WHITE PAPER – WRITING
A BUSINESS PLAN (www.planware.org)
Important Note
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Page Contents
1.
Why write a plan?
2.
Start with a Business Strategy
3.
Before writing your plan
4.
Planning to plan
5.
Develop an outline of your plan
6.
Business plan outline
7.
When you write the plan
8.
Introducing Invest-Tech and Planware
9.
Copyright and legal stuff
Why Write a Plan?
The preparation of a written business plan is not the end
result of the planning process. The
realization of that plan is the ultimate goal.
However, the writing of the plan is an important intermediate stage –
fail to plan can mean plan to fail. For
an entablished business it demonstrates that careful consideration has been
given to the business’s development, and for a startup it shows that the enterpreneur
has done his or her homework.
Purposeof the Plan
A formal business plan is just as important for an
established business, irrespective of its size, as it is for a startup. It servers four critical functions as
follows:
1.
Help management or an entrepreneur to clarify,
focus and research their business’s or project’s development and prospects.
2.
Provides a considered and logical framework
within which a business can develop and pursue business strategies over the
next three to five years.
3.
Serves as a basis for discussion with third
parties such as shareholders, agencies, banks, investor, etc.
4.
Offers a benchmark aginst which actual
performance can be measured and reviewed.
Just as no two business are alike, so also with business
plans. As some issues in a plan will be
more relevant to some business tha to others, it is important to tailor a
plan’s content to suit individual circumstances. Nonetheless, most plans follow a well tried
and tested strucuture and general advice on preparing a plan is universally
applicable.
A business plan shoul be a realistic view of the
expectations and long term objectives for an established business or new
venture. It provides the framework
within which it must operate and, ultimately, succedd or fail. For management or entrepreneurs seeking
external support, the plan is the most important sales document that they are
ever likely to produce as it could be the key to raising finance etc. Preparation of comprehensive plan will not
guarantee success in raising funds or mobilizing support, but lack of a sound
plan will, almost certainly, ensure failure.
Importance of the Process
Preparing a satisfactry business plan is a pintful but
essensial exercise. The planning process
forces managers or entrepreneurs to understand more clearly whta they want to
achive, and how and when they can do it.
Even if no external support needed, a business plan can play a vital
role in helping to avoid mistakes or recognize hidden opportinies. It is much easier to fold a sheet of paper
than a business.
For many, many entrepreneurs and planners, the process of
planning (thinking, discussing, reasearching, and analyzing) is just as, or
even more, useful than the final plan.
So, even if you don’t need a formal plan, think carefully about going
through the planning process. It could
be enormously beneficial yo your business.
Anticipate many weeks of hard work and several draft of the
emerging plan to get the job right. A
clearly written and attractively packaged business plan will make it easier to
interest possible supporters, investor, etc.
A well prepared business plan will demonstate that the managers or
entrepreneurs know the business and they have through its development in terms
of products, management, and most importantly, markets and competition.
In the following sections, we discuss the preparation of a
strategic plan and present ideas for preparing an outline of a business plan
and writing the detail.
Start with A Business
Strategy
A short strategic plan (2—3 pages)can provide a very useful
foundation on which to base a much more detailed and comprehensive business
plan. If you don’t have a sensible
strategic plan, how can you realistically wriet a sensible business plan? Use a
short strategic plan as the foundation for a more comprehensive business plan.
As the prelude to developing a strategic plan, it is
desirable to clearly identify the current status, objectives and strategies of
an existing business or the latest thinking in respect of a new venture. Correctly defined, these can be used as the
basis for critical examination to probe existing or peceived Strenghts, Weakness, Opportunity, &
Threats. This than leads to strategy development covering the following
issues which are dicussed in more detail immediately below: (1) vision, (2)
mission, (3) objectives, (4) values, (5) strategies. (6) goals, (7) programs.
Vision
The first step is to develop a reaistiv vision for the
business. This should be presented as a
pen picture of the business in three or more years time in terms of its likely
physical appearance, size, activities, etc.
Answer the question: “if some one from Mars visited the business, what
would they see or sense?”
Mission
The nature of a business is often expressed in terms of its
mission which indicates the purposes of the business, for example, “to design,
develop, manufacture and market specifict product line for sale on the basis of
certain features to meet the identified needs of specified customer groups via
certain distribution channels in particular geographic areas’. A statement along these lines indicates what
the business in about and is infinitely clearer than saying, for instance “
we’re in electronics” or worse still “we are business to make money” (assuming
that the business is not a mint!). Also,
some people confuse mission statements with value statements (see below) – the
former should be very bard nosed while the latter can deal with “softer” issues
surrounding the business.
Objectives
The third key element is to explicitly state the business’s
objectives in terms of the result it needs/wants to achieve in the medium/long
term. Aside from presumbaly indicating a
necessity to achieve regular profits (expressed as return on shareholders’
fund), objectives should relate to the expectations and requirements of all the
major stakeholders, including employees, and should reflect the underlying
reasons for running the business.
Values
The next element is to address the values governing the
operation of the business and its conduct or relationships with society,
customers, employess, etc.
Strategies
Next are the strategies – the rules and guidelines by which the
mission, objectives etc. Nay be achieved.
They can cover the business as a whole including such matters as
diversification, organic growth, or acquisition plans, or the can relate to
primary matters in key functional areas, for example:
1.
The company’s internal cash flow will fund all
the future growth.
2.
New products will progessively replace existing
ones over the next 3 years.
3.
All assembly work will be contracted out to
lower the company’s break even point.
Goals
Next are goals. These
are specific interim or ultimate time based measurements to be achieved by
implementing strategies in pursuit of the company’s objectives, for example, to
achieve sales of $3m in three years time.
Programs
The final element are the programs whic set out the
implementation plans for key strategies.
It goes without saying that the mission, objectives, values,
strategies, and goals must be liter linked and consistent which each
other. This is much easier said than
done because many business which are set up with the clear objective of making
their owners wealthy often lack strategies, realistic goals or concise
missions.
For more informaion on strategic planning, refer to other
papers in this series entitled “Developing a Business Strategy (and its
acompanying worksheet) and Devising Venture Strategies, and consider utilizing
the free online Strategic Planner.
Before Writing Your Plan
This section deals with prepatory issues, structure &
content, and length & time scale for the preparation of detailed plan.
Prepatory Issues
Before any detiled work commences on writing a comprehensive
business plan, you should:
1.
Clearly define the target audience.
2.
Determine its requirements in relation to the
contents and levels of detail.
3.
Map out the plan’s structure (contents page).
4.
Decide on the likely length of the plan.
5.
Identify all the main issues to be addressed.
Shortcomings in the concept and gaps in supporting evidence and
proposals need to be clearly identified.
This will facilitate and assessment of research to be undertaken before
any drafting commences. Bear in mind
that a business plan should be the end result of a careful and extensive
research and development project which must be completed before any serious
writing of a plan should be started.
Under no circumstances should you start writing a plan before all the
key issues have been crystallized and addressed.
To get started, use the outline below to prepare the basis
for your plan. Bear in mind that if a
credible and acceptable outline plan cannot be complied then it is highly
implobable that a more comprehensive plan can be prepared.
Take a moment to complete or view the results of these
surveys:
1.
Survey about strengths & weakness of
business.
2.
Survey about writing a business plan.
For Future practical guidances on these matters, review the
following:
1.
White paper offering “insights into business
planning.”
2.
“Checklist for preparing a business plan.”
3.
Comprehensive “business plan guide.”
Structure &Ccontent
A typical plan comprises the following main elements:
1.
Brief introduction setting out the background
and structure of the plan.
2.
Summary of a few pages which highlights the main
issues and proposals.
3.
Main body containing chapters broken into
numbered sections and subsections.
4.
Appendices containing tables, detailed
information, exhibits, etc. Reffered to in the text.
Length & Time Scale
Whilst the legthof a business plan may bear no relation to
the underlying prospects of a business, it is likely that a well developed plan
would be at least twenty pages long plus appendices.
The elapsed time needed to produce a detailed plan might be
between twenty and one hundred days.
This would be determined not only by the complexity and scale of the
venture, but also by the scale and maturity of the business and relevant
experience and skilss of the management team.
Whilst the task of writing the plan itself may only take a relatively
short time, be sure to allocate enough time to the research, preparatory work
and the underlying thnking and discussion.
For more guidance on the legth of the plan and the time
scale involved, have a look at “insights into business plan.”
Planning to Plan
Develop an Outline
Start by defining an outline (in example a table of
contents) of your plan. This will allow
you to concentrate on the essentials of planning the business rather than
becoming too absorbed in the detailed drafting of your plan. It will allow you to see the wood from the
trees.
Having devised the basic outline for your business plan, the
next taxk is to expand this to include subheadings and appendix tittles (see
the “business plan guide” for detailed suggestions). This extended structure should be critically
reviewed to ensure that all the salient elements of the plan are included and
that is has logical flow. This approach
should also ensure that the plan has an appropiate levels of detail and is
correctly targeted at its audience – investors, director or shareholders,
financial institutions, etc. For example, a structure which is mainly devoted
to detailed technical descriptions of products would be completely unsuited to
a plan being used to raise bank finance.
Prepare a Work Program
Once the plan’s structure has been defined, it can be used
as a checklist and basis for a work program and timetable to complete the
plan. This work program will often
entail extensive research and throught prior to the commencement of writing. For example, formal market research may be
needed before sales volumes and prices can be determined. Another example: professional advice may be
required to assess capital expenditures in relation to the acquisition of
premises and so on.
The work program could correspond to the key sections of the
proposed plan and could include timetables, resource allocations, and cost
estimates as indicated in the following chart:
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Section of Plan
|
Researced by
|
Written by
|
Elapsed time (weeks)
|
Cost ($)
|
Priority
|
Key Actions
|
|
|
|
|
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Further Suggestions
Some additional tips and suggestions:
1.
Be absolutely clear about the primary purpose
and audience of the plan from the outset.
If the plan has to serve multiple purposes, consider producing tailored
verson (or tailored summaries).
2.
Allow enough time to produce revised drafts of
the plan – three or five draft woud not be unusual.
3.
Write the introduction, Summary, and Conclusion
of the plan only after the plan’s main parts have been finalized.
4.
At an early stage, make smoe high level sales
and financial projections (covering 1—3 years) to explore the general direction
and size of the business, likely viability and possible funding amounts and
mix. For the purpose, consider using the
free “online financial planner” or the Quick Plan facility within “exl plan”,
our range of financial planners for use with excel.
5.
If the elapsed time needed to prepare the plan
and commence its execution in lengthy, set the start date for financial
projection close to the commencement of execution. For example, if you begin preparing a plan
ini January and hope to raise startup finance in October, the start date for
projections might be set to September.
Any expenses incurred before this date could be rolled up into the
opening balance sheet for the projections.
6.
Seek external assistance sooner rather than
later. This may take the form of sotware
tools, consultancy assistance in the form of specific assigments, or mentoring
and counseling on an as required basis.
7.
If planning a significant business, ensure that
a management team has been identified (and possibly in place) before the plan
is finalized.
8.
Identify and cultivate possible key recipients
of the plan during the plan’s preparation.
This will ensure that when the plan is finally presented, these contact
will have some prior knowledge of its contents and the promoters and, where
appropiate, the views of contacts may have been taken into account during the
preparation process.
9.
Start compiling the plan at the sections devoted
to marker\t research or analysis and sales forecasts or plans, or with details
of the proposed product or service offerings.
Leave the detailed financial projections aside until all details in
relation to sales, costs, expenses, operations, capital investment and possible
sources or types of finance have been resolved.
Forfuther help, check out:
1.
The white paper entitled “Insights into Business
Planning” which has been based on the views of hundreds of people who have
prepared business plans.
2.
The 30 point “Checklist fr Preparing a Business
Plan.”
3.
The comprehensive “Business Plan Guide.”
If you have a problem or query relating to the compilation
of a business plan which is not covered the various white papers, you may wish
to use our free and confidential “Online Business Plan Advice Service.
Develop an Outline of
Your Plan
The next section presents an outline structure for businee
plan. Feel free to change this outline
to suit your project and its state of development. It can be readily expanded to become a “full
blown” business plan by extending the level of detaied as explained in the
“Busines Plan Guide.”
The suggested page lengths for a comprehensive plan are
given in parenthesis after each section’s heading within outline. A small, straightforward business should work
within the minimum page laenghts whereas a large, complex business seeking a
substantial external investment might hit the maximum page lengths. Note the importance of marketing and sales in
term of the suggested number of pages for these sections. For more guidance on the lenght of business
plans, have a look at “Insights into Business Planning.
Avoid going into too much detail within the plan’s body by
placing detailed or supplementary material in accompanying appendices. Bear in mind that most investors, bankers,
etc. Dislike having to read overlong business plans just as much a
entrepreneurs and managers dislike writing the plans in the first instance.
Work on the assumption that whoever reads your plan will be
completely unfamiliar with your business or project and will be seeking answers
to relatively basic questions and key issues, for example, what will the
business do, will it make money, etc.
For further information on business planning issues, refer
to other papers in this series which cover “insights into business planning,
financial planning, cahs flow forecasting, strategic planning, devising venture
strategies, and managing working capital.’ You can use our free “online
financial planner” to produce first cut five years projections for your
business. Finally, you should review the
contents of the “business plan guide.”
Business Plan Outline
Use the outline below as the roadmap for your plan and then
wruet up each section concisely but comprehensively. Only address matters of real subtance and
major significance within the main sections of the plan.
1.
Introduction (1)
Introduce the plan. Explain who wroet it,
when and for what purpose. Give contact
details. See “1. Introducion” within the
“Business Plan Guide” for mor info.
2.
Summary (1-3)
Wriet last.
Present the higlights of the Plan. See “2. Summary” within the “Business
Plan Guide” for more info.
3.
Mission, Stategic, etc (1-2)
What are the central purposes and
activities of the planned business? What
are its SWOTs? What are is major objectives, key strategies and prime goals?
See “3. Mission, Strategic, etc”. within the “Business Plan Guide” for more
info.
4.
Present Status (1-5)
Summarize achievemens and performance
(financial, sales, techinical, ec.) to date.
Introduce the stakeholders in the business. See “4. Present Status” within the “Business
Plan Guide” for more info.
5.
Product or Service Offerings (1-3)
Keep descriptions short and confine them
broad group. Explain briefly what makes
them special. See “5. Product /
Servicces Offerings” within the “Business Plan Guide” for more info.
6.
Profiles of Target Market (3-6)
Size, segments, trends, competition and
user or customer profiles. See “6.
Profils of Target Markets” within the “Business Plan Guide” for more info.
7.
Marketing Stategies, Sales Plans &
Projectins (3-6)
How will the business market its products
or services and sell to customers? What sales will be achieved in its main
markets? How will it deal with
competitors? Indicates costs. See “7. Marketing Strategies, Sales Plans
& Projections” within the “Business Plan Guide” for more info.
8.
Technology and R & D (1-2)
If relevant, explain progress, plans,
resources and highlight any technological advances. See “8. Technology and R&D” within the
“Business Plan Guide” for more info.
9.
Operational or Manufacturing Plans (2-5)
Cover distribution & service activities
and/or manufacturing. Highlight major
elements only. Indicate organization,
resources, costing, etc. See “9.
Operational / Manufacturing Plan within the “Business Plan Guide” for more
info.
10.
Management & Administration (2-3)
Introduce the proposed management team,
structure, etc. Indicate administrative
arrangements and specify overhead costs.
See “10. Management & Administation” within the “Business Plan
Guide” for more info.
11.
Financial Projections (4-8)
Use simple tables to present key financial
projections e.g. summary P & L, cashflows, balance sheets, and key
ratios. Place the detailed analyses in
appendices. See “11. Financial
Projections” within the “Business Plan Guide” for more info.
For more help, download a trial version of
our financial planners – “exl-Plan” (for excel) – and review its annual output
reports and Textual Summary Report or use our free “Online Financial Planner”
to produce first cut five year projections for your business.
12.
Funding Requirements & Proposal (1-2)
If applicable, summarize funding
requirements, possible resources, likely terms, and, for investors, the
projected return on their investment. Be
realistic. See “12. Funding Requirements
& Proposals” within the “Business Plan Guide” for more info.
13.
Implementation (1-3)
Explain the major decision points, time
scale and actions required by management and others to progress the plan. See “13. Implementation” within the “Business
Plan Guide” for more info.
14.
Conclusions (1)
Indicate why the business will succeed and
why it should be supported. See “14.
Conclusion within the “Business Plan Guide” for more info.
15.
Appendices
Use appendices at the very back of the plan
to present important background data and detailed plans. This will avoid disrupting the flow of the
plan or cluttering it with exercissive detail.
See “Appendices” within the “Business Plan Guide” for more info.
For further information on business planning issues, refer
to other papers in this series which cover “insights into business planning,
financial planning, cahs flow forecasting, strategic planning, devising venture
strategies, and managing working capital.’ You can use our free “online
financial planner” to produce first cut five years projections for your
business. Finally, you should review the
contents of the “business plan guide.”
When You Write the Plan
The following suggestions may be of assistance when drafting
the plan:
1.
Build the detailed business plan on a carefully
considered outline (table of contents) – see the business plan outline above.
2.
The most important and difficult sections to
prepare relate to marketing and sales as these can make or break not only the
business plan but also the business itself.
3.
Support market and sales projections by market
research. Ensure that there is a direct
relationship between market analysis, sales forecasts and financial
projections. Assess competitors’
positions and possible responses realistically.
4.
Be realistic about sales expectations, profit
margin, and funding requirements. Ensure
that financial ratios are in line with industry norms. Do not
underestimate the cost and time required for product development, market
entry, securing external support or raising finance. Consider the possibilit of the halve – double
rule – halve the sales projections and double the cost and time required.
5.
Restrict the level of detail on product
specifications and technical issues.
6.
The financial projections are likely to be
straightforward but decide on a sensible level of detail as regards the time
horizon, etc. Consider using a personal
computer and a financial modeling package for the projection.
a.
See Invest-Tech’s range of financial planners –
“Ex Plan” (for Excel) – which can be downloaded from the PlanWare site.
b.
For further specific information on financial
planning for business, refer to the page untitled “Preparing Financial
Projections” accessible from the PlanWare site.
c.
You can use our free “Online Financial Planner”
to produce first cut five years projections for your business.
7.
If looking for external equity, be realistic
about the value of the business. Risks
involve and possible returns, and be sure to indicate possibel exit
mechanisms. Put yourself in the shoes of
an investor and remember the golden rule – he who has the gold makes all the
rules.
8.
The management section of the plan is of crucial
– experience, balance, ability and commitment.
If a new venture is involved, then management is like ly to be its only
real asset. Consider formation of a
management team or strengthening management as part of the plan. Remember the five ingredients of a successful
business are management, management, management, market, and product ( in that
order, and not in the reverse order as some investors and entrepreneurs might
like to think).
9.
Be positive but realistic about the business’s
prospects and explicitly recognize and respond honestly to shortcomings and
risks.
10.
When writing the plan:
a.
Avoid unnecessary jargon.
b.
Economize on words.
c.
Use short crisp sentences and bullet points.
d.
Check spelling.
e.
Concentrate on relevant and significant issues.
f.
Break the text into numbered paragraphs,
sections, etc.
g.
Relegate detail to appendices.
h.
Provide a contents page and number pages.
i.
Write the summary last.
11.
Get a qualified outsider to review your plan in
draft form and be prepared to adjust the plan in the light of comments secured
and experiences gained.
12.
External help and guidance preparing a business plan
can be extremely valuable. If outside
help is used, make sure that the resultant plan remains your own and not that
of your advisers.
13.
If presenting the plan to outsiders, attach
appendices and number pages. Add a
contents page and blind it within attractive covers.
Introducing
Invest-Tech and Planware
Invest-Tech develops and sells a range of financial planning
packages – Ex-Plan and Cash Flow Plan – for business of all sizes and
types. Trial versions of all products
can be downloaded from PlanWare Site and many other sources on the Net.
We also offer and extensive range of commercial software for
writing business plan, market planning, assessing business ideas and evaluating
strategies.
PlanWare also features:
1.
Paper on cashflow, financial, strategic and
business planning, etc.
2.
Advice on getting new business ideas, managing
working capital, devising venture strategies, and much more.
3.
Free online financial planner to produce first
cut five years projections and freeware business plan template (Word format).
4.
Pages devoted to famous business quotations and
examples of bad business advice and mistakes.
Get Planners for free.
Ex-Plan generates comprehensive short term financial projections. It is a useful product in its own right and a
great introduction to our Cashflow Plan and Exl-Plan ranges.
Copyright and Legal Stuff
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about copyright and attribution. If you
wish to make and electionic printed copy for your personal use, you are free to
do so provided that it is unmodified and provided that it remain complete in
all respects. All copying for commercial
or educational uses requires our written prior permission. You are free to quote short extracts provided
our site’s URL is acknowledged as the sourve.
PlanWare, Invest-Tech Limited, 27 Ardmeen Park, Blackrock,
Co. Dublin, Ireland.
