The challenges of the current economic climate have tightened the banks lending criteria, so the demands of having a professional business plan have only strengthened.
Having such a plan improves your chances of success with your bank and helps your financial prospects over the longer term.
The structure laid out below is what you should have as a minimum in your plan. It’s unwise to go overboard with the volume of your document because lenders just won’t read the information.
The majority of people that receive your plan are likely to have minimal understanding of you or your business idea, so you need to be concise and get to the point fast.
For most businesses, a 20-page document is sufficient to explain the journey of how you’re going to get started and reach your profit objectives. The planning structure falls into four distinct areas:
| Area | Description |
|---|---|
| Strategy | Information about your business strategy together with details about the product or service specifications. |
| Customers | Precise information for your typical target customer profiles, initial communications tactics, sales, marketing and pricing strategies. |
| People | Your personal background story with details on your team’s knowledge and qualifications. |
| Finances | Details about your financial projections to reach your profit objectives. |
If you require a bank loan, then include the timings on repayments in your financial forecasts. Many people forget to add this section, and it often presents a big hole in the cash flow forecast which may lead to the rejection of your loan application.
Below are the main headings required by lenders. Each section requires one or two pages of A4. Add appendices at the end of the document for any detailed analysis that adds clarity to your projections.
The executive summary is the first page of a plan summarising the following subsequent pages. It’s effectively a concise and condensed version of the entire document and is usually the final section completed.
The external analysis includes economic, competitor and market size together with the latest market research and trends. Most of this data is freely available from credible sources. Always quote the source of any material that’s referenced to aid credibility.
Your internal analysis contains information about your business, products, costs and profit margins.
The SWOT analysis is the summary of the preceding two sections highlighting relative internal strengths and weaknesses together with external opportunities and threats.
The Sales and Marketing section details the exact plans you have for your sales team and the marketing activities you’ll undertake.
The staffing and management team section lists the people behind the brand so add in biographies of the key players.
Financial statements contain detailed forecasts for the first 12 months then yearly for years two and three. You should include a Profit and Loss Account, a Balance Sheet and Cash Flow Forecast in this section.
You should write the executive summary at the end once all other elements are in place. More detail should be developed for your first 12 months of operation because these are the most critical year in your history. If you can’t succeed in the first year, then it’s unlikely that years two and three matter as much.
For most banks, they’ll read the executive summary first then look at the detail of your numbers. They’ll probably have most questions about your finances so make sure they stand up to scrutiny.
If financial projections are not your forte, then get qualified help. In all cases, you should ensure you can adequately demonstrate the construction of the forecasts so you can answer questions about them. If required, take along an accountant to any investor or loan application meetings.
Although planning can seem a chore, it pays dividends further down the line to complete this exercise.
As it’s your business with your ideas, it’s always better to manage and execute the process yourself rather than use a third-party.
There will be many questions asked if you’re applying for finance and if someone else has constructed your plan you may not have the answers.
There are software packages available to help speed you through the process. All banks offer basic free software although most have limited help to complete the sections required.
Once you have a draft copy ready, get people you trust to critique your work. Read the contents out loud as though it were a company presentation. Get people to ask you questions then you’ll be more prepared than most other businesses requiring finance.
Not all the data you require will be readily available for free. However, many industry reports are available online by spending time wisely. Some of the largest brands post proprietary research in their annual reports, and many research companies post summaries of their findings online.
