A continuation of our ‘Start your Own Business‘ series, In an extract from his book in Sunday Business Post 25/4/2010, Starting a Business in Ireland, Brian O’Kane continues on with advice on the format of your Business Plan.
A standard business plan format
Each business plan is unique. However, those whom you seek to convince to invest in your project have come to expect certain information in a broadly standard format that presents information in an easily digested logical sequence.
For a very small or simple business, the following intuitive format – adapted from Applying the Rules of Business (Steps to Entrepreneurship series), by Ron Immink & Brian O’Kane, Oak Tree Press – may be sufficient.]
You need to cover all the information that a reader of a business plan is likely to want to know in order to come to a decision on the plan. and ensure that you have fully thought through all aspects of your business.
Simple business plan outline
I am . . .
Explain who you are, your education/work experience etc, especially insofar as it applies to your proposed business.
My product is . . .
Explain your product: what it is, what it does, how it works, how it is made, what makes it different/unique, etc
My customers are . . .
Explain who your customers will be and what evidence you have to support this.
My customers will buy my product because . . .
Explain why your customers will buy your product and what evidence you have to support this.
My customers will pay . . .
Explain how much your customers will pay for each unit of your product and what evidence you have to support this.
At this price, my customers will buy . . .
Explain how many units of your product your customers will buy at the price set and what evidence you have to support this. I can make . . .
I can make . . .
Explain how many units of your product you can make in a given period and what evidence you have to support this.
To make each unit of product costs . . .
Explain how much each unit of product costs to make and what evidence you have to support this.
The start-up investment I require is . . .
Explain the start-up investment you need, what it will be used for and what evidence you have to support this.
I have a viable business because . . .
Explain why you believe you have a viable business and what evidence you have to support this.
In summary . . .
On a single page, list the main points of your plan in bullet point form. This is the part of the business plan that will make the biggest impression on your reader – make sure it’s easy to read and understand. Then put it at the front of your plan, where it will be seen.
Planning for success outline
Contact details: address, telephone, fax, email, website
Status: sole trader, partnership or limited company
Registered for: Vat, PAYE, corporation tax
Formed as: purchase of existing business/ purchase of franchise/start-up/other Business objective
External accountant: address, telephone, fax, e-mail, contact name
Product/service range: include descriptions and prices
Staff: numbers employed in production, sales/promotion, administration, other duties
Competitors: include estimates of competitors’ turnover
Investment and financing: details of fixed assets, personal assets, current assets, long-term/medium-term assets, liquid assets, short-term finance, start-up costs, subsidies/ grants, allowance for contingencies, total investment, total available finance.
Budgets: forecasts for turnover, gross profit, gross profit percentage, net profit, cashflow and personal expenses over first three years
2: The entrepreneur
(If there is more than one founder, each must complete this section.)
Personal details: name, address, date of birth, etc
Income: details of present income, source of income, benefits, income of spouse/partner, etc
Education: details of post-primary education, including any courses that you are currently attending
Practical experience: details of your working history and experience and any other significant experience that could be useful for your business
Motivation, objectives and goals: why do you want to start a business? What do you want to achieve with your business?
Personal qualities: what special qualities of yours are important for your business? List your strong and weak points. What are you going to do about your weak points?
3: Formal requirements
Overall description: a general description of your proposed business
Research: list the organisations you have contacted to discuss your plans and summarise the outcome of these discussions
Legal status: what legal status will your business take? What considerations led you to this choice?
Name and location: what is the name of the business? Have you checked that this name is available? Describe your location. How can customers reach your location? Is access for supply and removal of goods available?
Is there enough parking for your customers’ cars and for your own cars? How big are your office premises? Are there expansion possibilities at these premises?
Are the premises leased or purchased? Give details of cost of lease/mortgage. Have the premises been professionally valued? Has a lease or purchase contract been prepared by a solicitor? (If so, give the name of the solicitor.)
Is there any pollution in the ground at your premises?
Licences: do you fulfil all of the licensing and permit requirements for the field you will be working in? If so, which and on what grounds? If not, why not and what are you doing about it? Is your business registered at the Companies Registration Office? What other licences do you need? Are there any other legal applications required (for example, environmental concerns)? If so, which?
Employer and employees: initially, how will your staffing be organised? Have you drawn up clear job descriptions for your future employees? Do you plan to expand your employee numbers quickly? Who will replace you during any required absences?
Administration: who will do your accounting? Who will do your bookkeeping? Give names, addresses and contact numbers.
Insurance: are you insured against the normal risks? If so, what is insured and for how much?
Terms of trade: how is responsibility for product delivery arranged? Are product deliveries insured? If so, for how much? Summarise your terms of trade.
Vat: Is your business registered for Vat?
What is your Vat number? What rates of Vat apply to your business?
Start date: On what date do you want to start the business or when did you start?
Market: who are your target groups? What do you have to offer? What is your business objective in seven words?
Market research: describe your market, future developments and your potential customers (local, county, national and international).
Describe the level of competition you face. What are the leading indicators in your market sector? Estimate the size of the Irish market for your product. What part of this market do you intend to service? Have you contacted future customers? What was their reaction? Have you obtained any forward orders?
What comments did you receive with these orders?
Image: what image will your business present? Formulate the core of your marketing plan based on your target groups, product assortment, price level, etc.
Product (range): describe briefly the product( s) you want to launch. Describe the primary and secondary functions of your product(s).What choices do you offer your customers? What extras do you offer compared to the competition?
Price: what are customers prepared to pay? What are customers used to paying? What are your competitors’ prices? What is your price? How is your price made up? Will you offer discounts? If so, what will they be? Will you give special offers? If so, what will they be? Will cost calculations be monitored during operation? If so, how?
Place: explain your choice of location. Will future developments change the attractiveness of your location? How did you allocate space for the various necessary functions?
Personnel: profile yourself as a businessperson.
How many people will be involved in production, sales/promotion, administration, other duties? How are you going to make sure that your staff uphold the image of your business?
Presentation: how are you going to present your business (layout, colours, music, atmosphere, correspondence, brochures, business cards, van signs)?
Promotion: rate those areas your customers are most interested in and your relative strengths in those areas. How are you going to approach your customers and what buying motives are you going to emphasise? What marketing and promotion resources will you emphasise? Explain your promotion methods (how, where, frequency, etc)
Competitors: list your main competitors. Assess their strengths compared to your own.
In what ways do your products/services differ from those of your competitors? Can you estimate the total turnover of your competitors?
What are your strong points compared to those of your direct competitors? What are your weak points compared to those of your direct competitors?
Purchasing: have you contacted your future suppliers? If so, what are their terms of trade? Are there alternative suppliers? What advantages do these alternative suppliers offer you?
Production process: are you involved with (or will you be using) new techniques or new products in your production processes? If so, are you receiving assistance from experts? If so, who are they and how are they involved? Describe your production process.
What experience do you have with this process?
What equipment do you use in the production process? List the equipment you intend to lease, buy new or buy used. What guarantees/ back-up do you have for this equipment in case of malfunction?
Have you enough capacity to achieve the revenue for which you have budgeted? Have you checked your products and production processes for environmental considerations?
Are there any environmental objections? If so, what are you planning to do about them?
5. Investment and financing
Investment: describe the investment you will have to make to start your business and to run it over the first three years (exclusive of Vat)
Personal assets: what assets can you (and your business partner or partners) put up? How did you value your personal assets?
Other (bank) finance: details of long term/ medium-term, short-term finance, subsidies/grants; shortfall, surplus, etc.
Credit assessment: can you support the required investment in fixed assets with quotations from suppliers? If not, how did you calculate your investment? Is your investment cost-effective? In your estimates, did you take seasonal business influences into account, and calculate based on your maximum requirements?
How did you estimate your stock and work-in-progress levels? How did you estimate the value of your debtors? Do you have sufficient liquid assets to cope with disappointments and unexpected expenses?
Did you approach a bank or banks about the financing of your plans? If yes, which banks and who was your contact person?
Did those contacts lead to any agreements?
Did you approach other finance companies about your plans? If yes, with whom did you speak? Were any decisions reached or arrangements made?
6. The operating budget
Turnover forecast: list your revenue sources and project the amounts you expect from each in the first three years
Costs: give details of costs for staff, production, premises, transport, sales and promotion, general expenses, finance and depreciation in each of the first three years
Profits and cash-flow: give detailed cash-flow projections for the first three years
Comments on the budget: describe how you calculated and estimated your revenue (number of customers, average order per customer, turnaround).What expansion do you expect over the next few years? How did you calculate your purchase costs? How did you estimate salaries? What effect will any shortfall in turnover have on your business and how do you plan to handle it? What is your minimum required turnover?
7: Personal expenses
Personal expenses: fixed expenses; rent/ interest and repayment gas, water, electricity; taxes/charges; insurance; study expenses; membership expenses/contributions; TV licence; private use of car; repayments (enclose loan details); household expenses, etc.
Home equity: do you own your own home? If so, have you had it valued? What is its market value? How much equity do you have in your house?
Additional debts: what other debts do you have (personal/private loan or credit, car financing, study costs, etc.)?
Minimum required turnover: what is the minimum required turnover for your business, including your personal expenses?
Detailed cash-flow projections for each month/quarter, outlining all income and expenditure, together with the opening and closing bank balances each quarter over the first three years.
Sometimes the summary or overview is expanded with a narrative executive summary, a concise oneor two-page summary of the entire plan.
This executive summary is the last thing to be written, but the first to be read. It must persuade the reader that the idea is good; otherwise, he or she may not read on. It summarises the company, its objectives and why it will be successful. It describes the products, the market, critical financial information and, finally, outlines what form of finance is required, how much and when. It assumes that its reader is not expert in your industry and knows nothing about your business. And it does all this in as few words as possible.
You should avoid giving detailed personal reasons for wanting to be your own boss. It is very easy to confuse your personal ambitions with your objectives for the business.
Bankers and other investors are primarily considering your prospects for success (getting them a good return), not your prospects for personal satisfaction. It is important to keep your focus, like theirs, on the business. Nonetheless, your character and skills will be of importance to them, so these are things to mention.