Q&A: Business plan basics

The first task of starting up your own business is drawing up a solid business plan that outlines your strategy, funding, objectives and other vital information. Alan Gleeson from Palo Alto Software explains how to create such a business plan and how to present it

What is a business plan?

It’s a document that enables businesses to look ahead, focus on key issues, allocate resources where they’re needed and prepare for problems and opportunities well in advance. Too many people think of business plans as something they only need when they’re starting up or when they need to borrow money or attract funding. They’re just as important to running a business.

Is there such a thing as a standard business plan?

Usually, they describe the firm’s products or services, customers, competitors, management team, strategy and implementation plan, as well as detailing profit and loss projections, sales and cashflow forecasts. The key points and figures are highlighted in an executive summary, which appears at the beginning of the plan.

So I simply need to produce one business plan?

Don’t think in terms of a ‘business plan’, rather different versions of your business plan, each tailored to the reader and guided by your specific objectives in that instance. If you’re trying to attract funding, your business plan should provide compelling evidence you need the money and can afford to pay back any loans.

What’s the most important element of a business plan?

You’ve got to get the executive summary right, because in most cases experienced people will read this first and if it doesn’t capture their imagination, inspire or impress them, they won’t bother reading the rest.

How important is the financial information?

Sound figures underpin all good business plans. Your financial information must stack up when scrutinised. Specifically, I’m talking about cashflow predictions, sales forecasts and profit and loss projections. Cash is usually misunderstood to mean profits, but making profits doesn’t mean you’ll have enough cash to pay your bills. Many profitable ventures have gone under because of cashflow problems. Your plan must also show your business has effective cashflow management measures. 

Should management responsibilities be detailed?

Brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities to managers, with clear objectives, dates and budgets that enable you to measure results.

How long should a business plan be?

It’s not a simple question of number of pages. A 10-page business plan with dense text and no graphics is harder to read and digest than a 20-page plan broken up with bullet points, user-friendly illustrations and charts. A well laid-out plan will offer readers a sufficient overview of its main points after a quick skim. Format, headings, white space and illustrations make a big difference. Key points should stand out as immediately as they do in an effective business pitch or presentation. Also make sure the document looks good and reads well. Any mistakes will make you look unprofessional.

What’s the key to implementing a business plan successfully?

A business plan will be easier to implement if it’s simple, specific, realistic and comprehensive. But even then, someone needs to take ownership for implementation and monitoring of progress. In a small business, of course, this is usually the owner-manager. They need the energy and drive to make the plan a success – otherwise it’s unlikely to happen.