Whatever industry you operate within, creating an effective business plan is the key to success. Your business plan will include the vision and mission of your business, as well as your long and short term goals. It’ll also lay out exactly how you intend to achieve these goals, and timescales for doing so. Not only will having a comprehensive business plan help to keep you on track when it comes to growing your business, but you’re also likely to need one if you want to apply for business finance.
In this article, we’ll explain how to write a business plan, including what you should include in your business plan and how to structure it.
What is a business plan?
Before we consider how to write a business plan, it’s useful to first consider exactly what a business plan is and why you might need one.
A business plan is a document that describes your business and how it will operate over a set period of time. It’s designed to help both you and your investors make informed decisions about the viability of your business and whether they should invest money in it.
A good business plan includes all of those details that potential investors might need to know before they’re willing to give you their money. You’ll need to include details such as the industry you operate within, who your target market is and how they can be reached, a SWOT analysis, marketing strategy and a comprehensive financial forecast.
This will help investors understand whether or not your business is going to be successful in the short term and long term, as well as identifying which areas of your business need to be improved. It will also allow investors to make comparisons between different businesses, helping them to make an informed decision about whether or not they want to invest in you.
Why do I need a business plan?
Now that we’ve outlined exactly what a business plan is, the next step is to consider why you might need one. Here are some of the key reasons why your company should have a business plan in place.
1. To help you to keep track of your business’ progress.
By having a comprehensive document that outlines your aims and objectives, it will be much easier for you to keep track of your performance over time. You can then use the business plan as a benchmark for your progress, and consider whether certain milestones have been met. This will help you to identify areas of your business that need improvement, as well as celebrate all of your successes along the way.
2. To secure financial investment
In order to secure financial investment in your business, you’ll typically need to provide a business plan as well as a pitch. The investor will want to have as much information as possible before they invest any money, so it’s useful to be able to provide this information quickly and easily. Not only that but if you don’t have a business plan, it will be difficult for you to demonstrate your long term strategy and how you intend to achieve it.
3. To help with strategic decision making
Running a business can be challenging, especially when you’re still relatively small. This is why having clear goals in place is so important, as they’ll act as your guide, helping you to make informed decisions and focus your efforts on specific areas of your business.
4. To highlight different opportunities and threats
Many businesses make the mistake of focusing too much on their industry’s strengths, which can lead to a lack of innovation over time. A business plan will help you to think more broadly about your current environment, as well as any potential opportunities and threats.
What to include in a business plan
A well-written business plan should explain what your potential customers can expect from you and your products or services, as well as explaining the culture within your organisation. It should also explain how your products or services will benefit or add value for both your customers and your business.
Let’s take a look at some of the key parts of a business plan.
1. Executive summary
Every business plan should begin with an executive summary. This should briefly summarise the key parts of your business plan, so we’d advise writing this last, after you’ve finished drafting the rest of your business plan.
2. Business description
The next section of your business plan should be a description of your business. This should outline the types of products or services that you will offer to your customers. It should also describe the culture within your company and how it aims to deliver top quality service to its customers.
It’s also recommended that you include a mission statement as part of this section too, as this helps define the type of business you are, as well as the aims and objectives of your company.
3. SWOT analysis
A SWOT analysis is a useful tool for identifying the strengths, weaknesses, opportunities and threats that your business faces.
Strengths: Think about the things that make your business stand out. It could be that you’re offering a completely unique product, that you already have a strong customer base, that you occupy a prime position on the high street or that you have a tight-knit and talented team.
Weaknesses: A SWOT analysis isn’t all about looking at the positives, so think of some of the issues that may be preventing your business from achieving its goals. This could include an underperforming product or service, poor customer feedback and even poor staff morale.
Opportunities: Opportunities describe any potential growth your business might see in the future. These could include new products or services, a lower cost of doing business or new markets that you could begin to target in the future.
Threats: Finally, consider whether there are any external factors that could affect your business negatively in the future. This could include legislation changes, competitor activity and fluctuations in the economy.
4. Competitor analysis
In this section, you should take a look at other similar companies and consider how their business is both similar and different to your own. It’s a good idea to evaluate their marketing materials in this section, so that you can identify where you will use a similar strategy and where you will differ your own marketing.
You should also include a background to the industry, including any trends or factors that could impact on your business in the future. For example, whether there is likely to be increased competition from new businesses starting up in the same sector as you, or if there are any legislative changes that may affect how you operate.
5. Marketing Plan
Your marketing strategy should outline how your business is going to be successful in terms of generating new customers and keeping existing ones. It should also identify any key events that could affect revenue, including changes in seasonality or legislation.
In this section of your business plan, you should consider who your target market is and how best to reach them. You should outline who specifically you are looking to target, how you will do so, and the methods that you will use.
For example, if you are launching a new product or service, your marketing plan might include details of where your customers can see your new offering before it launches. You may decide to place posters in local stores or arrange a roadshow in your local area to showcase your products or services.
Alternatively, if you will be selling your product or service online, you may choose to focus on digital marketing. This could include social media, blogging, SEO and video marketing.
6. Product development plan
You will also need to include a product development plan as part of your business plan. This should outline the future plans for your products and services, as well as how you plan to develop or improve them over time.
In your product development plan, you should include details such as pricing and how your products will be distributed.
Your product development plan should also include any further changes that you wish to make to your existing offering over time, such as launching different versions of your product or making small improvements. You should also detail what you plan to do in order to improve your current products or services.
For example, if a particular material is causing problems with customer satisfaction ratings, you will need to discuss how you plan to resolve this shortfall. This could include changing the product itself, changing who your supplier is, or altering how it is packaged.
7. Operations and management plan
Your operations and management section should provide an overview of how you will run your business, including the resources that you have at your disposal for this purpose.
You should also outline how you will be spending your time as a business owner. Do you have the right team in place to help you achieve your goals? Will other company owners be working with you over the next few months or years?
For example, if your business is set to expand quickly, it may make sense for you to hire additional employees or a new manager. You should also include any plans you have for outsourcing work, such as ensuring that your online marketing is being handled by a reputable company.
8. Financial forecasting
At the end of your business plan, you should include a financial forecast. This is where you can estimate how much money you expect your company will be making in the future and whether you believe it will be enough to sustain operations.
You can use your existing revenue and expenses to generate an initial prediction for this section. You can then edit these figures based on any changes that you make to your business, such as launching a new product or service.
You should also include details of how much money you need to help facilitate the growth of your business. This could be in the form of additional funding, an increase in working capital or equipment needed for your employees.
What do investors look for in a business plan?
When you give your business plan to a potential investor, there are some things that they will be looking for.
Firstly, they’ll want to understand how your business operates. They’ll be able to see this in your executive summary, as well as your business description and your operations and management plan. These sections should give the potential investor a clear insight into how you plan to run your business and how you will set yourself up for success.
Your SWOT analysis will then give the potential investor a more in depth understanding of your business, including your existing strengths and where your business could potentially fall down. This will give the potential investor a clear picture of your business and how it could be affected positively and negatively by both internal and external factors.
Next, they will need to understand the products or services that you are offering, and how you plan to develop these over time. This should be covered in your product development plan.
They’ll also need to understand how you plan to market these products or services to your target market. In your marketing plan, you’ll talk the potential investor through the types of marketing that you’ll be using, such as social media marketing, video marketing, email marketing or blogging.
Finally, and arguably most importantly, the potential investor will want to see a comprehensive financial forecast. This should include an analysis of your existing income, a cashflow forecast and your breakeven point. This will give the potential investor an insight into how profitable your business could be with their investment.
A business plan is an essential document for any business. Not only will a business plan help to give you a clear view of how your business could develop over time, but you’re likely to be asked for a business plan by any potential investors should you require financial investment.