Self-employment : Business plans

Why write a business plan?

Your business plan is the framework for your business idea. You need a business plan in order to gain credibility, obtain funding and manage risk.

Your business plan describes the aims and objectives of your business, its market, strategies and financial forecasts. Generally, a plan highlighting your intentions and ambitions over the next three years will suffice to begin with.

The process of preparing the plan will enable you to evaluate the feasibility of your idea and focus your mind on how to make your business a success. It will become a sales tool, help raise funding, attract potential business partners, suppliers and clients or even persuade reluctant parents. Your aim is to persuade readers that your idea is viable and that you (and your possible partners) have the necessary motivation, skills and business acumen to succeed.

What should it include?

There are many different templates for business plans, and terminology varies, but generally you should include the following:

Executive summary: a concise overview of the key points and features of your entire plan. It needs to be attention grabbling and interesting and ideally no more than two pages in length. Whilst the rest of the plan will change frequently over time, this summary should remind you of what you set out to do and why.

Business concept: a summary of your business track record and an overview of the business’s aims, what it will provide and what the benefits are to the customer.

Business ownership: detail what type of business it is (sole trader, partnership, etc.) and list all of the key people involved in the business and their relevant experience, knowledge, skills and accomplishments.

Market summary: evidence that a market exists for your product or services. Describe three key areas of the market place - its history, current performance and forecasts. Review changes in market share, leadership, market variations, costs, pricing, competition and related opportunities relevant to your company’s success.

Competition: a summary of your competitors, their reasons for success or failure. Demonstrate how your business will be different, i.e. outline your company’s competitive advantage.

Goals and objectives: demonstrate that you have clearly defined SMART goals that are:

• specific; 
• measurable;
• achievable; 
• realistic;
• time-framed.

Include short, medium and long-term goals that describe specific measurable objectives such as market share and revenue/profitability. Break these down further to highlight how you will achieve these objectives.

Financial plan: definition of relevant financial factors, including pricing assumptions, cash flow, expected sales and profits for your first three to five years of trading. Greater detail is needed for the initial 12 months. Include any financial assistance the business needs (loans, overdrafts, directors’ capital) and demonstrate your business’s ability to repay any borrowing required.

Resource requirements: details of what the business needs to start and grow, including:

• technology: machinery, photocopier, tools, computers;
• personnel: business skills, specialist staff, operatives;
• external resources: suppliers and products/services outside the company;
• other: e.g. distribution, financial, legal, promotion/marketing, professional membership subscriptions and licences.

Risks: all successful entrepreneurs are able to identify, understand and plan for the risks they face in running a business. Examples include competition, advances in technology, legislation, a lack of funding, skills shortages, fire or theft. Describe such risks and their potential effects on your business and propose a response to mitigate possible damage.

Annex: any additional details you think will add value to your plan, such as:

• full CVs of the management team;
• promotional material;
• market research results and reports;
• competitor materials;
• details of premises and equipment sought.

It is important that you are comfortable with and understand the terminology you use. This is crucial for gaining and maintaining confidence in your stakeholders. Asking questions at the beginning will significantly increase your chances of success.