How to prepare a successful business plan

Research shows that businesses that develop and make continuing use of a formal plan have a greater chance of surviving than those without one.  Businesses that fail to plan, plan to fail, it’s that simple.  A Business Plan can be used – and may be required for any of the following:

Preparing for a bank loan application.
To attract investors to your business.
Familiarising yourself with the finer points of your business.
Making application for a commercial lease.
To counsel areas of your business requiring further development.
Preparing for and taking on a retail lease or franchise.

Success in business comes as a result of planning and the best way to start a new business is to create a Business Plan.  Another way to look at your Business Plan is to consider it a story about what you expect to happen.  The story has to include how you will acquire customers and or clients, how much money you expect to collect and spend each month, how much profit you expect to make, and how many hours these efforts will take.

You need a detailed, written plan that shows you what the ultimate goal is, the reason for the goal and each milestone that must be passed in order to reach your goal.  Your Business Plan is an operational plan for achieving your goal and should detail your basic product, income objectives, operating procedures and overall directional policy for the production, sales and profit goals of your business.

Many entrepreneurs are under the mistaken impression that a Business Plan is the same as a financial proposal, or that a financial proposal constitutes a Business Plan.  This is a misunderstanding of the uses of these two separate and different business success aids.

The Business Plan is a long-range "map" to guide your business to the goal you have set for it.  This plan details the what, why, where, how and when, of your business.  Your financial proposal is a request for money based upon your Business Plan, your business history and objectives.

In most cases, you will need a Business Plan to attract investors, obtaining finance and to hold onto the confidence of your creditors, particularly in times of cash flow shortages.  Writing and putting together, a "winning" Business Plan takes study, research and time, so don't try to do it in a couple of days.

Overall, you'll be developing an operating manual for your business – a valuable tool that will keep your business on track and guide you in the profitable management of your business.  Because it's your idea, and your business, it is very important that you do the planning.  This is your Business Plan, so you develop it, and put it all down on paper just the way you want it to read.  Seek out the advice of other people; talk with, listen to, and observe other people running similar businesses, enlist the advice of your accountant and solicitor.

Remember too, that statistics show the greatest causes of business failure to be poor management and lack of planning – without a plan by which to operate, no one can manage and without a direction in which to aim its efforts, no business can attain any real success.

The best Business Plans for even the smallest businesses run 25 to 30 pages or more, so you will need to "title" each page and arrange the different aspects of your Business Plan into "chapters”.  The format should pretty much run as follows:

Title Page.
Statement Of Purpose.
Table Of Contents.
Business Description.
Market Analysis.
Business Location.
Management.
Current Financial Records.
Explanation Of Plans For Growth.
Explanation Of Financing For Growth Documentation.
Summary Of Business & Outlook For The Future.
Listing Of Business & Personal References.

Title page
 
On the very first page (the Title Page) put down the name of your business with your business address underneath.  Now, skip a couple of lines, and write in capital letters: SOLE TRADER – followed by your name.

Statement of purpose

Following your title page is the page for your statement of purpose.  This should be a simple statement of your primary business function, such as:

 "We are an internet service business engaged in the comprehensive listing of businesses for sale throughout Australia.  The company will offer a truly national prospective backed by solid professional expertise and alliances.”

Then you should skip a few lines, and from the left hand margin of the paper, write out a subheading in all capital letters, such as:

EXPLANATION OF PURPOSE.  From, and within this subheading, you can briefly explain your statement of purpose, such as:   “Our surveys have found most entrepreneurs to be sadly lacking in basic information that will enable them to achieve success in finding the business of their choice.  This market is estimated at more than 3 million persons Australia wide, with at least half of these people actively searching for sources that provide the kind of information they want, and need.

With our business, advertising and publishing experience, it is our goal to capture at least half of this market of information seekers with our internet web site Business Buy Sell.  Our market research indicates that we can achieve this goal, and realise a profit of $100,000 per year within the next 5 years”.

The above example is generally the way you should write your "explanation of purpose” and in subtle definition, why you need such an explanation.  Point to remember:  Keep it short.  Very few business purpose explanations are justifiably more than a half page long.

Table of contents

Next is your table of contents page.  Don’t really worry about this one until you’ve got the entire plan completed.  It's a good idea though, to list the subjects (chapter titles) as we have, and then check off each one as you complete that part of your plan. 

By having a list of the points you want to cover, you'll also be able to skip around and work on each phase of your Business Plan as the idea or the interest in organising that particular phase, stimulates you.

Business description

In describing your business, it's best to begin where your statement of purpose leaves off.  Describe your product, the production process, who has responsibility for what, and most importantly, what makes you product or service unique – what gives it an edge in your market.  You can briefly summarise your business beginnings, present position and potential for future success, as well.

Market analysis

Next, describe the buyers you're trying to reach – why they need and want or will want to buy your product, show the results of any tests or surveys you may have conducted.  Once you've defined your market, go on to explain how you intend to reach that market – how you'll alert these prospects to your product or service and induce them to buy.

You might want to break this chapter down into sections such as publicity and promotions, advertising plans, direct sales force, and dealer/distributor programs.  Each section would then be an outline of your plans and policies.

Moving into the chapter on competition, identify who your competitors are, their weaknesses and b points – explain how you intend to capitalise on those weaknesses and match or better the b points.  Talk to as many of your competitors as possible – perhaps those operating in different cities or states.

One of the easiest ways of gathering a lot of useful information about your competitors is by developing a series of survey questions and sending these questionnaires out to each of them.  Later on, you might want to compile the answers to these questionnaires into some form of directory or report on this type of business.  It's also advisable to contact the trade associations and publications serving your proposed type of business. 

Business location

This chapter describes the physical location of your business including the location of all branches, offices, and manufacturing plants.  The reasons why the business is located in a specific area should also be given.

Management

This chapter on management should be an elaboration on the people operating the business.  Those people that actually run the business – their job titles, duties and responsibilities.  It's important that you paint a b picture of your top management people, because the people coming to work for you, or investing in your business will be "investing in these people" just as much as your product ideas. 

People becoming involved with any new venture want to know that the person in charge – the person running the business knows what he's doing, will not lose his cool when problems arise and has what it takes to make money for all of them. 

After showing the "muscle" of this person, go on to outline the other key positions within your business; who the persons are you've selected to handle those jobs and the sources as well as availability of any other help you might need.

Current financial records

If you've been in business previously, the next chapter is a picture of your financial status – a review of your operating costs and income from the business to date.  Generally, this is a listing of your profit & loss statements for the past six months, plus copies of your business income tax records for each of the previous three years the business has been an entity.

Explanation of plans for growth

The chapter on the explanation of your plans for the future growth of your business is just that – an explanation of how you plan to keep your business growing, a detailed guide of what you're going to do, and how you're going to increase your profits. 

These plans should show your goals for the coming year, two years, and three years.  By breaking your objectives down into annual milestones, your plans will be accepted as more realistic and be more understandable as a part of your ultimate success.

Following this explanation, you will need to itemise the projected cost and income figures of your three-year plan.  It will take a lot of research, but it's very important that you list these figures based upon thorough investigation.  You may have to adjust some of your plans downward, but once you've got these two chapters on paper, your whole Business Plan will fall into line and begin to make sense.  You will have a precise "map" of where you're headed, how much it's going to cost, when you can expect to start making money, and how much.

Explanation of financing for growth documentation

Now that you know where you're going, how much it's going to cost and how long it's going to be before you begin to recoup your investment, you're ready to talk about how and where you're going to get the money to finance your journey – unless you're independently wealthy.

Make a list of relatives and friends that might help you with an outright loan to furnish money for the development of your business.  Then search out and make a list of venture capital organisations.  Pick up loan application papers, read them, study them and even fill them out on a preliminary basis, check the costs and interest rates, determine which business publications would be best to advertise in – if you were to advertise for a partner or investor.  Write an ad you would want to use if you did decide to advertise for monetary help.

With a listing of all the options available to your needs, all that's left is the arranging of these options in the order you would want to use them when the time comes to ask for money.  When you're researching these money sources, you will save time by noting the "contact" to deal with when you want money, and whenever possible, by developing a working relationship with these people.

In your documentation section, you should have a credit report on yourself.  When, you get your credit report, look it over and take whatever steps are necessary to eliminate any negative comments.  Once these have been taken care of, ask for a revised copy of your report and include a copy of that in your Business Plan.

If you own any patents or copyrights, include copies of these.  Any licenses to use someone else's patent or copyright should also be included.  If you own the distribution, wholesale or exclusive sales rights to a product, include copies of this documentation.  You should also include copies of any leases, special agreements or other legal papers that might be pertinent to your business.

Summary of business and outlook for the future

In conclusion, write out a brief, overall summary of your business – when the business was started, the purpose of the business, what makes your business different, how you're going to gain a profitable share of the market and your expected success during the next 5 years.

Listing of business and personal references

The last page of your Business Plan is a "courtesy page" listing the names, addresses and phone numbers of personal and business references – persons who have known you closely for the past five years or longer and companies or firms you've had business or credit dealings with during the past five years.

That's it – your complete Business Plan, read it over for a few days and if possible have it reviewed by your lawyer and/or accountant then print at least three copies and put it together properly in some form of binder.

You now have a complete and detailed Business Plan with which to operate a successful business of your own.  A plan you can use as a basis for any financing proposal you may want to submit and a precise road map for the attainment of real success.