Your business plan outlines what your business does or will do and what you are trying to achieve. It explains what the market opportunity is, what makes your business special and how you will make it a success.
Business plans are not just for limited companies. They can be valuable tools for self employed sole traders and businesses that are planning expansion into new markets or a change of direction.
Writing a business plan helps you:
- check that your business idea makes sense
- plan your sales, marketing and business operations
- identify potential problems and how to overcome them
- set out your objectives and the financial return you expect
- work out what financing you need
- convince other people to back your business
Management and personnel structure
1. Why write a business plan?
Writing a business plan helps you think about what you are doing
- The plan sets out your strategy and action plan for the next one to three years, or sometimes longer.
- As part of the process, you set concrete objectives and plan how you will achieve them.
- Writing a business plan helps you focus and develop your ideas. Priorities are identified. Non-priorities are dropped, saving precious time.
- Putting the plan in writing makes it easier to spot any gaps where you have more work to do.
- Once written, the plan is a benchmark for the performance of the business.
- By involving your employees in the planning process, you can build a successful, committed team.
You may need a business plan to explain your idea to other people
- A business plan is essential if you are raising finance from a bank or outside investors.
- A good plan can help you attract new senior management, or business partners such as distributors and agents.
- You should tailor your plan to the target audience. For example, you may want the plan to 'sell' the business to your bank manager or investors.
- Ask the intended recipient if there are any specific issues they want the plan to address or a template you should follow.
2. How to write a business plan
Base your business plan on accurate, detailed information where possible. But do not include all the detail in the plan. Leave the detail for operational or marketing plans.
Keep the plan short
- Focus on what the reader needs to know.
- Cut out any waffle.
- Make sure there are no spelling mistakes.
- Detailed business plans are often quickly shelved because they are difficult to use on an ongoing basis.
Include any detailed information you need in an appendix
For example, you might want:
- detailed financial forecasts and assumptions
- market research data that backs up what you say
- CVs of key personnel (essential if you are seeking outside funding)
- product literature or technical specifications
Base your business plan on reality, or it may be counterproductive
- Over-optimistic forecasts can lead to increased overheads followed by a cash flow crisis and drastic cost-cutting.
- Be realistic, even if you are selling the business to a third party. Financiers, business partners and employees will see through over-optimistic plans that ignore weaknesses or threats. Management credibility can be damaged.
Make the plan professional
- Put a cover on it.
- Include a contents page, with page and section numbering.
- Start with an executive summary. This summarises the key points, starting with the purpose of the business plan.
- Use charts, if helpful.
Even if the plan is for internal use only, write it as if it were aimed at an outsider
- Include company or product literature as an appendix.
- Give details about the history and current status of the business.
Review your business plan
- Read through the plan from your target reader's point of view. For example, try to imagine the impression the plan will make on your bank manager.
- Check the plan is realistic. Include evidence to back up what you say (perhaps in the appendix) or provide evidence if needed.
- Make sure you assess the risks. What might go wrong (eg if your main supplier closes down or you lose a key customer) and what would you do about it?
- Concentrate on the executive summary. People often make provisional judgements based on this. Only then do they read the rest of the plan to confirm their decision.
- Show the plan to friends, business peers and expert advisers for comments. Which parts did they not understand or find unconvincing?
3. Your business and products
Explain the history of the business
- When did it start trading and what progress has it made to date?
- If the business is just starting up, what is your personal industry background and what progress towards launching the business has been made?
- Who owned the business originally?
- What is the current ownership structure?
Describe what your product or service is, avoiding technical jargon if possible
- In general, what makes your product or service different?
- What benefits does it offer? What are its disadvantages and how will you address these?
- What changes and improvements are you planning?
Explain any key features of the industry
- For example, any special regulations, whether the industry is dominated by a few large companies or any major changes in technology.