Writing a Business Plan

A Practical Guide

Ignatius Ekanem

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781315465791
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Resourcing new ventures is-all important for entrepreneurs, and creating a successful business plan can be make or break when it comes to attracting investment. Written by an experienced academic and consultant, this book provides a concise guide for producing the optimal business plan.

Business plans are vital when it comes to making strategic decisions and monitoring progress. Writing a Business Plan is designed to teach you how to write your business plan without relying on someone else or internet templates. It will take you through each stage of business-plan writing, with chapters on generating ideas; describing business opportunities; drawing a business road map; and considering marketing, financial, operations, HR, legal and risk. The book includes a range of features to assist you, including worked-through examples.

This unique book provides a one-stop shop for entrepreneurs and students of entrepreneurship to hone their skills in writing a useful and comprehensive business plan.

1
Introduction to this book

Business planning is a very important part of a new business creation. There is a popular saying that ‘if you fail to plan, you plan to fail’. This is a truism in entrepreneurship and new business development. Every venture requires diligent planning. If you are planning to start your own business, the first thing you need to do is to develop an effective business plan.

A business plan is a written document to describe a business opportunity, the goals of the business and the methods to achieve the goals. It is a road map for your business. A business plan fulfils two main objectives. The first objective of a business plan is that it serves as a strategic planning document for entrepreneurs (Deakins and Freel, 2012). In other words, it is a plan to guide the business and a basis for making strategic decisions, and it serves as a subsequent monitoring device. The second purpose of a business plan is to help you raise money from banks, investors or other lenders. It may also be required to obtain funding from agencies such as local enterprise agencies or local authorities. Many people pay more attention to the second function of a business plan than to the first. For all intents and purposes, the first is the most important.

As a road map, a business plan helps you to spell out exactly where your business is heading and how it intends to get there. To help you have a firm control of your business, it provides a fixed set of criteria against which you test every decision in the business. This means that a business plan is not a book to be left on the shelf to gather dust. It is a document you should keep on the table and work through continually, and it should be shared with everyone who is connected with the business.

Every business needs a clearly defined plan. As an entrepreneur, you will count on your business plan as a guide for your future business operations. When you develop the plan, you should keep in mind that you plan for the lifespan of your business. Without planning, you can make mistakes that will cost you large amounts of money.

Of course, there are some aspects of running your business that you can learn as you go along, but planning for your business is clearly not one of them. Oftentimes, there can be a great deal of complexity and difficulty involved in starting a business, but that does not have to be so. Proper planning will alleviate some of these challenges. It is important to note that starting a new business involves a wide range of activities for which you will need to make decisions straight away. You must also realize that there may be no time to establish what decision should be taken once you have opened the doors of your business. This is why you must plan in advance in order to avoid making expensive mistakes.

Ideh (2012: 21) emphasizes, ‘You have no business without a plan.’ I could not agree more with that statement. If you want your business to succeed and grow, you must have a plan. Without a clear plan of action, it is easy to lose direction of your business. A business plan will help you to plan your strategy, map your direction and stay on course.

If you want a business plan to have a great impact on your business, it must be genuinely related to your initial business idea. It would not be a great business plan if you simply fill in a template on the internet or even pay someone else to do it for you with no relationship whatsoever with your lofty business idea. It might look good, feel good, and give you that sense of satisfaction, but it would not do you any good without a good deal of input from you.

The business plan is an intricate part of the vision and purpose of the business. Therefore, it must be prepared and written by the original owner of business idea. It is not a document to be copied from the internet. It must be written in a way that reflects the vision of the business owner(s). The business owners must be prepared to adjust the plan as they go along the journey because, as a road map, the route may change as a result of road works or diversions.

As a senior lecturer and researcher with deep interest in entrepreneur-ship, economic regeneration, and small-business development, I have interviewed many small-business owners who have started their own businesses without a business plan. I have also come across many people who go into business with little or no knowledge or idea of the business that they have gone into. Some go into ventures for which they have no skills or experience. Consequently, they lose focus and direction of the business, and what seemed to be a great business idea in the beginning starts to dwindle and wither away simply because the start-up process was not well planned.

Therefore, before deciding to embark on a business venture, you need to carry out a ‘self-analysis’ which requires you to ask yourself serious questions such as the following:

• Who am I, and what do I want to achieve?
• Do I have the skills necessary to start a business, or should I first of all seek some kind of training?
• What kind of technical help do I need (i.e. accountants, lawyers, management consultants, computer specialists etc.)?
• Can I afford such assistance?
• What is the worth of the business opportunity?
• Can I relate the business opportunity to the market and industry conditions?
• Will I be able to sacrifice present benefits to concentrate on starting a business?
• Am I willing to take the risk to invest time, money and effort in the business?
• What do I expect from the business in the future?
• Where do I see myself in ten years’ time?

It is only after answering these questions that you should develop a business plan.

The advantages of a business plan cannot be overemphasized. The first most important advantage of the document is that it helps the business owner to maintain a focus on the business strategy, competitive forces, risks and financial projections. The second most important advantage of a business plan is helping you to raise finance for the business. Therefore, the finance section of the business plan is very important.

Many entrepreneurs lack the financial skills to put this section together in a professional manner, and the lack of professionalism here can work against the enterprise on many levels. If a prospective investor cannot get a clear financial picture of the enterprise, it will certainly affect the chances of investing in the organization. This is another area where this book becomes handy as it seeks to show the reader how to go about it.

A major problem often encountered while designing a business plan is that different funding bodies may have different requirements. For example, while a bank manager may be interested in financial projections, the venture capitalist and business angel may require a more detailed business plan and more market analysis for the obvious reason that the venture capitalist or business angel may not be able to take a collateral security to safeguard their investment (Mason and Stark, 2004).

Similarly, an enterprise or development agency may vary in their requirements if a business plan is needed for funding (Deakins and Freel, 2012). Therefore, although the business plan is primarily written for management and strategic decision-making purposes, the business owner is advised to find out the format required by the funder. In this case, the entrepreneur should be prepared to adjust, modify, shorten or extend the plan to suit the requirements of the funder.

This book is written for academics, practitioners, entrepreneurs, would-be entrepreneurs and students. It is intended to be a practical ‘how to do it’ handbook which aims to ensure that readers have the knowledge and skills to develop a business plan, put it into operation, make decisions regarding their business and plan for growth and exit strategies. The book will remind the reader of appropriate basic academic theories and analytical tools to achieve a successful business start-up, grow the business and make important decisions on future strategies.

This book aims to facilitate the development of a unique business plan. A particular emphasis is placed on planning the business beyond the startup phase. Especially important is the reconciliation of theory with practice. Finally, the book will help your business to get off not only to a cracking start but also to a growing stage!

In particular, the book will help readers to:

• explore business ideas and entrepreneurship, including feasibility, profitability, market analysis, competition and timing
• draft a business plan while choosing and shaping the best idea and growing their business beyond the start-up phase
• formalize the idea to enable the resourcing of the project, especially focusing on practicability, financing and market positioning
• be able to report to their investors using an investors’ meeting and a company report.

On completion of this book, readers will be able to:

• master all the necessary business-function areas that need to be addressed in establishing and running a new venture
• identify and apply major strategies required by a management planning process for developing a new venture into the future
• define the day-to-day issues which confront a new and growing venture during its formative stages.

In summary, this book will enable readers to:

• produce a comprehensive and coherent business plan and critically evaluate the risks to its implementation
• implement all aspects of setting up, running and developing a new venture, including establishing a company, raising finance, marketing, staffing, premises, accounting records, production of final accounts, growth and exit strategies
• summarize progress of their company to date and present arguments for continued investment and growth to shareholders
• recognize the information needs of banks and equity investors
• present the achievements and aspirations of a new and growing venture to stakeholders effectively.

References

Deakins, D. and Freel, M. (2012) Entrepreneurship and Small Firms, sixth edition, McGraw-Hill, London.

Ideh, S. (2012) Quick Win Tips for Entrepreneurs – Entrepreneurial Development Series, Olad World of Creation Publishing, Nigeria.

Mason, C. and Stark, M. (2004) What do investors look for in a business plan? A comparison of the investment criteria of bankers, venture capitalists and venture capitalists. International Small Business Journal, 22, 227–248.

2
The contents of a business plan

It is impossible to be prescriptive in the content of a business plan since every business plan will be different and will be designed for different requirements. However, there are a number of standard sections that are normally included in a business plan. These sections are listed below and discussed in detail in subsequent chapters.

Cover sheet

The cover sheet should include:

• the name of the business
• the names of the directors
• addresses and telephone numbers of the business and directors.

Table of contents

This section should not be more than one page. The purpose of the table of contents is to help the reader to locate the section of interest easily.

Executive summary

The executive summary is the first major section of a business plan. However, it should be the last to be written since it is a summary of the main contents of the business plan. This section should state the purpose and objectives of the business plan. If the business owner’s intention is to raise finance for the business, he/she should briefly state the legal structure of the business, where and when it was incorporated and why he/she needs to raise finance.

The executive summary should be a concise summary of your marketing, financial, operational and management/organizational plans. Ideally, a brief description of your markets and products/services will also be included in this section. It is important to bear in mind that some people will read only the executive summary. For this reason, the executive summary should capture the entire business plan.

Introduction

This is the first main section of your business plan and should provide information about the background of the business, such as a brief history of the business, how the business idea was conceived, the business name, business activities, the industrial sector, the unique selling point(s), the main aims and objectives of the business, and the legal form.

Business strategy

This section of the plan should discuss the vision and mission statements of the business. It should also discuss the strengths, weaknesses, opportunities and threats of the business. The location of the business as well as the names and addresses of the directors should be provided in this section of the plan.

Marketing research

In this section, you will report the results of your market research, both secondary and primary research analysis, comprising the market size, your target market, competitors, advertising and promotion techniques and selling strategy.

Finance

The finance section will cover the start-up costs, pricing strategy, daily cash collection, projected financial statements such as the cash flow statement, profit and loss account, the balance sheet and notes to the accounts. Financial ratios will also be presented in this section.

Operations management

The operations section will discuss the business premises and layout, equipment, sources of suppl...