The Business Plan

Learning outcomes

When you have read this chapter and undertaken the related exercises you will be able to:

- Explain the purpose, structure and content of a business plan;

- Draw up a business plan for your new venture;

- Recognize the information needs of bankers and equity investors;

- Be able to present the plan effectively.

Purpose of a business plan

The business plan framework exercises at the end of each chapter should provide you with all the information you need to write a formal business plan. The business plan is a formal written document often used for external purposes, such as obtaining finance. It is the result of your business planning process. The plan should set out what your venture seeks to achieve and how it will achieve it. There are no set rules that can be used to create a ‘perfect' business plan. However, remember that the written plan is a formal business document that needs to be succinct, professional and well presented.Whilst the next section sets out a general pro-forma plan, each planis particular to its business and will be different to others. Sections might be expanded or contracted and it may well be appropriate to omit or add complete sectionsto suit different circumstances. Each business is unique.

The complexity and length of the plan will vary with the scale of the start-up. What is more, this may vary with the purpose for which the plan was written. If it is simply for you, to help you organize the venture systematically, then it might be brief and functional, almost an ‘aide-memoire' or summary plan, running to 10 pages or less. In these circumstances the discipline of using the New Venture Creation Framework to develop a plan is probably of more value than the written plan. However, the written plan can still provide an invaluable set of milestones against which progress can be checked. And if assumptions and circumstances change, then you may have to start altering your plans. A business plan should be sufficiently detailed to give you direction but should never be so rigid as to blind you to new opportunities or threats.

If the plan is intended for external use, for example to help you raise finance, then it will need to be thorough, better presented and, inevitably, longer. After all, it is a document that should be ‘selling' your venture to a financier, supplier or business partner. A full business plan of this sort will typically run to about 20 pages, with financial projections and other details going into the appendices. If it is intended to help you raise finance, the more money you are trying to raise, the more thorough it will need to be. Indeed if you are trying to raise equity finance it will need to be extremely thorough and well presented. Although you might keep to approximately the same length of plan, the appendices might easily run to 30 pages and be placed in a separate document. Having said that, keep the plan as succinct as possible. Do not pad it out unnecessarily.

As we shall see later in this chapter, bankers are interested is slightly different things to equity investors. Most equity investors prefer to see a business plan (or at least the executive summary) before they meet the entrepreneur behind it. Some plans for large-scale start-ups can take the form of professionally produced brochures. However, there is always a fine balance between including sufficient detail in the plan to convince the reader that you know what you are talking about, but not so much that they lose interest. Indeed, too much focus on the operations may convince equity investors that you are product- rather than market-focused - and that will definitely turn them off.