Whether you’re an entrepreneur seeking funding for a new idea or an established business owner with solid turnover, a business plan is critical to keep you on track to reach your goals.
Historically, a business plan was a written document summarising all areas of your business to convince the bank to give you a loan to get your business off the ground. Now, however, a business plan is a more fluid concept that should be updated periodically to reflect the current situation of your business and serve as a constant reminder of your core strategy and objectives.
If you’re not sure where to start, the following 5 tips can help you in crafting your perfect business plan:
1. Keep it thorough yet concise
Clearly state what makes your business special and unique from the competition, but don’t write a novel. Although your plan should cover all key areas of your business, including its primary objectives, strategies, sales, marketing, and financial plans, it should get straight to the point in enough detail but without the excess fluff. Describe your location and work facilities, but leave out the discussion about interior design.
Also include an executive summary that hooks the reader in. Your business plan should tell a story and engage to the audience it’s directed at – whether that’s the bank, potential investors, or for internal use.
Your plan should also consistently refer back to your business’s main objective, using it to inform all other actions you plan on taking. Consider watching Simon Sinek’s TED Talk ‘Start With Why’ to see how to keep your mission at the core.
2. Be realistic
Your plan should only include achievable time frames and financial projections, avoiding the use of superlatives and strong adjectives (‘incredible’ ‘amazing’ ‘fabulous’). It’s better to set conservative estimates and medium-term goals and then exceed your expectations later on. Also discuss when investors can expect to be paid back – this will show you’re addressing all the practical details and aware of the resources being given to you.
3. Back up every claim you make
Along with being realistic about your predictions, ensure that you back up every claim you make with evidence and avoid making assumptions that you can’t prove. Simply ‘knowing’ your product will sell isn’t good enough.
Is there a definable market for your product or service? Has this segment been growing in the last 2 years? Do proper market research and answer questions like this with data and industry statistics, many of which are available free from sources like the Office for National Statistics. Along with things like defining your target market, discuss the strategies you’ll use to reach it.
4. Get input and insight from outsiders
Before you present or file your business plan, seek input from others who have created their own and learn from their successes and failures. Their advice can be more valuable than any textbook or blog post on starting a business.
Additionally, all good business plans take into account the competition, so do your research. Look at what they are doing right and wrong and use this to back up why your plan will be successful.
5. Update your plan continuously
Markets, consumers, and their needs are constantly changing. Your business plan should reflect these changes and be revisited regularly to ensure it still reflect the current realities your business is facing. Have you introduced a new product? Are there new or stronger competitors? These are signs that it’s time to update your business plan. Stay aware of trends in the market, such as in pricing, product design, or consumer preferences, and adapt your plan accordingly.
How do I know if my business plan is on track?
To measure the effectiveness of your business plan, consider using a regular system of reports that covers essential metrics, such as your revenue growth rate, customer growth rate, or net cash movement. By looking at these figures, you can clearly see the progress you’ve made towards achieving the business objectives you set in your plan and determine what’s working and what’s not.
This is a guest blog by Float Cash Flow Forecasting, an add-on for Xero.
For more information visit floatapp.com.