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Writing your first business plan
Writing your first business plan is one of the “Become a Successful Owner Manager”
series, and provides a summary of the key contents of a business plan. Ideally, you should
become familiar with other books in the series, particularly “Market research for the first time”,
“Marketing for the first time” and “Financial forecasting for the first time”, completing the
assignments in each. This book may then be used to help you to pull the results of those assignments into a detailed business plan. In addition to a brief overview it provides examples taken from real business plans which will give an idea of how easy it is to set out your own business plan.
Its specific objectives are:
to summarise the key contents of a business plan; and, to suggest an appropriate order and format for your business plan.
The Series Planning to start in business Unlock your potential Market research for the first time Marketing for the first time Personal selling made easier Organising yourself Organising your business and keeping it legal Financial forecasting for the first time Writing your first business plan Employing people for the first time Book-keeping and financial control Become a successful owner manager Writing your first business plan © Project North East & LiveWIRE Youth Enterprise Published by Project North East Hawthorn House, Forth Banks, Newcastle upon Tyne, NE1 3SG Tel 0191 261 7856 Fax 0191 261 1910 e-mail firstname.lastname@example.org This book: ISBN 0 947557 32 6 Series: ISBN 0 947557 35 0 All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the written permission of the publishers.
This book may not be lent, resold, hired out or otherwise disposed of by any way of trade in any form or binding or cover other than that in which it is published, without the prior consent of the publishers.
Writing your first business plan Writing your first business plan The best managed businesses see planning as a continuous activity in which they set both long-term and short-term objectives. Having a plan should not be considered a straightjacket, but as a way of ensuring that everyday activities happen in a structured way. Well managed businesses will see a plan as a framework providing the ability to be flexible and responsive when opportunities arise, without being blown totally off course. Knowing that the bulk of your activities are performing according to plan will give you the freedom to explore those opportunities.
“Planning is about Regular monitoring of how a business is performing is also
When a business is on top of its planning, it becomes a very straightforward process to summarise the different elements into a written plan. In the same way that a balance sheet gives a snapshot of the current financial position, a business plan should give a snapshot of the planning process.
Strategic thinking Many small businesses think of strategic or long-term planning as something that is only undertaken by large businesses. The businesses that survive and prosper are those that meet their customers’ needs by offering benefits to them at prices which not only cover the costs of providing the features but also generate a profit. To do this effectively, Peter Drucker argues1 that organisations need to focus on the external environment in order to create a customer. Similarly, Michael Porter argues2 that the way a business positions itself in the market place is of paramount importance. More specifically, your task is to match effectively the business’s competences (that is, its knowledge, expertise and experience) and resources with the opportunities created by the market place. In other words, businesses should be market driven.
Peter Drucker, “The Practice of Management”, Pan Books, 1968.
Michael Porter, “Competitive Strategy”, Free Press, 1980.
© Project North East / LiveWIRE 1996 Business planning Too many businesses think they can provide a product, but are unsure of whether it is really needed.
In setting goals for your business you need to satisfy three groups of people: owners, staff and customers. Each will have their own
The owners will be looking for a return on their capital locked up in the business. This may be yours (and your partners') but you should still be aiming for a better return than you would achieve if the money was, say, in the bank or building society. If you have external investors, they will be looking for capital appreciation and evidence that their investment is being well managed.
Staff will be looking for realistic rewards for their efforts, career opportunities and an environment in which they are happy to work.
Customers will be looking for a product or service which fulfils need and which represents good value for money.
Preparing the plan A business plan is a complete description of a business and its plans for the next one to three years. It explains what the business does (or will do if it’s for a new business); it suggests who will buy the product or service and why; and, it provides financial forecasts demonstrating overall viability, indicates the finance available and explain the financial requirements.
A written business plan is however only an encapsulation of all of these components at a particular point in time. Your thoughts and ideas before you started in business will inevitably be changed by the experience of starting and running your business. Your business plan needs to reflect your growing experience. Use your plan to compare actual experience and results against your initial ideas and change it as often as you think is necessary. This will enable you to stay in control and help you to plan for success.
Personal aspirations affect how you feel about self-employment and what kind of business you want to run. Are you in it just for fun - or to make money? An assessment of your strengths and weaknesses will help you to focus on what products and services your business is capable of producing, and to identify the skills you need to develop further. Researching the market in which you are trading will enable you to identify the opportunities from customers and threats from competitors that exist for your business. From all this, it should be possible to develop a clear idea of what your business is doing, where you should be going, and how you are going to get there. As suggested above, you will also need to think about the resources that will be needed - cash, equipment, premises, people - and how they will be deployed.
The rest of this guideline This guideline is in sections which address the main elements to be covered by a written business plan. It suggests a framework for your plan within which you can describe the business, its potential market, how it will operate and the associated financial details.
This guideline does not set out to explain in detail all the techniques required to derive the information for your business plan, though many of these are covered in LiveWIRE’s other guidance notes. It does, however, aim to show you how to pull together all the pertinent information about your business into a single coherent document. It will not provide answers to the many questions you will have, but will prompt you to search out solutions for yourself. This booklet is only intended as guidance not a hard and fast rule book. If you feel information sits more comfortably or more logically in a different order to that suggested, then feel free to write it that way. Use this guideline as a checklist though - to ensure that you do not omit any vital information. The © Project North East / LiveWIRE 1996 Business planning true-life examples from existing business plans will show you that others have trodden the same path successfully!
Compiling the plan You will write your plan based on information which you collect from a variety of sources.
For most businesses, the business plan will be the main method of convincing prospective funders that the business proposal is viable and that the proprietor has the commitment and determination to succeed. It is important therefore to take the time to research the content carefully and to present it professionally.
You will notice that some of the examples are written in the third person, eg “The Hawthorn Brewery was formed in May 1993”, instead of “My business was formed in May 1993”. This is recognised practice, and can look more professional, but is by no means compulsory.
Presentation The cover gives the reader an instant impression of the business so it needs to look professional. It should show the business name and logo, if you have one, and your name. A well laid out cover page will present a professional image to funders and will attract their attention and interest. You should make every effort to have your plan typed up or word-processed. It will make the document easier to read.
The business plan contents The summary Although the summary is the first section that people will read, it should probably be written last. However, since it is the first bit you will read, we will describe it first.
The summary should briefly describe the business and highlight its purpose. It should explain how the purpose will be achieved and why the proprietor is the person to make it happen.
If one of the uses for your business plan is to raise finance, then a clear simple outline will catch the attention of prospective funders and make them interested enough to read on. Remember that the people assessing your business are likely to be very busy. Highlight the strengths of the business and why you should be supported.
Indicate the expected turnover and profitability for the following year. If you are already in business, briefly describe your history to date and, in particular, provide details of turnover and profitability for the previous one or two years. How does the business’s performance compare with its competitors? What have been its major achievements?
Lastly, indicate how much money you need to raise and the proposed sources.
Fat Frog Design Fat Frog Design will provide a graphic design and desktop publishing service throughout the north east of England and other areas within the UK.
In providing this service, it is believed that Fat Frog Design will attract clients through the introduction of an annual design package, a competitive edge through pricing and attention to the detailed needs of each individual client through designer/client liaison.
Although the present market is extremely competitive, Fat Frog Design have found through extensive market research that there is a definite demand for Fat Frog Design’s features and benefits, such as the annual design package, which none of its competitors offer.
Once Fat Frog Design has become established and has gained a reputation for quality and reliability within the North East, the business hopes to expand its range of services throughout the UK thereby increasing its client base, its turnover and ultimately its profits.
The business This section should briefly describe the purpose and goals of the business. Whether or not the business has started, explain who owns it. What was the trigger to launch the business?
If the business has already started, describe its history and performance to date. How high is the sales turnover? How profitable is it? What is its net worth? Provide summary figures here and detailed profit and loss account and balance sheets in the appendices. How does its performance compare with its © Project North East / LiveWIRE 1996 Business planning competitors? How has the business been funded (eg equity, loans, grants)? What have been the major achievements to date?
Explain the legal structure of the business (company, sole trader or partnership). State if there are any distinguishing features such as a unique feature of the product or service or approval to ISO9000.