The path from planning to becoming a viable company

Keep your plan short and simple, says Fred Ohlsson. Photo / Thinkstock

Every successful business starts with a vision but that must be backed up by sound research, writes Fred Ohlsson.

What tips do you have for writing a simple business plan?
First, identify your vision. What do you want to achieve? Your business plan should be all about how to achieve this. It's like a roadmap to take you from bright idea to profitable business.

Your vision must be realistic. Research your market and customers. Who will buy your products or services? What are the age, income and spending patterns of your potential customers? Who already sells these things? Can the market support another supplier? Why would buyers switch to you?

Set clear objectives: in finance, targets for such things as turnover and operating costs; strategy; key success factors; operations, including technology needs; and marketing. You might also have social or environmental objectives.

These are most useful if they're specific, measurable and time-related. Instead of "increase revenue", say something like "increase revenue by 10 per cent by the end of this year". Without a time limit, you've got forever to achieve your goals - you may never get there.

Keep your plan short and simple - a few pages of bullet points can be easy to work with. Long, complex plans are often forgotten. There's a useful template and detailed advice at anz.co.nz/BizHub.

What else should small business start-ups be considering at the beginning?
Your business plan is top of the list. A thorough and well-thought-out plan will demonstrate the viability, sustainability and growth potential of your business and give you credibility with investors and lenders. Avoid getting someone else to write it for you. The bank will want to see that you understand your new business and have thought through various scenarios and know where it's heading.

It's worth investing in expert advice at the start as this can save money later and lead to higher profits. Before signing a lease or licence agreement, consult a lawyer. Your accountant will guide you in setting up your accounting systems and may recommend some software to help you track your business performance.

What state do the finances have to be in?
You need to make sure you have enough money to get started. This means covering set-up costs such as buying the business, equipment and initial stock, and ongoing costs such as rent, wages and raw materials. Detailed profit forecasting is key: a new business doesn't start out at full speed; sales will build towards a point where they cover costs. Beyond this you will make a profit.

You need to know this break-even point and when you expect to reach it. You must have enough working capital to finance the business until you get there.

There are free guides to profit and cashflow forecasting and useful templates at anz.co.nz/BizHub.

What else does the bank need to know in order to give the green light?
You will need to outline your skills and experience and demonstrate how you will use these to run a successful business. A CV is useful.

You will also need to contribute to the business set-up cost: you are more likely to make the business a success if your money is invested in it.

Fred Ohlsson is managing director of ANZ business banking.