What is a business plan and how do you write one?
The best answer to the question – what is a business plan? – is that it is like a road map. It describes what your business does, what goals your business has, and how you plan to achieve them. It also identifies current and potential problems and explains how you will overcome them. Put simply, without a business plan, it is very difficult to understand where the focus of the business should be, what the key opportunities for it are, and how you plan to overcome the inevitable hurdles the company will encounter on the way to realising it’s goals.
How does a business plan help your business?
Business plans serve several objectives. The main one is typically to convince investors of the viability of your business idea and to put their money into it.
But plans also help to attract the right employees, new business prospects and win deals with key suppliers. However business plans are not only of value to those outside the business – many veteran business owners consider them crucial to understanding how to optimise growth, analysing the company’s strengths and weaknesses, and knowing what to prioritise.
The broad outline of a business plan
As you can imagine there are countless views and opinions as to what exactly should be included in a business plan and the amount of detail it should contain. There is general counsensus however about the main areas that should be covered when writing a business plan for your start up business or any business for that matter.
These main areas are as follows:
1. Executive Summary: This is the very first page that comes after the table of contents. It should, as briefly and clearly as possible, summarise the key messages of the entire business plan across all the main areas. Although the executive summary appears at the beginning, it is common practice to draft this last, after the rest of the plan has been written to make sure the whole document is aligned and consistent.
2. The Business: This section focuses on the business itself. It will describe what the business does, what it’s vision and objectives are, and importantly what makes the business different to all the others – it’s Unique Selling Point or USP. It will also state who the key people in the company are and any legal requirements it is required to comply with.
3. The Marketplace: This section will contain a systematic analysis of the market in which the business operates based on your market research. It should assess present and future proposects for growth, describe who the target customers of the business are, your competitors and the strengths and weaknesses of the company in the context of all those things – often called a Strengths Weaknesses Opportunities Threats (SWOT) analysis. And this section will finally conclude with your marketing strategy and present a clear plan on how sales targets are going to be achieved.
4. Business Operations: In this section you are in short describing how the business will be run on a day to day basis. It will outline who the people involved in the business are, highlighting the individual roles of each member of the team. It can also cover the premises the business will be working from, what equipment it uses and needs, key suppliers and any operational risks that have been idenfitied and how they are being managed.
5. Design and Development: Particularly if your business is producing a product the business plan can also include a specific section which provides a detailed description of it and its’ design. It will also explain where it currently stands in the production cycle and any plans for developing it. This is mainly to give the investors a detailed idea of how the product works and how you plan to keep developing it to stay ahead of the competition.
6. Finance: This is where you provide an overview of the finances of the business – the start up costs, planned cash flow, profit and loss forecasts, existing funding sources and any financial risks which have been identified and need to be managed. Remember it is critical at this stage that your finances are accurate and sensible. Just because your spreadsheet says you are going to make a million by this time next year doesn’t mean it’s true. Investors in particular are looking for projections which are robust and can be fully justified.
How long should a business plan be?
There is no fixed length for a business plan and they can vary from a few pages to a hundred pages long. It all depends on the nature and complexity of your business concept. Think of a document you would be happy to read yourself if someone sent it to you and keep in mind that more doesn’t always mean better.
The idea is to have a crystal clear plan that is both convincing and realistic, and one that will succeed in attracting the best people to help make your business journey a success.
Latest from Basics of Business
How to start your business - the 100 day guide
Posted on 8 January 2018
If you are thinking of starting a business in the UK there is no time like the...Learn more
8 big legal mistakes start-ups make
Posted on 29 November 2017
When you start a business the inevitable excitement does not usually extend to the legal points that...Learn more