Thursday, 4 March 2010

Business Plans for Art Businesses Part 2




Further to my previous post "Business Planning for Art Businesses" I gave an overview of the business plan and WHY it is important to write one. In this post I will show you the kind of information your plan should include.

Your business plan should be concise and easy to read. Not everyone who picks up your business plan will want to read the entire document through, particularly if they have 20+ other business plans to consider (usually funders or banks). The business plan should always start with an "Executive Summary" - a short list of key points taken from the entire business plan. The Executive Summary will show the key features of your business, giving the reader an overview of what you do. The reader should know, from the Exec Summary, exactly what you do and what you want, without all the dressing.
When do you write the executive summary? Although this is the first part of the Business Plan it needs to be the part you write last so that you can pick out those key points from the rest of the document.
Start with an opening sentence that tells the reader what the exec summary will show, for example:
"This business plan will show that (name of business) is a viable business and that it can develop successfully".

Now you need to list those key points of
1. What you are doing successfully now and
2. what you will be doing to take your business forward.
You will take these from the remainder of your business plan, which is why you write the executive summary last.

You can also include a separate list of key points showing the reasons that you can run a successful business. For example:
"(Name of Business) will be a successful arts enterprise because..." then list the opportunities that will arise in the future.
At the end of your Exec Summary the reader should know exactly what you do without being bored with the detail. In fact, the reader should be interested enough to want to read the rest of your report.

Also, as part of your Exec Summary, the bank, funder or backer will want to see an overview of your figures over the next three years. You will need to show the following overall figures in the Exec Summary: Income, Expenditure, Outcome. List these in a grid and calculate them over the next three years. Forecasting your finances for the next three years isn't going to be an exact science so increase your first year's calculations by a reasonable percentage but be realistic. This is called a "Summatitive Table of Costs".

Income: how much money is coming into your business (sales, funding, loans, teaching workshops, services)
Expenditure:how much money has come out of your business (purchases, overheads, costs, travel, materials)
Net Income: how much is left after you have taken all your costs out of your gross income(profit)

On the same page as your Summatitive Table you will need to indicate to the reader that there is a comprehensive breakdown of costs at the end of the report. This will be in the form of an appendix.

Setting out the Summatitive Table.
You can set your costs out in two sections: CURRENT and PREDICTED. They should be listed in columns so that they can be read across from left to right.
The first column shows your business activity (such as sales, workshops, craft fairs, design services, commissions, paid employment, exhibitions etc)broken down into headings.
The next column should show a breakdown of the income for each activity.
The third column should show your expenditure.
The fourth column should show your net income.

If you are applying for a bank loan or funding don't be concerned that your Net income is 0. If you can prove that you understand your finances and that all money has been ploughed back into the business you should look, on paper, like a viable investment. However, if you are spending more than you are making or using your own cash "invisible money" to fund your business you will look like an amateur and not worth investing in.

In my next post we will look at your business products and services and your future vision for your business.

2 comments:

  1. Thanks for this post - I (fingers crossed) hope that one day i will be writing a business plan!

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  2. Great post, Jo - this is such an important step in overall business planning, and it's one which artists often shy away from. This is just another step to making a successful business out your art - thanks for explaining it so well!

    Kirsten

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