What is a business plan?
A business plan is a way of setting out the goals and objectives for your business in the medium to longer term (up to about five years). A good business plan will include not just financial projections but also:
who is running the business;
what skills and weaknesses and they have,
what the business is;
where it operates;
who will buy from the business;
how big the market is for the business;
what the risks are to the business, both in terms of income streams and also costs;
what the opportunities are for growth;
how you will get funding to cover the period until the business is established;
who the competitors are, their strengths and weaknesses;
how you will achieve success. This covers the detailed steps needed to set up (milestone planning) and also your measures of success. The latter can cover when you start breaking even, payback period, and also “softer” measures of success. “Softer” measures of success can be treating a certain number of people within the first year, obtaining a satisfactory, or better than satisfactory, rating from all of your customers, or other such measures that you wish to achieve.
Contents Of A Business Plan
Cover Page-name of business and address and contact details
Index/ Contents – if it is a long business plan
Section 1 – Executive summary
- description of business
- you need to give a brief description of the business including your unique selling point and your niche target market
- finance required
- you need to state what finance you are requesting from investors and what you are going to use it for.
The main types of finance are:
- for a company to issue shares to investors who will have some rights in the company and be entitled to share in the ongoing profit but also take some of the risks; this will not apply to most therapists as they do not set up as a company
- to obtain a bank loan. Banks do not share in the risks of the business, nor do they benefit from any increase in profit or suffer from any losses. They will charge a rate of interest on the loan outstanding, and demand repayment over a period of time. Interest on a business loan is allowable against tax but it also means it has to be paid out before any profits are distributed to the owners of the business. If a therapist has a business loan from a bank the interest and capital (loan) repayments will need to be included in the cash flow forecasts.
- To obtain a loan from friends and family. This is often the easiest form of funding to be obtained but can cause the greatest issues if anything goes wrong or if the investor feels they have a right to tell you how to run your business.
- Financial projections
Key highlights for profit and the payback period and breakeven should be included. Ideally figures should be for the next 3 to 5 years.
- Business differentiators
What makes the business different from the competition? In essence this is your USP. Your USP does not necessarily need to be anything too technical: it might be you are the only counsellor or psychotherapist in your area of town specialising in teenagers, for example.
- Business credibility
In essence, this should be about who you are. What are your qualifications, your track record, your skills etc. Do you have a list of the skills and specialities of other key people in your team even if they do not work for you full-time, for example, do you have a business mentor or bookkeeper?
- Prospects for the investor/lender
The lender will need to know when they’re going to get their money back with interest. As a sole trader therapist you will need to show to the bank when you will have repaid the loan and also that you have the funds to cover the interest throughout the loan period. Even if you have a loan from friends or family it is still useful for them to know when you consider you will be able to refund the money to them with any interest that you have agreed. Research shows that people who have lent money to somebody, remember very clearly when they are due for that money to be returned. Therefore, make sure that you give yourself enough time to pay back the loan.
Section 2 – Purpose of the business
2.1 Purpose of the business.
What are the objectives of your business and what are your values? As a therapist your “mission” (to use the jargon) may be to relieve people in your area from back pain or stress or whatever area you are specialising in.
2.2 business founders and skill sets.
Give a brief description of who you are, your skills, roles you are going to undertake and any past successes relevant to the business. It is important you identify achievements not just give chronological job descriptions. If other people are working for you, or with you, this is the place to describe their skill sets and their roles in the business. If there are obvious weaknesses in your management or business skills, you need to set out how you propose to deal with those weaknesses.
2.3 Competitive differential.
In essence how your business fits in with the market, how it is different and how it will be branded.
If you have a logo or trademark, this is the time to use it, stating how relevant that is in the market.
Section 3 – Products And Services
3.1 Product or service.
You need to give a simple description of your service and/or products. If you have developed a new methodology for provision of service (maybe you merge cognitive behavioural techniques with hypnotherapy for example, and you may want to brand that) state that and detail any trademarks or patent applied for.
3.2. Future growth
What other services will be developed or new products are being considered, what are the barriers to entry to the market, if any?
For future potential, how are you going to build your business? An investor will be looking for growth in value of the business. As an individual you can only work so many hours a week and therefore the maximum you can earn is the available hours multiplied by your charge-out rate. If being busy and earning that amount is your criteria for success that is fine. However, if you wish to grow your business you need to think how you are going to “leverage” your time or money by tapping into others resources. For example you may wish to set up a clinic and have other therapists who either rent a room or you employ; or you may wish to sell complementary products (aromatherapy oils, Chinese herbs, nutritional supplements, books, DVDs).
Section 4 – Markets
4.1 Geographic spread.
Where is the business located and how broad is its reach? For a clinic this would generally be a smaller catchment area than for someone who is mobile.
4.2 Market history.
What has the market been like in the past? Is it still growing or has it levelled out?
4.3 Market size.
What is the size of the market? This can be done in terms of potential customers, or analysed into sector in which the niche is positioned.
4.4 Possibilities of growth.
Although there are different growth models, successful businesses tend to go through a number of stages:
- generate repeat sales;
- find new customers;
- develop competitive advantage based on the unique selling proposition in the target market
- develop long-term relationships and networks. It is at this point the staff are usually recruited and the owner need to think more strategically about the business; where it is going and you may need to consider further funding. From the research that I have done therapists who are successful reach a stage where they can no longer take on more clients (or maybe feel they cannot take on more clients, due to the nature of the work). In order to grow the business a therapist must look at achieving different streams of income. This can be providing different therapies to existing clients, earning money from writing articles or teaching, and taking on additional therapists for example.
Who are your customers, how do they buy from you? What are their problems that you are trying to solve? Are they the decision-makers or do other people make decisions for them, for example parents?
4.6 Who are your competitors?
Where are they located? Taking two or three main competitors in particular look at their strengths and weaknesses, their competitive advantages, their market share, and a prognosis of how they are likely to respond to your challenge.
4.7 Market share.
What market share do you estimate your business will achieve? Obviously the more that you define your niche, the larger market share you can achieve.
Section 5 – Marketing
How do you intend to promote your services and what will it cost? For this you will need to have done some secondary research on the costs of various marketing areas such as advertising, discounts, getting flyers printed and delivered etc. You will need to show that you have explored different promotional methods such as:
using affiliates, and other methods appropriate for your particular marketplace.
5.2 Test and measure.
For every method of marketing and promotion that you do you should test the response rate and how many new clients you get from that (called the conversion rate in the jargon).
5.3 Sales pitch and benefits of the product or service.
What are the benefits of your products or services and how are you going to display that and market that?
5.4 Sales expectations.
How many clients do you expect to see and over what time period? Is the income likely to be seasonal? (For example as a sports massage therapist specialising in rugby players you may find you have a shortage of clients during the summer months, so you may also need to specialise in a summer sport such as massage for tennis players).
5.5 Market position.
What is your position in the marketplace in relation to the competition? What that means is: are you going for high-end, high-quality, high price or discount high-volume low price?
5.6 Prospective customers.
In your early market research how much interest has been shown in your therapy and by which type of customers?
5.7 Pricing. How have you arrived at your pricing? (see separate section on pricing and charging fees).
Section 6 – Operations
Where will you be based? How much will it cost? Do you need a license? Have you read through the contract? Is it short-term or long-term? Why did you choose the location?
Specify your sources of supply of key materials and equipment.
6.3 Information Technology
What is your information technology strategy? See separate section on websites.
7.1 Who are the business owners? What are their Curriculums Vitae ( Resume) (this should be included by way of appendix)
7.2 what are the skills and knowledge base of all staff and where are the gaps? How are these gaps going to be filled?
You will need to show your profit loss account, the contribution and breakeven analysis, cash flow analysis, sensitivity analysis and balance sheets for between three and five years. (See later module)
What are the assumptions that you have made in preparing the accounts?
What are the principal risks that could affect the figures?
What funds are required and when? What are the terms of the deal:
what interest rates are being charged;
is the loan fixed rate or floating;
what are the payment periods;
what guarantees are there?
what are the types of financing?
what ( or who) is the source of finance?
what is the exit route for investors?
8.5 Produce a SWOT analysis that is strengths of the business, weaknesses opportunities and threats (see later module).
9 Risks And Rewards
10 Objectives And Milestones
10.1 milestone plan (See template)
10.2 personal objectives
10.3 business objectives
Appendices can include any technical data market research reports, marketing plan, CV of owner or owners and detailed financial projections including cash flow forecasts.
Summary and Conclusions
It is worth while going through the process of doing the business plan yourself even if you do not have any investors as it should be clear to you by the time you’ve finished if you have a viable business or not, if, of course, you have realistic forecasts!
Three Questions You Need to Ask Yourself
At the end of the process you should be to answer the following three questions: 1 what is your business about?
2 how do you help people?
3 why should I buy from you?
If you are still not clear about each of these questions you need to do some more research before starting a business, if you are not going to waste a lot of time money and energy on a business that becomes another failure statistic.