Business Plan Writing?!?!?
Discussion
Hello all!
I'm looking for some advice on writing a business plan. I've written a couple before, one in uni for a hypothetical e-learning company and one for me working as a sole trader IT contractor/outsourcing. The one I need to write now is going to be a lot more complicated and important as it will need to be a tool for attracting investment or loans. It’s for a retail eCommerce business so will need to be quite in-depth regarding stock, distribution, technology, supply chain, etc.
I was wondering if anyone is in a situation where they read a lot of business plans and could offer me some advice on what in there opinion makes a good business plan.
Also if those who have recently written a successful business plan could point me in the direction of a good website or book with guidelines on writing a business plan.
Any help would be much appreciated and motivating! Thanks.
>> Edited by Work-Shy-Wanabe on Monday 25th July 14:03
I'm looking for some advice on writing a business plan. I've written a couple before, one in uni for a hypothetical e-learning company and one for me working as a sole trader IT contractor/outsourcing. The one I need to write now is going to be a lot more complicated and important as it will need to be a tool for attracting investment or loans. It’s for a retail eCommerce business so will need to be quite in-depth regarding stock, distribution, technology, supply chain, etc.
I was wondering if anyone is in a situation where they read a lot of business plans and could offer me some advice on what in there opinion makes a good business plan.
Also if those who have recently written a successful business plan could point me in the direction of a good website or book with guidelines on writing a business plan.
Any help would be much appreciated and motivating! Thanks.
>> Edited by Work-Shy-Wanabe on Monday 25th July 14:03
My advice is to forget about the rwiting and concentrate on the numbers.
Build up a decent financial projection for the years you want to project (say years 1 and 2 in detail, and years 3,4,5 in budgetary form)
If this stacks up then you can start writing the plan.
If you do it round the other way you may 'waste' a lot of time.
davidy
PS I've never seen a large Excel type spreadsheet without mistakes in it, so I would suggest using something like Sage WinForecast which also allows you to 'flex' your inputs and outputs to generate different financial models/
PPS Don't forget to pay yourself enough, any lender worth his salt wants to see you doing ok, as you don't want to be worrying about domestic finance as well as a fledgling business.
Build up a decent financial projection for the years you want to project (say years 1 and 2 in detail, and years 3,4,5 in budgetary form)
If this stacks up then you can start writing the plan.
If you do it round the other way you may 'waste' a lot of time.
davidy
PS I've never seen a large Excel type spreadsheet without mistakes in it, so I would suggest using something like Sage WinForecast which also allows you to 'flex' your inputs and outputs to generate different financial models/
PPS Don't forget to pay yourself enough, any lender worth his salt wants to see you doing ok, as you don't want to be worrying about domestic finance as well as a fledgling business.
Thanks Davidy!
The main thing that worries me about financial projection is assessing things correctly. Finding the size of a market may be straight forward using the numbers supplied by the relevant trade organisation. But how can you accurately predict your potential share of that market?
Well thats what forecasting is all about!
Pull the last few years accounts of your potential competitors from companies house, look at their business growth in relation of the overall market. Is the market growing or stagnating (only way to gain business is off your competitors)
Will you gain market share by cheaper pricing? (doesn't always apply)
Will you make more from selling a little for a lot? (depends on big you want to grow your business)
Just keep asking questions and then finding out the answers. You'll know when its right!
Also don't be worried about making a loss in year 1, as long as the business has sufficient cash you'll survive. And as one of my old accountants used to say, if you're going to make a loss it might as well be a big one!
davidy
Pull the last few years accounts of your potential competitors from companies house, look at their business growth in relation of the overall market. Is the market growing or stagnating (only way to gain business is off your competitors)
Will you gain market share by cheaper pricing? (doesn't always apply)
Will you make more from selling a little for a lot? (depends on big you want to grow your business)
Just keep asking questions and then finding out the answers. You'll know when its right!
Also don't be worried about making a loss in year 1, as long as the business has sufficient cash you'll survive. And as one of my old accountants used to say, if you're going to make a loss it might as well be a big one!
davidy
I must read about half a dozen business plans each month. I can tell you the most common mistakes are under-estimating sales & marketing costs and a lack of contingency costs. A quick rule of thumb that has served me well over the years is to double the projected sales costs and halve the projected sales enquiries.
Try and make it simple:
1) What you need is "customers"
then
2) Sell them a product / service which has a margin attached.
then
3) Retain the client if possible.
As such, try and establish what "enquiry generation" mechanism will be needed (advertising, direct-mail, tele-sales, or whatever.) What is the cost of the enquiry generation, and how many enquiries is it likely to generate? Let's then assume that you've generated 100 enquiries, how many of these would become customers? Assume it's, say, 20% - that means you will have 20 customers from 100 enquiries. What is the "Gross" margin on the product / service you are selling? If, for example, it's 40% then you will make a Gross profit of 40% of your turnover. You will then need to subtract your selling costs and overheads from your GP to establish what your profit will be.
Secondly, presumably a proportion of the clients will continue as customers, so they're not "one-off" accounts - this obviously will depend on the product / service. With these accounts there is far less sales costs so the margins are likely to improve the longer the company is trading - known as "client retention over time".
So the real trick, is knowing what your sales KPI's are going to be (enquiry rates, conversion rates and client retention), then working out the margins involved - and on the back of fag packet you can work out the profit.
As such, I won't normally touch a deal unless there has been a reasonable degree of "sample marketing" to give me an indication of these numbers. I'll then halve them, and if it still makes commercial sense I'll be interested.
Edited to say: PS, you might want to change your PH hamdle if you're looking for investment from the PH massive!
>> Edited by srebbe64 on Wednesday 27th July 11:18
Try and make it simple:
1) What you need is "customers"
then
2) Sell them a product / service which has a margin attached.
then
3) Retain the client if possible.
As such, try and establish what "enquiry generation" mechanism will be needed (advertising, direct-mail, tele-sales, or whatever.) What is the cost of the enquiry generation, and how many enquiries is it likely to generate? Let's then assume that you've generated 100 enquiries, how many of these would become customers? Assume it's, say, 20% - that means you will have 20 customers from 100 enquiries. What is the "Gross" margin on the product / service you are selling? If, for example, it's 40% then you will make a Gross profit of 40% of your turnover. You will then need to subtract your selling costs and overheads from your GP to establish what your profit will be.
Secondly, presumably a proportion of the clients will continue as customers, so they're not "one-off" accounts - this obviously will depend on the product / service. With these accounts there is far less sales costs so the margins are likely to improve the longer the company is trading - known as "client retention over time".
So the real trick, is knowing what your sales KPI's are going to be (enquiry rates, conversion rates and client retention), then working out the margins involved - and on the back of fag packet you can work out the profit.
As such, I won't normally touch a deal unless there has been a reasonable degree of "sample marketing" to give me an indication of these numbers. I'll then halve them, and if it still makes commercial sense I'll be interested.
Edited to say: PS, you might want to change your PH hamdle if you're looking for investment from the PH massive!
>> Edited by srebbe64 on Wednesday 27th July 11:18
All comments posted are bang-on. Business is about money so it's figures that count.
However, you mention it's a complex business so some form or written description will be required and for this, you need to be as simple, basic and brief as is humanly possible.
You should avoid lengthy tomes about how wonderful life will be, excessive cross references to appendecies and the like.
Simply cover what the business will be, what it'll do, how it will make money and what the investors will get.
And remember to spell-check it!
Good luck.
However, you mention it's a complex business so some form or written description will be required and for this, you need to be as simple, basic and brief as is humanly possible.
You should avoid lengthy tomes about how wonderful life will be, excessive cross references to appendecies and the like.
Simply cover what the business will be, what it'll do, how it will make money and what the investors will get.
And remember to spell-check it!
Good luck.
Much as I'm suspicious of BusinessLink, my local one ran an excellent course on preparing business plans and cash flow forecasts recently.
www.businesslinksolutions.co.uk/
www.businessboffins.com/index3.html
www.businesslinksolutions.co.uk/
www.businessboffins.com/index3.html
Agree with a lot of what has been said on here - most potential investors will read the Executive Summary of your plan (if it is more than 1 page of A4 they may not even do that) - if you have their attention they will read on....
Think of it as a CV in that sense - get someone who knows nothing about what you are setting out to do to read you business plan (can get them to sign a confidentiality agreement if necessary), their feedback will be invaluable. If you can "tune" the plan so anyone can understand it, you should be looking good....
Think of it as a CV in that sense - get someone who knows nothing about what you are setting out to do to read you business plan (can get them to sign a confidentiality agreement if necessary), their feedback will be invaluable. If you can "tune" the plan so anyone can understand it, you should be looking good....
Get hold of this book.
www.amazon.co.uk/exec/obidos/ASIN/0753509636/qid=1122933692/sr=2-1/ref=sr_2_11_1/202-1731704-5363034
It's short, concise and gives you plenty of examples through the book.
I use this when reviewing my own business plan.
Matt
www.amazon.co.uk/exec/obidos/ASIN/0753509636/qid=1122933692/sr=2-1/ref=sr_2_11_1/202-1731704-5363034
It's short, concise and gives you plenty of examples through the book.
I use this when reviewing my own business plan.
Matt
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