Demystifying business plans

All businesses have to plan for the future. Smaller businesses may carry out their planning in a very basic way, whereas larger businesses may have sophisticated planning tools and processes. However, even small start-ups need to be able to describe what they plan to do in the future and to develop a business model. The purpose of developing a business plan could be to obtain finance and other support, such as government grants. As a lawyer working in business, it is important to be able to understand business plans so that you can contribute to the decision-making process and assist with progressing any commercial proposal based on the strength of the supporting business plan. 

The key elements of a business plan

The key elements of any business plan are:

• Project planning.
• Business analysis.
• Business case development.

The aim of the process is to translate the objectives of a business into a financial model and to test key assumptions to evaluate whether the project is worth doing, what it will need to succeed and most importantly, whether it is likely to be successful. The financial model will be based on market analysis of competitors and customers, the relevant business market, the strengths and weaknesses of the business, and assumptions about the future including economic factors and interest rates. 

The key is to know how to evaluate financial information and spreadsheets. There are specialised software packages for writing business plans, but many businesses simply use a standard spreadsheet package such as Excel for their financial planning and modelling. It is important for a lawyer to be familiar with the use of spreadsheets so that even if you are just the recipient of a financially modelled business plan, you will be able to read it properly and test it for viability. This will give you a greater sense of understanding of the business in even more detail.