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How to write an effective business plan

Related tags Management Economics Executive

A well-prepared and well-researched business plan is crucial to secure funding

With most banks seeing hospitality as a high risk sector, a business plan is a critical document that potential lenders will interrogate in depth. Shirley Smith, a partner at hospitality business advisers Reeves, highlights key points that will improve your chances of securing funds.

Problem: "I want to expand by business by turning outbuildings into further guest accommodation, but I am uncertain as to what to include in my business plan to present to banks to obtain funding for my expansion plans." Anonymous.

Solution: A business plan is effectively your sales pitch for funding.

Banks will be looking for a well prepared, well researched and realistic business plan which clearly demonstrates your track record and ability to make the repayments on their financing.

You will find websites that give advice on the structure of the plan, but it is advisable to get professional help to assist you in the preparation of the details and the financial forecasts.

The seven main areas you should include in your plan are as follows:

Executive summary – start by clearly stating the purpose of the plan, in your case to fund expansion plans. Include a brief description of the business and details of the funding required.

Background and overview – include a description of the history of the business, when first established and major achievements to date to demonstrate a track record.

Marketing and promotion – the market analysis should show the present market, economic factors, competition and customer profile. It should also include details of your target market and promotion plans to maximise occupancy of your expansion.

Products and services – include a profile of your current accommodation offerings and how you expect the expansion to change this. For example, if the additional accommodation will open up opportunities for conferences and weddings.

Human resources – detail your management team and their skills and attributes. Don’t forget to include what extra resources you will need after the expansion.

Physical resources – include the details of the new accommodation here, the furnishings and the ambiance being created, which should help the reader visualise the target guest market.

Financial evaluation – summarise the results for the past three years, including commentary on the trend of the results. Give honest reasons for any obvious areas of under-performance and how these have been addressed.

Then project the profit and loss for the next three years following your expansion plans. Again, give commentary on any projected increase in turnover and expected profit. Include a sensitivity analysis here showing key assumptions such as expected occupancy rates and gross profit margins.

Appendices may also be included. Detailed plans that you have prepared can be included here or perhaps some draft marketing and brochures for your vision of the new accommodation.

One last thing, get someone to look over it for you before you present it to the bank. They may be able to point out some important ‘what ifs’ or perhaps add some useful ideas for the successful use of the new guest rooms. Oh, and good luck with the funding.

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