By Leon Gettler

Many people going into business have a problem with business plans – they don’t have one.

Now there are many good reasons why managers would not bother to sit down and write a business plan. First, who has the time? Managers tend to be action oriented people. Besides, if you have to choose between selling to a customer and writing a plan, you follow the money.

However, no-one can afford to not have a plan in these credit constrained times. Banks have pulled back on credit. They now expect to be provided with a business plan. They want a marketing plan. They want to know whether people understand the cash flows of the business and the market they’re in. So what are the rules of writing up a business plan?

According to Business Victoria, the plan needs to have the business overview. It’s an explanation of what you’re offering and how it will be produced, what your target market is, what makes you different from competitors, what the business structure is for growth and tax purposes and how you plan to manage the business, what are the costs and how you plan to meet them, and what is your action plan? How are you going to achieve your business objectives?

The Lifehacker site suggests basically the same with some additions. Like for example going into detail about your marketing plan and what you will spend on investing in corporate identity design (e.g., logo design, website development, business cards), and all the expenses like advertising in newspaper or search engine listings, and other ways you’ll reach your customers. Also, present the research on your competitors—what they’re charging, how they position themselves and what their products are compared to yours. You also need to spell out the financials, explaining what the money will be used for and listing every expense you can think of for the next three years at least. You also need to identify how much you expect to make each year (financial forecasts); and set some financial assumptions like your tax rate and how many days you’ll give your customers time to pay your invoices.

Forbes says the plan needs to tell the reader why customers are more likely to buy your products and services over your competitors. It must provide details about the team including profiles of each of your business’s founders, partners or officers and what kinds of skills, qualifications and accomplishments they bring to the table. It’s also important to give a detailed description of all revenue streams (product sales, advertising, services, licensing) and the company’s cost structure (salaries, rent, inventory, maintenance). Be sure to list all assumptions and provide a justification for them. Also, include names of key suppliers or distribution partners. And finally, you need to detail how much money the business will make, what sort of cash flow you’re expecting and where the money will come from.

The National Australia Bank recommends involving the team to develop the plan, keeping it realistic, avoiding overly ambitious sales targets, and explaining how you will position the product or service, your pricing policy, your distribution policy and sales methods. Also consider including a one-page analysis of Strengths, Weaknesses, Opportunities and Threats in your business plan (e.g strengths = brand name, weaknesses = lack of finance or dependency on a few customers, opportunities = increasing demand or a competitor going bust, threats = a downturn in the economy or a new competitor).