Planning for the future

Plan, plan, plan

How do you write a business plan? What should it include? Lloyds TSB's Richard Holden explains

Planning and organisation are crucial in the early stages of setting up a new franchise business. You have a far higher chance of success if you take the time to prepare a business plan. Before you contemplate putting time, money and effort into a new enterprise, weigh up the pros and cons on a personal level. Be clear about your goals, your strengths and weaknesses, and why you'd rather set up your own business than work for someone else. Ask yourself: Are you suited to franchising?

Consider what the local market needs, then look whether there is sufficient demand for you to build a successful business. You can get a good overall picture of your market using surveys, researching what your competitors offer, and checking current research provided in specialist publications such as trade magazines or directories.

You can also use the Internet to research on specialist websites and publications. It's your responsibility to understand your local market, so don't rely on the franchisor to do this research for you.

The essence of a business plan is to prove the viability of your idea to yourself and others. It will identify where you are, where you want to be and what actions need to be taken in order for the plan to succeed. Many businesses fail because they don't have a clear strategy and objectives. Writing a business plan forces you to address the details of your own business proposal and clarify exactly what you have to do to make it a reality. Any shortcomings or potential problems will soon become obvious if you take the time to look at your business idea objectively.

A business plan is not only for business start-ups. It is an evolving document that should be reviewed regularly. It will always be a useful tool to persuade others to invest time, money and effort in your business.

What should be included?
A good business plan answers four simple questions:
1. Why does your business exist? (purpose or mission statement)
2. Where do you want to take it? (objectives)
3. How will it get there? (strategy)
4. What will it cost? (budget)

1. Purpose
You should be able to sum up your purpose in a couple of sentences. It should clarify what you want your business to achieve, beyond making a profit.

2. Objectives
While purpose is general, objectives should be SMART: Specific, measurable, actionable, realistic and timed. You may have a number of different objectives, but they should complement each other and be prioritised.

3. Strategy
While your strategy may be flexible, it should always be grounded in thorough market research. You should investigate:

• Potential customers and competitors
• Economic and market conditions
• How trade works in your chosen sector
• Who the suppliers are
• The staff, facilities and equipment required
• Trends and emerging technologies that could transform the marketplace
• Include a SWOT analysis, listing the strengths, weaknesses, opportunities and threats.

You should then be able to answer the following questions:

• Who will buy from me?
• Why should they buy from me?
• How will I supply what they buy?
• What makes me different from my competitors?
• What is my unique selling point?

Budget
The success or failure of your business rests on its ability to make a profit - anyone thinking of investing in your business will scrutinise your budget closely.
Work to a 12-month cash flow and estimated two-year profit projection, breaking down your budgets into monthly figures, showing the main areas of expenditure and income.

Remember to include a contingency to cover unexpected costs. While you need to show confidence in your business, unrealistic projections are likely to do more harm than good.

Exit strategy
A proposed exit strategy demonstrates the thoroughness of your planning.

Executive summary
Start your business plan with an executive summary to provide readers with a quick overview of the whole report. This is best written last.

Language and structure
A good business plan should be:

• Clear and concise.
• Free of jargon.
• Well-researched.
• Achievable.

You may also be interested in...