If you start a business, it won't be long before someone asks to see a business plan. It could be an investor, your bank manager or a supplier considering extending you a line of credit.
Either way, they want to check you've thought your ideas through. They need to know your project is more than a pipe dream. More to the point, they want to feel confident their money is in good hands and they will earn a decent return.
While a business plan is essential for raising or borrowing money, it also gives you a road map. It tells you and anyone you might work with where you are heading and how you intend to get there.
The act of writing a business plan produces an insight that goes beyond your original idea. As you write it, you'll be able to identify your strengths and weaknesses. Oliver Hill, Country Manager at HP New Zealand, says a well-written plan enables you to manage through "strategies, opportunities and priorities – key components for any business weathering an ever-changing economy".
"A business plan not only lays out a roadmap to success, but can help anchor you in challenging times like these. HP understands many businesses are not operating as usual and technology has never been more important in enabling us to adapt to new ways of working and re-focus on long-term goals and productivity," says Hill.
The plan outlines the thinking and research that you've done to turn your ideas into a viable, long-term business. So Hill says it's important not to underestimate the time needed to prepare information and organise your thoughts into an effective plan.
"It shouldn't be a one-off. It's no use coming up with a business plan, then filing it away or only getting it out to impress investors. It needs to be a living, breathing document you return to all the time. You will need to make changes to the plan as you learn more about the challenges you face and the prospects that open up."
Step one:
Start your business plan with an executive summary. This opening section should be a page or less to give investors a snapshot of the venture. It should succinctly demonstrate where and how you'll make money – without going into too much detail. Focus on the bigger picture. Answer questions like where you are going, what problems you will solve and what your end goal is. Explain why your idea is unique.
Step two:
The next part of the plan is more detailed – it needs hard facts and numbers. Explain how your business came to be, what are your values and purpose. You'll need to show you have a personal financial stake in the business. Investors are unlikely to give you their money if you can't commit your own.
Step three:
You'll also need to show where money will come from and where it will go. Everyone knows a new business can't write an accurate financial forecast. You need a track record for that. Even so, investors expect to see realistic numbers. Research all the costs and write down how you reached the numbers in your plan. Explain how you reached your sales figures and what you can do if things don't work out as expected.
Bills need to be paid up front most of the time. One mistake newcomers often make is to misjudge when bills fall due compared to when the revenue arrives. In some industries, customers will pay cash when they buy, in others you may have to wait until later. Show investors how you'll deal with cash flow if there is a lag. You'll also need to show how you will price your goods or services to make a healthy profit.
Step four:
Profile the people who will make your idea happen. This means potted biographies that focus on skills, experience and previous success. You need to show you and your team have what it takes to deliver. If your team is missing key skills, make this clear in your plan and tell investors how you intend to plug the gaps.
The next steps:
Our first four steps cover the must-have basics of a business plan. The rest depends more on your specific strategy. Many successful business plans also cover how you will execute, a basic marketing plan and analysis of strengths and weakness.
Mapping out a path for your enterprise before you act is the best way to plot a route to business success.
Whether you are a start-up business or developing new ways to grow and adapt, HP has a range of business PCs and printers you can rely on so you can focus on the things that matter. www.hp.co.nz/hpforbusiness