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People often underestimate the importance of a business plan. A business plan is a document that lays out the key objectives, finances and resources for a business venture. It is an essential tool in the smooth start-up and running of a new business, and could be used to attract outside investment.
A business plan is an internal and external document, used for both the business owner and the potential financiers. It is the main requirement when applying for funding and support and works as the key reference once a business is running.
A good business plan should coherently and logically set out the strategic and financial plans for the business, with extensive research and clearly presented results. It is created to assist the business owner as well as interesting potential investors, so it is important to fit in all the necessary information.
Many people are overwhelmed by the prospect of writing a business plan, but with enough research, career advice, clear goals and a little assistance, it is perfectly manageable.
This is the first part of the business plan, and can be treated as the blurb or synopsis of a book, briefly outlining the business type, vision, market and goals. The executive summary will be the first thing that a potential investor will see, so it needs to be clear and grab attention.
Basic information about the company, including a bit about the person who is starting it, contact information and the legal status of the business (PLC or LLP etc.) is also required in this section.
Here is where the vision and goals of the business should be laid out. This section outlines the business venture as a whole, how it will start out, how it will function and what it will become. A description of the type of company it will be and the products it will offer must be addressed. Explaining how the company is unique or better than the competition is also recommended.
Setting out the aims for the company is not only helpful for an outside party to see why the idea is good, but will also work as a reference for the owner to assess progression.
It is crucial to fully research a business idea, in order to assess how it will succeed in its market. Without clear and detailed market research, a business plan could appear amateur and will not be taken seriously. Market research is split into two areas: customers and competition.
Research into the consumer market will find out who the business’ customers will be, and what they expect of the product or service. By using simple questionnaires, an entrepreneur can assess how much demand there is for their product or service, how much customers would be willing to pay, and what they would expect in return.
The competitors come next. Research into similar products and services that are already out there can determine whether a business idea is profitable. If there are competitors out there, research into what their weaknesses are will show how the new business will be able to succeed in bettering them.
The sales and marketing section basically outlines how the new business is going to successfully sell to the consumers. Briefly outlining a potential marketing strategy, whether using PR or advertising, is essential is making sure that a new business is known in the market.
The market research done for the previous section will help here, as it would highlight the company’s unique selling point (USP) and who to target the marketing towards. Usually businesses have a separate marketing plan, so this section does not need to be too long.
Here is a short section outlining how the business is going to operate.
Will staff be hired? Who will be the suppliers? How much of the work can be done in-house? This part will show potential investors or partners the practicalities required for running the business, and what outside resources are required.
The financial part of a business plan can be the most complex, but equally the most important. Drawing from the market research, all the facts and figures must be presented in this section, accurately and concisely. This section explains what has already been said about the business, but using numbers.
This section must include:
Assistance with working out financial forecasts can be found at certain banks and building societies, so there is no need to panic with all the numbers.
This is the part of the business plan which addresses what money will be needed for the business to run initially. If applying for a business loan or investment, this is the part of the business plan the potential financiers will scrutinise the most, so it is crucial that the figures are well thought out and realistic.
The cash-flow forecast should have shown how much finance the business needs. In this section it must be clear how much finance is required and exactly what it will be used for.
This is a bit like a “what if” section. Investors and partners will want to know that all risks have been considered, and that there is a contingency plan in case certain factors do not go to plan. Consider all possibilities, and logically explain how problems could be resolved.
Assessing potential risks will increase the business’ credibility when being considered by investors and banks.
When writing a business plan is it good to remember that it is not just directed at investors; this business plan is meant to be a useful resource for the business owner to refer back to as a means of measuring progress, amongst other things.
Keep the business plan as short as possible, and keep it clear and professional. It should be easy to understand, with sound figures and information, and minimal assumptions. Try to be as realistic as possible and set achievable goals. Highlighting weaknesses is not a negative, as long as the solution can be explained.
For more detailed advice on how to write a business plan, please follow the below link: