How to Write a Business Plan
A key ‘foundation stone’ in the ‘construction’ of a sound venture is a well thought business plan. Using a plan not only allows you to set goals, but also to create time frames and benchmark your progress. This allows you to keep your business on track, create and shape a sound business model, and the all-important fundamental of telling the world of investors exactly how you envision meeting (hopefully exceeding) their expectations. Investors can be investment companies, angels, personal investors (there are many around), your friends, your family and even banks. Banks are not typical investors, but still should be treated as such because they will still need to be happy that their money will be repaid, especially if your company is new and has little trading history and assets. Often, once your personal money is tied and the money from those closest to you is spoken for, banks are the next stage before reaching out to other larger sources of finance. Many angels and personal investors would like to see some kind of trading history, intellectual property or other asset of value before they invest. Normally, to get this type if investor onboard, you will have already needed to spend some money to create a proposition of value.
The following is just a guide aimed to help you to think about what you may like to include. Always seek advice before developing your business plan. The headings are not necessarily typical and if you are a student, we recommend that you use the resources that you have been given or directed to by your academic establishment. We do hope that the following helps you though. Contact us if you have any questions, concerns or comments.
Now, businesses are all different and what is required can vary greatly. If you offer a service, you will need to shape your prospects in a completely different way to those who plan to retail to customers, those who have a B2B concept or people with the intention of manufacturing a product. The research needed will be different and the people you need to involve/learn from will also vary. A person who is experienced in the construction industry for example will have a different skillset to those who have been involved in retail. However, certain concepts overlap including accounting procedure and the fundamental need for other to be aware of what you can offer.
What are the Sections of a Business Plan?
Many companies offer to write a business plan for you. If you are new to business, or have difficulty in putting your ideas into writing, it may be advisable to seek professional help. Never let your ability to write put you off. If you have ideas and a logical business model, put it into words. You can hire proof readers to turn your ideas and creative flare into a well written document. The concept of business involves using resources and people who offer particular skills to their full advantage. Very infrequently is business about doing everything yourself, even if you are a small company with one director and one share holder.
The main sections are:
- State the company name.
- Give the business scope i.e. what it intends to do.
- State the market (who would be interested and where would they be located).
- State the size of the market potential in total numbers and how much of a percentage of the total market you think would be interested in your product or service.
- State how you intend to target this market.
- What are the economics of scale? i.e. how much more profitable will you be as you get larger and have more facilities.
- Outline who is involved and what their skills and attributes are. Perhaps use the heading ‘Management Team’ of this is more than one person. If experienced individuals, explain where and how this experience is gained. Just one or two sentences is sufficient for the summary.
- In one paragraph, outline how financing will be used and how this adds value. Also state the amount needed. Use several bullet pints of the capital is to be used for several activities e.g. percentage allocated to marketing, percentage for product development, percentage for new/more efficient machinery etc.
About the Business
- State the company name.
- State company trademarks, design rights, patents and other intellectual property (IP) granted or pending (without giving too much away if not all IP has been granted).
- Detail what the company does i.e. its products, services or retail channels.
- State the company’s location and if relevant, why that location was chosen.
- How does the company’s products, services or retail channels differ to existing organisations. These may be small differences, including but not limited to something as simple as location.
- How does what you offer benefit your customer? Again, this can be simple such as no quibble returns or a pay in installment option. Obviously, if you have something that is significantly unique, metaphorically shout it from the rooftops at this stage.
- What has the venture done to date? State turnover and key successes.
- What are the establishment’s core competences and unique selling points (USPs)? State what you do best and what you can do that nobody else in the market/location can.
- Detail who is involved and what they bring to the business. Often of someone who has handles budgets, finance or accounts is working with someone with specific industry experience or skills, this can be exciting for investors as it marries many important aspects needed for profitability and sustainability.
- If you have a mission statement, define it here. We recommend that you develop a catchy mission statement that portrays where you want your company to be and its core values.
About the Market and Industry where you Trade
- What are the barriers to entry? For example, is a specific qualification or registration needed. If no specifics are needed, write a sentence about barriers such as getting suppliers, getting logistics/shipping accounts etc.
- Discuss what is required in terms of regulation and safety. This may be as simple as ensuring all stock is manufactures to your country’s safety specifications.
- Discuss what could happen (or not happen) if economics changed. If you relay on a supplier from oversees, what happens if exchange rates change etc. What are your oprtions.
- If a supply chain is needed, outline the links in the chain and how you can manage each link to ensure smooth operations, continued sustainability and increased growth. If other companies are utilized, explain how they bring value and what happens if substitution is needed. Again, sharp, condensed and to the point answers are required here. Remove fears and resolve concerns rather than outlining all possibilities of failure. Even the biggest and best business have ongoing risks!
- What is the total size of your potential market?
- How much of the potential market can be realistically targeted?
- What is the likely take up (conversion rate) of those targeted/made aware?
- What is the likely spend per order/transaction and why?
- Where is the market based? Is it global or local? Write a one sentence explanation of how that market can be supplied and fully catered for by your firm.
- What are the purchasing decisions? Is the purchase a considerable expense that requires thought/debate or a relatively low spend that can be picked up without the need for complex decision making or discussion?
- What are the customer needs? How have trends changed and how are trends likely to change in the future? How can you adapt to changes in trend, of so, how?
- In terms of marketing, what are the 4Ps of your marketing mix i.e. product, place, price and promotion. A simple and short answer here may be good enough, as long as anyone reading your plan can make an informed decision. Read about the marketing mix in the marketing section of the Bizzle Dizzle website (we are hopefully here to help!).
- Explain what the competition is and how you differ. Before developing a business plan, do a SWOT analysis as explained on this website and document your findings (at least the positive aspects) in this section of your plan. You must develop strategies or coping plans for any weaknesses or threats that your SWOT analysis discloses. How can threats be avoided. Often competition is a good thing and the efforts of competitors can be leveraged to your advantage by selectively marketing one point where you have a difference or advantage to a market that has already been made exited and ready to buy by your competitors. Obviously be aware and careful of any legal/liability issues.
- How can you deal with future competitors? Potentially a simple statement explaining how you plan to be the ‘go to’ brand may help, especially of your business plan already details a branding strategy.
- Sometimes the addition of an investor can add value here, because an investor with industry experience may make your company a more attractive proposition to your potential customers. Investors want to protect their money too and can often give you valuable help, support and advice.
Marketing and Sales
- Marketing will involve a reiteration of the 4Ps of the marketing mix. Simple and short, perhaps the same story as above, but in different words.
- Sales are aligned with but very different to marketing.
- Who will be your sales people and what is there background/experience?
- What will be your sales channels e.g. online marketing or conventional hard copy media. Explain why each channel is used, the projected costs for each and the overall percentage of money given to each. If possible, estimate the return on investment (ROI) for each.
- How much will you turnover and make as a net profit (or earnings before interest and tax, EBIT) each year and how much can you forecast this to increase each year.
- What will you do on a daily/monthly basis?
- What machinery, technology, or systems will be used and how will this be managed?
- What will you outsource and why? Often machinery and the learning curve to use machinery will be too expensive for in-house operations. In this instance, consider outsourcing to trusted parties. Often, concentrating on the key areas that your business is good at (i.e. your core competencies) will produce the most favorable results. Investors are likely to know and understand this.
- What equipment is required? How much will this cost? How much will the equipment cost to maintain? What are the training costs associated with using the equipment?
- How will current and future HR and staffing levels be managed, allocated, and financed? Explain this briefly in your business plan.
The Management Team and Company Structure
- State who the key players of your business are. Highlight the important aspects of their academia, contacts and experience.
- How will the overall scalar chain of command look today and in the future i.e. who will manage/supervise each aspect and why will each aspect of your company require this (think in terms of value here).
- If you plan to be big (or compete in an established market), use the term ‘Board of Directors’ and state who the directors will be.
- Will the company be a limited company (LTD) a public liability company (PLC), a sole trader (self-employed), a partnership or a limited liability partnership (LLP). Explain why and how this may benefit the company. Often the market routine (or overall liability) may decide the company structure.
- Decide on an exit strategy. If you do not wish to leave the company every, at least make it clear how other investors can either get a return or dispose of their shares profitably in the future.
- What tests or system review may be needed. What are the costs and why are these required?
- What are the costs of training or time lost?
- What will you do of additional funding is required? How will the company value/shares be diluted and what will the implications of this be? Often dilution of value is not a bad thing, especially if the value has multiplied several times before dilution.
Risks and Threats
- State the risks logically and simply. Be honest, but do not over-emphasize risks
- Try to rate risks if possible so that readers can understand factors that are low risk. If you are unsure of the extent of the risk, you may wish to state this.
- State how you will protect the company from each risk. One or two clear, descriptive sentences may be sufficient.
- State what the company will turnover and make a net profit if all goes to plan. Give examples of best and worst-case scenarios. Please give clear, short explanations for each; less may be more (metaphorically) here.
- This is not a summary, as this is the first part of a business plan.
- Here state the business name, product or service, IP, USP, and people involved.
- Write the mission statement (no explanation, just the statement in the conclusion because the explanation/definition has already been given earlier in the plan).
- State the amount of finance required. Also state the projected turnover and profit for year 1, year 3, and year 5.
- Finish with a statement thanking the reader for their attention and inviting questions.
- Give your name and full contact details for your company.
The above is for information only and not a substitute for professional advice. Always seek advice from and act upon that given by a suitably trained, qualified, and indemnified professional before making any decision or taking any action. We cannot be held responsible for any action you take that leads to a negative effect, infringement or financial loss occurred by you, your company, a third party, a government, or any other organizations or individuals. Every company will need a different business plan. Sections will need to be added, removed, and amended depending on your industry, market, location, laws, amount of finance, etc.
Part of writing a business plan is to ensure that readers can understand your business. This means writing in a clear and concise way using correct grammar. For spelling, punctuation, and other writing tips, visit the Write Correctly website. There you will find lots of helpful information that may help you to improve your documents, letters, and emails.
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