Fag-packet business plans stubbed out by recession

By PrintWeek Team, Friday 10 June 2011

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In economically softer times, funding was easy to secure and a business plan was often a much less formal document drawn up over a pint and a pub lunch, but the downturn has put paid to that

When times were good, you could write the outline for a business idea on the back of a fag packet. Armed with these scant details you could take your bank manager down the pub for a ploughman’s and secure the funding that you needed in double quick time.

Today, the situation couldn’t be more different. Jotting down a few bullet points on a packet of Bensons no longer cuts the mustard. As a result of the changing economic climate, the humble business plan has gone from being an afterthought to an essential part of every business. Staggeringly though, according to our survey, over 20% of respondents said their firm did not have a business plan.

But the reality is that if you want to secure finance for a new investment, your lender will require you to deliver reams of paperwork detailing exactly how you will meet your repayment responsibilities.

But how do you set about writing a business plan and what should it include?

The first thing that you need to do before you sit down and start to consider what content the business plan should include, is establish who should compile the plan. Usually one person will be tasked with writing the plan itself, but it’s wise to get input from a number of different parties, according to Paul Coggins, managing director at Print Finance.

"It should be drawn up by a cross-section of staff and not just the directors. This will help identify any problems early on. Get outside opinion if possible; ask your accountant, but don’t believe that either he or your bank manager is the messiah. You know your business better than they do."

Often you can get funding from local business support organisations that enables you to call on companies who specialise in this type of work, says Paul Holohan, chief executive at Richmond Capital Partners. However, he cautions: "Choose an advisor who understands the industry. This saves an awful lot of time and effort."

Compiling a business plan can be a stressful and time-consuming endeavour and the exact amount of time that you spend on it will be dictated by the size of the business and the availability of the time that management can commit to the project. These two factors will also dictate how comprehensive a business plan can be, says Coggins.

"At whatever level of detail, business plans are important, mainly because it proves that you have thought about all the issues affecting the business. This can then be shown to suppliers, be it finance or paper merchants, whose support you need."

Getting buy-in from the top down is crucial if the business plan is going to be effective and the role of the plan in today’s economic landscape shouldn’t be underestimated, explains Murray Booker, director at BPFL, who adds that their importance has grown significantly in recent months.

"In a climate where lenders are demanding – not unreasonably – more and more detailed information, business plans are definitely more important than they used to be," he says. "As an owner of a business, this sort of information is invaluable in directing and targeting the future development of that business. It may also be a document that could be shared with the workforce to get their opt-in and make sure everybody is pulling in the same direction."

So what should the document itself contain? There are a set of basic rules that people drawing up the plan should abide by, according to Holohan (see boxout for suggested content). He advises the use of simple language and no jargon – "bullet points are good". Stick to the bare essentials, write the plan in a logical sequence of facts and ideas, quantify any figures where you can and don’t overstate the truth.

"It should also include a SWOT (strengths, weaknesses, opportunities and threats) analysis and a scan of the business environment and is an invaluable process in reviewing the company’s past, present and future," says Holohan. "It’s the working plan for the firm and should embody the future direction of the business, which in the current climate, for some, may be as basic as survival."

According to the government- funded business advice website Business Link (www.businesslink.gov.uk), key ingredients of the plan include an executive summary, a short description of the business opportunity, your marketing and sales strategy, your management team and personnel, your operations and financial forecasts.


Other uses
Of course these different criteria need to be tailored for the circumstances as different plans are used in different ways for different things. For example, for investment in presshall kit, you will need to weight in a particular way, advises Booker.

"In terms of seeking finance for new equipment, the plan needs to illustrate the effect that the new equipment will have on the business in terms of profit and, most importantly, cashflow. It should take into account what it is replacing and whether any new technology will facilitate any reductions in ongoing overheads from labour to basic materials," he says.

But it’s not just investing in new gear that you will need a plan for. According to Holohan, it’s essential to have in place a good business plan when selling a business, for example. "New owners will have their own ideas, of course, but they’ll be impressed you are planning ahead."

Once the plan has been drawn up and signed off by all interested parties, there is the issue of how to use it with potential purchasers of your business or lenders. Coggins advises businesses to take the personal approach.

"Try and present it to the reader rather than post it," he explains. "They are often long documents and funders won’t read them all. A meeting to present the highlights will help significantly. Lastly, it should be remembered that, if lending is a borderline decision, directors who can demonstrate a full evaluation of their plan will be heard more clearly than those who know it, but can’t be bothered to show it."

According to our research, more than two thirds of respondents update their plan once a year or less, which can defeat the object of creating one in the first place. Holohan says that business plans can be neglected due to the pressures of day-to-day work, but it’s vitally important that they are checked and updated all the time to make sure that they are still relevant.

Coggins concurs: "Someone who helps draw it up should be nominated to monitor progress and be able to explain at least internally why you are above or below expectations. This way you can make changes if needed."

Booker goes one step further. "In the current climate, changes can occur very quickly, so start with an annual plan and then update it at least quarterly or following a major shift in direction."

When it comes to business plans, vigilance is the watchword. This is not just a piece of paper containing a few hastily scribbled ideas, it’s a document that should be engrained within the DNA of a business, as Holohan explains.

"The business plan is an essential element in any successful print business and is vital to support any application for finance. However, it is much more than a financial document and should be the basis for the business activity. It is the vehicle for all in the company to work together in the same direction toward the same ends."


Paul Coggins, managing director of Print Finance, says that a business plan should demonstrate that you have addressed a number of questions about your business. Here are a few things that are worth considering.
• As a business, where are we going?
• What are we good at?
• What are we bad at and how are we addressing this?
• What is our largest market?
• Do we have a plan and is it realistic and achievable?
• What are the cashflow implications: can we fund the growth if we are successful?
• What are the production implications: will there be lost production or downtime before the increases come?
• Will progress cause us other problems, such as bottlenecks in production or staff issues? If so can we overcome them?
• Will our suppliers support us at the levels we need? If we get it wrong what is our safety net?
• Can we cope with the worst-case scenario?

Source: Print Finance

• Executive summary
• Overview of the plan
• Summary of findings and decisions
The market
Your assessment of the market you are in or going into. The benefits of your services to companies. Your strategy for competing. Action plan for delivery
• The financial implications
• Your objectives
• The funding needs and why
• Growth, targets and profitability
• Payback, return on investment (ROI)
• People
• Leadership
• Team
• Skills
Contingency plan
What happens if things don’t go exactly to plan
• Monitor and control
• Exit plans (where appropriate)
• Appendices
• SWOT analysis
• Competitor analysis
• Financial projections for up to three years into the future
• Detailed profit and loss for year one
• Cashflow forecast
• Balance sheet
• Management structure

Source: Richmond Capital Partners

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