How to Write a Business Plan – Fundamental Principles – An Exercise in Effective Persuasion – Part 1

Writing a business plan is an exercise
in effective persuasion. It’s not enough to demonstrate that your company has a
well-rounded management team … with a credible strategy … to exploit
a sustainable competitive advantage … in an attractive market. It’s not enough
to show that your commercial strategy is supported by well-researched
analysis … illustrating that the opportunity for investors is
considerably greater than the risk. To succeed in its objectives, your business
plan must stimulate an enthusiastic response … from cynical financiers who’ve seen it all before. It must lower their perception of risk …
and encourage their pursuit of profit. Your business plan should therefore
anticipate all the initial questions … that a potential investor might ask
about your company … answer them fully … and give a very clear impression … that this
is an opportunity that shouldn’t be missed. This is difficult to achieve.
There’s usually only one opportunity to make a good impression. A well-written
business plan will deliver that good impression. This course will guide you
along the correct path … so that you’ll succeed in producing a very persuasive
and credible document. One of the first things to understand … is that most potential investors don’t read
a business plan with any enthusiasm. Usually, they’re reading it only because
they’re being paid to do so. Their initial attitude will hover between
neutral to hostile … and they’ll therefore chuck your proposal in the bin … as soon
as the commercial logic … the risk … the prospects … or even the syntax … appear to
be questionable. Consequently, the enormous amount of brainpower … and hours
of work … involved in the production of a business plan … can often be a pointless
waste of time … if the finished article doesn’t press the right buttons … or
doesn’t press the right buttons in the right order. To make a start … it’s a good commercial discipline to write a core business plan … if you haven’t already done so.
This is for internal use … and should be regularly updated. This core
business plan should focus the activities of your business … on
pre-agreed objectives. For best results, the entire management team should be
involved in its production. It shouldn’t just be written by the managing director
or the owner … with input from the finance director or your accountant. The heads of
all departments … or other relevant employees of smaller companies …should
be fully involved. They don’t all need to see the complete business plan … but it’s
essential that they should buy into the section for which they’re responsible.
Only then, will you be able to feel justifiably confident that your business
plan rests on solid foundations. For internal purposes, the overall
thrust of your core business plan should be to discuss … measure … and project the
expected performance of the business over the next three to five years … how
you intend to achieve this performance … and what financial and operational
resources will be required … to deliver this performance. You should then clearly
identify the key drivers of the growth and profitability of your business …
explain your plans for co-ordinating the resources of your departments or
divisions … in order to concentrate on such drivers … and set out the procedures
whereby success or failure to meet your objectives … can be measured. Your core
business plan can then be adapted … with the help of your professional advisers …
to suit the particular purpose for which a wider distribution is intended. This
could be to raise equity finance … … to raise bank finance … to prepare an
Information Memorandum for the sale of your company … or to pursue a management
buyout … each of which will require a different type of business plan. Even if
none of these projects is intended (at least not just yet),
your core business plan will keep your company focused on
increasing the value of your business. This is important … because if you
benchmark every commercial decision you take … against the question: “Will this
match the objectives of my business plan and increase the value of my company?” …
you’ll find that you’ll always be in a strong position to take advantage of
opportunities whenever they arise. Furthermore, although you may not
currently intend to sell your company … … a core business plan will be continually
preparing your company for sale … and once every seven or eight years … the stock
market encourages extraordinarily stupid methods of valuation. If such valuations
are, for example, based on a very generous multiple of sales … it’s only sensible to
be ready to accept an unexpectedly good offer … and a company
which follows a commercially sensible … and regularly updated … core business plan …
is likely to receive one.

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