Chapter 5 - Lets Get Down to Business with a Business Plan

Keep going as you're well on your way to realising your goal. I bet you’re so proud of yourself, well done. Now lets get down to business and write it up.

Its now time to write your Business Plan.

Embarking on the journey of creating a business plan can feel overwhelming, especially if you have never prepared or even seen one before. But fear not! A brilliantly crafted business plan is your secret weapon to help you and your small business soar and shine in the competitive market. Get ready to emerse yourself into this post, where I will walk you through each essential component of a business plan that can pave your way to success!

Why a Business Plan is Essential

If you think it’s not necessary to write a business plan, you are in danger of missing a trick, because a business plan is not just a document; it's your roadmap to success! It’s the proverbial satnav for your business, not only does it help you define your business goals and the strategies to achieve them, it encourages you to dream big and assess your business's potential, putting you in a positive frame of mind to make it happen. A clear plan is your best friend when seeking finance or partnerships, making it an invaluable tool for small businesses. It’s worth every minute you spend crafting it.

Executive Summary

Kicking off your business plan is the executive summary. This is your business's snapshot, highlighting the key components. Include your business's mission statement, a brief description of your product or service, and basic information about your leadership, employees, and location. But try to write this part last as it will be much easier that way as you will know exactly what detail you have already covered and have a better idea of how to summarise it. The executive summary is an overview of your plan, no details though, the details are covered later in your document.

Business Description

Now, let's dive into the heart of your business! Describe what your business does, how it fits into the current market, and what makes it unique. What problem it is trying to fix? Share your industry insights, target market, and expected growth. This is your chance to showcase your passion and vision!

Market Analysis

Conducting a thorough market analysis is a game-changer. Include your findings from conducting your market research and who your target customers are, what are the market trends, demographics, and competitor strengths and weaknesses. This part should be relatively easy for you as you have completed Chapters 2 and 3. Bear in mind that in your business plan, this section provides the data-backed insights that will guide your business strategies and help you connect with your audience effectively. Remember making informed decisions? You do this using data that you have collected.

Organisation and Management

This section should outline your business structure, whether it’s a sole trader, partnership, or corporation. Include a brief bio of yourself and key team members, highlighting their skills and experiences. If you are going to open a coffee shop, have you ever held a job as a barista? A clear organisational structure shows potential investors that you have a winning team in place.

Service or Product Line

Here's where the magic unfolds! Describe your products or services in detail. What benefits do they provide? How do they meet the needs of your target market? Discuss the product lifecycle and any plans for future offerings. This is your moment to shine and show why your offering stands out in the marketplace! It should demonstrate your passion for your product/service such that any reader would also feel enthusiastic about it.

Marketing and Sales Strategy

Crafting a marketing plan is your ticket to reaching your target audience. Discuss how you plan to attract and retain customers. What channels will you use? Whether it's traditional advertising, online marketing, or community engagement, outline your strategies clearly. This sets the stage for driving sales and growing your business. The list below is a good place to start, which of these would you need to use to market your product/services:

1. Media advertising (newspaper, magazine, television, radio)

2. Direct mail

3. Telephone

4. Seminars or business conferences

5. Joint advertising with other companies

6. Word of mouth or fixed signage

7. Digital marketing such as social media, email marketing, SEO, or blogging

8. Provide limited free consultations (such as free job pricing for Contractors, free landscaping consultation for landscapers, or free pricing opinions for real estate agents)

9. Sponsor local sports teams or other community events Give free informational talks either at the business offices or for local businesses offering complementary services (such as a real estate agent providing seminars about preparing a home to bring to market)

10. Do free work for local non-profits (such as an ad agency designing a local farmer’s market’s website for free)

    
    

If needed, what will be the sales approach? Will there be full-time commissioned sales people, contract sales or another approach? Many one-on-one service businesses are heavily reliant on word of mouth. Take this into account when developing the sales strategy.

Funding

If you're seeking funding, this is your spotlight moment. Clearly outline how much funding you need and how you plan to use it. This can include costs for equipment, inventory, or overhead costs. Be specific about the timeframe for funding and your preferred repayment terms if applicable.

Financial Projections

Financial projections are your crystal ball for business success. Provide forecasts for revenue and profits for the next three years as a minimum. Data-backed predictions show that you've done your homework and have a solid understanding of your business’s finances. Up to this point, the target market, target customers, and pricing have all been identified. These items will help estimate the company’s sales forecast. But lets talk a bit about assumptions.

This is important so listen up, assumptions are what you make when you have little to no data to go on and making assumptions is necessary in order to plan or project your sales. You need to have a sound basis for making an assumption. For example, if you have a bed and breakfast, some research has informed you that there is 40% occupancy on average every year. This would be a sound assumption to make to base your financial projections on. On the other hand, if you feel you can achieve 60% occupancy just based on your confidence, this would NOT be a sound assumption and using it would likely give rise to a poor forecast. When doing a financial projection, it is important to document your assumptions so that you can analyse at a later date.

The other side of the business will be what expenses are expected. This is important on an on-going basis to see when the business is profitable. But to start with, it is also important to know what expenses will need to be funded before you achieve any customer sales, i.e. start up costs.

Projections are usually presented in spreadsheet form and should cover the first three years in detail. Showing, for each year:-

Cash injection (your own money introduced into the business)

Start up costs (including capital purchases such as equipment)

Assumed sales

Estimated costs (in detail)

Net Profit

If you have a seasonal business, it is helpful to break down your sales revenue according to your business's seasonality and sales trends. This will give you a more accurate picture of when cash is expected to flow into your business. And when you might need to inject cash from saved amounts.

Common expenses include:

• Rent or mortgage payments

• Utilities

• Salaries and wages

• Inventory/Material purchases

• Marketing expenses

• Interest costs

Remember to consider both fixed and variable costs. It's vital to be thorough here, as overlooking minor expenses can lead to significant discrepancies in your projection.

Definitions

A Fixed cost is a business expense that normally doesn’t change with an increase or decrease in the number of goods and services produced or sold by the business. Fixed costs are commonly related to recurring expenses not directly related to production, such as rent, interest payments, insurance, depreciation, and property tax. Since fixed costs are unrelated to a company’s production of goods or services, they are generally indirect costs. A fixed cost is one of two different types of business expenses that together produce total cost.

Variable costs are directly associated with production. Therefore, they change depending on business output. These costs can increase or decrease relative to production levels or sales. When production increases, variable costs rise. When production decreases, these expenses drop. Examples of variable costs include the cost of labour, raw materials, utilities, distribution costs, and commissions.

NB Things to be aware of when preparing a forecast:-

If you have direct labour - use a percentage of sales i.e. labour is forecast to be 30% of assumed sales

If you buy goods for resale or material costs associated with production - use a percentage of sales i.e. materials is forecast to be 25% of assumed sales.

If sales go up, so do these costs. If sales drop in off season, so do these costs. It is a common mistake that any financier will look for.

Create the Forecast Projection

Now that you have your data-driven assumed sales, and your researched costs, it’s time to create a template for your forecasted projection. A visual representation should be included in your business plan. If you would like the Lead Coach to create one for you simply fill in the contact form on the website www.theleadcoach.biz 

Here’s a basic structure to follow:

Columns should be for each quarter (or month for seasonal businesses) : List the quarters in your forecast (usually for 3 years).

Then add rows for the following:-

• Cash sales

• Costs: List different costs and subtotal them.

• Net Profit: Calculate the difference to find the closing cash balance for each period.

• Separately, provide a table of assets of value, including the cash you have introduced to buy equipment etc. Add to it, (or subtract from it) any profit (loss) you make each period. This will form the basis of your projected balance sheet.

A word about your own wages that you pay yourself. This does not belong on the forecast projection, it belongs on the balance sheet, subtracted from the net profit figure.

This structure will help you to visualise your business's position clearly and you can make adjustments as necessary.

Check it for accuracy.

Conclusion

Crafting a business plan doesn’t have to be a monotonous task. Instead, see it as your blueprint for success! Each section is your chance to explore the intricacies of your business, build confidence in your vision, and attract partners and investors who share your enthusiasm. So seize the moment! Set aside time to compile your ideas, insights, and plans into an engaging business plan that sets you on the path to success!

Remember, writing a business plan is not a one-off task but a living document that should evolve as your business grows. Revisit and revise it regularly to ensure you’re always aligned with your goals and the shifting market landscape!

By following this easy guide and infusing your unique passion into your plans, you'll steer your small business toward realized dreams and exceptional achievements!

Crafting a killer business plan is within your reach. Embrace the challenge and remember: every great business started with an awesome plan! Happy planning!

More Chapters in this series

Chapter 1   - A Business Idea - Lets Make it Happen

Chapter 2  - Target Your Market

Chapter 3   - Land Your Brand

Chapter 4   - The Price is Right

Chapter 5   - Lets Get Down to Business

Chapter 6   - Its All in the Name

Chapter 7   - Location Location Location

Chapter 8   - Financing your New Business

Chapter 9 - Recruitment

Chapter 10 - Law and Taxes: Play it Smart, Stay Sharp

Chapter 11 - Kick off Your Business with a Bang

Chapter 12 - Financial Review for your Small Business

Look out for the next chapter.

If you need further coaching, please get in touch via the contact form on www.theleadcoach.biz