This weekend saw the final of the UK TV Show The Apprentice. This year, unlike previous years, the objective was not to land a job, but to get a business partnership with Lord Sugar and a £250k investment. So after the usual rounds of challenges the final round came down to not only a review of the CV but an in depth review of the business plan the candidates were asked to prepare. So it brings us neatly to the topic of business plans. One of the most common questions we get in our email is "do I need a business plan?" – short answer, unless you're borrowing money, no you don't but this post will explain why it's a good idea to have one. This is the fourth part of the 10 days to starting a business series. In case you missed the earlier articles in the series you can catch up here. Business plans are like creating your business on paper. If something doesn't work in on paper you can change it and start again. You can change your mind, you can change direction and you can think things through.
Getting a Loan
If you're writing a business plan for the sole purposes of getting finance from your bank, a good starting point is to visit your bank and ask them for the template they provide businesses or what they need to evaluate a business for loan purposes. This will save you a lot of time and minimise the chance of being rejected from the get go by missing some vital content that the bank will require of you.
Writing for you
If you're writing a business plan for you as a blue print to growing your business, then good for you. Just as you wouldn't start off on a hike without a route map you shouldn't get started in business without a business plan. Make no mistake, a business plan will not guarantee you success, but hopefully it will avoid any costly mistakes. Essentially there are 3 main elements which need to be in your business plan if you're writing one for yourself:
1. The Concept
This is where you describe what your business is going to do, the structure of the business and who is going to do what.
2. The Market
Here you'll describe the types of customers who are going to buy your product or service along with an analysis of the competition and an evaluation of why and how your products will sell against the competition. 3. The Financials Here you'll describe the costs associated with building, marketing and distribution of your product along with your projected sales revenues (be realistic!) For more details see the resources section at the end of this post.
Don't be an island
Share your plan with people you know who know you well (not the "yes" people) and get them to ask critical questions and challenge you on your answers. This will help you create clarity in your own mind about what needs to be done and make sure that "obvious" flaws don't go unchallenged. Sometimes when you've lived and breathed a business plan and you're caught up in the enthusiasm of it all then it's sometimes hard to see the wood from the trees. UK Apprentice contestent Susan Ma discovered to her cost that just because a business works as a part time activity selling goods on markets and manufacturing products in your kitchen, it doesn't mean that the business can scale. Too often people make the mistake of multiplying out what is sold in one outlet by 20 and not factoring in the additional costs of management and increased sales and distribution costs and the overhead that being bigger brings to the table. Reviewing your plan with others will help identify these problems before they occur.
No business plan
At the start of this post I wrote:
"do I need a business plan?" – short answer, unless you're borrowing money, no you don't but this post will explain why it's a good idea to have one.
It's true you don't need one. There's no law that says you've got to have one, and you won't get prosecuted if you don't have one. But if you're raising finance the chances of you getting funding without a plan are about the same as winning the lottery. A business plan will help you think things through and see things more clearly. It's not a panacea for overnight success nor will it necessarily make you a fortune, but it will provide a road map for all the things you need to do to get your business off the ground.
Fire and Forget
Or rather don't fire and forget. Once you've written your business plan and got your business off the ground. Regularly review your plan and update at least once a quarter to make sure you're on tract and you're doing the things you said you you would. If your business hits a flat spot you might have the answer in the plan which you had previously forgotten about.
We've written several articles on writing a business plan and have included a template for you to use in your own business: Business plan on a page Business plan template Business Plans Made Simple So what about you? If you've started a business did you use a plan? If you're already in business, are you updating your plan regularly?