Finding Business Plan Resources

Introduction - Creating a successful business plan is the most important step in launching a new business so its important to find as many business plan resources as possible. A business plan aims to crystallise your business goals, provide descriptions of the products or services you intend to offer and define the market opportunity. It should provide detailed explanations of how you intend to finance your goals and describe your unique selling points of your business idea. Producing a business plan is time-consuming and forces you to test and validate how realistic your assumptions actually are. Consolidating your business plan resources, helps you evaluate the strategic aspects and critical success factors of your business idea. By producing a set of goals and targets you will have something to aim for in future. Without any business goals, how will you know when you have succeeded or failed?

Failing to Produce a Business Plan - There are many entrepreneurs that form a new business without even bothering to bring together all the relevant business plan resources. Typically, these people are using their own money and feel they don't need much cash to start. Therefore, these entrepreneurs don't perceive the need to worry about justifying their plan to anybody else, apart from themselves. These types of entrepreneurs are more likely to be concerned about the level of their own personal activity, the features and functions of the product, or how pretty their promotional material looks. Instead, they should focus on the 'boring' financial business planning which forms the core of all business plans. By failing to predict the risk of late payments, bad debts and cash flow issues, many of these types of ill prepared enterprises are likely to fail. Stocks build up, sales don't happen as originally thought or unexpected expenses occur at the wrong time. Failure to produce a cash flow forecast means that undercapitalised businesses are more likely to fail, when entrepreneurs cannot finance their salary and afford to carry on.

Why Produce a Business Plan? - Entrepreneurs that go to the trouble of producing a set of business plan resources with comprehensive planning and detailed information, are more likely to achieve their goals, than entrepreneurs that the didn't bother to produce anything at all. This is because a business plan helps to:-

• Test the Market - by checking and testing your underlying assumptions on a small scale, you can make mistakes on paper rather than committing all of your money (or somebody else's) to an untested business idea.

• Helps Understand Financial Requirements - The planning process helps calculate how much money you will need to finance your new business, how long you will need it for and when you will need the money. Business start-ups that run into cash flow problems within the first year or have been undercapitalised in the business formation stage, are more likely to fail. The process of raising business finance in the first place, will mean that you will need to produce a written business plan to convince the bank or other financial organisations that have a credible idea, and that you have a sound head for figures. The investors like to understand the financial detail and how that relates to what you are trying to achieve. If clear and meaningful, you are more likely to obtain business finance.

• Convince Financiers You are Realistic - Producing a business plan is a worthwhile exercise in itself, as knowledge and research helps entrepreneurs adapt change their plans accordingly. Financiers are looking at the entrepreneurial flair, and quality of presentation and your plan, as much as they are the business idea. Business angels and venture capital companies will receive hundreds of business plans of varying quality. To stand out from the crowd and differentiate your plan from the others, it will have to be of a high quality than other would-be entrepreneurs plans. The plan is your key through the investors' door, so you can present and discuss your business idea in person, and obtain that critical business loan or equity investment.

• Helps Understand Customer Needs - your knowledge will improve because you will be logically analysing the needs and wants of your perspective market, and seeing how your proposition meets those needs and wants. By demonstrating this in detail in the business plan, financiers will better understand your knowledge of demand in a particular sector, and design small business services around the.

• Helps Prove Assumptions - business plan resources with proven deliverables are more likely to succeed in raising finance. Conversely, unproven prototypes are rarely investable business opportunities. However, by summarising market sampling and testing, you are demonstrating that the risk can be reduced, as the results are more quantifiable. In addition, any unique selling points (such as legal protections using as copyright, patents and trademarks), which have been tested, can really differentiate the plan. While legal protections do not always guarantee competitive advantage in the future, they do provide a valuable differentiation in order to raise business finance and get past first base.

• Realistic Sales Forecasting - there are generally agreed and understood growth metrics and financial ratios around different types of industries. Entrepreneurs naturally tend to over forecast and overvalue their business idea. However, by producing a realistic sales forecast, based on quantifiable business assumptions and costs, financiers are more likely to believe the claims made in the business plan. Indeed, it may now be more profitable to produce a realistic sales forecast (based on quantifiable assumptions) than to make unproven and unbelievable high growth estimates. Investors take a dim view of wild over confidence, arrogance or ignorance.

Hot Buttons - a good business plan must be written with type of reader in mind. It must be written so the reader can empathise with the selling proposition and understand what the entrepreneur is trying to say. This includes producing a plan that reflects the language, concerns and issues in the forefront of the minds of banks, business angels, venture capitalists, business grant based organisations and other financing companies. These various interest groups are likely to have different priorities and hot buttons. For instance, high street banks may look for assets to represent security to underpin term bank loans. Where as business angels may look for the level of skills and expertise in the entrepreneur and their team, in order to judge how much value they can personally add as a business specialist. Where as venture capitalists will be interested in the level of growth of the business, relative to the value of their investment.

The Format and Structure of the Business Plan - there is no formal or correct way to structure a business plan, as each opportunity may be entirely different. There are many suggested structures and layouts for a business plan. Remember, its primary aim is to convince the reader it is a worthwhile and viable investment opportunity, so you can get your foot in their door to convince them in person. It willbe essential that any potential investor who reads your business plan signs a confidentiality agreement, in order to protect your business ideas. With this in mind, the following areas are likely to be sought after by potential investors:-

• Title Page - this should include all of the contact details of the owner of the business plan;

• Executive Summary - this is the most important page of the plan and should be written last. Ideally it should last between one and two pages. It should summarise the highlights of the plan including the strategic objectives of the company, the description of the products and services and any legal protections such as a patent. It should define the compelling reasons to buy in the targeted market and the growth of this market sector. It should summarise the profitability, cash flow and sales projections in the short and medium term, including the planned sales strategies. It should also include the funding required, investor returns and how any investment monies are to be deployed in the business.

• Products and Services - this section should include a description of what the products and services to sell and how the company is planning to differentiate from competitors in the market. Descriptions of the life cycle of the product should clarify how mature the product is in your chosen market. Any product development costs and risks should be identified in this section.

• Sales and Marketing - investors need to know you have an understanding of the target market and its size. They will also like to see evidence that there is room in the market for your business proposition and that the barriers to entry (such as advertising and brand awareness) are not unrealistically high. They would like to see evidence of your market research, examples of your key marketing messages including the selling methods, distribution channels and pricing strategies, you plan to deploy.

• Logistics and Operations - investors will want to understand the cost base of your company in terms of its cost of any manufacturing, distribution and break even point. They will expect to see descriptions of the operational processes affecting profitability and how any regulatory or legal requirements impact upon the operational process of the business.

• Financing - investors will want to understand how much money is required to achieve the stated objectives of the company. They will need to understand what proportion of shares and private equity capital are being offered relative to their investment. They will expect to see some level of personal financial commitment from the entrepreneur as an indication of your seriousness. They will need to understand your budget for the money required and over what time period. Investors will expect to understand how they exit from the business with a profit, (especially if their investment is only designed to kick-start the company within the first three to five years). It is probable they will not like riskier business models that rely on keeping cash tied up in stock or in long-term capital investment projects.

• Company Structure - in the section you must define who is going to do what. In particular, descriptions of the key staff and employees of the company. This may have to include any financial incentives offered for employees, recruitment and business training plans to as well as an indication of the level of outsourcing required, where skills are lacking.

• Project Planning - by giving investors deadlines, timeframes and a working implementation plan, it helps their understanding of how plan will be delivered and when. It makes it real and believable. Remember, they will have no knowledge of your plans and so you need to give them a clear understanding of the major milestones, risks and opportunities. This will in turn help them establish sales targets for entrepreneurs and may form part of the negotiation process regarding equity stakes in the company.