While the multi-page document may be a thing of the past, having a small business plan for where you’re going is still invaluable for attracting investment, getting advice, and utilising your time – however you present your ideas.
Yet research carried out by the Centre for Economics and Business Research (Cebr) in December 2015 revealed that more than one-quarter of small British businesses don’t have a plan at all, with ten per cent of micro business owners admitting they wanted a business plan but didn’t know how to put one together.
Given that the same study found that small businesses with detailed plans expected revenue growth 1.6 per cent higher than the average in 2016, a roadmap for where your business is headed is vital.
“One of the most valuable functions of a business plan is that, in writing it, you’re forced to worth through the details of your business yourself – so it’s a valuable exercise in itself even if not shared externally,” explained Tom Davenport, whose startup TalentPool secured £300,000 of funding from angel investors in April 2016.
Flexibility about small business plan format
Many potential investors or supporters will want a deck of slides explaining the plan you have for your business, while some accelerator programs are more likely to ask for a YouTube video explaining your vision. So making sure you have the answers to key questions and calculations you can explain in person as well as on paper is more important than having a nicely bound final document.
Alexander Osterwalder’s Business Model Canvas is a one-page sheet that covers everything important, and provides a good starting point for getting down information to then be adapted for different formats.
Loan applications and pitching competitions will ask a variety of different questions about your target market, who is already competition for consumers’ attention and how you are going to serve them better than other businesses – all these boil down to the challenge you are providing an answer to.
“Clearly define the problem you are solving and show there is a market – without clear customers, you don’t have a business,” was the advice of New Entrepreneurs Foundation fellow Christopher Pavlou.
Proving that the market exists to make your solution profitable requires predicting what you can sell your product and service for and how much it will cost you to make, taking into everything from electricity bills to your own living expenses while you build the business up.
Time spent thinking about the team
Whether you’re pitching to investors or trying to convince a big supplier that you are worth taking a punt on, don’t forget about the people behind it because you’re too focused on your idea. Bank managers, potential mentors and angel investors want to know what skills you have – whether past experience running a business or technical skills that will allow you to develop a high-quality product or service.
‘If you’re seeking investment, the other really important bits are the financial summary and the team – the latter is often left out yet, for many investors, it’s more important than anything else,” said Davenport.
Covering all the bases
While being clear about the problem your solving is key for a small business plan just designed to be used by founders, if you’re using it to pitch for advice or investment, planning needs to cover all bases. Barclays guidance on small business plan writing asks what accountancy software you plan to use, while the form for marketing and advertising accelerator programme Collider asks if you’ve applied for advance assurance from HMRC for the Seed Enterprise Investment Scheme (SEIS).
You will never be able to guarantee that your planning has covered everything but asking mentors, bank managers, or entrepreneurial contacts who have already used a business plan to get someone to buy into their idea will give you certainty as well as detail when it comes to that all important-pitch.
Summing it all up
After all the time and effort that has gone into digging into the details of your target market and how you are well placed to wow customers within it, it’s understandable that you want to share your hard work with those you’re trying to get on side. But being able to summarise the logic of your business in a precise paragraph is a useful exercise for you as a business owner, as well as a key tool for persuading others.
“For me, the most important thing is distilling the key messages and presenting them up front – often as an executive summary,” said Davenport.
“Investors, in my experience at least, will form 75 per cent of their views on a business on the basis of the concept.
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