What is a business plan and how do I write one?
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 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 anytime as you learn more about your business, customers and the market.
The important thing is that it exists and that it will prompt you to back up all your decisions with solid reasoning.
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 become reactive rather than proactive, and you’ll find growth a lot more difficult.
More seriously, lacking a business plan may 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.
It’s also helpful for understanding your customers and marketplace.
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.
It also makes it easier for them to contribute to the business by suggesting innovative ways to develop the plan.
The plan will also encourage you to do your market research 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 an 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 must 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 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 or 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 three to five years
- Long-term ambitions: This is optional, but looking beyond five years can help with current planning
- Finances: This includes the 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, two or five years?
- What is your long-term aim – e.g. do you want to crack a particular market, become a franchise, or 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, achievable 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 a 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 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 provisions 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. They must be able to see at a glance what your business does, how it makes a profit and how you expect it to grow.
They should come to the last page feeling that this is a business they want to be part of – whether as a creditor, an investor or a colleague.
Who can help me write my business plan?
An accountant can help you at any stage, whether you already have a plan that 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 can build a plan that stays robust through good times and bad.
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