Whatever the reason for creating a business plan, it will be a significant outlay in time and cost so don’t put your goals in jeopardy by not investing in professional help to create a realistic and attainable plan, says d&t's James Thomas
As chartered accountants and business advisors, d&t was selected to present at the Virtual International Franchise Show held on 6 June. Britain’s biggest and busiest franchise show went online for the first time and I delivered a seminar entitled, Seven Tips for a Killer Business Plan. In this article, I wanted to share some of that insight with you.
Tip #1: Be concise
Bank managers and investors read hundreds of business plans, so it’s important to get to the point and don’t waffle by removing filler language. The plan should be divided up into sections. The executive summary is your elevator pitch and although it will appear first in the plan, it should be written last as a “summary” of what is included. The plan should also incorporate a marketing plan and director(s) bios plus the financial information. “Financial” is the detail that backs up the claims made. This will be examined with a fine-tooth comb!
Overall, be concise and we advise business plans should be no longer than 50 pages.
Most businesses think plans are primarily financials, all the numbers which are at the back of the plan. However, a business plan contains so much more detail, structure, process management, director CVs, marketing strategies, SWOT analysis which are all just as important (in some cases more) than the numbers. This is because they make sense and prove that the numbers will be attainable, so make sure you devote enough space in your plan to these important details.
Tip #2: Know your competition
Some information will be provided by your franchisor. This may include a clear USP, information on systems and processes, branding, an operations manual and the secret ‘blend/recipe/product’ which makes the franchise model a success.
However, it’s up to you to include your own detailed research and analysis on location, competition, marketing strategies, SWOT analysis, pricing and any business partnerships. Here’s where you really show you know the market and understand some of the challenges and opportunities that the franchise presents.
You need to know exactly who they are, what their pricing is and know how you’re going to disrupt the market in the area. That can include partnerships with local businesses if you’re a café with a dance studio above, why not tap into the parents leaving their kids there!
Tip #3: Backup every claim
One of the main reasons for developing a business plan is to attract funding. However, investors and bank managers are a particularly risk-averse group of people! Your own opinion won’t be evidence enough. You will need to show why your product or service is groundbreaking; evidence why your director(s) will make your business a success; show how will you penetrate the market and discuss how you will protect your business from the competition, plus, any unforeseen socio-economic factors.
Do not make unsubstantiated claims, they will stand out to the trained eye! Do use graphs, patents and diagrams which can help put facts and figures into a good format, demonstrating how you can back up your claims. They are also a great way to show scientific evidence for a product. Including CVs for directors and the managerial team is also key.
Tip #4: Be conservative
Everyone says they are conservative with their estimates and forecasts, however, in our experience most people aren’t! Be realistic and use the evidence provided by your franchisor to backup projections. Be honest with yourself and your own learning curve. In addition, build in contingencies to allow for unseasonal occurrences. It will never hurt to be above plan, but it will hurt to be below!
Tip #5: Avoid optimistic timeframes
It takes time to get a new business off the ground. There will be unforeseen circumstances. You will find some elements more challenging and more time consuming than others. Therefore, ensuring you have plenty of time to reach your break-even point will mean you will calculate sufficient cash flow to keep the franchise going comfortably until then.
If you overstate your financials and don’t have enough working capital to make it through the downward curve, you will find yourself immediately on the backfoot and potentially faced with the option of whether to continue.
Tip #6: Analysis and understanding
A business plan is made up of assumptions and a myriad of variables, any one of which if slightly misjudged could have disastrous effects on your business performance. Therefore, proof-read, justify costs, know your breakeven and pinch points. Get a second opinion as often new franchisees can be too close to see mistakes.
The business plan is a working roadmap for the future. So, once it’s completed, don’t lock it in a drawer and never look at it again! Use the information to check you are on track and progressing towards your goals. If not, it can flag up any issues early and you can get help before the challenge becomes a real problem.
Tip #7: Ask for advice
Whatever the reason for creating a business plan, it will be a significant outlay in time and cost so don’t put your goals in jeopardy by not investing in professional help to create a realistic and attainable plan. At d&t, we have worked with many franchisors and franchisees over the years and have needed to outline some flaws in some of their business models which had previously been hidden! We have also been able to help many new business owners on the road to success through creating a workable plan which takes into account the many variables faced by individuals on their journey into franchising.
It is never possible for a new franchisee to understand all the implications and optimum configurations for things like vehicle finance, VAT thresholds, asset finance, company structures and tax, so talk to people who do! Starting a new business is never free of risk but by investing a small amount in professional advice at the outset, can offer the best chance for a successful outcome in the future. Now is not the time to ‘wing it’!
James Thomas, QFP is the commercial manager at d&t.