Business plans

Business plans

On occasions, it is necessary to provide a detailed business plan in order to make a case for a particular business venture or project. Before a business plan is written, it is necessary to:

• clearly define the target audience for the business plan
• determine the plan's requirements in relation to the contents and levels of detail
• map out the plan's structure (contents)
• decide on the likely length of the plan
• identify all the main issues to be addressed (including the financial aspects).

Shortcomings in the concept and gaps in supporting evidence and proposals need to be identified. This will facilitate an assessment of research to be undertaken before any drafting commences. It is also important to bear in mind that a business plan should be the end result of a careful and extensive R&D project that must be completed before any serious writing should be started.

A typical business plan comprises the following main elements:

• An introduction which sets out the background and structure of the plan.
• A summary consisting of a few pages that highlight the main issues and proposals.
• A main body containing sections or chapters divided into numbered sections and subsections. The main body should include financial information (including a profitability forecast).
• Market and sales projections should be supported by valid market research. It is particularly important to ensure that there is a direct relationship between market analysis, sales forecasts and financial projections. It may also be important to make an assessment of competitors' positions and their possible response to the appearance of a rival product.
• Appendices should be used for additional information, tabulated data and other background material. These (and their sources) should be clearly referenced in the text.

The financial section of the plan is of crucial importance and, since it is likely to be read in some detail, it needs to be realistic about sales expectations, profit margins and funding requirements ensuring that financial ratios are in line with industry norms. It is also essential to make realistic estimates of the cost and time required for product development, market entry and the need to secure external sources of funding.

When preparing a plan it is often useful to include a number of 'what-­if' scenarios. These can help you to plan for the effects of escalating costs, reduction in sales, or essential resources becoming scarce. During a what-if analysis, you may also wish to consider the halve-double scenario in which you examine the financial viability of the project in the event that sales projections are halved and costs and time are doubled. The results can be sobering!

When writing a business plan it is necessary to:

• avoid unnecessary jargon

• economise on words
• use short crisp sentences and bullet points
• check spelling, punctuation and grammar
• concentrate on relevant and significant issues
• break the text into numbered paragraphs, sections, etc.
• relegate detail to appendices
• provide a contents page and number pages
• write the summary last.

Finally, it can be useful to ask a consultant or other qualified outsider to review your plan in draft form and be prepared to adjust the plan in the light of comments secured and experiences gained.