Many SME owners are asked about a business plan when they are approached by a potential investor, or apply for funding, or apply to a government scheme or grant project. While business plans are certainly a useful summary for external parties, you should have a business plan from the very start of your business. That way you can plan the growth journey of your business and anticipate ahead of time when you need to expand to new markets, explore strategic partnerships, or apply for funding.
Having a business plan is important to attract investors, establish business milestones, determine financial needs, and uncover new opportunities, among others. These are the common segments in a traditional business plan, as per the U.S. Small Business Administration:
Harvard Business Review has several tips for those looking to write a winning business plan. First when you explain the Market Analysis, emphasise the market over the specialty of your product. Highlight a large untapped market, an interested consumer base, and make sure to document any claims you make. For instance, don’t claim you can reach 1% of a market unless you can document who exactly the target customers in this 1% are: the size of their business, and which specific products or services will be used to reach them.
The next tip is just common sense: address your investors’ needs. If your business plan is to support a funding ask, you need to tailor it to who you are presenting to in the moment: a large corporation, a traditional bank, a private equity investor, a venture capitalist, a small family office, or a potential business partner?
Many business owners write a business plan from their point of view, being fully-invested in their business for the long-term. Not all investors share that view: venture capital investors often have exit horizons of 3-7 years, while large corporations may want to acquire your SME and absorb it into the parent company if it is successful. Thus, it is important to ensure your 5-year financial projections are sound and not overinflated, a red flag for many investors.
If it's your first time at the business plan rodeo and you are still unsure how it will play out with your audience, it never hurts to get a second (and third) set of eyes on it. It’s a rare entrepreneur who can view his/her own business objectively and without rose-tinted glasses.
Your business plan is very likely to change and adapt to situations and challenges that arise unprecedentedly. Thus, it is not a strict rulebook for your business’ future per se, but an evolving plan that continues to be updated in response to both internal and external changes to business conditions.
If you are a business customer with Alliance Bank, you have access to over 150 partners and third party service providers within the Alliance Digital SME BizSmart ® Solution marketplace. Here, you can find offers and discounts exclusive to Alliance Bank customers from business advisory experts such as Cheng & Co and K Konsult Group, that can help you tailor your business plan to better speak to your target investor’s concerns.