How to put together a business plan
If you’re starting a business, one thing we recommend you write (whether you need investment or not) is a business plan. Here’s a quick guide on putting one together.
A business plan is a crucial document for any business – from startups to more established enterprises. Not is it a crucial document if you’re securing funding, but it also gives your business a clear framework to progress against and establish goals and objectives.
So, how do you go about putting a business plan together? We worked with Direct Line for Business to create this guide to help you write your own.
What is a business plan?
Before we take a look at the information that you need to include in your business plan, it’s important to understand what this document is.
At its most basic level, a business plan outlines the goal and objectives of your business, and plots out how they can be reached in a series of simple and easy to understand steps.
It’s an essential planning document for anyone who is starting a business for two reasons:
- It validates the reason for the business existing. If you cannot write a coherent business plan then you should question whether it is worth setting up the business in the first place.
- It’s a requirement for anyone who is seeking investment in their business. Potential investors will want to see your business plan before they consider putting money in.
It’s also important to bear in mind that a business plan will be written initially when the business starts up. But after this time, the size and scale of the business will almost certainly change. So the business plan should be constantly updated and adapted as your business does.
Why is a business plan important?
Putting together a comprehensive business plan can help you convince your bank to raise vital investment cash. But even if you are putting up the money yourself, creating a business plan will help you keep your feet on the ground and stay focused.
A business plan could also help you spot potential pitfalls before they happen, and assist you in structuring the financial side of your business. They’re an important means of measuring your success too, as you will have a concrete set of goals and figures written down in one place.
In a climate where banks are tightening their lending rules, a good business plan will also give you the edge on your competitors and help ensure that you come out on top.
What’s included in a business plan?
When it comes to writing your own business plan, you need to make sure you include the following elements:
- An executive summary.
- An overview of the business.
- A snapshot of your business’s management structure and personnel.
- Financial forecasts.
Let’s look at each element in more depth.
Your executive summary
The first thing that every business plan needs is a strong executive summary. This is should be a punchy, high-level overview of your business that includes:
- A brief description of the products or services that you will provide.
- A summary of your business objectives.
- A strong description of the market that your business will operate in.
- A snapshot of your business’s growth potential.
- An overview of your competition in the market, with any advantages that your business will have over the others.
- An overview of your business’s funding requirements.
First impressions are incredibly important for every business and many lenders and investors make judgments about your enterprise based on this section alone.
Remember that for any presentation the attention of the reader or viewer will typically peak at the beginning and gradually tail off afterwards. So you need to put the most important points towards the beginning in a neat summary.
Because it needs to act as an overview of your entire business plan, it can be worth writing the executive summary after the rest of the business plan. That way you can refer back to what you’ve written in the other sections quickly and easily.
The executive summary should definitely not be a long description of the business and its products, or a boring list of contents that will turn the potential investor off. It should also be free of hype and jargon, and the rest of your business plan should follow suit.
Your overview of your business
Next up in the business plan is a short description of the business opportunity. This should explain:
- Who you are.
- What you’re selling (or plan to sell or offer in the case of a start-up).
- Why and to whom.
In this last section, you need to set the vision that you have for your business, as well as summarising:
- Your business history.
- Key features of the market sector.
- The product or service and its benefits.
Even if the elements of the business are straightforward, it’s important to state clearly what the business is and how it works.
If you’ve already developed your business idea through researching your chosen market ‘niche’ and done extensive business planning, you should have most of this information to hand.
On top of this, you also need to include an overview of your main competitors and how you plan to develop the business in the future.
The next section should look at your marketing and sales strategy, and you need to communicate why you think people will buy what you want to sell and how you plan to sell it to them.
This section will address questions about how you are going to position your product or service in the market, who your customers are and how you plan to attract new ones. It will also look at your pricing policy and how you plan to promote your product or service.
You also need to describe your sales methods, such as direct marketing, advertising and PR, and talk about how you will reach your customers and the channels you will use to sell to them.
A snapshot of your business’s management structure and personnel
In the next part of the plan, you need to describe your management team and other staff that will be working for your business, as well as your own background and credentials. If you haven’t yet recruited anyone to work with you in either a management capacity or otherwise, you need to outline the people you plan to recruit to work with you.
After this, describe your business’ operations and properties, any production facilities that you might have (including any home offices), and any management information systems and important technology.
People like to invest in people, and so showing that you have a credible team in place will go a long way to reassuring investors, and ensuring that you can actually get your business plan executed.
Your financial forecasts
Finally, you need to provide accurate financial figures for your business. This is the financial forecasts section and it should run for the next three to five years, so make sure to think this far ahead when starting up your business.
When you create a business plan make sure you’ve thought carefully about how much funding you need, what sort of security you can offer lenders, how you plan to repay any borrowings, and sources of revenue and income.
The forecasts themselves should include:
- Cash-flow statements.
- Profit and loss forecasts.
- Sales forecasts.
However, the more details you include, the better.
If you follow this structure, you’ll have the beginnings of a strong business plan.