Time Required to Produce a Business Plan

How long should it take to write a business plan and how should the time be allocated?

Some useful answers to these questions can be gleamed from an ongoing survey being conducted by PlanWare amongst people who have prepared written business plans.

Based on over two thousand responses, more than one-third (38%) of the respondents spent less than a month on their plan; a similar proportion (37%) worked on their plan for 2-3 months; and the balance (25%) spent several months on the task. More detailed analysis of these findings indicated that:

• The elapsed time to prepare comprehensive plans was considerably longer than that for basic plans.


• Over one-third of all plans compiled within an elapsed time of one month were used to seek bank
  loans or approvals from shareholders/directors, or they were compiled for internal/personal use.


• About one-third of all plans used to raise venture capital/equity took least three months to research and write.

The survey also showed that the task of actually writing the plan was usually the least time consuming part of the planning process as almost two-thirds (63%) of respondents spend more time researching than writing their plan. For a fifth (21%) of respondents researching and writing times were about equal. Only a small minority (16%) undertook little or no research before drafting their plan.

For more findings, see a detailed analysis of the survey findings and the latest survey results.

Making Better Cash Flow Forecasts

"Cash is the lifeblood of every business" and "more businesses fail for want of cash than lack of profit." These may be cliches but they are very, very true.

A key element of controlling cash is to forecast cash flows and requirements. This entails forecasting and tabulating all significant cash inflows relating to sales, new loans, interest received etc. and then analyzing in detail the timing of expected payments relating to suppliers, wages, other expenses, capital expenditure, loan repayments, dividends, tax, interest payments etc. The difference between the cash in- and out-flows within a given period indicates the net cash flow. When this net cash flow is added to or subtracted from opening bank balances, any likely short-term bank funding requirements can be ascertained.

Typically, a spreadsheet-based plan can be used to compile cashflow forecasts, assess possible funding requirements and explore the likely financial consequences of alternative strategies. Used effectively, this plan can help prevent major planning errors, anticipate problems, identify opportunities to improve cash flow or provide a basis for negotiating short-term funding from a bank.

When planning to seek external funding, the time horizon covered by the forecasts should be equal to or greater than the period for which the funding is needed. The greater the amount of funding required and the longer the period of exposure for the provider of these funds, the more comprehensive must be the supporting projections and plan.

For short-term cash planning you should make assumptions on sales, costs, credit, funding etc. to produce monthly cash flow projections for up to a year ahead. Initial assumptions can be readily altered to evaluate alternative scenarios. For example, the plan could be used to explore the extent to which future sales could be increased whilst holding bank borrowings within predetermined limits; to assess the effects on cash flow of varying sales, costs or credit terms; or to determine the likely short-term funding requirements for a business.

Our Exl-Plan range of financial planners generate fully integrated profit & loss accounts with cashflow statements and balance sheets for up to five years ahead and Cashflow Plan is a specialist cashflow planner covering 12 months ahead, with weekly projections for the initial three months.

Sound Market Analysis is key to a sound Business Plan

The Market Analysis section of a business plan is very difficult to prepare especially for start-ups or established businesses diversifying in new (to them) markets. These difficulties will be compounded, due to an absence of any reliable data or evidence of likely demand, for businesses entering completely new markets or launching radically new offerings. Nonetheless, this section is critical as it underpins the business plan and demonstrates that the promoters have done their homework and know their marketplaces (at least as well as the incumbent players or other new entrants). If this section is unclear, vague or superficial, it begs the question as to whether there might be any real, sustainable demand for the proposed offerings.

Use this section to profile target markets based on market sizes, segments, trends, competition and user/customer profiles. Allow about three-six pages for this most important part of your plan. In most cases, it is very desirable that all detailed market research (field and/or desk) and analysis be completed before this section is written. If research reports or detailed findings are available, refer to their detailed findings in appendices or include them as annexes to the plan.

You will need to analyze the market in fair detail to dig down to your actual target market segments which you can then explore in depth. You will also need to consider competition, customer/user categories and so on. Create simple tables to show how market sizes, segments and shares are likely to move in the future after your entry/growth.

Avoid at all costs generalized statements like "we aim to achieve xx% of the xx market within three years". Instead, build up your projections from sound analysis/research and detailed assumptions (number of outlets, customers, consumption and so on) based on clear marketing and sales plans.

For more information and insights, see Profiles of Target Markets and Marketing Strategies, Sales Plans & Projections within our detailed Business Plan Guide.

Get a Vision & Mission before you Plan

Before starting to write a business plan, you must have established a clear vision and direction for the business. Without these, your detailed plan will lack focus and it will roam around in whatever direction
your latest idea or your keyboard (or pen) takes you. Instead, you need to start with some serious strategic thinking about a vision and mission.

First, you need to develop a realistic Vision for the business. This should be presented as a pen picture of the business in three or more years time in terms of its likely physical appearance, size, activities etc. Answer the question: "if someone from Mars visited the business, what would they see (or sense)?" Consider its future
products, markets, customers, processes, location, staffing etc. Here is a fictitious vision:

AnyBiz will be operating from a xxx sq. ft. unit near xxx Town. It will have annualized sales of $xxx and be profitable. It will employ xxx people mainly engaged in R and D, marketing, support and admin.
AnyBiz will offer xxx core products and provide added-value services to a large customer base throughout the xxx market segments and in xxx countries overseas. AnyBiz's offerings will be technically advanced
and offer many clear-cut advantages and improvements over competitors' possible offerings. AnyBiz will continue to expand through organic growth and acquisitions in related technology/market segments. It will have recently received mezzanine finance prior to a public offering.

Next up is a Mission statement. This indicates the purposes of the business, for example, "to design, develop, manufacture and market specific product lines for sale on the basis of certain features to meet the identified needs of specified customer groups via certain distribution channels in particular geographic areas". A statement along these lines indicates what the business is about and is infinitely clearer than saying, for instance, "we're in electronics" or worse still, "we are in business to make money" (assuming that the business is not a mint !). Here is a fictitious mission statement:

AnyBiz designs, develops and markets advanced systems for specialist data capture and transaction processing management. These web-based systems work with specialist hardware supplied by major integrators. They are sold to small, medium and large-sized companies within the xxx industries for a range of specialist applications. AnyBiz's systems are distinguished from competition by their sophisticated interfaces, scalability and ease of modification and are extensively patented. Sales are made directly and through major distributors/OEMs in the home market and overseas.

For more help on preparing a strategic plan, see Developing a Strategic Business Plan, Devising
Business Strategies and the free On-line Strategic Planner for creating a 3-page strategic plan.