Every new company should have a business plan. View it as a ticket to ride on the start-up express. If you don’t have one you won’t get anywhere.
It’s essential that you have a business plan if you want to attract investment either from a bank or financial backers. But it’s also worthwhile writing one even if you’re using your own savings or bootstrapping your new business. Your plan can be a useful map to help you run your business, and can help to remind you in the tough times why you set up your own company in the first place.
Here are three tips for how to write the perfect business plan:
• Don’t save your best until last. A good executive summary is essential; many decisions about whether or not to back a fledgling firm are made purely on this section alone. It’s the last part of your plan that you will write but the first part that anyone will read. It might be the only part they read. In it you need to set out clearly and concisely:
- What your start-up will do and why it is different from its competitors
- What is the business opportunity you see and how your business will exploit that gap in the market
- Who will run the business and what relevant experience you have
- Your financial projections, including your expected sales for at least the first year, how much funding you will need and your expected profit.
• Be realistic. Most business plans contain figures that are hopelessly optimistic. They tend to overestimate the number of clients a start-up will attract, its volume of sales and its profits. Often, all three. But don’t worry, because everyone does it.
What’s important is that you adjust your plan’s key assumptions (e.g. how much you expect to charge, how many sales you expect to make, what you think your expenditure will be) once you know they’re wrong. Otherwise, your figures may not still add up. Optimism has never killed a start-up, but negative cash flow, created because a start-up owner refused to change their business plan assumptions in spite of the cold light of experience, frequently has.
Be candid about any potential weaknesses there are in your strategy or your company. It will help build – not undermine – potential investors’ confidence in your venture.
• Keep it fresh. Remember that nothing contained in your business plan is set in stone. It’s not the Ten Commandments, after all. “No campaign plan survives first contact with the enemy,” stated the military strategist von Clausewitz. Similarly, no business plan will remain unchanged after its first contact with the marketplace. You should update it as you learn more about the sector in which you operate and your own business. Your business plan is like your computer passwords. If you don’t bother to update both of them, they’re not much use.
If the task seems daunting or you are stuggling to find the time to put pen to paper, remember that a business plan need not be complicated. See the Hiscox guide to collating a single page business plan and get your business on track without producing a full manual.