Writing a successful business plan
All successful businesses start with a strong business plan. Also known as a business proposal, this document helps attract investors and customers alike by demonstrating your knowledge, passion and drive
Writing a business plan is essential when starting your own business, but what is a business plan and why do you need one? Well, a business plan describes your company, what it aims to achieve and outlines how it'll achieve it. It helps you to clarify your ideas, identify potential problems with your business model, establish short and long-term goals and, over time, measure your company's progress.
A business plan is vital if you're looking to secure investment, but it can also convince customers and suppliers to support you. You should update your business plan regularly, tailoring it to its intended reader as you would a CV and cover letter. Here's a suggested business plan template to get you started.
After the title page - which includes the name and business address of the author, the date of publication, and details of the plan's circulation and level of confidentiality - you'll present your executive summary. Bear in mind that this is the last section of the business plan you'll write, because its job is to grab the reader's attention by summarising what will follow.
Over three to four pages, briefly highlight the key purpose of your business plan and summarise the capital requirements, financial projections, and management structure of your company. You should also provide details of your competitors.
When writing a business plan, your focus throughout should be on highlighting how your product or service takes advantage of a significant market opportunity.
Begin this section by addressing your company's products and services, before going into greater detail about its aims and objectives. Expand on the history of your business and explain its ownership structure. You should also mention what type of business it is.
An overview and outlook of the industry should be included, covering details of any relevant regulations and specific markets of interest. However, this information will be expanded on in the market analysis section, so keep it brief.
Finally, address how your business can be developed to meet future needs or changes, and admit any weaknesses that it may have. Being open in this manner will inspire confidence.
Essentially a condensed marketing plan, this section focuses on several factors:
- Market research - It's vital to know that you've got a group of buyers for your product or service. Become familiar with the market and job sector as a whole, so the company can be positioned appropriately in terms of price and quality.
- Target audience - Discuss which market segments you're aiming to pursue, such as local customers or those of a particular age group. Indicate the key characteristics of your typical buyers.
- Competitors - Summarise your competitors' strengths and weaknesses and consider how you can prevent others from entering your market space.
- Existing customers and sales - Mention any customers that you've already lined up and address how you'll sell, whether it's over the phone, on your website, face-to-face or through an agent. In addition, if you have more than one product or service, consider the contribution of each to your turnover.
- Marketing strategy and goals - Address how you'll promote your product. This may be through means such as advertising, public relations (PR), direct mail or email. Examine likely sales, growth, profit margins and costs.
Management and operations
This section explains how your business will function. You should detail the:
- Background, experience, and training of the 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, insurance, and personnel, before highlighting any potential limitations to production.
- Logistics - Detail each division and their assigned tasks, addressing how you'll cover sales, finance, marketing, administration, stock control and quality control. You should describe the systems and procedures that will be involved in all aspects of production, from the customer's initial payment through to transport and delivery, including detailed information on your suppliers.
In this section, you must translate your company's aims and objectives into measurable goals. This means providing numbers including:
- the estimated costs of starting and running your business
- how much additional finance you require, plus what it will be used for
- sales forecasts for the first year
- profit and loss forecasts for the first three years
- cash flow forecasts, showing that you've considered key variable factors such as sales revenue and wages
- your budget and pricing strategy.
Be aware that you should justify any assumptions that you've made when reaching each forecast.
Consider any risks associated with running your business, plus any legal obligations surrounding factors such as insurance, licences, and health and safety.
You should also create detailed 'what-if scenario' backup plans, documenting how you'll react to issues that may arise. Not only will this help you to minimise risk, but you'll enhance your credibility with potential investors by showing that you've thought about your business plan from every angle.
The appendix of a business plan features copies of essential supporting documents, such as:
- credit history information
- detailed cash flow plans
- detailed CVs of the management team
- market research results
- receipts and bank statements
- tax returns.
Much of the information contained within your business plan will be highly confidential. You should therefore tailor your appendix depending on who is receiving your plan - potential investors, for example, will expect to find out more than potential affiliates.
Overall, your business plan should be clear, concise, and realistic. If it's too long, or your objectives are too ambitious, it won't be read fully or taken seriously. Keep your audience in mind, using non-technical language where possible to be more readily understood, and ensure the points you make are logical, sound and backed up with explanation or evidence.
Find out more
- Find out whether self-employment is right for you.
- Learn more about freelancing.
- Discover things to avoid when starting a business.