Ask the expert: writing an effective business plan
OPINION. Q: I want to give my business plan an overhaul. What are some of the key points I need to remember when rewriting or writing a business plan?
A: At the core of any business plan is the idea or concept which you intend to take to the market. Whether this is a product or service, this should be presented in a clear, succinct manner suitable to those who will ultimately read the business plan.
The most effective business plans (those with the X-factor) explicitly address how the idea or concept will generate a sustainable competitive advantage.
You may have a brilliant idea or concept for a business, but how defensible is it? What distinguishes it from the competition? How likely is it that the idea or concept could be easily replicated? What will ensure long-lasting success?
These questions may represent concerns raised by those reading a business plan; many of whom will have been approached for investment.
The more you can convey that the idea or concept will have a beneficial, long-term advantage over the competition, the lower the potential identifiable business risk and the more robust the business plan becomes.
Many investors and business professionals receive hundreds of business plans per year, therefore it is important that their curiosity and interest are sparked from the start.
One way this is achieved is through a well-written executive summary, which initially hooks the reader and draws them into reading further.
Following the executive summary, the detail of how the business will approach and enter the market should be presented.
Fundamental areas of the business such as strategic objectives, pricing, sales and marketing, scalability, and funding are necessary for the reader to understand how you intend to bring the idea or concept to life.
An in-depth explanation of the idea or concept itself and how it will operate is also necessary.
It is helpful to present these as separate headings that follow a logical thought pattern.
Any business plan should also contain an overview of the external environment in which the business will operate.
Broadly, these areas include competitor analysis, market climate, and political, economic, social and technological factors likely to have an influence (referred to as a PEST analysis).
As these external factors change, so should the business plan, which should be a fluid and evolving document.
Business plans should never be static or set in stone. Ideas and concepts may change rapidly in reaction to the external environment, therefore it is important to remain agile and make adjustments to the business plan when necessary.
Scott Kerse is a PwC Partner who advises privately owned New Zealand businesses.