Developing Business

Plans
 Specification
Developing Business Plans
• the purpose and contents of
business plans
• sources of information and
guidance.
Candidates should be aware of
the benefits and problems of
plans/planning for small
businesses.
The planning process involves
decisions based on the
resources to be used and
factors providing competitive
advantage.
The sources of information
should include: small business
advisors, accountants, bank
managers and government
agencies.
Purpose of Business Plans
The purposes of a business plan are that:
– Provides a focus on the business idea - is it really good and why?
– Helps clarify thoughts and identify gaps in information
– Provides a logical structure to thinking about the business
– Encourages the entrepreneur to focus on what the business is really about
and how customers and finance-providers can be convinced
– 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
The above list will prove helpful in your BUSS1 exams. If the examiner asks a
question about business planning, it is important to remember that the plan is
about more than just raising money from the bank or investors . The planning
process involves decisions based on the resources to be used and factors providing
competitive advantage.

Limitations of business planning for a start up business

Business planning is not an easy process.

– For a start-up, the plan is often produced with incomplete or out-dated
information, it can be time-consuming and there is a danger than 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. A detailed business plan is certainly time-consuming, although there
are plenty of resources available to help . The business planning process
should be kept simple and focused
– The written business plan should be long enough for purpose – it doesn’t
have to be a bible!
– The trick is to remain well organised, to do enough (but not too much market
research) and to seek help (ideally free) when needed.
 Contents of a Simple
Business Plan
A simple business plan

The simple business plan is rarely shown to outsiders of the business. It is written
by the entrepreneur, for the entrepreneur. The simple plan helps summarise the
key aims and targets of the business and the actions required to make the business
a reality. It is likely to be written in quite an informal way. What would go into the
simple plan?

The content would include:

– The idea - a simple description of the proposed business
– Where the idea came from and why it is a good one
– Key targets for the business - sales, profit, growth (gives a sense of direction
for the business), ideally for the next 3-4 years
– Finance required - how much from the founder, how much to be loaned over
how loan and from who
– Market overview - main segments, market size (value, quantity), growth,
market shares of main competitors (if known)
– How the business will operate (location, premises, staff, distribution
methods)
– Cash flow forecast (important) + trading forecast

Sources of Information and Guidance

Given the importance of business planning, it is not surprising that there is a

wealth of free and other guidance available to the entrepreneur. Here are some of
the main support resources available: small business advisors, accountants, bank
managers and government agencies

Banks: The main high street banks all provide specialist support to start-ups to
help produce a business plan (e.g. Barclays Bank, HSBC, Lloyds TSB).

“Business Link” The Government-funded agency provides comprehensive guidance

on the business planning process

Many commercial organisations that deal with start-ups and small businesses
provide advice on business planning: e.g. BT Websites dedicated to small business
are also active in this area.
 Contents of a Detailed
Executive
Business Plan
Brief 1-2 page summary – the key issues. Should contain nothing new, but
summary highlight the key points
Market Profile of the target market segment based on market research
Product What it is and how it is differentiated from existing products in the market
(the "unique selling point")
Competition Honest description of the competition in the target market - strengths /
weaknesses and likely response
Protecting How the product and business can be protected from competition - e.g.
the idea patents, trademarks, branding etc
Management Crucial area. Who is involved in the start-up and what will they be doing?
team What experience and expertise do they bring? Which management roles
will need to be filled as the business grows? Appendices should contain the
employment histories of key management.
Marketing Key elements of the marketing mix should be explained here. Remember
that for a start-up the marketing budget is likely to limited, so the strategy
should be a credible approach to promoting the product and include
realistic assumptions about how many customers will buy and at what price
Production Explains what is involved in the production process, what capacity is
/operations needed, who will supply the business, where it will be located etc. A
reader of the plan will want to know that the detailed operational issues
have been considered carefully, and that the cash flow forecast takes
account of all operational requirements
Financial Summary of the cash flow and trading forecasts. This section should
projections highlight the key assumptions that have been made and also outline the
main risks and opportunities in the forecasts (i.e. what might go wrong, or
where things might prove better than forecast). The detailed projections
would be included in the appendices.
Funding Proposals for where the funding needs to come from (founder, banks,
requirements investors etc).
Exit strategy How the entrepreneur expects investors to get a return on their
investment. Who might eventually buy the business, when, and for how
much?
 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.