Writing a business plan

Let’s get one thing straight at the start: there is no mystery to writing a business plan. If you can describe how your business works to your friends and colleagues, you can write a business plan.

At its simplest a business plan is the story of how you expect you business to operate and make money over a period of time.

This is true whether it is a commercial operation selling goods and services or a social organisation bidding for funds to deliver training and development services.

Yes, you will need to include  financial data, technical details and information about the people who will be involved in the delivery of your proposal but ultimately you are telling a story and that story needs to be easy to read and engaging.

In this blog I will focus on how to write a commercial business plan and rules that will help you make it follow the “easy to read and engaging” principle. For me the first rule is the most important:

1. KISS: Keep It Short and Simple

The person reading your business plan will be very busy. It is likely that your business plan is one of many that they will have to deal with.

As a rule of thumb you have to get their interest in the first 30 seconds. After that they will only be skimming through your business plan rather than reading it.

To get their attention you need to give them something interesting to read at the start of the business plan. This makes a business plan like an elevator story which is the story you would use to tell somebody you were sharing an elevator ride with about you and your business.

In this situation you could not be sure what floor they will be getting out on so you have to tell them the important stuff first, and you have to tell them in 2-3 sentences. If they don’t get out at the first floor you then have an opportunity to continue

At this stage the trick is to bring in the next most important bits about your business and so on. Ideally you will have between four and six  “levels” in your elevator story.

For your business plan this bring up the first challenge: what is the reader likely to find interesting? Clearly this depends on who is reading it and brings us to Rule 2:

2. Understand your audience

To get a reader’s interest you need to understand where they are coming from. In most cases you will be trying to get a loan for your business and the reader will be a bank manager or funding provider.

Clearly they will be interested in how you will repay your loan and will expect your business plan to tell them this.

I will talk about how to do this effectively further on. In the mean time we come to Rule 3:

3. Start with a summary

This come right back to Rule 1: KISS. The summary is the first thing that the reader will see. A good summary will be less than one A4 page and  will start with some key facts and figures about you business. As an example my business plan starts:

Windmill Insight Solutions Ltd has been in business for four years. In that time it has developed a base of long term contracts which deliver a 65% profit margin.

From these contracts I have identified a need for high quality but affordable English language business skills courses from European and Indian institutions.

I am now looking for funding to explore and develop these markets.

In this situation I had a proven track record to write about and was able to show potential investors that would be lending to a successful business.

Importantly I also showed that my new venture was related to my previous work, giving them reassurance that I would be able to do the required work.

Getting funding for a new business is more difficult. In this situation you need to show that you have researched the need for your proposed product or service. Here is the example I used when I set up my first business, Sapience Consulting:

Sector Skills Councils, Trade Organisations and other publicly funded bodies spend £486 million pound annually on labour Market research.

While much of this allocated through high value contracts with large research houses some 20% is spent on contracts with a value of £50,000 or less. This gives a potential market size of nearly £100 million per annum.

With 6 years experience as Head of Research and Performance for a UK Sector Skills Council Sapience’s principal, Bob Windmill, will bid for such contracts either in his own right or as part of a consortium.

Bob also has a formal offer of an associate contract with Host Policy Research which has a 25 year track records of successfully bidding for such work.

Sapience Consulting is seeking start-up funding to cover its running costs in the first 12 months.

In this introduction I told potential investors about the potential returns (£100 million per annum) and why I think I can get a share of that market (Six years as Head of Research and Performance with a UK Sector Skills Council).

I also told them about the associate contract that I had been offered by another research house which further establishes my research credentials.

It is worth taking some time to produce a really good introduction to your business plan. After all, if you get the introduction wrong there is little chance of the rest of your plan being read.

Always get comments from friend, family and colleagues, especially from those who do not know your business. If they do not “get” what you are saying easily, you need to go back and try again.

With your introduction introduction in place it’s time to think about Rule 4:

4. Say what your business is going to do and why it is doing it.

In this section you need to provide more detail about your products and services. In your mind you will probably have a very clear idea of what makes your proposed products and services attractive to customers.

The real challenge is to write this down in a way which is interesting and understandable to your potential investor.

Coming back to my Sapience Consulting example it’s core service was what is called Labour Market Research (LMR), a research discipline which bring together a range of quantitative and qualitative data to produce a robust description of a given situation.

Even as I wrote that last sentence I could imagine a potential investor scratching his or her head and wondering what it meant.

What I needed was a short phrase that would say what I was offering that employers and funding providers would value and, more importantly, would pay for.

After a lot of thinking I settled on this: “Employers spend a lot of money on training and developing their staff. LMR helps them understand where and when they should be spending their money to get the most benefit“.

To support this opening statement I then wrote three rather more technical but short paragraphs which set out the details of the research process. My aim there was to show potential investors that I knew what I was talking about and could deliver the work.

At this point it’stime to work on Rule 5:

5. Show them the numbers

If any part of a business plan needs to observe the KISS principle it is the finances. For some reason business finance is regarded as complicated and hard to understand. While this may be true for a big company I know that I run my own finances on a simple Excel spreadsheet.

To make my business plans easy to read I only present a summary of the financial information in a table with some supporting text, keeping the calculations in an appendix. This saves the reader having to wade through masses of numbers to find the information that they need.

So, what are the important numbers? Clearly if you are asking for a loan you are going to have to show how you expect to repay it. This means being able to make realistic estimates of your future sales, the income from those sales, the cost off making those sales and hence the profit that you expect make.

Making these estimates is generally referred to as “Financial Forecasting”. Some people confuse financial forecasting with business planning. Clearly you financial forecasts are an important part of you business plan, but they are only one part. You need the other sections to put your forecasts in a context.

That said, the more evidence you can provide to support your forecasts, the more likely you are to get your loan. However the details of your research and supporting evidence belongs in an appendix, not in the main plan. All you present in the plan is a summary of your evidence.

This seems like a good point to come to my final rule: Use appendices.

6. Use appendices

Appendices are simply sections that follow the main report. In these sections you can show the detail of your research and financial calculation.

They are also a good place to show the research you have carried out on market size and potential profits and give a detailed CVs of the key people involved in your proposed venture.

I cannot emphasise too strongly how important appendices are in making your business plan easy to read. The key point about appendices is that they make the detail available to the reader without getting in the way of the story.

In summary

  • A business plan is the story of how your idea will make money – make it easy to read
  • Understand your audience – what will they want to see in your plan
  • Show them you know what you are doing – you have or can hire the necessary skills
  • Provide realistic and defendable numbers – no numbers, no loan
  • Present summarised information in the plan – the detail goes in appendices

Finally

I hope that you have enjoyed reading this post. If you have thoughts on what I have written so far please leave a comment. Also if you have an idea for another business topic let me know and I’ll be delighted to find a space for it.

Thanks again

Bob windmill

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.