A business plan turns an idea into a description of how the business will operate. It brings together your research, assumptions and funding needs so you can assess whether they fit.
It is useful even when no lender has asked for one. Writing the plan can expose a gap in staffing, an unrealistic sales assumption or a cash shortage before it becomes a problem.
Write for the reader
A potential lender needs to understand what you do, who will run the business and how the finance will be used and repaid. Keep the document organised and provide enough detail to support those decisions.
Start with a clear overview and finish with a concise summary of the proposal. Supporting detail can sit in appendices rather than interrupting the main argument.
Cover the main parts of the business
A practical outline is:
- Overview: What the business does, its current position and what you are proposing.
- Background: The history of the business and the experience of the key people.
- Management: Responsibilities, staffing plans and outside expertise.
- Products or services: What customers buy and why they value it.
- Operations: Premises, equipment, production capacity and quality control.
- Market and marketing: Customers, competitors and how you plan to win business.
- Finance: Forecast sales, costs, profit, cash flow and the funding required.
- Supporting information: Evidence and detail that help the reader assess the plan.
The amount of detail should reflect the business and the decision being made.
Make the forecasts fit the story
Sales projections, margins and overheads need to agree with the operational plan. If growth requires more equipment or staff, the costs and timing should appear in the forecasts.
Include a monthly cash-flow forecast showing when money is expected to arrive and when bills fall due. Consider both better and worse outcomes, and use a break-even calculation to understand the sales needed to cover costs.
Use the plan after it is written
A plan should explain how you will put it into practice and monitor progress. Compare actual results with the assumptions so you can respond when events differ.
A well-presented plan helps someone understand the proposal. A realistic plan also helps you manage it.