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How to write a business plan - and why you need one

Your business plan is a vital part of structuring the early development of your business, and will act as a dashboard to manage your starship Enterprise once she’s operational. Here's how to go about strategic planning, and a template for crafting a winning business plan.

Your business plan is a vital part of structuring the early development of your business, and will act as a dashboard to manage your starship Enterprise once she’s operational. Here's how to go about strategic planning, and a template for crafting a winning business plan.

The process of commercialising your ideas is all about getting things out of your head and out in the open where other people can play with them and pay for them. The creation of your business plan is one of the core ways that this happens and—sorry, bureaucracy bashers—it’s pretty much compulsory.

Writing a good business plan is also a great way to show that you’re serious. Hayes Knight’s chartered accountants help craft innovation business plans, and see good and bad examples. “I know that banks have been requesting business plans and getting back a two- or three-sentence email—that’s common in about 60 percent of cases,” says business improvement director Aaron Wallace. “I know of firms turning over $300 million who still don’t have a written business plan. It’s all in their heads. But these days you won’t get any funding without one.

“We can’t write your business plan for you, because you’ve got to own it and be passionate about it to take it forward. But we can flesh out your thinking to make sure you haven’t got your blinkers on.”

Your business plan should form the basis for all your other documents, and nearly all the actions you take. There may be times when it’s all you have. As soon as possible, it should include some numbers you can stack up and back up. “You will need to do at least three years of financial modelling, including cash flows on a monthly basis,” says Wallace. “It’s all very well showing that you can make money over the year, but what if you run out of cash in month three?”

To get investment money flowing, show where the income will come from, and how fast. To get loans, show that you can pay the money back, service the debt—and get out if you need to. Getting numbers down will also help you allocate resources effectively. This in turn helps shape your basic business structure. For example, what do the numbers look like if you set up your own shops to sell your new product, or run completely online? What about if you license it to other distributors, or just develop it in the lab and sell it on?

Richard Ede, managing partner at BNZ Partners, confirms that banks want to see paperwork before they lend. “The main thing people do wrong is leave everything until the very last minute,” he says. “You’d be amazed at how often that happens, even in really big lends. If you have seen your lawyers and your accountant, and have the figures ready, you’re far more likely to get a better outcome.”

Ideally, your business plan should have three-year, five-year and tenyear milestones. At ten years, it’s your vision, because the world could have changed. And if you’re still around by then, well done, but why haven’t you moved on to something else by now?

Business planning for beginners

Here’s a basic structure to get you started. If you can’t fill in a section, do some research, or get some help. Areas left blank have a habit of filling up with weeds and rubbish. You can get more advice on how to create your own at www.business.govt.nz

The business

  1. Description of business

  2. Marketing

  3. Competition

  4. Operating procedures

  5. Personnel

  6. Business insurance

Financial Data

  1. Loan applications

  2. Capital equipment and supply list

  3. Balance sheet

  4. Break-even analysis

  5. Pro-forma income projections (profit & loss statements)

  6. Three-year summary

  7. Detail by month, first year

  8. Detail by quarters, second and third years

  9. Assumptions upon which projections were based

  10. Pro-forma cash flow

Supporting documents

  1. Tax returns of principals for last three years and personal financial statement (banks have these forms)

  2. For franchised businesses, a copy of franchise contract and supporting documents provided by the franchisor

  3. Copy of lease or purchase agreement for building space

  4. Copy of licenses and other legal documents

  5. Copy of resumes of all principals

  6. Copies of letters of intent from suppliers, etcetera

How to get everyone singing from your hymn sheet

Have just one plan. It’s tempting in the early phases to tell everyone what they want to hear in the hope of getting that important intro, the investment you need or just some priceless encouragement. But expressing a singularity of purpose is crucial to gaining the trust of others. You can sell your business plan in many different ways, but your core story must remain rigorously consistent, or nobody will believe it.

Be realistic. Innovation should push back many boundaries, but not the bounds of reality. A robust plans has rocksolid information as its foundation. You are like an army headed for unknown, possibly enemy territory: do your recon. Establish a flow of top quality intelligence on your economy, your industry, your sector, your competitors and, most importantly, your potential customers. Sign up to feeds from the relevant websites, attend the right conferences and meet the folks involved at every opportunity. Analyse the information, inhabit it, infest it.

Take off the rose-tinted spectacles. Your business plan doesn’t have to paint a picture of effortless plenty. A good plan should include detailed acknowledgements of key challenges and how you’ll meet them. This is good discipline for you and provides guidance for staff and partners. Also, if potential investors know of a risk and it looks like you haven’t accounted for it, they’ll put their chequebooks away. Sensible investors know innovation is a risky business; they want you to demonstrate that you know it, too.

Challenge your business plan. It’s written on computer, not carved into marble. Don’t be afraid to put your business plan in the ring with all the experts you encounter, and improve it when you can.

Keep it current. Like a CV, your business plan should be constantly honed. Things change. There is a military saying, ‘No plan survives first contact with the enemy’. When British prime minister Harold Macmillan was asked by a young journalist after a long dinner what can most easily blow a government off course, he answered: “Events, dear boy. Events.”

Keep using your business plan. Use it to track, monitor and evaluate progress. You should plan to grow your business by improving: · The number of customers · The frequency with which they buy from you · The value of each transaction · Your efficiency.


Ten golden rules of innovation from the AUT Innovation Centre

  1. People will always find money for painkillers. You need to be making them an offer they can’t refuse.

  2. Add value, not features. More is not always better.

  3. Ensure your product is easy to adopt.

  4. Ensure that profit is on the radar. Watch your cashflow.

  5. Know your competitor. A competitor is not necessarily a similar product, it’s the company that is chasing the same dollars as you are.

  6. Know what business you’re in and articulate your value proposition clearly.

  7. It’s a risky world: sell confidence. You need to believe in it, and make it obvious that you believe in it.

  8. Choose the right partners and manage them with care.

  9. Focus, focus, focus—target your resources consciously.

  10. Now you’re successful— change or die!