A business plan is an essential document that helps turn an idea into an actual business. It guides you through every stage of setting up and running as it outlines what actions you need to take in order to successfully launch and grow your business.
But can you believe that two-thirds of small businesses don’t have a complete business plan?!
This time we would like to help you write one yourself! So have a read through and find out not only what elements should be included in a business plan but also the ways to approach it and the benefits of having one.
The benefits of a business plan
It gives you clarity
A detailed business plan can help you make the right decisions. Once you do in-depth market research, set your objectives and identify the risks, it’s easier to plan your actions and make decisions as you know what you need to focus on.
It helps you secure funding
Most times investors or banks want to see a well-researched detailed business plan before investing. It helps them understand how you operate your business and what your cash flow predictions look like, so they know whether they will receive a return on their investment.
A business plan can help you secure great talent
If you need to hire someone at the very begging of your journey, it can be difficult to attract the best people as they don’t know if your business has the potential to succeed. When you have a business plan, you can prove to them how you’re going to achieve that success. And even if you’re thinking of employing someone only when your business expands, your employees will want to know the company’s vision and objectives.
It lets you predict future scenarios
Many businesses fail because they can’t adapt quickly enough. When you write a business plan, you identify the risks which means you can prepare for them before things even happen. The worst-case scenario might never happen but it’s always better to be prepared!
How to approach a business plan
Writing a business plan isn’t a one day job. Well, it could be. But the chances that you write a good one that quickly are very low. That’s why the first step of writing a business plan is actually taking time to do it.
Don’t rush and take one step at a time. While some sections can be easy to complete, others require more effort and in-depth research.
Another thing to think about before you start writing your business is the reason why you’re writing it. For example, if the main purpose of it is to secure funding, you need to find out what potential investors want to know about you and your business. This way you know how to meet their criteria and are likely to get that investment.
Moreover, when writing your business plan, you must be honest, present your ideas clearly and show credibility by validating your decisions. Also, you need to make sure that any figures included in the plan match those in the financial forecasts. Many new entrepreneurs lose the credibility of their business plans simply because those figures don’t match.
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What should be included in a business plan?
There isn’t one right way to write a business plan. If you did a quick search online, you would find hundreds of templates and prewritten examples that can help you write your own business plan. The structure you choose can also depend on the type of your business and the stage your business is at. However, the following headings cover the essential elements that should be included in any business plan.
This is a brief overview of the rest of the plan and it should be no longer than two pages long.
The executive summary is the first thing that a potential funder will read. That’s why it’s very important that it’s clearly written and engaging. You need to prove to the reader that your business is interesting and you have the passion, right skills and experience to run it.
When writing an executive summary, you need to include information such as:
- A brief insight into you, your current personal circumstances and your financial situation. For example, do you live with someone, do you have caring responsibilities, do you have your own home etc.
- A description of your skills and experience including any additional strengths you can bring to the business. Think about qualifications you have, what training you’ve attended, what responsibilities you had in your previous employed roles and what skills you’ve gained both through employment and education.
- A brief description of the business idea. Mention the legal status of your business, the nature of the business and what products or services you offer. Here, you should also include the reason you’re starting your business, trends in sales and, if you’ve already started, how many months you’ve been trading.
- A brief description of your target audience. Think of any associations with the customers you’ll be aiming your products or services at, such as age group, gender, location, culture and things like hobbies and shopping habits.
- Talk about any opportunities for the business to grow and develop.
- Explain how you’ll fund the start-up cost. Is it personal savings? Family contribution? Are you planning to get a loan or grant?
While this is the first section of the plan, you should write it last. You need to know everything in detail before you can summarise all your findings.
Knowledge and experience
This part of the business plan has two sections – personal skills and experiences and business skills and experience.
When it comes to personal skills, talk about the qualifications you’ve got, any additional training you’ve attended, previous employed roles and responsibilities you had. Also, include any personal skills you think will be beneficial when running a business such as communication skills or confidence.
Business skills and experience should include things such as sales experience, management or supervisory experience, any type of marketing experience, customer-facing skills or bookkeeping skills.
Start this section by writing a detailed description of the business. Explain the legal structure of your business, the nature of it, what is motivating you to start this business and whether there are any trends or seasonality in sales.
Then you need to describe the individual products/services you’re going to provide. Put as much detail as possible. As it’s your own product or service, you might think that you can explain what you sell in a few words, but a potential investor will need a detailed description.
Another thing you need to talk about in this section is premises. It’s not enough to say that you’ll, for example, be working from home. You also need to explain why the location is convenient (i.e. you are planning to work from home to keep the costs down). If you use any alternative locations for meeting with customers or for any other reason, you need to include those too.
Moreover, if your business needs any licenses, registrations or fire precautions, health and safety regulations and data protection, you need to demonstrate that steps have been taken towards getting those.
Who is your ideal customer? When researching your target audience, you need to identify basic characteristics such as age, gender and location as well as their socioeconomic status and psychographics, including their hobbies and interests and shopping habits.
Identifying your target market isn’t only something you need to show to your potential investors. It will also help you come up with appropriate marketing and sales techniques, so you give your customer what they want instead of what you think they want.
Marketing, sales, promotion
Describe your branding and how your customers will be able to identify you. Do you have a logo? How do you stand out from the competitors?
Explain what marketing channels and methods you will use to make sure you get the message out and it reaches the right people.
Also, don’t forget to include the costs associated with your marketing plans.
Do in-depth market research to find out what the industry is like for your type of business. Find out whether there are any changes taking place which would impact your sales or any other changes that would give you an opportunity to grow.
Expand the description of your target customer groups. Do you know what they are interested in and what websites or networks they might visit on the internet, so you could reach them? Do you know the size of the market? Find out some stats about it using the Office of National Statistics or other websites.
Once you know more about your target market, conduct research such as surveys with a small group of those people to find out what they actually think about your idea, whether they would buy and use your product or service and how you can improve. Include the findings in your business plan.
Start this section by providing a brief overview of the level of competition within the area or online. Then identify your direct competitors and create a list that highlights their strengths and weaknesses.
If you’re not sure what is the difference between direct and indirect competitors, let us help you. Direct competitors sell the same products or services as you and indirect competitors sell different products or services but satisfy the same customer needs. For example, a direct competitor of McDonald’s is Burger King while indirect competitors are Dominos, Nando’s, Pizza Hut etc.
Once you have analysed your competitors, explain how you will compete against them and how your business will stand out from the competition. Is there any chance to work with your competitors to gain additional work? For example, subcontract work or referrals if they are too busy?
Here you need to create a list with all your prices for each of your products or services as well as the time and cost involved for each one.
After that, compare your prices with your competitors.
In this section, you need to explain how your business will run day-to-day and how work is managed.
Include what days and hours you will be working and describe what a typical working day will look like. You also need to provide information such as what suppliers you’ll use and when deliveries will be made, what computer equipment and software you will use and how you’ll record your financials and maintain your accounts.
You need to create a sales forecast that will represent the peaks and troughs in sales over the first 12 months and break down those months into “high”, “medium” and “low”. You can make assumptions by using your market research.
However, you need to back up your assumptions. If you say that December is your “high” month, you need to explain why, for example, “December will be a busy month due to the seasonal products I will be selling”.
Once you know that, you need to work out your average sale and how many of those average sales will you make during “high”, “medium” and “low” months.
If you want to learn more about how to prepare a sales forecast, check this article here.
Work out your start-up costs by creating a list of assets you need to purchase and their prices and another list of assets you already own and will transfer to your business including the value and date purchased.
Once you have the total, you need to explain how you will fund those costs.
Identify what could go wrong and how you’re trying to minimise the risk including any accidents, health and safety risks and operational risks such as delays from a supplier.
Set yourself both marketing and sales objectives you want to achieve over the first 12 months.
Also, think about the prospects for the business to expand or grow.
Plans for the business
What are your plans for the business? Will you need bigger premises if the business grows? Will you need to hire new people or replace a vehicle or equipment?
A ‘strengths, weaknesses, opportunities and threats’ analysis shows both your business’s and your own strengths and weaknesses. It also allows you to identify external opportunities and threats that can impact your business, such as consumer trends, competitor activities, financial issues or changes in the industry.
How much money do you spend a month on personal needs? Create a list of everything you spend money on including rent/mortgage, any bills, food, clothes, entertainment, children, loan repayments, savings etc and how much you spend on those things.
Then estimate your monthly income that includes drawings from business and any other income. This will show whether you will make enough profit not only to cover your business expenses but also your personal ones.
Even though you now know what should be included in a business plan, it still can be difficult to write it on your own. So why don’t you contact us for help and guidance!
Our business advisors will not only help you write a professional business plan but will also support you at every step of your journey. We are looking forward to seeing you!