Finance & Funding

The business plan

The key to borrowing money is a good business plan. A business plan is all your careful financial planning (the working out of what you need financially, what you've got coming in, going out and held in reserve) put into context. It shows what your business does, why there is a good market for it, the research you've done, the skills you have that mean you are more likely to succeed, your knowledge of what your customers want and how you run and advertise your business effectively on a day to day basis.

A business plan doesn't have to be a long complicated document. Much better is a shorter, clear, well thought-out report that covers:

• The executive summary - a sort of one page summary of the business plan that investors read first to see if they want to read the rest!
• Background - what your business does, how long you've been going (or when you want to start), why you've chosen to be in this business.
• Research - why there's a place for your business (research), or, if you are expanding, why you think there's a market for your expansion, exactly what your expansion plans are, why you need them and what impact they'll make on your business.
• Your vision for the future - investors want to know what your long (or medium) term goals are. Do you want to potter along, gradually growing and hand the business over to your kids? Do you want to grow fast and sell early, making a healthy profit before moving on to the next enterprise? They want to know so a) they can gauge the potential return and b) so they can get an idea of how they get their money back out...
• Management and skills - detail your skills and those of your key staff. Highlight your management approach - investors like to see business managers who have their finger on the pulse, who pay attention to quality, service and financial management and who value and develop their staff.
• Operations - describe your day to day operations - show how you tightly run your business.
• Premises, equipment and stock - describe where you operate from and any features or benefits. Describe your equipment and stock if it's relevant, paying attention to quality and your rigorous sourcing techniques.
• Suppliers - if relevant to your particular business, describe your key suppliers and your relationships with them. Investors can be very impressed by strong business to business relationships because they want to be assured that a) you are good to do business with (since they'll be doing business with you themselves, if they invest) and b) that your supply chain won't fall over and cripple your day to day operations.
• Your marketing plan(s) - this is very important. You might have the best products and services but unless customers know about you, you're nothing. How do you raise your profile, attract customers and convert enquirers to buyers through canny advertising, great deals, customer service and excellent enquiry handling?
• Your financial plans - this is where you really show your complete grip on the financial side of things, both the day to day running and cash flow, and the capital needed to start your business or expansion project. Don't forget to show at what point(s) you need to inject additional money and for what purposes.
• Timescales - lots of businesses forget this! When does your project start? When will it be up and running? When will it be making money? Have you allowed enough time for your building works/marketing etc to kick in, or staff to be recruited and trained etc.
• Investor proposal - they want to know what you have in mind for them and what their exit strategy is. Are you looking for a loan that you repay over a certain period or are you prepared to give up some equity - a share of your company. If so, how will they realise their investment - by selling the company or you buying them back out from the profits? What sort of timescales? Three years? Five?

There is lots and lots of help out there for writing business plans. Your bank will give you advice, and may even have templates. Business Link (www.businesslink.gov.uk)provide detailed guidance and offer downloadable Excel sheets for the financial information. Contact a Business Link Advisor for tailored help in person Also try your local business support agency and your bank. Plus, do a bit of searching online. You can find information, guidance, real business plans to use for inspiration and also specialist advice from specific funding sources, such as charities, venture capital companies and business angels. See Quick Links on the right for contacts, further information and resources.

Suggested next step in this section:

• Choosing an accountant