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A business plan is a written document that describes your business, usually covering strategies, objectives, marketing, sales and financial forecasts. More than that, it can be a way to provide a clear roadmap designed to take your business from where it is today to where you want it to be in the future.
But if you haven’t created one before, it can be hard to know where to start. That is why we have put together a guide on how to write a business plan, including the elements you might want to include, and the different small business plan formats you may want to consider.
8 step business plan checklist
When writing a business plan, there are several factors to pay particular attention to.
- Have you included an executive summary detailing your mission statement?
- Are you clear on both your competitive advantages AND the key risks facing your business?
- Do you have a detailed organisational chart showing the structure of your business personnel?
- Are you on top of trends in your industry, and how your business can stand out?
- Have you explained how you will attract and retain your customer base?
- Are you explicit about how your product or service will benefit its intended audience?
- Do you know how much funding you need, and in what form?
- Have you included your latest financial projections?
This list is not necessarily exhaustive, but highlights some key things to pay attention to as you create your business plan.
Why should I write a business plan?
There are a range of reasons why you might consider writing a business plan, from clarifying your intentions to securing a business loan.
Clarify your business idea
By writing a business plan you can hone and sharpen your initial business idea, making it a stronger, more detailed proposition.
It will give you a top level overview of what you need to do and, importantly, how much money you need to do it.
Set out your goals
Going through the process of creating a business plan will help you set out tangible goals for different stages of your growth.
Where you want to be after year one will differ from what you want to have achieved by year five, and writing a plan will encourage you to engage with your targets on both a short- and long-term basis.
Spot potential problems
A business plan isn’t only about sharpening your idea and setting your goals. If done properly, it can help you spot potential problems that you may not have previously considered, or that were not obvious until you’d done the research a business plan requires.
Measure your progress
A business plan is only the beginning. Once it is in place, you will have a set of targets to measure your progress against.
These targets can act as points of reference to evaluate the various stages of your organisation’s development.
A business plan will be essential if you’re looking to secure a business loan or other form of credit from a bank. Potential investors will also want to see one before they consider partnering with you.
It can also help convince suppliers, customers and employees to support you in your endeavour.
How to write a traditional business plan
A traditional business plan is comprehensive and detail-oriented. For these reasons, it is the format most commonly requested by lenders and investors.
Let’s go through the sections you would expect to see in a traditional business plan – but remember, you don’t need to stick to an exact outline. Instead, use the sections that make the most sense to your business and its needs.
Step 1: Draft your executive summary
Outline briefly what your company is and why it will be a success. Include your mission statement, your product or service and basic information about your location, workforce and leadership team. And if you’re seeking funding, lay out your high-level growth plan and financial information.
Step 2: Write your company description
In this section, you can elaborate on the points laid out in your executive summary. Explain the problems your product or service solves, and list the specific organisations, businesses and consumers your company intends to serve.
Furthermore, lay out the competitive advantages that will help your business prosper. Perhaps you have industry experts on your team or have sourced the perfect location for your store.
There is no need to hold back on your company’s strengths.
Don’t be afraid to mention key risks to the business. Any lender or investor will likely identify them for themselves and will be reassured by the fact that you have identified them and have plans in place to protect the business.
Step 3: Detail your management and organisation structure
Who will be running your business? How will it be structured legally? Will it be a limited company, limited liability partnership, or partnership, or will you work as a sole trader?
An organisational chart may help illustrate who will be in charge of what, and take the opportunity to describe how their credentials will contribute to your venture’s prosperity. You may even wish to include the CVs of key players.
Step 4: Carry out and explain your market analysis
You’ll need a solid understanding of both your target market and your industry outlook. Competitive research will shed light on trends and themes, as well as what other businesses are doing well, and how you could do it better.
Step 5: Define your marketing and sales strategy
There is no single way to approach your marketing strategy because it should evolve and adapt to your business’s individual needs as they arise. The goal in this section is to lay out how you will attract, and retain, a customer base. You’ll also need to describe how sales will actually happen.
You’ll likely need to refer to this section of your business plan later when you lay out your financial projections, so make sure your marketing and sales strategies are described in thorough detail.
» MORE: How to promote your small business online
Step 6: Describe your service or product line
Describe what you’re selling or what service you’re offering, as well as how it will benefit customers and what its life cycle will look like. If you have plans for intellectual property, such as patent filings or copyright, make sure that you share them. And if you’re conducting research and development for your product or service, explain it in detail.
Step 7: Detail your funding request
If you’re looking for funding as part of your small business plan, you’ll need to outline your requirements, preferably with a five-year projection and your future strategic financial plans, such as selling the business or paying off debt.
You’ll need to specify whether you require equity or debt, the terms you wish to be applied and the length of time your request will cover. Describe what your funds will go towards, such as paying salaries, purchasing materials and equipment or covering bills, until such time as revenue increases.
Step 8: Compile your financial projections
It’s a good idea to supplement your funding request with financial projections in order to convince readers that your business will be stable and successful.
If your business is already established, then include balance sheets, income statements and cash flow statements, preferably from at least the last three years, if not the last five. Be sure to list any other collateral you could secure against when applying for a business loan.
Provide a prospective financial outlook for the next five years, including forecast income statements, capital expenditure budgets and cash flow statements. For the first year, be even more specific, and break it down to quarterly, or even monthly, projections. Explain these clearly, and ensure they match your funding requests.
Your appendix can be filled with supporting documents and any other materials that have been specially requested. Items commonly added to the appendix include:
- product pictures
- credit histories
- letters of reference
- legal documents
How to write a lean start up business plan
This less traditional business plan format has a solely high-level focus. It is quick to write and contains only key elements. For these reasons, you may prefer a lean start-up business plan if you wish to explain or start your business in a short timeframe, or if your business is relatively simple.
It may also be a good format to use if you envisage regular change for your business or your business plan being regularly redefined.
These kinds of business plans are most applicable where you are building a business based on a new concept or product and people can understand that it is impossible to project exactly how it will develop at a more granular level of detail. However, many lenders will not consider such a high- level plan sufficient for the approval of a loan.
A lean start-up business plan is a useful summary of your infrastructure, value proposition, finances and customer base. As with the traditional business plan, it has commonly used elements, but they are not essential; you should mould your plan to your business’s particular needs.
You need to make a concise and compelling statement regarding the unique value that your company will deliver to customers, including the products and services you’ll be offering.will bring to the market.
Make note of the other companies you’ll work alongside in bringing your business to fruition, be they suppliers, manufacturers, sub-contractors or other strategic partners.
List the main ways your business will gain a competitive advantage in the market, from customer relations to revenue streams. highlighting It will highlight such factors as selling direct to consumers or leveraging tech to tap into the sharing economy.
List any resource you’ll use to maximum advantage in creating value for your customers. Your key assets may include capital, staff and intellectual property.
Specify your target market and remember: your business won’t be for everyone. Who are your most important customers? Enter into your small business plan with a clear sense of who you will actually serve.
Lay out how your customer base will interact with your business. Will it be automated, face -to -face or online? How will you grow your customer base and retain customers? Consider the customer experience from start to finish. Explain how you will find customers and retain them.
Will your company focus more on maximising value or reducing cost? Define your strategy, then list the key resources and most significant costs you’ll face.
Marketing and communication channels
How do you intend to talk to and communicate with your customers? How do your competitors communicate with their customers? And what are the most cost-efficient ways to do this? Most businesses make the most of a combination of marketing channels and optimise them over time.
How will your company make money? What are your customers willing to pay for the value you’ll add? Will it be through direct sales, advertising space or membership fees? If you envisage multiple revenue streams, be sure to list them all.
» MORE: How to create a small business budget
Tips for writing a business plan
When writing your business plan, it is worth keeping the following tips in mind to ensure you get the most out of the process.
- Have a clear goal:since there are many reasons why you might be writing a business plan, it is best to know exactly what you hope to get out of it before starting, as it will inform how you go about creating your document. For example, your aim may be to get funding or to convince potential hires to join.
- Know your audience: just as there are different reasons why you might write a business plan, there are different audiences who will be reading it. By keeping a target audience in mind from the beginning, you can tailor your plan towards the right people.
- Do your research:this cannot be overstated. The more research you do, the more detailed your plan can be, creating a stronger foundation for your business to launch from.
- Keep things concise and consistent:while it is important to do your research, you don’t want to swamp your reader in unnecessary detail. Make sure your plan is to the point and consistent in tone throughout.
- Check your spelling and grammar:it sounds basic, but poor grammar and spelling may undermine your business plan in the eyes of potential investors and partners. So make sure to give it a thorough read through – you may even want to consider hiring an editor or proofreader to review your plan.
Get your small business off to a great start
A well-written small business plan can be critical in helping secure funding and bring on new business partners. Remember, investors need to feel confident that they will see returns. Your business plan is the perfect tool to convince people to work with you, so put in the time, research and effort that your business deserves.
Not only will a plan help you be taken more seriously if you’re starting a business with little funding, but it will also help you understand every element of your business, better preparing you for the market.
Image source: Getty Images
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