At some point in the life of a business – generally before it has even started trading – its owner will have been asked for a business plan. This is where the vision of an owner-manager begins to turn into reality.
A business plan is often an essential requirement for securing funding, whether it's startup investment, a loan, or input into an established business from family members or shareholders. But there are other stages in the life of a business when a detailed plan can be useful. For example:
- When a major change in strategic direction is planned
- When new distributors are needed
- Before a senior management appointment
A regularly updated business plan can also help in succession planning and business continuity, providing the comfort of a common understanding of what the business's current owner has in mind in terms of business goals.
Preparing a plan can be seen as a necessary evil or a chore. Nothing could be further from the truth.
Preparing a business plan can be a valuable exercise at any stage. Writing a plan forces you to look externally – at the evolving market and at what your competitors are doing – and to take the time to really think about where the business fits into the world.
When you own a business, it's easy to get caught up in the all-encompassing detail of its day-to-day running. But when you're focused on that, you can miss opportunities (or potential pitfalls). Taking the time to stop and think carefully about where the business is going over the next few years, and what you may need to do to secure its future profitability, is a very helpful exercise.
So what does a typical business plan cover? There are six main elements:
- A short summary, laying out what the business does and its strategy
- A detailed description of the business
- An overview of the market in which it operates
- Competitor analysis
- Design and development of the business's products or services. This might include pricing strategy, a discussion of what makes the products desirable or unique, future development plans
- A discussion of business strategy, operations, and key management
- Financial information including a cashflow forecast, income statement, balance sheet and any other relevant information – to show the company's value, as well as its ability to earn a profit and cover its costs.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.