How to Write a Business Plan and Get Set for Success
Why Write a Business Plan?
Writing a business plan is a fundamental part of setting up any company for a number of reasons. These reasons can be grouped into two categories: what this business plan will do for you, and what it will do for other people.
What a Business Plan Will Do for You
To feel secure in your new venture, you’ll want a firm plan of action. When you write up a professional business plan, you’ll be setting out your goals and giving yourself time to think about what you’re doing. You can set out exactly what you want to achieve and how you’re going to do it over a certain period of time (this may be one year, five years, or even more if you’d prefer). In turn, this will help you to:
- Set concrete objectives and work out a way to achieve them
- Focus and develop ideas for your business
- Find your firm’s priorities and drop ideas you no longer need
- Identify any issues or gaps in your current plan
- Build bonds with your team by including them in the plan’s development
- Set out a course of action that you can use to track the success of your business
When you start a business, you may need some start-up loans and support from banks or other companies. Your business plan is evidence that your company is a smart financial investment, so they’ll be more likely to back you or even to buy your company if you’re planning on selling.
Giving investors a step by step guide helps them to see where their money is going, and may even help you to attract new senior management or business partners.
You should always make sure that your plan is tailored to your target audience, and you may wish to ask your intended recipient if there are any specific issues they’d like the plan to address.
How long your business plan should be will all depend on what you want to achieve with it. Most critically, it should meet all your needs and cover everything you want your business to do and become over a set period of time.
Most business plans will fall under two formats, the traditional format or the lean startup. The traditional business plan is the most common, with most firms using a variation of a familiarly structured format. This is a more detailed plan, and may be dozens of pages long.
A lean startup plan also uses a standard structure, but focuses on summarising the most important elements of your plan. This type of plan may only take you an hour, and will usually only be one page.
Here, we’ve provided a step by step guide on how to create a business plan using an example of the traditional format:
Writing an Executive Summary
This is a short section detailing what your business is and why it will be successful. It should include your mission statement, information about your products or services, and the basics on your company’s leadership team, employees, and location.
If you’re planning on asking for financing, you should also include financial information and any high-level growth plans.
Describing Your Company
The company description section of a business plan should go into more detail about your firm. Explain your company history, talk about the progress it’s made since it was first founded, and describe your team and the advantages they’ll bring to the business.
Tell your reader about the problems your business can solve and how it will solve them, and whether it will solve them for consumers, organisations, or other businesses. You should make sure that you demonstrate to your reader how your products and services are different from competitors, as well as listing advantages and any disadvantages that you plan to address or improve.
If your business is a new startup venture, you should include your personal industry background and detail your current progress towards launching the business.
Setting Out Market Analysis
Make sure you understand your target market and your industry outlook. Highlight the market segments where you intend to compete, or are already competing, and note down the key characteristics of customers in each segment. Make sure you know what influences their purchasing decisions, how large the segment itself is, and what your market share is.
If there are any important trends, such as market growth or changing tastes, these should be written up into the plan. You should also be able to explain the reasons behind the trend and explain the outlook for each important market segment.
Look at your competitors and find out what these other firms are doing to become successful. Make a note of who supplies them and what advantages and disadvantages they have compared to your business. Write up each of these, and explain why customers will come to you instead (never openly criticise or underestimate your competitors, however). Explain how your competitors will react to losing business, and how you intend to respond to this.
Tell your reader more about your existing customers, if you’ve already started work. Explain how well they fit the market segment you’re planning on targeting. If your firm is a new startup, you should also make a note of any confirmed orders you have for products or services, and explain who your best prospects are in terms of your target market.
Your Marketing Plan and Sales Strategy
This section should set out where you would position your product or service in the market, in terms of both price and quality. You should explain if it is marketed as a specialist product or service due to its particular features and demonstrate any unique benefits you can offer your customers. Also note which of these benefits you’ll concentrate on.
Explain your pricing policy and tell your reader how price-sensitive your customers are. Identify where you make your profits in each market segment or product you sell, and work out where it may be possible for you to increase margins or sales. Set your prices accordingly.
You should also explain to your readers how you plan to promote your product or service. Each market segment should have one or two ideas which work best. This may be direct marketing, advertising, or even PR. If you’re considering using a new marketing method, this should be started on a small scale to test it out.
Look at the sales channels and identify which ones you use to reach your customers, for example, if you sell products online, through retailers, or agents. Compare these with alternatives, including those used by competitors, and work out the positive and negative trends in your chosen channels.
Create a section on the cost-effectiveness of your sales methods, including all the hidden costs (such as management time), and explain how long it takes to make sales and get paid for them. Make sure to write up the average sales value and how likely customers are to give repeat orders.
Your Management Team and Personnel Structure
Set out the structure and key skills of your staff and management team, including how you cover the key areas of production, marketing, sales, finance, and administration. Address any issues and explain how you plan to cover them. You should also set out your plans for recruitment and training, including timescale and costs involved.
Write up an analysis of your workforce in terms of total numbers, and numbers by department. Compare efficiency with your competitors, or with similar industries.
Always remember to be realistic about your workforce and the motivation and commitment of your workforce. Show how committed you and your management team are to the work, give consideration to how you’d handle the loss of a key worker, and add in any plans to improve or maintain motivation. You should also note any unusual upward pressure on pay levels.
Your Business Operations
This section should be focused on the capacity and efficiency of your operations, as well as any planned improvements you have in mind. What premises does your business currently have, for instance, and will it meet your current and future needs? Does it have any particular advantages and disadvantages? You’ll also need to consider your long-term commitments and decide if your business should move in the near future.
Your plan should also include any information you have on your production facilities and equipment. This includes notes on how modern the equipment is, their capacity compared to current demand and forecast demand, and your key suppliers. You should also note down how you select and manage your suppliers.
You’ll need to know which management systems are in place, such as management accounts, sales, stock control and quality control. You’ll have to explain how reliable these are to your readers and say whether or not they can handle proposed expansion.
You should also explain whether your company’s IT services are a key strength to your firm or a weakness.
When you create this section, you must include what quality or regulatory standards your business conforms to.
Your Financial Forecasts
This part of the plan translates everything you’ve said about your business into numbers. This should start off, if possible, with a breakdown of the company’s historical financial information. Ideally, this will be from the last three to five years. It should also:
- Break down figures into component parts
- Show the gross margin for each sales component (including listing the costs that are included as direct costs)
- Show the movement in key working capital items of stock, trade debtors, and creditors. Use ratios such as stock turnover (in months), debtors period (in days), and creditors period (in days)
- Highlight any major capital expenditure made
- Be up-to-date in terms of balance sheets, and have an up-to-date profit and loss account
- Explain any reasons for movements in profitability, working capital, and cash flow
You should also provide a realistic forecast for the next three to five years. How long or sophisticated this part should be will all depend on the size of your business. For instance, small businesses may only need sales, profit, and cash flow budgets. A more complex or asset-based business, on the other hand, will need balance sheet forecasts as well.
You should clearly state the assumptions behind each of these forecasts and tie in to what you say in the rest of your plan. You should also consider what-if scenarios, such as a higher or lower cash flow for an unexpected growth or dip in sales.
If you have a particularly detailed financial plan and forecast, this should be
added in an appendix at the end of your plan. It should include assumptions such as the profit margin on each of your products, the financing you’re expecting and the interest rate you’ll pay, how long it will take to collect payment from debtors, and what credit suppliers will offer your firm.
You can use the cash flow forecast to predict any future financing requirements. This includes identifying what types of financing you could want, from long-term loans to an increased overdraft facility.
Whenever you add this information into your plan, you should explain why the financing is required and tell your readers what it will be used for. If you need help with this section, small business advisers at banks and other organisations may be able to help you put financial forecasts together for free.
Putting together a SWOT Analysis
This is a page that should be dedicated to the strengths, weaknesses, opportunities, and threats to your business (SWOT). These should be listed as follows:
- Strengths may include brand name, the quality of your product, or the management experience
- Weaknesses may be reliance on a small customer base or a lack of finance
- Opportunities include increases in demand, or gaps in the market made by a competitor going out of business
- Threats include downturns in the economy or the arrival of a new competitor
Be honest about any weaknesses or threats and be sure to point out any actions you are taking to mitigate them.
Whenever you are putting together a professional business plan, you should always make sure that you are completely focused. This means only including what your reader needs to know, and ensuring there are no spelling errors or mistakes in the grammar.
Any market research or data, CVs of key personnel, or product literature and technical specifications should all be added into your appendix.
Will Your Business Need an Office Space in the UK?
If you’re ready to get your brand-new UK business up and running but you haven’t yet decided on a place to carry out your work, get in touch with us today. We can offer you a variety of office spaces to let across London, with enough room to accommodate your entire team and any equipment you need for your everyday tasks.
Our friendly team will be ready and waiting to put you in the space that suits your company’s needs, and with help from us, you’ll even be able to move your firm to a new location as it expands and flourishes.
If you only need a meeting room to host and impress your potential investors before the real work begins, we’ll also be happy to loan you the use of one of our meeting rooms. Whatever office space you need most to get your business off the ground, we’re ready to supply it.