Detailing your aims, ideas and research by writing a business plan will greatly boost your chances of success
What is a business plan?
Business plans describe your company, what you're aiming to achieve and how you'll do it. They help you to clarify your idea, identify potential problems, establish goals and measure your progress.
They're vital to secure investment, but can also convince customers and suppliers to support you. Business plans also provide a realistic assessment as to whether your idea is worthwhile, making them an essential stage of the start-up process. You should review and update your plan regularly.
This includes the plan's heading, plus a brief description. Also mentioned are the plan's author, the date, and details of circulation and confidentiality.
Tasked at grabbing the reader's attention and enticing them to continue, this highlights the plan's key content and purpose. Executive summaries are usually three or four pages long and written last. Summarise your company’s:
- product or service;
- mission statement;
- competitors and market opportunity;
- management structure;
- capital requirements;
- financial projections.
Here you should address your company's aims and objectives, converting them into measurable goals. You should also detail your business's offering, history and ownership structure.
The section also briefly describes the industry and its regulations, individual markets, present outlook and future possibilities. Make your competitive edge clear; detail what your customers will gain from your product or service. Also address how your business can be developed to meet changing needs. Be open about any weaknesses, as discussing anything that'll negatively affect your business inspires confidence.
Essentially a marketing plan, this section includes several components:
- Industry analysis and market research - It's vital to know that you've a group of buyers for your product or service. Become familiar with the market, so that the company can be positioned in terms of price and quality.
- Target market - Discuss which market segments you're pursuing, such as local customers or a particular age group. Indicate key characteristics of buyers, plus the size, growth and trends of each segment. Identify also how you'll recognise potential clients.
- Competitive analysis - Summarise your competitors' strengths and weaknesses, using this information as evidence to define your advantages. Consider also the barriers that can be developed to prevent others from entering your market.
- Existing customers and sales - Mention any customers that you've lined up or sold to. Also address how you'll sell to customers; for example, by phone, website, face-to-face or through an agent.
- Marketing goals - Consider the contribution to profit of each part of your business, if you have more than one product. Examine likely sales, growth, profit margins and costs, outlining any scope for future development.
- Marketing strategy - Address how you'll promote your product; for example, using advertising, PR, direct mail and email.
Management and operations
This section highlights how your business functions. You should detail:
- Management team - Highlight individuals' roles and responsibilities, plus their relevant skills and experiences. You should also mention the financial contributions, salaries and company benefits of each member.
- Capital requirements - Discuss the company's needs in terms of equipment, facilities and personnel.
- Logistics - Detail each division and their assigned tasks, addressing how you'll cover sales, finance, marketing, administration, stock control and quality control. You should also describe the systems and procedures involved in payment and delivery.
- Limitations - Highlight any potential limits to production.
Here you translate everything into numbers, addressing:
- the estimated costs of starting and running your business;
- any additional finance required;
- sales forecasts for the first year;
- profit and loss forecasts for the first three years;
- cashflow forecasts, showing that you've considered key variable factors such as sales revenue and wages.
List all of your key assumptions for each forecast; for example, prices and sales volumes. Small business advisers and your local business support organisation can help you put together your forecasts for free.
Consider any risks associated with running your business, plus the legal obligations surrounding insurance, licences, and health and safety legislation. Create what-if scenarios, and document your reaction in the form of backup plans. This will help you to minimise problems and build your credibility with investors.
The appendix organises copies of the business plan's essential supporting documents. These may include:
- credit history information;
- CVs of the management team;
- detailed cashflow plans;
- market research information;
- receipts and bank statements;
- tax returns.
Information is often highly confidential, so tailor your appendix depending on who is viewing your business plan. For example, potential investors need to know more than potential affiliates.