Business plans

Writing a business plan is one of the most important steps in developing a start-up. The plan sets out the new business’s goals, market analysis, and projected income and profit.

How it works

Before a start-up entrepreneur can write a business plan, they need to have done enough research to identify a clear opportunity in the market for the product or service, and to define how the proposed new business will be uniquely positioned to capture that market, given the services or products offered. An outline of existing finances and an accurate projection of sales and profit are essential components, especially if seeking external funding.

Key elements

Preparing a business plan can take several weeks, and it is worth doing thoroughly. It is a vital document for securing funding, so the financial forecast must be both realistic and accurate. If showing it to others, pare the executive summary down to two pages, write it in plain English, and explain any technical terms.

Executive summary

Fill in this section last, bearing in mind that it may be the only part a busy person reads:

❯ Business summary Company structure, name, product or service, and customer profile
❯ Business goals Three objectives over one, three, and five years
❯ Financial summary Expected sales and costs, and funding
❯ Elevator pitch Two-minute talk to sell your idea to a customer

Business background

Provide details of each person in the business:

❯ Experience Relevant work carried out to date
❯ Qualifications Credentials, such as diploma in horticulture for a gardening service
❯ Training Past and future, including business skills such as assertiveness

Products and services

Describe what the business is going to sell:

❯ Product or service With a picture if product is new
❯ Range If more than one, such as garden design and maintenance
❯ How it is different What makes the product or service stand out from the crowd?

The market

Set out specific details of your potential market:

❯ Typical customer Businesses or individuals and their profile; local, national, or international
❯ Market research What the local market is for similar products or services

Marketing strategy

Choose about three of these methods:

• ❯ Word of mouth
• ❯ Advertising
• ❯ Business literature
• ❯ Direct marketing
• ❯ Social media
• ❯ Website

Competitor analysis

Show how the business idea compares with the competition:

❯ Table of competitors Who and where they are, what they sell and for how much, how good they are
❯ SWOT analysis Including how to remedy any weaknesses and combat known threats, such as a garden center opening nearby
❯ USP Unique selling point of the product or service

Operations and logistics

Describe from start to finish how the business will run day to day:

❯ Supply and delivery How the goods or service will get from A to B
❯ Equipment Details of transportation, office items, and premises
❯ Payment, legal, and insurance How customers will pay and how that translates into salaries; compliance with the law

Costs and pricing strategy

Work out how much the product or service costs and its sale price:

❯ Cost How much each unit or batch costs to make and deliver
❯ Price How much each unit or batch will sell for
❯ Profit margin The difference between cost and price per unit

Financial forecasts

Predict sales and costs over the year, allowing for seasonal fluctuation, such as spring demand for lawn services:

❯ Sales calculations For each month, the expected number of sales
❯ Costs calculations The costs of the predicted sales each month
❯ Cash-flow forecast The money coming in and out of the business

Back-up plan

Make a Plan B in case something goes unexpectedly wrong:

• ❯ Short-term changes Cutting costs or boosting sales immediately
• ❯ Longer-term changes Shifts such as working online, not on premises
• ❯ Closure Lessons learned and skills acquired if the business closes

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TOP FIVE REASONS TO WRITE A PLAN

• ❯ The process Working through each element ensures nothing is forgotten
• ❯ Costing The only way to find out whether the business is viable is to work out details of costs and sales.
• ❯ Funding A good business plan improves chances of getting a loan.
• ❯ Areas of expertise Making a business plan clarifies where outside help is needed—for instance, in bookkeeping or marketing.
• ❯ Getting to know the competition Conducting market research is the best way to give a business an edge.

NEED TO KNOW

❯ SWOT analysis Stands for Strengths, Weaknesses, Opportunities, and Threats
❯ Unique selling point (USP) The feature that makes a product different from the competition

Start-ups in the US are
2.5x
more likely to go into business if they have a written plan