A good business plan guides you through each step of setting up and managing your business. It can help you find a new direction for your business or test the financial viability of your idea. Every business is different, and therefore you should tailor your plan to your needs and audience. No matter how small your venture is, your plan should include, at a minimum key strategy points, crucial milestones and essential projections, sales, spending and cash flow analysis. You should prioritise substance and leave out any empty gimmicks or unrealistic financial projections or milestones. This article shares tips and best practices to help you write a thorough and accurate plan for a New Zealand business and win investors and other stakeholders.
What Is a Business Plan?
A business plan is a crucial document for your business. You should not start running your operations without a business plan as this will help you avoid common causes of failure, such as not having enough capital or an adequate market. Your business plan should explain:
- the nature of your business;
- details of your offering, target market and competition;
- sales and profits forecasts;
- how much capital you require for startup or expansion and how you are planning to use it;
- your legal business structure, ownership details and key personnel; and
- whether you have obtained any patents, prototypes, or essential contracts regarding product development or conducted any marketing tests.
If you are putting together a plan for the first time, it is essential to understand how to write and present your content effectively. You want to engage your readers early in the process and be able to communicate succinctly what you need and why. For example, you may need a loan to buy new equipment, so how will you repay this loan and over what term?
Keep It Relevant
As with most content that you will produce throughout the life of your business, you need to write for your audience and therefore understand their needs. Your business plan’s target audience may include your potential investors, lenders, potential partners, employees, customers and suppliers.
For example, if you are writing a version of your business plan for a venture capital (VC) firm, you want to be concise, clear and convincing. VC investors are often busy, so your plan will likely only get a few minutes of their attention. You may want to use some visual representations of your data for impact, such as charts and graphs. If you are writing for an angel investor, prepare a brief, less formal plan to avoid sounding imposing. They are generally more informal and tend to trust their instincts over your pitch. Think like an investor, and write what they would want to see.
Continue reading this article below the formKeep It Concise – And Nail Your Pitch
When it comes to length, your business plan should convince your readers that you truly understand your market and have a strong execution strategy. Most business consultants agree on a minimum of 15 pages, and it should not take longer than 15 minutes to skim through.
The New Zealand business.govt.nz website provides a free business plan template. Make sure you tailor it to the needs of your business and audience, and ask a consultant or mentor to review it before you present it to your investors.
Do Not Make Empty Claims
Your prospective investors have likely read thousands of business plans and can easily recognise empty claims and gimmicks. If you state that your product has the potential to get 10% of the market in a specific timeframe, you have to support your assertion with carefully analysed data. Otherwise, prospective investors are likely to dismiss your business. For example, you should provide evidence of your customers’ acceptance of your product or service and the rate at which you can likely sell it.
Be Conservative
Be conservative and realistic when making financial projections and forecasts in your business plan. You should include five-year profitability forecasts to help your investors decide how much they want to commit and at what price. You should avoid relying on over-optimistic figures, as investors can quickly see through these. Talk to your accountant if you need help preparing your financial forecasts and presenting them in a standard format.
You should also be conservative when defining milestones. Being realistic will make your presentation more credible. Before you start, research and add a 15% buffer to your key milestones to avoid missing important deadlines.
Include Payout Options for Investors
Your investors need to feel comfortable that they can make an adequate return or when and how they could cash out. As a general rule of thumb, many investors want to get their money back within three to seven years. Therefore, you should briefly describe your plans to pay them out.
Have Your Key Legal Documents in Place
In conjunction with putting your plan in place, key legal documents such as documents recording your business structure, employment agreements with key staff members, contracts with third parties, terms and conditions of trade, and intellectual property must be properly recorded and registered in the background. Having these legal arrangements properly documented will minimise the risk for businesses. In the event of a dispute with other parties or customers, if there is no contract in place, this will create a lot of uncertainty for the business trying to navigate what process is to take place.
Additionally, if you are looking at approaching, for example, a VC firm, the VC will want to ensure that the key legal arrangements of the business have been properly recorded before making their investment. If the structure of the business and ownership of the business’s intellectual property is not legally sound, this can be a continual risk for the business and may dissuade a VC from investing. Although these legal documents do not need to be part of the plan itself, these arrangements must be properly documented so that your business plan is not subject to any unforeseen legal risks.
To protect your business, ensure supplier contracts meet your business’ needs. Our free Commercial Contracts Checklist will help.
Key Takeaways
Your marketing, operational and financial issues are unique to your business. Therefore, your plan should be tailored to your business needs and focus on areas of concern to your audience. Your investors rely on your plan to understand your business objectives and the capabilities of your management team and determine whether they can earn an adequate return for their investment. Your investors will also want to see that the business has its key legal documents in place, which minimises the risk of the business and, in turn, their investment. Therefore, you should keep your business plan relevant, concise, realistic and conservative to win your investors and other stakeholders.
If you need help defining your business’s regulatory environment or reviewing your business plan before presenting it to investors, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0800 005 570 or visit our membership page.
Frequently Asked Questions
Your plan should start with an executive summary that summarises your business, the problem that you are solving, your target market, and financial highlights. Think of it as a one-page pitch that will help your audience decide whether they want to continue reading or not. You should then go into more detail about your business, strategy, current and planned team, market and competitor analysis, strategy and budget, assets, financial plan, business continuity plan and legal and regulatory requirements. As a rule of thumb, your plan should not take longer than fifteen minutes to skim through.
You will use your business plan to test the commercial viability of your idea or to plan the next stage for your business. It will help you decide how much capital you need to fund your venture and whether you want to get funding from investors or a loan from a bank. Your plan can also help you attract talent for your management team or secure a deal with a new supplier.
From financing your operations to attracting talent, you will write your business plan to help you define and meet your goals. Therefore, your target audience will include investors, lenders, potential partners, employees, customers and suppliers.
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