Do this, not that
Things you must do, and things you mustn't, when writing your plan
There are endless guide books, courses and websites devoted to the subject of preparing business plans. But it's largely down to following a few common-sense rules.
One of the most common mistakes when preparing a business plan is to make it too wordy, difficult to read or even boring. The golden rule is to keep it as simple as possible. Focus on what the reader really needs to know and cut out any waffle.
"Always put any substantial information, such as market research, in an appendix," says Julie Stanford, creator of The Essential Business Guide. "In today's 'immediate' world, the most impressive business plans are those which are kept deliberately succinct, easy to read, yet at the same time exude the passion and energy of their originator."
By all means, base your plan on detailed information, but put operational or marketing data in an appendix. Business plans which are too detailed tend to get shelved because they are impractical for daily reference.
"Whatever you do, be sure to base your business plan on reality" says Duane Jackson, a partner in Key One, a London based IT solutions provider. "Over-optimistic sales forecasts, for instance, can lead to increased overheads followed by a cashflow crisis and drastic cost-cutting," says Duane.
"Bankers, business partners and employees will eventually see through over-optimistic plans that ignore weaknesses or threats. In the long run, this can be damaging to your management credibility."
As many as 80% of start-up businesses fail inside three years, and half of those within a year, depending on which statistics you read. The following are high on the list of reasons for these failures:
All of these issues would be at least partially resolved by making your business plan honest.
Darren Jones, who launched AKC Home Support Services care business back in 1991, says there are certain things he would do slightly differently with the benefit of hindsight. "I would try to get more assistance and perhaps make the document look a bit more professional. After all, it's your best way of gaining support for the business," he says.
He recommends showing your business plan to an independent third party – a friend or family member with their own business - who might be able to point out if anything is missing or unclear. "It's far better to make your mistakes on a practice run than when it really matters," he says.
Your business plan is an important item - you will undoubtedly become very busy later on and, without a plan, you run the risk of losing your sense of direction in all the day-to-day complexity of running the business.
One overriding rule upon which Julie, Duane and Darren are totally agreed is that you should never view your business plan as simply a means to getting money out of your bank manager. Your business plan should be your book of rules for running your business. It should not be locked away in a filing cabinet, but rather updated and consulted on a regular basis. It should be seen as a 'living' document: your roadmap for your enterprise.