Business Plans

Imagine I am a bank manager Imagine I am a bank manager. What questions do you think I would want to find about your business before deciding to give you a loan?

What is the product and how is it different or unique? What is the target market segment and who are the potential competitors? Who are the customers; how much will they buy and at what price? What will it cost to produce and sell the product? At what stage will the business break-even and what are the likely profits? What investment is required to launch and establish the business? Where will the money come from and what type of finance is required?

Why have a business Plan? Provides a focus on the business idea - is it really a good one, and why? Producing a document helps clarify thoughts and identify gaps in information The plan provides a logical structure to thinking about the business It encourages the entrepreneur to focus on what the business is really about and how customers and finance-providers can be convinced It helps test the financial viability of the idea - can the business achieve the required level of profitability The plan provides something which can be used to measure actual performance A business plan is essential to raising finance from outside providers - particular investors and banks

Limitations Business planning is not an easy process. The plan is often produced with incomplete or out-dated information It can be time-consuming There is a danger that the financial forecasts produced might create misplaced optimism about the business prospects For the entrepreneur, a common complaint is that he/she does not have time to plan.

Main Sections are called Executive summary Market Product Competition Protecting the idea Management team Marketing Production /operations Financial projections Funding requirements Exit strategy

Exam Tips Remember that a business plan isn't just written to raise finance. It plays an important role in the whole start-up process. A start-up's business plan needs to be flexible. The figures are bound to change once the business starts trading and the entrepreneur discovers what the market is really like. A good business plan provides a focus and a discipline for the entrepreneur. However, it is no substitute for what really matters to make the business a success - i.e. hard work, skill, luck etc. Too much business planning is a bit like procrastination - putting off more important work. The entrepreneur needs to spend most time out in the market, finding customers, promoting the product etc.