Background

This is where the backer is introduced to the business, where you set out clearly and concisely what makes the business tick. We’ll discuss this under five headings:

• ■The opener
• ■Goals and objectives
• ■Strategy
• ■Resources
• ■Basic financials.

The opener

Here, in one paragraph, should be the essence of your business. Or your business proposition, if it is a start-up.

It will form the first paragraph of Chapter 2 of your plan, but the reader will have seen it before. It will be reproduced, word for word, as the first paragraph of the executive summary in Chapter 1 of your plan.

This is because all the essential bits of information will be in that paragraph. It will include:

• ■who you are – the name (or code name, if yours is a confidential plan) of your business
• ■what products or services it focuses on
• ■which main customer groups your business serves
• ■where it is based, where else it has operations and where it sells
• ■with what success, in terms of revenues and operating margin (operating profit divided by sales), and by which year.

Let’s look again at the opening paragraph of the executive summary for the Dart Valley Guest House and Oriental Spa:

‘The Dart Valley Guest House and Oriental Spa (‘Dart Valley’) is a destination with a difference. It is set overlooking a spectacularly beautiful valley in South Devon and yet offers visitors a touch of the Orient in its rooms, cuisine and spa. It has 17 rooms for hire, with spa and restaurant facilities also open to day visitors. It turned over £513,000 in 2021, having grown by 36% per year since 2019, and operating margin is expected to top 20% in 2022. Further investment of £1.05 million in a 16-room extension and a swimming pool is forecast to double sales by 2026 and boost operating margin to 34%. Opportunities to exploit a proven concept outshine risks of cost overrun or slower build-up of occupancy.’

That’s all you need at this stage – an elevator-speech type of introduction to the business and the plan.

Next, you set out briefly how the business has evolved over time in terms of its goals and objectives, strategy, resources and financials. There is no need for a separate section on history, but rather all these sections should track key historical developments inasmuch as they are relevant to the company’s situation today.

Goals and objectives

We could debate endlessly on how a company should articulate with pure strategic clarity its vision, mission, aims, purposes, goals, objectives, values, beliefs, principles, and so on.

Fine in theory, but, in practice, by the time you have grappled with all the definitional nuances, by the time you will have split a salon full of hairs, the business plan will be out of date!

This is an essential guide; 99% of small and medium-sized enterprises (SMEs) won’t be bothered with this kerfuffle.

So, here is what you should use: goals and objectives, full stop.

A goal is something your business aims to be, as described in words. An objective is a target that helps to measure whether that goal has been achieved, and is typically set out in numbers.

One of your goals may be for your business to be the most customer-centric supplier of your services in the North of England. Objectives to back up that goal could be the achievement of a ‘highly satisfied’ rating of 30% from your annual customer survey by 2024 and 35% by 2025, with 80% ‘satisfied’ or ­better by 2026.

Or you may aim for your business to be the Australian market leader in a key segment, with measurable supporting objectives being 40% market share by 2024 and 45% by 2026.

Goals are directional, objectives are specific. You may have come across the useful acronym SMART for setting objectives, which stands for specific, measurable, attainable, relevant and time-limited.

The best objectives are indeed SMART – as exemplified above: specific (a market share target in that segment); measurable (market research to which you subscribe will reveal whether the 40% by 2024 is met); attainable (you are at 33% now and your new product range has been well received); relevant (market share is a good indicator of strategic progress); and time-limited (2026).

So, what about all these other terms, you may ask, shouldn’t they also slot into the plan? Suppose your backer wants to know, for instance, what your company’s mission is (unlikely, but possible)? Here’s a guide:

• ■Mission – in theory, what sets your business apart from the rest of the competition; in practice, you can treat this as a goal.
• ■Vision – in theory, where your business aims to go or become; again, you can also treat this as a goal.
• ■Aims – they can be taken as roughly synonymous with goals.
• ■Purposes – ditto.
• ■Values – in theory, a set of beliefs and principles that guide how your business should respond when there are moral, ethical, safety, health, environmental or other value-related demands on the business that may conflict with the goal of shareholder value maximisation; in practice, this tends to be obvious in most SMEs and should only form part of the business plan if there is a serious conflict – and then its resolution can be identified as a separate goal.

What were the goals and objectives of your business when it started? Were they met? How have they evolved over time to what they are today? This is what you should describe here briefly, particularly if these goals and objectives are still of relevance to the issues in the business plan of today.

If your business is a start-up, what are your goals? What SMART objectives have you set towards the achievement of those goals?

Strategy

This is where you set out your company’s competitive advantage and what strategy you deploy to sustain and enhance it. We’ll go into strategy and its definitions in more detail later (see Chapter 5) but, for the time being, just set out here, in summary, how the company has maintained its competitiveness over time, including in response to any adverse circumstances.

If your business is a new venture, what is your strategy for creating a sustainable competitive advantage in the marketplace you are targeting?

Resources

You will describe in detail the resources deployed by your company in Chapter 6 of your plan. Here, in just three or four paragraphs, you will distil the essence.

How have the resources deployed developed over time? This is where a timeline chart can be most useful to the reader. Many are the times when reviewing a business plan that I have skipped the words in this section to focus just on the timeline chart, which should highlight neatly the main resource-impactful events in the company’s history.

Resources covered in the timeline chart could include the following:

• ■location and scale of main business infrastructure, e.g., office headquarters, manufacturing facilities, distribution depots, IT centres
• ■notable landmarks, such as the tenth or one hundredth employee hired, French agent engaged, US subsidiary launched, patents approved
• ■acquisitions – of key people, assets, companies.

If you are starting a new venture, address the basics: Where will it be based? What space will you require, what physical assets, how many employees, what systems? Who will manage?

You should include one paragraph on the management team. It is a truism that investors back people, not businesses. Your backer will want to know the credentials of the people heading operations, IT, sales and marketing and finance – as well as yours as managing director. They will also want to know how any changes in management over time have impacted on performance in the past few years.

If it is just you in the business at present, as a sole trader, what do you bring to the table in promoting this venture? Will you be contributing transferable experience and capabilities in addition to coming up with the business concept?

Finally, this is where you should add a sentence or two on how the ownership and governance of the business has evolved. A summary is fine for the time being – if ownership and governance are complex, they will be dealt with further in Chapter 6.

Basic financials

In the opening paragraph, you have already set out the turnover and operating margin of the business for the latest financial year. Here is your chance to summarise recent financial history, showing the financial impact of key developments at the company or in its markets over time.

Again, at this stage, aggregate numbers from the profit and loss account, preferably just sales and operating margin, are the only level of detail needed. Balance sheet and cash flow data can be left for the detail of Chapter 7. There is one exception to this: if a significant item of capital expenditure has influenced performance in recent years, you should highlight it here.

If yours is a start-up business, you will have no sales history to set out here. But you will surely have incurred some costs, probably self-financed, and this is a good place to summarise them – as well as specify how much time you and your partners have invested thus far.