A business plan is probably the most important first step in starting your new company. That’s because it helps you set out your goals and expectations, as well as how you expect to achieve them.
It can be a vital tool in helping you access finance or find investors, but most of all, it focuses and refines your own ideas and objectives.
It should be a straightforward document, plainly written, which describes the business, its strategies, markets and financial forecasts.
Writing the plan will help you focus on specific aspects of the business and give you an important document to help secure finance and support.
In this guide we’ll give you all the tools you need to get your business plan sorted, including:
- Why you need a business plan
- How to write a really simple business plan
- How to write a detailed business plan
- Common mistakes when writing a business plan
- How to present your business plan
Why you need a business plan
Unfortunately, most business people and department managers never prepare a proper business plan. Of those that do, most only do it for ‘special’ occasions, like starting the business, launching a new product or raising capital.
But a business plan should be much more than a document to impress outsiders! Used properly, it is a catalyst for creative thinking and hence a vital tool to help you develop a healthy business.
“A plan is also proof – or not – that you fully understand your business and are going into something with your eyes open,” says bank manager Aled Morris. He turned down a request for a loan to buy a business for this reason.
The applicant in question had worked as a manager in a shop for two years and now wanted to buy out the owner. “It wasn’t simply that he had no business plan,” adds Morris. “I wanted evidence that he had considered all the implications of running the business himself. He thought he could just take over and carry on as before, even though he had no experience of some vital aspects of running a business.”
A good business plan shapes realistic goals and ambitions for your company, gives you guidelines on how to achieve those goals, and is a clear sign to lenders and investors that you really understand your company, product and market.
How to write a really simple business plan
The key to easy business plans
The key is to make your plan short, clear and realistic so that you or your management team actually uses it. You can always put any details in an appendix for reference when needed.
The recipe for success is to map where the business is now, where you want it to be and how you will get there, onto one page. It’s easy if you know how.
The simplest business plan in the world
Take a sheet of A4 paper and divide it into four boxes. In each box, in bullet form, outline the information below:
- Where you stand now as far as any particular project is concerned in terms of, say, employees, customer profile, media profile, turnover, profit, employees and so on
- Where you want to be by a specific date
- What needs to be done to get you where you want to be, covering every aspect of your business, from hiring people and improving your PR profile to investing in technology or training
- The to-do lists based on these strategies: who will do what, by when?
A good plan with short- and long-term goals helps you aim for the bull’s-eye. If you know where it is, you have a chance of hitting it. Otherwise, you are just shooting in the dark.
How to write a detailed business plan
A simple business plan can work wonders. But sometimes going into more depth really helps you flesh out your plans and ambitions for your company.
An in-depth business plan needs to include:
- An executive summary – an overview of the business
- A short description of the business opportunity – who you are, what you plan to sell or offer, why and to whom
- Your marketing and sales strategy – why you think people will buy what you want to sell and how you plan to sell to them
- Your management team and personnel – your credentials and the people you plan to recruit to work with you
- Your operations – your premises, production facilities, your management information systems and IT
- Financial forecasts
The executive summary
This is crucial. The executive summary is basically a synopsis of the key points of the whole business plan. Many judgements about loans, backing etc. are initially made on the basis of this section alone. Keep it interesting and short – no longer than two pages. It should sum up:
- Your product or services and its advantages
- Your opportunity in the market
- Your management team
- Your track record to date
- Financial projections
- Funding requirements and expected returns.
Even though it’s the first section of your business plan, it’s actually a good idea to write this section last.
That’s because it needs to sum up all the other sections – and you’ve not written those yet!
If you do decide to write your executive summary first, don’t forget to come back and give it a good edit after you’ve completed all the other sections, just to make sure it fully covers all the essential points.
The business opportunity
This section should include an overview of your business, including:
- When you started or intend to start trading and work carried out to date
- The type of business and the sector it is in
- Any relevant history or experience, if you acquired the business, who owned it originally etc.
- Whether the business structure is a Sole Trader, Limited Company or Partnership
- Your vision for the future
In this section you should also describe your products or services. Try to keep it nice and simple, but also include:
- What makes it stand out from other products or services
- What benefits it offers
- Why customers would buy it and what they would gain
- How you plan to develop your products or services
- Whether you hold any patents, trademarks or design rights
- The key features of your industry or sector.
Marketing and sales strategy
Market and competitor research
In this section you should define your market, your position in it and outline who your competitors are. Refer to any market research done and show how large the sectors are, important trends and the reasons behind them, key characteristics of buyers and customers you already have.
Key areas to cover include:
- Your market – its size, historical data about its development and key current issues
- Your target customer base – who they are and how you know they will be interested in your products or services
- Your competitors – who they are, how they work and the share of the market they hold. List the advantages and disadvantages of all your competitors and their products
- Why customers will come to you
- Anticipated changes in the market and how you expect your business and your competitors to react to them
Sales and marketing plans
This section often gives a good indication of the company’s chance of success. It should include:
- How you plan to position your product or service in the marketplace. Show your prices, quality, response time and after sales service
- Buyer personas. These identify who your customers are, with an idea of demographics, details of customers who have shown an interest in your product or service, and how you will plan to attract new ones.
- How you will promote your product or service, e.g. through direct marketing, websites, advertising, PR, email, ecommerce
- Your sales strategy – including sales methods (by phone, via a website, face-to-face or through retail outlets), how long each sale will take, whether you expect repeat sales
Management team and personnel
If you’re planning to have employees, you’ll want to identify key skills of management and staff:
- Define each management role and who will fill it
- Show strengths and outline how you will cope with any weaknesses – e.g. through training
- Describe background and experience of each member
- Describe how you cover key areas of production, sales, marketing, finance and administration
- Outline management information systems and procedure – e.g. accounts, sales, stock control and quality control
- Outline any external help, mentors or support you may have
This section covers the practicalities of running your business, such as facilities and infrastructure.
- What facilities does the business have and how will it deliver the product or service to the customer
- Show pros and cons of location, whether owned or rented
- Indicate if you need facilities, equipment or machinery and consider potential limits to production capacity
Management information systems
- Have you got established procedures for stock control, management accounts and quality control?
- Can they cope with any proposed expansion?
- Strengths and weaknesses, reliability and planned development of systems, software, websites or apps
Forecasts should be for three to five years, with the first 12 months being as detailed as you can manage. You should include:
- Cash flow statements – your cash balance and monthly cash flow patterns for at least the first 12 to 18 months. The aim is to show that your business will have enough working capital to survive so make sure you have considered the key factors such as the timing of sales and salaries
- Profit and loss forecast – a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads
- Sales forecast – the amount of money you expect to raise from sales
Common mistakes when writing a business plan
Overestimating your opportunities
A common mistake when preparing a business plan is building a financial forecast from the top down. People start by saying how much they want to earn, add in the costs, then work out how much they must sell.
Instead you should be thinking: my research shows that the market is this big. If I can sell to 5% of that market I will make this much, and this is how I will persuade that 5% to buy from me.
Making your business plan too complex
“A business plan also provides a structured framework to consider even the mundane areas and gauge their impact on your business,” says Margaret Bowler of accountants Kidsons Impey.
“However, some businesses become bogged down in vast plans that look at everything in minute detail. These documents end up being ignored because they are too daunting to read – assuming they ever get completed!”
How to present your business plan
Keep it short and professional, but make sure that anyone reading it can understand what you mean. It’s much better to keep your business plan simple and straightforward rather than trying to use complex language just because it seems more impressive.
Include a cover and a contents page and number all sections so it’s easy to find each individual section. And always start with the executive summary – even if it was the last section you actually wrote.
Edit carefully and get others to read it for sense and mistakes. It can even be helpful to read it out loud to make sure it’s crystal clear.
And lastly, your business plan isn’t just the first thing to cross off your startup checklist, it’s a living document that should grow and develop as your business changes. So it’s a great idea to regularly review and update your business plan.
Not only can it be helpful in a practical sense, but it can help you understand and evaluate where your business is, and where it could go.