How to write a business plan
Business planning and writing a business plan are two of those
compulsory processes of starting a business that seems to be
over-debated, over-analysed and over-complicated.
They're actually very simple. Creating a business plan should be
a rewarding not daunting experience, clarifying and proving to you
before anyone else, what your business is, what it will achieve
and, crucially, mapping, in a clear, succinct document, how it will
- There are no hard and fast rules on writing business plans or business plan
layout, but they should always include an executive
summary, a short description of the business, market research, an
account of your marketing and sales strategy, details of your
management team and staffing, some information about how the
business operates and last but not least, financial forecasts.
We'll look at all of these in more detail later in this guide.
- If you're preparing a business plan for external consumption -
say a bank or investor - you should think in terms of 20-40
pages of information. If the plan is for internal use - for
instance, simply to provide a route map for you and your key
managers - you don't have to go into as much detail and 5-10 pages
is often fine.
- Your plan should be clear and concise, anchored in
fact and evidence. Aim to have plenty of white space rather than
endless dense text, and use tables, graphs and pictures of
products. A good plan can be skim-read in about 15 minutes - use
bullet points and clear headings to make sure this is possible. You
can see some good samples here.
The executive summary
- Unsurprisingly, this is a synopsis of your entire
business plan. Its role is to highlight the key
points that you go into in greater depth later in the document
- It's sometimes the only section a potential backer will
read - so it has to be enticing while also providing a good
understanding of the business.
- Typically, the executive summary should cover a couple of
sheets of A4 paper or 800 - 1200 words.
Description of the business
- This section should cover the basics of the
business in terms of where it stands today, where you plan
to take it and where it has come from.
- Include details of when you plan to start trading or (if
already started) when trading began. You should also provide
details of the company's history, the current legal structure ( are
you a sole trader, limited company or partnership?).
- Describe your product and your unique selling
points. USPs. In other words why people will want to buy
what you're selling.
- Outline how you plan to develop your product or
grow the range you have to offer.
- Provide details of any patents, trade marks or design
rights you own. If intellectual property - whether in the
form of clever branding or unique technology is important to the
success of the business, explain how this can be defended.
- Remember to avoid jargon. You may be an expert in
your industry sector but the external audience for your business
plan won't necessarily have the same degree of technical knowledge.
What they want is a clear view of the business prospects.
Market research and sales strategy
- Provide details of your competitors - direct and
indirect. Who are they? What is their market share? What niche will
your product or service fill in the existing market?
- Equally important, you should be clear about your
customers. If you're selling to individual consumers, you
should provide details of the target group - in terms of age,
gender, income, interests, etc. In the b2b market, you should
detail the kind of company you are planning to reach. In both
cases, the plan should explain why your target customers will buy
- Provide some information about the size of the
market and the market share you plan to achieve.
- Provide information on your marketing and sales
strategy - the channels you plan to use, pricing and service
Your management team and employees
- Investors and financial backers will want to know if you have
the skills in place to deliver on your goals, so provide
information not just on your managers but all members of
- Include external advisors such as lawyers and
accountants as this will also provide assurance that you have the
necessary skills in place.
- Set out how much time and money each person will
contribute and what you plan to pay in terms of salaries.
This will help both you and external parties assess whether you
have the right cost base in terms of personnel.
- Include any plans for recruitment.
- Include details of your current or planned
location, costs and why you chose it.
- Provide details of the facilities you require to
produce your product or service. This should include both in-house
facilities and any aspects of the business that have been
- Management information and control systems are also an
important element in the operational mix. You should explain
what systems you plan to use - for instance stock control, quality
control - across the business. Provide details of any
weaknesses and how they can be improved.
- In addition, you should also detail your IT
requirements both now and in the future.
Your financial forecast
- This is a crucial section in that explains everything
you've previously said about the business in key numbers.
You'll need to include forecasts covering sales, profit and loss
- Typically, these forecasts will cover three to five
years, covering where the business is now (and in the short
term future) and where you see it going. How quickly will sales
grow, when is the business expected to turn a profit? What is
the cashflow outlook?
- You should include information on the capital you
require, all sources of revenue, any securities (investment
assets) that you hold and outstanding loans.
- Ensure the projections are realistic. If you have
a trading record, you have something to go on but if the business
is new then you will be reliant on educated guesswork based on your
market research. Don't be over-optimistic.
- Always include details of the research you've carried
out to arrive at your forecasts.
Should I write two business plans - one for internal use
and one for external consumption?
You should certainly tailor the plan for the requirements of the
target audience. However, the basic information that forms the
basis of the document should be the same. Essentially, you should
be describing the same business, albeit in more detail for an
My company is new with no trading history. How can I
produce credible forecasts of sales?
It's really a question of market research. You need a clear idea
of your target audience. One you know that you can work out how big
the market is and how much your customers are spending on similar
products at the moment. Factor in your own unique sales proposition
and you can put a figure on likely sales. It is, however, just an
estimate, and most entrepreneurs tend to be over-optimistic.
Unique sales propositions (USP): These are the
things that differentiate your products and services from those of
your competitors - the selling points. They could be related to the
product itself (price, quality, etc) or the service wrapped around
Direct and indirect competitors: Direct competitors
are those that you go to head-to-head with on a day to day basis -
usually companies working in the same sector and often in the same
location. Indirect competitors may not be in the same sector but
their activities can affect your business. For instance, if
you run a DVD rental business, your direct competitors will be
other stores, but the success of indirect rivals - such as the Sky
movie channels will also have an impact on your operation.
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