When you’ve finally taken the decision to buy a business – and maybe even found an opportunity you’re excited about – pausing to make sure that you’re going to end up with a company that’s profitable as well as enjoyable can feel like a drudge.
It’s an important part of the process, though. Writing a business plan – actually getting your strategy down on paper and outlining your business model is critical. Your business plan will continue to evolve as you move through negotiations; it will help you to pinpoint the potential perils and pitfalls, as well as outlining your vision for success.
Organising your thoughts in this way will make you ponder your goals in greater detail and crystallise just what’s necessary to transform your theory into measurable practice. If you approach it in the right way, you should emerge with a clearer idea of how much money you need to spend, how you’re planning to raise the necessary finance and how you can make sure you utilise it in the most cost-effective way. It will also give you the chance to think about your target audience – who they are, how you’ll attract them and what will keep them coming back.
A business plan can be daunting for new business owners, but it is essential to work through this crucial process to ensure you’re clear about the purpose of your business. Writing a business plan will not only clarify your immediate business strategy but will also begin to define your long-term objectives.
How should you structure your business plan?
A business plan will be worth every bit of time and attention you lavish on it. It will act as a blueprint for running your business and as a benchmark against which you can measure progress. A well-written plan will help convince your bank and lenders that you’ve thought about all aspects of the venture and it can help to make your business a more attractive proposition to staff, suppliers and customers alike.
This section should appear at the beginning of your business plan – but it’ll probably be the last piece you write. It should outline all the key elements of the business plan and summarise the advantages of your product or service together with the market opportunity, financial projections and funding requirements. You can also include an overview of the management team here.
This is the place to explain the background of the business you’re buying. Include details of the market sector in which it operates and provide some context. Explain how long the business been established and then outline the strengths, weaknesses, opportunities and threats. Detail any unique selling points – exclusive contracts or a desirable geographical location, for instance. Make a few projections based on what you’ve learned about its business model.
Potential for growth
It’s important to discuss where you think there may be opportunities for growth and development. It could be that existing premises may be extended or upgraded, there may be potential for the introduction of new products and services or a price hike might be in the offing. Even if the business already operates successfully, you will be looking for ways to evolve your proposition in the coming months and years, so start thinking about it right now.
Where it’s at
Location may not be an issue if you’re buying an online business but for a business that depends on walk-in or destination trade, it could be a make-or-break factor. Consider the advantages and disadvantages of the location. Is there ample parking or opportunity for further development? Are there any restrictions to usage or is there a requirement for immediate refurbishment. Give some thought to practical considerations like access and think about how you could add value.
Explain the types of customers you plan to target, who’ll use your service and why. Outline the benefits you can give to customers. Discuss the different segments of the markets and whether they are growing or declining. Illustrate the trends and outline the key characteristics of the buyers using demographics.
Record all your main competitors including their market and location. Describe their strengths and weaknesses. Show you understand where your foremost competition will come from and discuss how your product or service is better than theirs.
Sales and marketing
Explain how your business will advertise and promote the products or services. This gives your reader a good indication of the business’ chances of success. Identify your target audience and choose which marketing communication tool you will use to reach them – public relations, direct mail, e-mail marketing, advertising, sales promotion.
Management and staffing
Detail the management team, if any, that’s currently in place and how much time you intend to devote to the business and in what capacity. Pinpoint key staff, managers and advisers, together will the skills and experience each team member possesses. You should include a calculation of staffing costs here. List opening hours and details of management information systems and procedures.
It’s important to consider risks to the business – anything that could go wrong and, if it does, what the outcomes may be. This will enable you to estimate the level of insurance and indemnity required. Almost any eventuality can be covered by insurance; it’s up to you to decide how potentially harmful a situation may be, weighed against the likelihood of it happening.
Explore in more detail how much investment is needed, what the projected profits and running costs are, and factor in any debts. Make sure you include a realistic finance forecast, a profit and loss forecast and projected balance sheets.
Test the business plan thoroughly; share it with trusted friends and professional advisers and don’t be afraid to ask them for comments. In simple terms, your plan should give the reader a good feel for the business and offer your investors, customers, suppliers and staff a clear vision of your goals.