Sylvia Walker | 02 November 2023
Sylvia Walker is a financial planner at Andrew Prior Consultants. She spent many years in a senior management position at Old Mutual before venturing out of the corporate world. She is also a freelance finance writer and author of several non-fiction books.
Business plans are often associated with funding requests, but they are useful far beyond that. A well-constructed business plan is a powerful tool for managing your business and measuring progress. Follow these ten tips so you can start off right and watch your business thrive:
1. Understand your why
Ask yourself why you want to embark on this venture and why it will work. By doing this, you will identify your market and your unique selling proposition (USP).
You may not be developing a new product or service, but rather selling or doing something in a different or better way, disrupting the market. This USP should be the thread running throughout your business plan and all the elements of the plan should support it.
2. Know your market
Your business plan must demonstrate that you know your market and have the right solution. Speak to potential customers to understand what they want, and interrogate the environment in which you will operate.
This information is invaluable, but don’t let your ego get in the way, cautions Erin Louw, executive for marketing and human resources at small business funder Retail Capital.
“Entrepreneurs who have a great business idea easily get attached to brand names, product ideas or distribution platforms. Be humble and actively source input from your potential customers. Getting too attached to the idea and believing that you have all the answers can lead to your downfall,” she cautions.
On the other hand, be careful of falling into the trap of over-researching, warns Gavin Ellis, managing director at small business funding and advisory company, GCE Business Solutions. “Sometimes you need to get going and learn as you go along.”
3. Crunch your numbers
According to Arnold February, regional investment manager at leading business loan provider Business Partners, the best written plan won’t guarantee success unless the fundamentals are in place.
He suggests you explain how you will monetize your business and how your revenue model will work in practice. Detail the business’s cash flow cycle from when you engage with suppliers, provide the product or services and when you get paid, given the terms of payment provided to your customers.
The financial model should be well packaged, including the assumptions used in the business projections. If this is not your strength, enlist a professional to help you.
Don’t just paint a rosy picture going forward. In reality, there are three scenarios: a high road, a middle road, and a low road, so include them all. “Funders will stress test the figures themselves,” Ellis says.
“They’ll chop the revenue line or inflate expenses and see if you’re still profitable.” Be realistic and consider all possibilities instead of presenting one happy picture of the future, he advises.
4. Take a full 360-degree view
Include a comprehensive strengths, weaknesses, opportunities and threats (SWOT) analysis. According to Louw, strengths and opportunities are easier to identify. Identifying threats or weaknesses may be more difficult.
“Consider challenges you may face are often due to unforeseen costs,” she explains. “You need to anticipate this as part of your SWOT analysis so that you’re not faced with any surprises.”
Never underestimate the power of the competition, but do not focus too much on what they’re doing, Louw advises. “It’s better to know what they’re good at, so you can improve on it,” she says.
5. Keep the information fresh
Your business plan must be well-researched and contain information and data to reinforce your statements and strategy. Never use outdated statistics or information. Louw says this is a common mistake, especially if the business plan has a long lifespan. Funding approval may take months, so update the information regularly. “It’s a small thing to fix, but failing to do so may seem like you don’t pay attention to detail,” she says.
6. Don’t be a lone ranger
The life of an entrepreneur can be very lonely and it’s easy to fall into the trap of trying to do everything yourself, Ellis says. Find people who complement your skills, ensuring that your business plan is well-rounded with no glaring gaps. “Having an advisory board or mentor to speak to is also very valuable,” he adds.
7. Tell your story
Storytelling is very memorable. Your business plan must contain your thoughts and not those of a consultant, February advises. If you use a template, customise it to relate why you think your business idea is a great one, and why you are a good fit for the business. “I’ve seen some terrible versions where a consultant has copied and pasted a business plan for a client,” he says.
You are a crucial part of the business plan. “Investors may back the jockey, particularly if they have had successful businesses elsewhere,” Ellis explains. Telling your story adds enormous weight to your business plan, but never sugarcoat anything. If you’ve made mistakes, share them as well as how you recovered from them. “Business is fluid, and how you react to changes is important,” he says.
Also, show your time and commitment to the business. “No one will invest in you unless you invest in yourself,” says February says.
8. The perfect length
A successful business plan must be comprehensive, but not too long or too short. There’s a happy balance between the two. All business plans have a certain format, and the executive summary is the most crucial part. This is your opportunity to hook the reader so that they want to know more.
February says that a two-page business plan can work if it’s an existing business with a website and track record. “But if it’s a brand new venture, you need to go into far more detail.”
Ellis says knowing your audience is vital. “Technically-minded people will look at the specifications,” he explains. “Finance people will hone in on the economics and how long it will take to make money.” Write content that is relevant to your audience and avoid waffle.
Get feedback on your document before you finalise it. Louw advises giving it to people who think you are amazing, as this is a great confidence booster, as well as to people who will give you constructive feedback.
9. First impressions count
The quality of your document must be perfect. It reflects the time and effort you put in and says a lot about you as an entrepreneur. Use graphs, infographics, images or other appropriate visuals to bring your content to life.
Also, ensure that the content flows properly as your story evolves. “Don’t write one segment on page one and then another on page five,” February says. There must be cohesion in the document with perfect grammar and spelling.
People will buy into your passion and energy, so make sure your business plan reflects this. “First impressions last. People may not remember the exact content of your business plan, but they won’t forget how great it looked,” Louw advises.
10. Make it watertight
Don’t be vague about any part of your business plan. If you’re unsure of something, don’t skim over it, and hope that no one notices. Smart investors will pick this up and hone in on it. Enlist help if there’s an area you’re not sure of, but make sure everything is covered in detail.
Link your strategy to your USP. Your strategy outlines how you will reach your goals and is your business blueprint. Add your timeline and key milestones. Your metrics must align with your goals and track progress against your USP. Funders may also require regular reporting to monitor progress.
