How to Write a Business Plan - Part I

25th April 2007, 11:00am

You've found the property you want to buy, but you need to plan how it's going to make you money. Hugh Caven of industry specialists Walbrook Commercial Finance guides you through the basic principles...

Why do I need a business plan?
The most common reason for making a business plan is to convince a third party such as a bank to lend or invest money in your new venture. If this is the case the business plan will form the basis of your finance application and it is very rare that any bank will be able to reach a decision without a comprehensive plan from you.

The plan will, in effect, become an informal contract between you and the lender, you having laid down the reasons you feel the bank should lend you the money and they lending you the money based upon your expectations of the business.

I am not borrowing any money; do I still need a business plan?

Yes, definitely. During the time it takes to buy your property you will certainly have more time available to prepare forecasts and formulate development plans than when you are actually running the business.

Your plan will act as a document that will guide you through the first few years in the business and you will have financial forecasts against which you can map your actual performance against expectation.

Is the format of the plan the same whether I am buying a hotel, a restaurant or a pub?

Yes, the structure of the plan should be same, although for a pure restaurant, you will need to include more details about your experience, staffing levels, sample menus and information on the local competition.

What should be in my business plan?

The following is just a suggested format, not something set in stone. Don't forget - this is your plan and you should write it in your own style. It is likely that the reader at this stage has not actually met you, so try to make its style reflect your own character and personality.

1. Summary, or Executive Summary
The structure of a business plan is rather like that of a verbal presentation. One of the best methods of presentation is: "Tell them what you are going to tell them. Tell them. And then tell them what you have told them."

It may feel strange to start with a summary, but you should remember that your plan may be one of many being considered by the reader. A positive overview at the beginning will help set the scene. Outline the key points you feel will grab interest and encourage full consideration of your document.

• Your summary should include:
• Introduction and purpose of the document
• The name and address of the target unit
• An overview of the location
• A synopsis of the people involved in the purchase
• Summary of turnover and profit
• The purchase price and, if appropriate, the amount of loan or investment you require.

There, right on the first page, the reader has the knowledge of who you are, what you wish to buy and what you want.

2. The People
A formal detailed CV can look a little cold. If you feel it is appropriate, list your academic achievements, particularly any that are relevant to the proposed purchase. Dates of birth, marital status, dependents and interests will give the reader a feel of the people involved.

If you are already in the industry, list your work experience. If you are a new entrant, detail any experience you think is appropriate, such as team management, computer skills, stock management and ordering, marketing etc.

3. Your Finances
This section is particularly relevant if you are planning to apply for a loan or an investment from a third party.

Include a table of your personal assets and liabilities as they are at the time of purchase.

Prepare two columns. In one, detail the assets you own: your house, savings, investments and policies, together with items that may provide you with additional income, such as pensions or investment bonds. In the second column list material liabilities: your mortgage and other items of credit.

From this statement the reader will be able to understand not only where your investment is coming from, but also be able to see any assets you have that will remain in place after the purchase.

4. Existing Products and Services
In reaching your decision to buy the business you will have undoubtedly carried out hours of research into the way the business is currently run, its location, local tourism, staffing levels and other factors. You have reached the important decision that you can improve the product, so tell the reader your thoughts and objectives. Do not be too scathing about the existing product as this may concern your investor. Lenders like to feel that the product has a sound base.

5. Business Development Proposals
If you have definite plans for the business, list them. But prioritise your ideas under short, medium and long-term headings. If your plans come at a financial cost, detail the source of the additional contribution.

6. Local Competition
List some of your nearby competitors, comment on their product, and compare pricing structures.

7. Marketing Plans
Detail what the business currently offers and what your plans are to improve it. Examples could be: improved promotional material, weekend breaks in the shoulder months, the enhancement/introduction of a web site, or targeting local businesses and associations. Remember that your marketing strategy will almost certainly be the foundation of the growth of your business.

8. Resources and Systems
Who are the key staff? Do you feel they are motivated? Are they working to capacity? What changes do you feel are needed? What training and development plans do you have? People are the backbone of your business so tell the reader as much as you can about them. Consider structuring your comments by department: e.g. accommodation, reception, food & beverage.

Are there sufficient control systems in place? Do you intend to retain independent stock takers? Do you have your own system that you intend to implement? Does the business operate up-to-date computer software? Be aware that your plans will have a cost implication that will have to be justified later in your plan.

9. Structural Development
It may be that part of your future design for the business will involve actual alteration/development of the building. Again, you will have to justify the cost and say what return you expect on the investment, but detail to the reader the extent of your plans. What planning permission is required? Will the development disrupt the business? How long will it take and how are you going to pay for it?
Once you have completed all of the above, you will have to prepare the detailed financial aspects of your business plan.

To find out more, see Part II (coming soon)

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