Here is a masterclass in all the elements you need to tick off when composing your business plan
Daunting, scary, challenging. These are just three words a prospective franchisee recently used to explain their initial perception when approaching the process of writing a business plan.
I have seen business plans of all shapes and sizes - some way too detailed and some at the other end of the spectrum. The truth is, a business plan is a paper version of your envisaged business journey. Where are you now and where do you want to be? The business plan answers the all-important question: how are you going to get there?
Without a robust business plan, how do you know the proposed business is even worth running? If the outcome of running the business will not enable you to fulfil your personal objectives, it’s worth revaluating whether you want to undertake that business journey.
A business plan is also an essential element when securing funding to launch your business. It’s important a lender can be confident you will operate your business successfully, with an optimistic yet realistic road map to success.
4 KEY CONSIDERATIONS
I mentioned I’ve seen business plans of all shapes and sizes. Therefore, I want to outline some of the key considerations to help you when the time comes to write your own:
1. Business objectives
What are your short, medium and longer-term objectives for the business? Through sitting down and committing to a plan with specific, measurable, attainable, realistic and timely objectives and outcomes, you provide yourself with the focus necessary to drive towards what it is you really want.
2. Include a narrative
There is much more to a business plan than just the financials. A franchise business has numerous elements to consider. Namely, the franchisor, the territory and the franchisees.
Therefore, you must ensure you have adequate background information and data to support the benefits of the combination of the three. What are the franchisor’s credentials? How many franchisees does it have in the network and how are they performing? What training and support is provided? What marketing do you benefit from? Is the support hands-on or hands-off?
“A two-page business plan is no use, while a business plan with 200 pages isn’t much use either”
Next, the territory. How affluent is the target area? What local marketing initiatives can you run? Is there a high concentration of local level competition? And when it comes to you as the owner, what credentials do you have to show you will deliver the plan?
3. Include comprehensive financials
The devil is in the detail when it comes to financial projections. Firstly, it’s essential to be as scientific as possible, so leverage your franchisor and its existing franchisee network to provide you with guidance about what is achievable and realistic.
You need to compile at least three years of monthly profit and loss, cash flow and end of year balance sheets. The franchisor and any lender you approach will need to have confidence in your grasp of the financials and know you have followed a robust process to arrive at the end figures - it’s much more than a ‘finger in the air’ exercise.
4. In depth SWOT and competition analysis
These are essential elements of a robust business plan. Make sure you allow yourself the time to get under the skin of any competition. They are likely to be some of your biggest threats, particularly if operating in a saturated sector. Having competition isn’t a bad thing. In fact, it can be seen as a positive. However, this is your opportunity to show how you would mitigate any threat or risks.
Outline your strengths and opportunities, show a lender and your franchisor what you are made of and how you will deliver on your financial projections through capitalising on strengths and opportunities while remaining alive to and mitigating weaknesses and threats.
DON’T MAKE THESE 4 MISTAKES
On the other hand, it’s important to be mindful of the following:
1. Losing focus
A two-page business plan is no use, while a business plan with 200 pages isn’t much use either. A plan needs to be focused and concise. Covering too much or too little can be confusing, both for you as the business owner/operator and for a franchisor or lender reviewing the plan.
2. Being overambitious/too conservative
As with many things in life, it’s all about finding the right balance. Sky-high projections can damage your credibility and risks putting you in a position where you need to borrow more than is necessary to drive unachievable sales volumes.
Be too conservative and you risk undervaluing your business and not showing a lender the proposals in their best light. This is where talking to existing franchisees is so valuable, as they have been there and done it, so broadly your projections should be in line with others from the network.
3. Not engaging in the process
Doing a plan just for the sake of it is a pointless exercise. You need to demonstrate ownership of your business plan. Knowing and understanding what you are aiming to achieve, why you’re doing it and how you are going to make it a reality are fundamental elements of your business’ success. Make sure you are heavily involved and invested throughout.
4. Writing then not using your business plan
All too often plans are written to secure funding and never see the light of day again. Yes, a good business plan is an essential tool for securing funding, but if you do not use and tweak it on an ongoing basis, how do you know how well your business is performing?
You should always be monitoring key performance indicators and acting on the data you’re deriving. This could be the difference between business success and falling short of your objectives.
By this point I hope you have a clear idea in your head as to why you’re writing your business plan, what you need to include and the traps to avoid falling into.
Always bear in mind that you are in business for yourself, but not by yourself. If you’re still not confident about putting your own plan together, contact your prospective franchisor and ask for help or get in touch with Hitachi Capital Franchise Finance’s team of experts and we will help you compile a robust plan for your chosen franchise.
Rob Orme is franchise relationship manager at Hitachi Capital Franchise Finance