Preparing your business plan
It is crucial to have a realistic, working business plan when you’re starting up a business! A good business plan should help you to:
- Research and clarify the ideas you will already have about your business
- Focus your development efforts and spot potential pitfalls
- Structure the financial side of your business efficiently
- Present your ideas to another person (particularly helpful when trying to gain finance)
- Measure the progress of your business
You should also bear in mind that a business plan is a living document that will need updating and changing as your business grows. Regardless of whether you intend to use your plan internally, or as a document for external people, it should still take an objective and honest look at your business. Failing to do this could mean that you and others have unrealistic expectations of what can be achieved and when.
Tips for completing your business plan:
- Focus on what the reader needs to know
- Be realistic
- Make the plan professional
- Use charts if relevant
- Include a contents page
What your plan should include
Your business plan should provide details of how you are going to develop your business, when you are going to do it, who's going to play a part and how you will manage the money.
Clarity on these issues is particularly important if you're looking for finance or investment. The process of building your plan will also focus your mind on how your new business will need to operate to give it the best chance of success.
Your plan should include:
- An executive summary - this is an overview of the business you want to start. It's vital. Many lenders and investors make judgments about your business based on this section of the plan alone.
- A short description of the business and its history - who you are, what you plan to sell or offer, goals of the company.
· Markets and Competition - define your market, your position and outline who your competitors are. In order to do this you should refer to any market research you have carried out.
- 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 - this section translates everything you have said in the previous sections into numbers.
- Presenting your plan – you must know how to effectively present your plan so it makes the maximum impact on the reader.
Writing your business plan
Section 1 - Executive Summary
You may find it easier to complete this section last. It should contain a summary of the key points of your business plan and why you are confident your business will succeed. Some of the areas you might want to think about including are:
· What the business is.
· Who the key people are and what skills and experience they have.
· Why you think it will be successful.
· What product or service your business will be selling, and what your Unique Selling Point (USP) is.
· Some brief detail of the projected financial performance of the business and how it will be financed.
In particular, explain your aims, objectives and eventual aspirations. It should be concise - no longer than two pages at most - and interesting!
Section 2 - Your business, its products and services
This part of the plan sets out your vision for your new business and includes who you are, what you do, what you have to offer and the market you want to address.
Start with an overview of your business:
- when you started or intend to start trading and the progress you have
made to date
- the type of business and the sector it is in
- any relevant history - for example, if you acquired the business, who
owned it originally and what they achieved with it
- the current legal structure
- your vision for the future
Then describe your products or services as simply as possible, defining:
- what makes it different
- what benefits it offers
- why customers would buy it
- 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
Remember that the person reading the plan may not understand your business and its products, services or processes as well as you do, so try to avoid jargon. It's a good idea to get someone who isn't involved in the business - a friend or family member perhaps - to read this section of your plan and make sure they can understand it.
Find out more about Intellectual Property rights in the legal issues section.
Section 3 - Your markets and competitors
It is vital to understand the environment in which the business is operating. This section will familiarise the reader with a description of the industry, its size, history (five years), a forecast (next five years), the major business applications and the customers (manufacturers, institutions, governments, consumers, other)
1. Define the market segment in which you will be selling
- How large is each market segment?
- What is your market share?
- What are the most important trends? (and why)
- What are the key drivers affecting each segment?
2. Existing customers
- Do they fit the profile of your chosen market segment?
- Is there a heavy concentration of sales around one or two large customers?
3. Outline the competition
- What are the competing products or services and who supplies them?
- Why will customers buy your product or service instead of theirs?
Find out more info on how to research your market and competitors in the know your market section.
Section 4 - Marketing and Sales
This section should describe the specific activities you intend to use to promote and sell your products and services. A strong sales and marketing section means you have a clear idea of how you will get your products and services to market.
In this section of the plan you should usually address these five questions:
1. Where do you position your product or service in the market place?
2. What is your pricing policy?
· How sensitive are your products?
· Is there scope to increase margins or sales (look at each segment)
· How much will you charge for different customer segments?
3. How do you promote your product or service? (eg: direct marketing, advertising, PR)
· Cover all market segments considering the best method for each.
· Which method of promotion are you focusing on and why?
4. Through what channels do you reach your end user?
· Compare your current channels with alternatives
· How do these compare with your competitors?
· Look at the positive and negative trends in your chosen distribution channels.
5. How do you do your selling?
· Identify which methods of selling are the most effective four you segment
· Analyse the cost efficiency of each selling method
See the sales and marketing section to find out which methods best suit your business.
Section 5 - Management and personnel
Your business plan needs to set out the structure and key skills of both your management team and your staff. It should identify the strengths in your team and your plans to deal with any obvious weaknesses.
· Set out structure/roles and key skills
· Identify weaknesses and what your plans are to cover this
· Will there be any employees?
· Analyse the current workforce in terms of total numbers & department
· Compare efficiency ratios with competitors
· Benefits to employees
· Explain any plans to improve or maintain motivation
· Note any plans to expand your workforce
Things to consider when taking on staff and how to improve their performance are listed in the business planning section.
Section 6 - Operations
Give a description of the processes the business will go through and how will it operate? It helps to break these processes down into steps. Consider all activities not just the buying and selling processes
· What premises does the business currently have?
· Are there any commitments to these premises?
· What are the advantages/disadvantages of the location?
· Do you have any plans to move or expand premises?
2. Production facilities (equipment)
· Do you need your own production facilities or would it be cheaper to outsource any manufacturing processes?
· If you do have your own facilities, how modern are they?
· What is the capacity compared with existing and forecasted demand?
· Will any investment be needed?
3. Management information systems
· Do you have established procedures for stock control, management accounts and quality control?
· Are they reliable?
· Can these cope with expansion?
4. Information Technology
· What is currently in place?
· What are the strengths and weaknesses of this?
· Outline the reliability and planned development of your systems
Section 7 - Financial Forecasts
As part of your plan you will need to provide a set of financial projections which translate what you've said about your business into numbers.
What your forecasts 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
More information on these forecasts along with examples are included in the finance section.
Section 8 - Presenting Your Plan
To make sure your business plan has maximum impact, there are a number of points to observe.
Keep the plan short - it's more likely to be read if it's a manageable length. Think about the presentation and keep it professional - even if you only intend to use the plan in-house. Remember, a well presented plan will reinforce the positive impression you want to create of your business.
Tips for financial success:
1. Learnt to control your finances
2. Make sure your bookkeeping is done frequently
3. Choose an accountant you feel comfortable with
4. Write down your financial procedures and controls
5. Choose a bank manager you can relate to (develop a relationship)
6. Never borrow money you cannot afford to pay back
7. Keep it legal
8. Be realistic