Without a vision and clear trajectory, a business’s survival and success are hard to achieve. That’s why business plans exist. Whether you’re applying for investment, developing a roadmap for a new business, or planning short and long-term goals, a business plan is the core foundation of any company.
Having a thorough business plan helps you:
- Forecast your business’s future
- Identify and mitigate financial risks
- Provide a comprehensive understanding of who you’re up against (your competitors)
Although a business plan may not always be accurate, it is a valuable document that will keep you attentive, focused, and guided.
However, having a poor business plan or no business strategy at all can bring operational and financial consequences. A lack of direction will negatively impact your resources and time. You’ll miss important opportunities for growth, and turning a profit and covering expenses will become extremely challenging.
Before we begin this article, here’s a helpful tip that is often overlooked when writing a business plan: perspective. A business plan should be written from three perspectives: yourself, an investor, and your market. If your business plan is written solely from your viewpoint, you risk ignoring the two viewpoints that will yield your business’s financial viability – your market and investors.
Now, let’s get to the crux of this article. What is a business plan? What is included in a business plan? Let’s dive in and answer these questions.
What is a business plan?
What exactly is a business plan? We’ll keep the definition simple. A business plan is a document that defines your business. It describes everything: your objectives, your sales and marketing strategies, your financial projections, details of your workforce... the list goes on.
Usually, you wouldn’t buy a home or go on a 2-week holiday without having a plan. The same goes for starting or expanding a business; you wouldn’t pursue this journey without having a clear plan and direction in place.
Whether it's a small business plan or a business strategy for a large acquisition, it’s a helpful document that highlights where your business is, and where you want it to be in the future.
Why do you need a business plan?
A business plan is essential for several practical reasons, whether you're starting a new business or looking to grow an existing one. Here’s why a business plan is indispensable:
- Clarity of vision: It articulates your business idea, goals and the path to achieve them, ensuring that your journey is guided by a clear strategy.
- Securing funding: Investors and lenders seek confidence in your business's potential. A robust business plan demonstrates your venture's viability and profitability, making it easier to secure the necessary capital.
- Strategic planning: It enables you to outline your approach to market analysis, marketing strategies, financial forecasts and operational plans, turning challenges into opportunities.
A business plan acts as a roadmap for your business, guiding you through the early stages and beyond. It's crucial for making informed decisions and ensuring that your business moves towards its goals efficiently.
Whether you're seeking financial backing or just setting up your business structure, a well-thought-out business plan is your first step towards success.
Before you write your business plan
Before diving into the creation of your business plan, several foundational steps lay the groundwork for a comprehensive and effective strategy. These preliminary actions ensure that when you sit down to write your plan, you clearly understand your business's framework, goals and the market environment.
Here’s what you need to consider:
- Understand your business model: Define how your business will operate, make money and provide value. Identify your unique value proposition, main revenue sources and essential resources and activities.
- Conduct market research: Validate your product or service demand through market research. Analyse trends, identify your target market and assess your competitive advantage using tools like SWOT analysis.
- Set clear objectives: Establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals for both short-term achievements and long-term ambitions, covering financial targets and operational milestones.
- Financial forecasting: Begin with estimating startup costs, ongoing expenses and expected revenue to gauge your business's financial viability. This step is crucial for securing funding and understanding your financial needs.
- Identify your ideal customer: Determine who your ideal customers are to focus your marketing and product development efforts. Develop customer profiles that detail demographics, buying behaviours and motivations.
- Prepare for potential challenges: Anticipate and plan for potential business challenges by considering risks related to the market, finances, or operations and devising strategies to address them.
Business plan types
Various types of business plans serve distinct purposes, each tailored to specific needs and objectives. Let’s take a look at some of the most common business plan types:
- Startup business plans: These are vital for new ventures because they outline initial steps, market entry and growth strategies. Rich in market analysis and financial forecasts, they're comprehensive business launching guides.
- Internal business plans: Focus on internal strategy and short-term goals, guiding daily operations and financial planning. They streamline internal processes, emphasising immediate objectives over extensive company backgrounds.
- Strategic business plans: Long-term visions for a company, detailing market share goals and competitive strategies. These plans map out the path to long-term success, backed by in-depth market analysis.
- Feasibility business plans: Assess the viability of new ideas, focusing on market potential, financial needs and operational requirements. They're crucial for validating the feasibility of projects before full commitment.
- Growth or expansion plans: Strategies for scaling businesses, including entering new markets or launching new products. They outline steps for significant growth, supported by financial projections.
- Investment business plans: Designed to attract investors by showcasing the business's value, market opportunity and financial health. They highlight potential ROI and growth to secure funding.
How to write a business plan in 8 steps
This section of the article will provide 8 helpful steps to write a business plan. These business plan contents are traditional, but you don’t need to stick to them. Every business has unique needs and goals, so your business plan should reflect them.
Executive summary
The executive summary is your first chance to make an impression, and often includes an introduction to and overview of your business. It only needs to be one page, so it’s important to keep it concise. An executive summary often includes the following elements:
- An overview of your business, and what its purpose is.
- A summary of your target market, and how you aim to fill a gap in that market.
- A discussion of how your business will operate day-to-day (including its corporate structure and location).
- Snippets of forecasting and projections.
- An overview of your investment requirements.
Tip: Even though your executive summary comes first, we recommend writing it last. You’ll have a better understanding of your entire plan, so you’ll be able to write a better, more engaging summary once your plan is finished.
Company description
This is the time to bring your business concept to life. The company description is where you’ll provide a detailed overview of your business, what you’ll offer, and what makes it unique.
A helpful guideline is to answer the 5W’s and 1 H: who, what, where, when, why and how. Your company description will include the following elements:
- Your business name (who)
- Your business objectives (what, when, how)
- Your competitive advantage (why)
- Your target customers (who, why)
- Your business premises (where)
- Your mission statement (why, how)
- The product or service you’ll be offering (what)
- A potential opening date (when)
- Your business structure (how)
- A business continuity plan (when)
Your business goals
Planning for business means setting realistic goals, and that’s what this part of the business plan will present. You can return to these business goals and assess them, regardless of where you are on your business journey.
Unfortunately, we can't tell you what to write, because your goals will be subjective. But they should be SMART objectives and will be either number-based or intangible. Here are some examples:
Number-based goals:
- Achieve a net profit margin of 10% in two years.
- Increase revenue by 5% each quarter until the end of the fiscal year.
Intangible goals:
- Creating a positive company culture and winning a ‘Best Place to Work’ award.
- Increasing productivity and performance of all employees (or just one department).
Your service or product
Your product or service is your money-maker, so it’s crucial to describe what it is, why your target market will buy it, how it will benefit them, and what its life cycle will look like. You can include patents, trademarks, and R&D (research and development) in this section of your business plan.
The common structure of the service/product line section of a business plan looks like this:
- Describe your product or service
- Explain why its unique and compare it to similar products or services
- Did you trademark, copyright, or patent the product?
- Lifecycle stage
- Pricing strategy
- Sales and distribution plan
- Fulfilment strategy
- Requirements (like specific technology, materials, or equipment)
- Visual representations of your product or service
Tip: If you’re starting a business and only have a prototype, you need to think of ways to appropriately gauge your market’s reaction to it. One way to do this is by offering the product to experimental customers at a substantial discount in return for letters attesting to its value. Add these letters to your business plan to show investors.
Management and organisation structure
Creating a business plan also requires a description of how you’ll legally structure your business, and what your chain of command will look like. Will you be a sole trader, a limited company, or a partnership?
What will your entire organisational structure look like, and how will a person’s credentials contribute to the success of your business?
Tip: Use an organisational chart to illustrate your business’s structural hierarchy.
Market analysis
This section will probably take some time to complete. Market-driven ideas and strategies can yield high returns and attract affluent investors, so conducting thorough and accurate market research is strongly encouraged. Your market analysis will include:
Industry analysis: What is the nature of your industry? What is the industry acceptance of new products like? How often will you need to innovate to stay relevant in the eyes of buyers?
Target market analysis: Offer a qualitative and quantitative analysis of your target customers. What are their motivations? Do they have purchasing potential?
Competitor analysis: Competitive intelligence will be a game changer. Research and document your competitor’s market share, size, customer perceptions, financial strength, marketing strategies, and speed of innovation. You should also conduct a SWOT analysis here.
Tip: Always support your claims using accurate market data. This will demonstrate to investors that your product is credible and will be accepted by the market.
Marketing and sales plan
Up until this point, you should know your company, your customers, and your competitors. Now, it’s time to explain how you’ll reach customers and generate sales. How are you going to run your business? You’ll do this through a marketing strategy and sales plan.
Marketing plan
Your marketing plan will describe the most common elements of a marketing mix: product, place, price, promotion, people.
- Product: What is your product, and how will you present it to customers? What will your marketing messages consist of, and how will they emphasize your value proposition? Also think about packaging and logos.
- Place: Where will you be located, and how will you get your service or product to a customer from this location? If your business is online, what distribution channels will you use? Think about shipping costs, labelling, and delivery and incorporate these into your cost analysis.
- Price: how will you price your product or service competitively? Remember, you’ll need to break even, cover expenses, and eventually make a profit.
- Promotion: how will you reach your target market? You have dozens of options here: brochures, search engine advertising (PPC), email marketing, print ads, content marketing, customer reviews. What return do you need on your advertising spend, and what traditional or digital channel suits your product best?
- People: what human and budget resources will you need to deliver your marketing plan?
Tip: Remember to always address the needs of your market in marketing campaigns. Ignoring the needs and pain points of your target market will not bode well for your business.
Sales plan
Your sales plan describes how you’ll generate money, and it will tie in with your financial trajectory section (we’ll come to this soon).
First, you’ll need to have sales objectives. Do you want to sell 1,000 products in your first six months? Or do you want to increase an existing sales channel by 15% in the next year? Your objectives need to be realistic, but they also need to maintain a healthy cash flow.
Second, you’ll need tactics to implement your goals, which will depend on your business model. Will you be doing it on your own, will you have a salesforce, or will you use a website and organic traffic?
Third, set timelines for your goals. There’s no point in having a goal if you don’t have a deadline to achieve it by.
Fourth, how will you grow in the future? This includes internal growth (hiring more employees) and ‘external’ growth (acquiring another business or becoming a franchise).
Financial trajectory and plans
The last step of your business plan structure will be your financial plans. This section will be the most challenging, especially if you don’t have a knack for financial planning. We encourage you to hire a financial advisor if this is the case.
If you haven’t established a business yet, you should include:
- Income projections
- Cash flow forecasts
- Sales forecast
- Outline your funding needs and how you’ll use them
- Plan for unpredictable circumstances
- Develop an exit strategy
If you have established your business, you should include:
- Revenue model
- Profit and loss statement (at least 3 – 5 years)
- Balance sheet (at least 3 – 5 years)
- Cash flow statement (at least 3 – 5 years)
- Funding requirements and use of funds
- Review your exit strategy
Tip: Use visual aids to illustrate your projections. Graphs and charts are a great way to do this.
Business plan template
Writing a business plan from scratch can be dauting, so you can follow a business plan example to make things easier. A quick Google search will offer you hundreds of examples, but you can find a credible business plan template on the UK Government website.
The bottom line: writing a winning business plan
Although writing a business plan will take some time and brain power, it marks the start of an exciting venture.
Always remember that a business plan is more likely to succeed if it is written from three perspectives: yourself, the investor and the market. This will help clarify your vision, address investor’s concerns, and position your business concept alongside market preferences.
Now that you know how to create a business plan, we encourage you to read our business finance guide. This content offers credible research on different funding options to buy a business, invest in equipment, or expand your company.
We hope this article has been helpful, and we wish you success on your new business journey!
@Be_theBoss