Q&A: Business plan basics

A key task when starting up is drawing up a sound business plan that outlines your business idea, your strategy for achieving your aims and other key information including financial and marketing plans. Alan Gleeson explains how to create such a business plan and present it

What is a business plan?

A business plan is 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 they only need a business plan when they're starting up or when they need to borrow money or attract funding. A business plan is just as important when running a business.

Is there such a thing as a standard business plan?

Usually, a business plan will 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 cash flow forecasts. The key points and figures are highlighted in an executive summary, which appears at the beginning of the plan.

Do I need different versions of my 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. If you're trying to attract funding, your business plan should provide compelling evidence why you need the money and evidence that you 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. In most cases experienced people will read this first and if it doesn't instantly 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 cash flow 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 cash flow problems. Your plan must also show your business has effective cash flow management measures.

Should my business plan outline management responsibilities?

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 sales 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.