Crafting a comprehensive business plan is a key step for any entrepreneur starting a new venture.
In this article we discuss what a business plan is, the benefits of it and how to create one.
What is a business plan?
Every business should have a business plan.
It might be one short document, or a series of long documents, but whatever form it takes, it is the roadmap that sets out where your business wants to go, and how it will get there.
Writing a business plan is an important step in getting your business off the ground.
Not every entrepreneur is a natural planner, and it can seem daunting to put your ideas down on paper.
Nevertheless, writing a business plan can really help to focus your endeavours and protect you against the unexpected (which will happen).
Remember, you’re not carving anything in stone – you can come back and change it at any time as you learn more about your business, your customers and the market.
Do I need a business plan?
You can run a business without a business plan, but this puts you at an immediate disadvantage.
Without a plan, you will end up being reactive rather than proactive, and you’ll find growth a lot more difficult.
More seriously, the lack of a business plan will deter potential investors and creditors, so raising finance will be extremely difficult.
Finally, without a plan you’ll have nothing to fall back on when things don’t go your way, so a small crisis could quickly become unmanageable.
A business plan enables you to work out what’s coming next for your organisation and to create strategies to grow.
The benefits of a strong business plan
If you’re looking for funding, your business plan will form a major part of your pitch to investors, shareholders and creditors.
You might also use it to attract talent.
Potential employees may be motivated to join you if your business plan projects exciting developments in the future, and it also makes it easier for them to contribute to the business, by suggesting innovative ways to develop the plan (it’s much harder to improve a business plan that isn’t written down!).
The plan will also encourage you to do your market research properly, so as to have a much clearer understanding of your customers and marketplace. This is invaluable if you want to achieve growth.
A good business plan will help you predict challenges coming up, which in turn helps you to prepare for them.
For example, you can work out when you’ll need more resources and what you’re going to do to make sure you have them in time. It should also help you to work out if you need to conduct any research and development (R&D).
Your business plan also serves as a yardstick that helps you assess how well you’re doing and whether you need to alter your strategy.
By setting specific goals, you can see how close you are to reaching them and adjust your strategy if you’re not on track.
Remember, it is a living document that you can tweak continuously as your strategic aims and focuses change.
How to write a good business plan
Business plans aren’t the easiest documents to prepare, even for experienced entrepreneurs.
A good accountant can be invaluable when putting your plan together, as they know exactly what you need to include.
You will need to consider lots of details and think objectively – even negatively.
This can be hard when it’s something you’re very passionate about. Here are some basic tips for getting started.
1. Do your research
- Who are your customers and what are their concerns?
- Who are your competitors and what are their strengths and weaknesses?
- Where are there gaps in the market?
These questions will help you to explain why your business is important and to determine what it needs to focus on to succeed.
2. Know your audience
Your business plan is not just for you.
It will be most valuable when you are trying to win over funders or recruit senior staff.
You should therefore ensure it is robust enough to withstand close attention from sceptical and knowledgeable people.
3. Structure it correctly
Your business plan should contain the following sections:
An executive summary – a succinct description of your business
Company profile – a more in-depth introduction
Your market – show your knowledge of the space you’re entering
Your products / services – describe what you’re providing
Your business model – a clear explanation of how you plan to make a profit
Marketing – how you plan to market your offering
Mid-term goals – your plans and funding needs for the next 3 to 5 years
Long-term ambitions – this is optional, but looking beyond 5 years can help with current planning
Finances – including current balance sheet, cash flow models etc
Any other relevant information
4. Set realistic targets
Where do you want your business to be in one years/two years/five years etc?
What is your long-term aim – e.g. do you want to crack a particular market, become a franchise, diversify?
What turnover and profit are you aiming for in the first year/second year etc?
Be realistic about where you think your business will be in these timeframes, rather than setting a grand 10-year dream based on hopes rather than hard figures.
Make sure you are in a position to measure successes and drawbacks along the way.
Working along a series of smaller, achieveable milestones is easier and more reliable than just ‘aiming for the stars’.
5. Get the finances right
How will you fund what’s next on the agenda?
How do you expect to bring in money?
What will you earn as the business owner? Are there funds for this?
How much will you pay out in wages?
How would you use any funding or investment?
You’ll need to be really clear here and make sure your calculations are accurate.
Investors will want evidence that you know your business’s finances inside out, because these are its foundations for growth.
Again, an accountant can be indispensable in helping you put this section together, so that you’re not blinded by overconfidence.
Your accountant will make sure the plan is financially watertight and that it includes provision for unforeseen circumstances.
6. Be concise
This is a general rule to apply to every section of the plan.
Though detail is important, clarity is even more so.
The plan must be quick and easy for readers to understand, so that no-one suspects that the wool is being pulled over their eyes.
They must be able to see at a glance what your business does, how it makes profits and how you expect it to grow.
Who can help me write my business plan?
An accountant can help you at any stage, whether you already have a plan that just needs some financial fine-tuning, or are still stuck staring at a blank sheet of paper.
Experienced accountants have seen countless business plans, and you can also look for one who specialises in advising your type of business.
With their help, you’ll be able to build a plan that stays robust through good times and bad.