of the business.  If wife/family are to be involved describe their responsibilities including: Name, Age, Qualifications, Previous employment, Roles to be undertaken in the business, Experience and knowledge of this commercial enterprise.

4.   Market

Under this heading you should consider the following:
a.  Size - is  the market declining/static/increasing and why?
b.  Market Research - describe the market research carried out and the results.

5.   Product or Service

You have already described your product/service under section 2 but in this section say:
a.  How does your product / service meet your customer’s needs?
b.   Have any  tests been carried out? (if appropriate)
c.   Patented? (if appropriate)
d.   Method of production.
e.  If you offer more than one product or service what proportion of turnover does each contribute?
f.  Any promotional literature (leaflets, brochures, etc.)  should be referred to and a copy included  with the business plan
g.   Are there any products or services under development?

6.   Pricing

a.  What are the estimated selling prices of your goods or services?
b.   How did you arrive at these figures?
c.   Have you compared your prices with your competitors?

7.   Suppliers

a.  Provide details of your suppliers from whom you will make your purchases.
b.   Are there alternative suppliers available if necessary?
c.  Is credit available from your suppliers? If so, give details.
d.   If credit is available, will you make use of it?

8.   Physical Resources

a.   Premises - suitability for your purposes.
Describe your premises and list any improvements / alterations required.
Size of premises.  Proximity to suppliers / customers
Exact location.  Purchase or lease (give details)
Health and Safety implications,  Safety Policy.
b.   Plant and Machinery / Vehicles
Give full details of requirement.  Is plant readily  available?  New or second hand?  Cost?
c.   Sundries
for example, office furniture etc., and any other major items not already covered above.

9.   Personnel

You have already described the management of the  business under section 3.  In this section give details of any employees.  Wages or salaries?  Duties?  Training required? Full or part time?

10.  Profits

It is now necessary to convert your business plan into financial terms.  Some of the information will be known, the remainder will be assumed.  However, be realistic, not over optimistic.  You should, firstly, complete the cash flow forecast for your first 12 months trading.  In preparing the cash flow you will make some assumptions, the basis for which should be noted in this section of the business plan.   A layout for a 12 month cash flow forecast and budget trading and profit & loss account is available from the Enterprise Trust.

a.  The  figures must be realistic and must take into account such things as possible price changes on both  sales and purchases.  You should also consider any  restrictions on production due to, for example, your premises or shortage of working capital.
b.  Many figures in the cash flow are linked to sales and  you must use all the information available to you to arrive at a realistic estimate of sales.  This is a difficult item to complete but a serious attempt must be made.
c.  Having estimated your sales you can now insert the level of purchases required to sustain sales, taking into account your stock holding policy.
d.  You can now insert your labour costs not forgetting National Insurance contributions for employees.  If  your business is to be formed as a sole trader or partnership your earnings are shown as drawings and your N.I.C. is not included as they should be paid out of your earnings and not as a charge to the business.
e.  The remaining cash flow items should be relatively simple to estimate.  Some will be related to production,  others, rent for example will be fixed regardless of the level of production.   Quotations should be obtained for Business Telephone lines, Insurance, Printing, Advertising etc.
f.  VAT should be included in your cash flow where  appropriate.   If your forecasted sales are above the VAT threshold you will need to register with Customs &   Excise and your cash flow should show net repayments of VAT. Your business adviser will advise you of the current VAT threshold and how to calculate the repayments.

11.  Finance

Detail the sources of finance which you hope to make use of:
a.   Local Authority or Central Government Loan / Grant.
b.   Bank loan.
c.   Hire purchase.
d.   Leasing.
e.   Get Set Allowance Scheme.
f.   Own resources.
g.   Any other source.

Do you have any further sources of finance (either a person or elsewhere) to which you could have access if necessary.  State what stage has been reached in negotiating the above sources of finance.  If Bank / H.P. loans are proposed state the anticipated repayments.