Do I need to write a business plan if I am not planning for bank loan or investment?

This is a questions that I am asked by many starting up a business and the simple and emphatic answer is YES. The fact that a bank or investing individual or institution is a secondary consideration.

Primary focus if the business plan.

The primary and most important role of writing the business plan is to guide and direct the business owner or manger in the operation of the business. Preparing and writing the plan focuses the writer consider all the possibilities and aspects associated with their business. It forces the writer to confront and come up with solutions to any problems which the plan may highlight. It helps you to think about yourself and where you have a deficit in a certain skill and allows you to focus on these and allows you to search for training opportunities or advisers to fill this gap.

A good video on what type of business plan would suit you, by Tim Berry:

Financial advantages of doing a business plan

A monthly comparison of all known costs over time, will indicate to you the necessary sales you need to accomplish in order to match these and a make a profit. It allows you to look at this figure and assess whether it is a reasonable number, if it's not then it can cast a doubt on the validity of the adventure itself. So it is not just a tool for getting an investment or working capital but it's a tool to give your business direction and assess the validity of your hypothesises.

The business plan is an important and working management tool, which allows the manager to anticipate and compensate for situations before they arise and prevent business emergencies.

Foresight and planning are a vital part of starting your own business, don't underestimate them. You can find more information on writing business plans for small business.

Business Plan – You and Your Team

Introduction

Now you may be a one man band or you may already have 10 partners with different experience and expertise or you may already have a work force in place. The point is this is the section where you need to sell yourself and show what you bring to the business and how you are going to fill gaps in the experience. This section is important when it gets to getting funding, because people are not only investing in your business and the idea, but also in you as a person. So they need to be sure that you have the right skills and background to get this done.

Your Teams Skills

It needs to clearly lay out the skills you have in your management team and your staff, concentrate on the strengths in your team and show how you are going to deal with obvious weaknesses. Please note the word obvious, if you have no one with marketing experience and this is clear then yes discuss how you are sending the GM on a marketing course to fill this knowledge gap. But you don't want to discuss the GM's love of holidays and so he takes time off every 5 weeks. Only talk about what is glaring and what needs answering.

The Management Team

This can sell your business and get you that much needed investment so how do you do it! Explain who is involved, how they fit into your organisation. Include a C.V. For each key individual in the appendix and a paragraph on each person in this section. Concentrate on RELEVENT experience, skills and qualifications. Also include the greater support network, financial advisers, accountants, lawyers and specialist advisers.

In order to secure funding this section must prove to potential investors that you have the right mix of skills, determination, drive to make the business a success, with a keen focus on the business related aspects including operation and market experience, sales and marketing, financial and possibly man management these are just as important in market specific skills.

This section is where you show your commitment to this venture so give it your all, let your excitement, commitment and personality come through this will help you emotionally connect with investors.

The last thing you should discuss in this section is how much money will each individual draw from the business, this is very important for an investor as they use this to determine how much of a stake will be left. It is important to leave a substantial percentage for business development, especially in the first 3-5 years, this shows a long term commitment to this venture.

Your people

Give information regarding the size and demographics of your workforce, break them down by department if that is appropriate assign responsibilis and talk about any branch of the business which will be outsourced. If you are already established important stats include retention rates, productivity, average salaries and sales per employee if appropriate.

This section should also contain information about your recruitment and training processes, it should show a commitment to your people and should indicate time-scales and costs involved.

Be realistic about motivation and loyalty of your staff, we all know cold calling sales has a high turnover, but what investors want to see is how are you going to improve staff morale and improve commitment.

We will next be talking about the operation section of the business plan.

Markets and Competitors

After working through the previous two posts you have a clear vision and a direction, you know what products and you have some basic information regarding your customers and how you are going to get the products to them.


Now in this post we are going to help you define your market, your companies position in it and who your main competitors are. In order to do this you need to do some market research, there is some useful information here regarding doing your market research.


Once you have gathered all the information you will need to collate it all. You should have information on:

• Total size of the market
• Your main competitors and their share of the market (think local and national)
• history of the markets and the products
• your customers and their buying habits
• Product pricing and availability 

The main point of this section is to tell your reader that you know this market, you understand the trends within it and what drives it. You need to show that it is a growing market and how you are going to attract customers despite the competition.


I hear you say how am i meant to do this, well if you have been operating and or working in this market for a long time then it will feel natural and you will know this information naturally. If not then these are what you need to focus on to ensure that the readers get the level of detail they require:

1. your target customers - Who are they, what is their demographic information, including disposable income and spending habits, how you know they are interested in products and services you will be supplying. Why this group of people.
2. your competitors - who are they, how do they operate within the market, what is their main customer base, market share, it's good to perform a SWOT analysis on each competitor as well as yourself.
3. the future - Expected changes to the market, focus on how you and your main competitors will react and use this section to show how you are innovative and understand the trends and what drives the market and how you can fill a gap in that market.

I will be writing further posts on market research and competitors at a later date so please take a look at those to help with this section. But for now check out this article on Market Research

An important note to finish on is that markets, competitors and customers are not static entities they change and are very fluid by showing contingencies and other scenarios you are showing the reader you understand this and it adds a layer of trust and believability to this section of your plan.

Next up we'll be looking at you and your team and how this can be a big part of making your business a good investment prospect. As usual any questions  please feel free to ask.