Fail to Plan, Plan to Fail

It is a truth universally acknowledged that the business plan is one of the most important documents you and your business will produce as it explains what you hope to do, how much money you need, if you are borrowing money and how you propose to pay the money back.

However, there is more to the business plan than getting funding. First and foremost it helps you crystallize your thinking about your business. Very often people believe they are far too busy to commit their thoughts to paper. But it is, unquestionably, a very useful exercise as it will help you clarify your ideas and objectives.

In the business plan, you will have to answer questions about your business objectives, your product or service, pricing methods, your customers and competition. While many franchisors will assist in the preparation of a business plan, the reality is that it's your business and therefore your responsibility.

Preparing, presenting and defending your business plan is a real test of your business skills. If you can't defend it or justify why you have included certain figures or assertions, then don't bother submitting it to somebody for scrutiny. Your bank manager for example will have poured through hundreds of business plans before and will be able to spot unrealistic or over ambitious targets a mile away. If there is something you are not sure of, flag it in the business plan and leave it open for further discussion. Do not pull figures out of the air and never lie or make unrealistic claims in your plan.

Your business plan is the ‘sales document' for you and your business. Its preparation and presentation should project the image you want for your business. Its content should be clear, concise, to the point and divided into logical sections. The following is a useful guideline.

 

1. Introduction

• Describe the purpose of your business and briefly outline the concept.

• Include your overall business objectives.

• Decide on the ‘legal status' of your business - sole trader, partnership, limited company or co-operative? All have benefits and shortcomings. Find out which is right for your situation.

 

2. The product and service

• Describe precisely the product or service that your business will offer Include any relevant history of the product or service and try to avoid any jargon.

• List the distinctive qualities of your product or service and describe your ‘Unique Selling Point' (USP) - the key feature which makes your product or service stand out in the market place.

• Describe how your product or service can be developed in line with a changing market.

 

3. The personnel

You should include details of anyone who will be involved in making your business a success. These people are a very important asset and this is therefore a key section of your business plan. Include in this section:

• A brief summary of each person's skills and knowledge of the particular sector, including their personal assessment of their attributes, strengths and weaknesses as well as your own assessment of each person.

• Their relevant experience, commitment and reasons for involvement in your new venture.

• As you are the main driving force, don't forget to include yourself in all of this, including details of any experience you have gained in business.

• Finally you should also include a detailed CV for each person in the ‘Appendix' at the end of your plan.

 

4. The market

This is probably the most important section of the whole plan - without a clearly defined market your business will not succeed. If you can show that you have ‘done your homework' in this section, you will gain credibility for the whole business plan. Your franchisor will also have research in this area.

• Describe the current conditions in the market place for your product or service.

• Detail any relevant facts and figures relating to the market sector(s) that you will be targeting - for example geographical location, size, expected growth, and the type(s) of potential customers for your product or service.

• Give details of your competitors and explain why your potential customers will choose your product or service rather than the competition. This is the point where research pays off. You should make use of the wealth of business information that is available about markets, competitors and customers. This can be gleaned from a number of State agencies, the Internet, libraries, newspaper and magazine articles etc.

 

5. The marketing plan

Every business needs a marketing plan. As the saying goes, fail to plan then plan to fail. Your company must therefore have a clearly defined marketing plan, which will include:

• Your marketing objectives - for example number of sales or market share.

• Where your product or service will be ‘positioned' in the market place in terms of price, quality, image etc.

• What your planned marketing communications are - advertising, leaflets and brochures, etc.

• How your product or service will be distributed and /or sold eg. through agents, sales teams, online, etc.

• What customer care policy is planned and how it will work. Any interest that you have already generated or details of possible orders you have already taken should be include in the appendix.

 

6. The operation

Having an efficient and well run operation can be the key to a profitable business. This section should describe how you will supply your product or service. Your franchisor will have set systems that you will have to adhere to. Explain these and what they mean for the business.

• Include your sources of supply, labour and materials.

• Detail the resources required to operate your business, differentiating between what you already have and what you need to acquire.

• Identify any critical procedures or sensitive issues and outline possible alternatives.

• State where you intend to operate from - your current premises and future requirements.

• Outline your current Health and Safety policies - if you don't comply with your statutory obligations, you will need to take action.

 

7. The premises

You need to decide on the most appropriate premises for your business needs together with the franchisor. Whether you are working from home or looking for factory premises, you need to consider the following:

• Location.

• Future business growth.

• Running costs and ‘Uniform Business Rates', rent etc.

• Insurance.

• Planning Consent, planning issues.

 

8. Financial information

Arguably this is probably the most important part of the business plan as it sets out how the business is going to perform financially.

a) Introduction: Start with a summary of the key facts.

• The forecast profit (or loss) for the year.

• Whether financing is required and if so, how much and where the money is to come from.

• The ‘break even' sales for the business should be calculated and shown as a percentage of your anticipated sales.

• Details of the money you need to take out of the business to live on - your required income. A detailed schedule of your required income should be included in the Appendix.

b) Profit & Loss Forecast.

Your forecast profit (or loss) should be based on your anticipated sales, minus your direct costs and overheads. The assumptions made in producing your forecast should be listed.

• Include as much detail as possible to justify anticipated sales.

• Any direct costs (materials etc.) should be detailed.

• Don't forget your overheads - it is just as important to show how they have been calculated.

c) Cash Flow Forecast

Cash will flow in and out of your business - often at different rates and times for example, you may have to pay for materials in advance, yet wait months for payment after you have sold your

product or service.

Situations like this can lead to cash flow problems in an apparently profitable business.

To anticipate how much cash your business will require, you should convert your profit and loss forecast into a cash flow forecast. List your assumptions:

• When will you get the money from sales.

• When will you have to pay suppliers.

• The timing of specific overheads.

• How much capital equipment that you require for your business. Differentiate between existing equipment and expenditure still to be made - how much and when. Properly done, this will tell you when your business is likely to be short of cash and it will enable you to plan for this.

 

9. The appendix

This is the final section of your business plan. It should include the detailed information mentioned earlier - CV's, details of orders etc. You can also include:

• Details of premises.

• Insurance details.

• Product brochures, photographs and letterhead.

• Anything else that you believe will enhance the credibility of you or or your business including copies of any legal agreements, lease arrangements.

 

First published in Franchise Options Magazine© to order back issues please call 01 6611660