The actual document is a story describing the essentials about your business. Really, this is putting all your ideas down on paper so that either you can review progress over time or a potential investor such as a bank can instantly understand how you are going to achieve your financial projections and to assess the risk of lending you any capital.
The length of your plan should be as long as it takes to describe the following :
- where are you now with your business
- where do you want to take it
- how are you going to get there
Simple questions that require detailed answers. Most plans that are submitted to a bank should only be around 20 pages because that should be enough to get the important aspects out. Additionally a bank or any other reader will probably concentrate on 2 elements. Your executive summary and your finances.
The summary is just that. It summaries everything from a description about your business, the products, your customers, your management team and your financial forecasts.
Most people when thinking about starting a business know they have to write a business plan because they have probably been told that by their bank manager. The main challenge they face is getting finance. How to approach banks and what they should ask. Once you have developed your plan you will have confidence in your business idea and how it’s going to achieve the objectives you have in your mind.
If you have ever watched “Dragons Den” you’ll get a rough idea of what it’s like asking for money. Although going to your bank manager is not going to be such an experience, certainly the question and answer section is similar.
When asking for money you’ll going to have to sell your business idea and yourself. It really is a sales exercise. In the Dragons Den programme there are so many simple questions asked by the potential investors that the business owners can’t answer.
Questions like – “how many sales will you make in year 3” or “what is your profit margin” or “how many customers are there in your market” or ” why is your price set at $xx”
When you are developing your business and your plan you will write all of this information down and when you do you, yourself, will go through some form of decision making process to come to the conclusions. There should always be a reason as to why you write something down. The reason you will explain to your potential investors. (If you haven’t seen Dragon’s Den then look it up on the BBC or search for it and watch one of the programmes)