It's a plan!

The essential dos and don’ts of getting your business plan right, revealed by Cathryn Hayes

There are clear indicators that many businesses are turning
to their banks for funding. According to the British Bankers' Association (BBA), lending to small businesses rose by £391 million in June, while almost 50,000 new business banking relationships were established and deposits grew by £577 million.

Potential franchisees are likely to be considered more favourably for finance than a conventional start up because of the lower risk involved.
For an established franchise, most of the major banks will lend up to 70 per cent of the start-up costs, for new franchises the figure will be around 50 per cent.

So how can you make sure you secure the funding you need? The most important document your bank will need to see is a business plan, together with financial forecasts, to support your request for finance. Your franchisor will help with this, but you need to understand the figures and ‘own’ the business plan.

The business plan will clarify the main business idea of the chosen franchise and define the long-term objectives. It provides a blueprint for running the business and a series of benchmarks for you and the franchisor to check progress against.

A good business plan will contain:

• Summary business description – details of the franchise being purchased and your financial needs. When you present your plan, explain what help the franchisor will be providing and their track record.
• Market analysis and product/service –  research and identify local competition and assess what the likely demand of the product/ service will be in the specific territory.
• Market strategy – outline intentions for marketing the product/service and how thesales figures shown in the projections will be generated.
• Management plan – include details of the type of business (eg, sole trader, limited company) and CVs of key personnel.
• Financial data – at least two years projected figures are required, including a balance sheet, cash flow and, profit and loss statement, ensuring that projections correspond with the information outlined above and they’re realistic.  
• If it is a resale franchise, include details of the existing business being sold and a copy of previous years’ accounts.
• SWOT analysis – a one-page analysis of strengths, weaknesses, opportunities and threats.

Fundamental rules for writing a plan:
Do:

• Clarify the purpose of your plan before you write it.
• Focus on the key information the reader willwant and make it easy to find – sometimes it can be hard to clarify how much the applicant wants to borrow!
• Highlight future plans as well as describing the current situation.
• Be realistic – make sure that the business can afford the proposed repayments.
• If the lending is for the purchase of a poorly performing resale, give some commentary about why turnover and profits are set to rise, and details of the assumptions made.

Don't:

• Waffle or include unnecessary detail.
• Base your plan on over-optimistic assumptions.
• Ignore competitive threats and weaknesses.

The more solid the information that you can gather, the better the business plan will be. When requesting finance the bank will look to assess the proposal using all of the areas covered above.

A well researched and written plan will show the bank you are committed, therefore a request for finance is likely to be looked upon more favourably than those who are unprepared.

Additional help and assistance on writing a business plan can be found at HSBC’s Knowledge Centre, an online resource to help you start and develop your business.