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Why are business plans so important? And how to write one...

  1. Guide to writing a business plan
    iStock/Pinkypills
    Clive Lewis ICAEW

    Clive Lewis ICAEW UKBF Newcomer Full Member - Verified Business

    Posts: 0 Likes: 0
    4 |

    A business plan, put simply, is a document that details what your business does and how it sees its future. Business plans vary in length, but comprehensive plans comprise of three sections: business concept, marketplace and financial.

    Do I need a business plan?

    A startup should prepare a business plan to map its progress to profitability.

    For startups the sales forecasts are critical – particularly how the new business will attract customers. Next, the plan will specify the resources (people, equipment and money) required to achieve the forecast sales, including realistic timescales to achieve significant milestones such as when the business will break even.

    This information will be the basis on which the financial forecasts (profit and loss account, balance sheet and cashflow forecast) are prepared. Once completed, the plan can be used to monitor the performance of the business.

    What are business plans used for?

    As a business grows, the first business plan can be used to prepare annual budgets and updated financial forecasts for the year ahead. A business plan is next required when considering raising finance.

    Finance providers require considerable information in support of loan applications, such as financial forecasts, historic annual accounts and management accounts. A business plan should provide a vision of the business’ future, how it will grow and why the finance is required and how it will be paid back.

    But it’s when a business wants to sell shares that a full business plan will be most required. The business plan must be exciting, but credible, and offer evidence of growth and future prospects.

    The executive summary must have a wow factor. It should clearly describe the business proposition and contain a summary of the financial figures, up to five years ahead, including the amount of capital sought. Potential investors will want to examine the details supporting the business plan, so be prepared to back up key assumptions.

    How can a business plans help progression?

    A business plan gives company owners a view of the route ahead for the business and puts the day-to-day running of their business in a longer term context. The document a variety of uses and is a must if you want your company to succeed.

    The skills learnt and the perspectives gained preparing the first plan will help with growing the business, raising finance and, who knows, one day potentially the sale of a successful business.

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  2. suitontherun

    suitontherun UKBF Contributor Full Member

    Posts: 47 Likes: 9
    Useful post Clive. Thank you for contributing.

    I'm curious what your thoughts are on the emerging trend in the tech / vc / university space of creating a shorter business 'Canvas' rather than a traditional business plan. The basis of argument is that startups change direction, or if well directed, should be changing direction as they develop. To be honest, I'm on the fence with this one. I quite like the format of the traditional business plan but interesting how recently I was asked by investors for a canvas after presenting a business plan. What you reckon sir?
     
    Posted: Dec 9, 2016 By: suitontherun Member since: Aug 4, 2016
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  3. Edd Dutton

    Edd Dutton UKBF Contributor Free Member

    Posts: 31 Likes: 10
    I've not used a business plan yet for my business as I haven't really had a need for it yet, althought, in the new year, it's likely I'll be forming some form of strategy. I have used business model canvas to help guide the business in its early stages until things settle and I love its flexibility.
     
    Posted: Dec 16, 2016 By: Edd Dutton Member since: Dec 13, 2016
    #3
    Jeffrey O. likes this.
  4. ChrisGoodfellow

    ChrisGoodfellow Editor Staff Member

    Posts: 127 Likes: 35
    @suitontherun Got this response from Clive (sorry he hasn't logged in to post it himself):

    "The Business Model Canvas allows the entrepreneur to map out the key elements of the business. It includes topics such as key activities, the value proposition key resources and the revenue stream . In many ways it is a schematic of the Executive Summary of a Business Plan. I do not see a Canvas as a substitute for a business plan, more a shorthand format of it. A Business Plan will include the financial forecasts – the Profit & Loss Account, the Balance Sheet and the Cashflow forecasts’ do not think a Canvas can replace that information."


    Personally, I think what @Edd Dutton says is right; a business model canvas is a really useful and dynamic tool for developing new business ideas. Although Sift Media is an SME with around 100 employees, we use it to plan internal projects like events and to sense check whether there's customer demand for new offerings.
     
    Posted: Dec 19, 2016 By: ChrisGoodfellow Member since: Jul 10, 2014
    #4
    Jeffrey O. likes this.
  5. Jeffrey O.

    Jeffrey O. UKBF Newcomer Free Member

    Posts: 1 Likes: 0
    Thank you @ChrisGoodfellow for your great insight what I will want to know is how different is the Business Canvas is from a traditional business plan and what are the core qualities that separates the two. I will also want to know which of these two is widely accepted, since the idea of a business canvas is relatively new to me.
     
    Posted: Dec 29, 2016 By: Jeffrey O. Member since: Dec 29, 2016
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