How to write a great business plan | 8 steps
A good business plan will help you to test the feasibility of your idea, identify gaps in your plan and help you to potentially secure finance. It will also help you to define your ‘why’ – why you are in business and what you are trying to achieve.
A video worth checking out is this edited TED Talk from Simon Sinek – “Start with the Why”
We work closely with clients on their business plans, be it for new start-ups or for clients looking to grow, change, diversify or export. In this blog, we look at 8 steps to help you write a great business plan.
1. Executive summary
The executive summary is the most important part of your business plan. Positioned at the front of the document, it is the first part to be read, and in some cases, maybe the only part that will be read. Faced with a large pile of funding requests, venture capitalists and banks have been known to separate business plans into ‘worth considering’ and ‘discard’ piles based on this section alone.
Although it is the first to be read, it should be the last page to be written. It is a summary and therefore should bring out all the relevant headline information from the rest of the plan. It is difficult to do this until the rest of the plan is written. It should be interesting, concise and should grab the reader’s attention. Financial information should be included but without the detail.
The executive summary is NOT:
- A description of the business and its products. It’s a synopsis of the entire plan.
- An extended table of contents. This makes for very dull reading. You should ensure it shows the highlights of the plan, rather than restating the details the plan contains.
- Hype. While the executive summary should excite the reader enough to read the entire plan, an experienced investor or business person will recognise hype and this will undermine the plan’s credibility.
2. Product and suppliers
Be clear in your plan about what the business will supply, be it goods or services, or it could be both.
For goods, include as much information as you can about how you will price your product. Also, detail where the goods will be sourced from, the production lead times, the availability of the goods and the availability of credit to purchase the goods.
For services, again pricing is key, along with the availability of who will deliver the service, be it yourself or a member of your team. It’s also important to include any element of the service which might be outsourced.
3. Plan your marketing approach
Your marketing approach should be directly linked to your ‘why’ – which is your Unique Selling Proposition. Your USP is what will differentiate you from the marketplace and is a key area of interest for an investor. Use the information gathered from researching your target audience and competitors to clearly set out your marketing strategy.
This section does not need to be as in-depth as a standalone marketing plan but should set out who your target market is, how you will reach them and why they would buy from you. You should include your target market size, historical data about its development and key current issues. You should set out how you will communicate with your target audience, what method you will use to do this and how you will measure the return on investment from your marketing costs.
A key element to your marketing will be your brand, which is directly linked to your ‘why’. Branding is not just about the name or the logo, it’s about the story behind the brand. What are your core business values? What do you stand for? Think about your target audience, will this brand resonate with them? Not just in the look, feel, taste but the whole customer experience from start to finish and repeat business.
4. Identify your customers and target audience
Who is going to buy your product or service? Consumers or businesses? As part of your plan, you should identify your ideal customer and target audience. Try and be as specific as possible, for example; how old are they, are they married/single, where do they live, where do they shop, what type of job do they have and how much do they earn. If you are targeting a buyer within an organisation, you may want to consider what they do on a day-to-day basis, who they report to, what challenges they have and how will your product or service improve or enhance their role.
A good idea is to create a buyer persona or empathy map. This can be a great exercise to think about the specific type of customer you want to target. It can help you to identify their interests, work/home responsibilities and preferred communication channels so you can target them appropriately.
5. Determine your competitors
It’s important to identify your direct and indirect competitors within the plan. Highlight businesses that offer the same service or product as you and businesses that offer a service which fulfils the same need with a different product/service. Identify who they are, how they work and what share of the market they hold. It’s important to state what differentiates you from your competitors.
6. You and your team
It’s a good idea to include background information about you and your team in your plan, especially when looking for funding or support. Include a CV or paragraph on each individual, outlining their background, relevant experience and qualifications. Ensure that everyone you include in your plan has clearly defined roles. If you have a larger operation, give details of your workforce including:
- staff numbers by department
- sales or profit per employee
Also, include any future recruitment or training plans, including timescales and costs.
7. Financial projections
You will need to include a set of financial projections which translate what you have said about your business into numbers. This should include a profit and loss forecast together with an associated balance sheet – which will provide a statement of the trading position of the business. Show the level of profit you expect to make and the costs of providing goods and/or services. Ideally, you should include forecasting for three to five years. Include all your overheads such as the cost of premises, equipment, materials, wages, marketing, website and advertising.
Include cash flow projections and monthly cashflow patterns – the aim of which is to show that your business will have enough working capital to survive. Make sure you have considered the key factors such as the timing of sales and salaries. Also, consider the timing of payments such as VAT and PAYE. This should highlight any funding requirements, and of course, if funding is required you will have to demonstrate that any planned repayments can be met. It’s also worth including key assumptions, for example, what you have assumed to happen which will allow sales to grow.
Some sensitivity analysis can also be useful, for example, what would happen if sales come in 20% below forecast, what if your customers take 60 rather than 30 days to pay you or what if the cost of buying from your suppliers increases more than you expect. Be clear about what your Break-Even Point is, which is the level of sales at which your business is producing enough sales revenue to cover both your variable and fixed costs. Once you reached this point any additional revenue after variable costs, is profit.
8. Scenario planning
Detailing your long-term objectives in your business plan is a good way to demonstrate your potential to investors. The plan to achieve these objectives may change as your business develops so it’s worth including some scenario planning within your plan. For example, if you failed to grow your product range, what might the alternative growth plan be for the original range?
You may have ambitious plans for growth or you may have a target income but high growth is not a priority for you. Either way planning for growth beyond your original plans could help identify gaps in your plan or opportunities you may not have considered.
Remember: Don’t confuse the message and make it clear that there is a Plan A. It’s a good idea to put your scenario planning as workings in the appendix to avoid any confusion.
Most importantly, above all else, a business plan is for YOU – the owner of the business. It’s your vision and defines where your business is now and where you want it to go to – it’s the route map of how you get there. Use your plan as a working document to keep you on track and keep you accountable for what you set out to achieve.