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Business Plan Writing Tips

Promotional Strategy

This goes hand in hand with your marketing strategy.

You know who your potential customers are. In fact, you've done your research so well that you think you know their names. But how are you going to tell them about your brilliant new business which is aimed directly at them? To adapt an old saying, you can make the best mousetrap in the world, but no one will beat a path to your door unless you tell the right people how many mice you've caught.

How do you promote stuff? Deep breath now: advertising, direct mail, exhibitions and trade shows, telesales, networking, public relations, door-to-door sales, sponsorship, in-store demos, shop-front promos, leafleting, direct selling, point-of-sale, word of mouth (very effective, this one) plus all the myriad online promotional methods such as banner advertising, newsgroup discussions, e-mailing, newsletters, links from other sites and so and (almost) endlessly on.

Is that enough to be going on with?

Don't include them all, of course. Choose the promotional strategies which best fit your business and develop them (briefly) in the plan.

When outlining a particular strategy be specific. Rather than say "We'll undertake a local mail-shot campaign", which is unlikely to knock anyone's socks off say:

"We intend to distribute 5,000 A5 postcards in SW24, in particular targeting the affluent X and Y areas. The postcards will contain details of selected products and prices and will offer visitors to the shop (on production of the leaflet) a 20% discount on purchases up to £20 and 50 free points towards our customer loyalty scheme. The estimated cost of the mailshot is £1,250 including design, printing and out-sourced distribution."

Sounds a bit more convincing, doesn't it?

Finance Plan

We know – this is where many people get scared, particularly if they don't have good spreadsheeting skills.

If you really don't have a head for figures and can't even add up the cost of a round of drinks when you're in the pub alone, then think about getting advice from a business advisor, either privately, or at your local Business Link or Enterprise Agency.

Whether your do it yourself, or get help from the experts, these are the sort of things you'll need in your finance plan.

Revenue Forecast – Many people struggle with the revenue forecast, which can seem like a huge exercise in guesswork. It needn't be. One way to root it in some sort of reality is to (1) identify your target market(s) (2) identify the marketing channels which you intend to use to capture them (3) identify a likely success rate for each marketing channel and (4) multiply the resultant unit sales for each channel by the relevant price of your products or services. Ideally your revenue forecast should be prepared on a monthly basis for, say, the first 24 months and then annually, for, say, the next three years.

Profit and Loss Account Forecast – The combines your revenue forecast with your forecast for cost of sales (the direct costs of producing your product or service) and overheads (all other costs of doing business).

Cashflow forecast - This is the record of cash going in and out of your bank account, and should be prepared to match the profit and loss forecast. For a business which has significant payment delays either in paying suppliers or being paid by customers, the cashflow forecast is crucial to ensure that the business is adequately financed, particularly in the first few months of operation.

Sensitivity and Breakeven analysis – A useful additional sheet which shows the effect of changing the major assumptions on the profit and cashflow (sensitivity) and the number of unit sales which produces a zero net profit (the breakeven rate).

Balance Sheet Forecast – Beloved of venture capitalists and corporate financiers, the balance sheet forecast shows the asset and liability picture of the business at various points in the future (usually annually, although occasionally, and tragically, monthly). This is not a very useful addition to the forecast and in most cases you will survive without one.

Exit Strategy

Finally, if you are raising third party equity finance you need to show how you intend investors to get their money back.

Most business plans tend to say "Exit will be by way of trade sale or flotation in 3-5 years‟. This is about as useful and informative as saying, "the business intends to make a profit by selling things to customers‟ (i.e. not very useful, in case you're feeling a bit jaded by point 8. and you missed the sarcasm).

Most exits are by way of trade sale and if you want to say something genuinely useful then why not identify the types of business which are likely buyers and why your business would make sense as a strategic acquisition for them. Better still, include the names of some potential buyers. You may already have a business relationship with some of them as a client, supplier or sub-contractor.

If you really do think that your business is a potential flotation candidate then maybe you have identified similar, quoted businesses as a benchmark. If that is the case, then a few lines on each (success, market value, competitive advantages of your business) is likely to find favour with the reader.

The more detail you go into regarding exit, the more investors will see that you are the kind of entrepreneur who understands their motivations and is willing to align your interests with theirs.

© Envestors Ltd

Reproduced with the permission of Envestors Ltd.

For extensive information about starting a business and raising finance, see www.envestors.co.uk

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Page 1: General tips
Page 2: Promotional Strategy

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