Starting a business is one of the hardest decisions anyone can make. After all, there is most likely no finer way to leave one’s professional comfort zone. From this point on – all of the decisions are your own. While that does mean reaping all of the rewards when things go well – it also means being responsible for anything that should go wrong.
You may be familiar with David Copperfield’s 3 P’s of success: passion, preparation and persistence. It is a clichéd but powerful message and applies perfectly to getting into business. For most entrepreneurs, passion comes in abundance, but the key to success lies in meticulous preparation. This is where the business plan steps in.
Regardless of the type of business idea, you plan to develop; one thing is certain – to make it a reality and success, there will need to be a lot of thorough and thoughtful business planning involved. At this point in your first stages of business development, you will encounter the term ‘business plan.’ Naturally, like most entrepreneurs, you may not be familiar with the intricacies of writing a business plan; nor its gravity for the success of your enterprise. If you’d like to skip ahead to a particular section, please find details of contents and quick links below:
- What is a business plan?
- Write for your audience
- How to structure a business plan
- Executive summary
- Business background
- Market breakdown
- Marketing strategy
- The proposal
- Finance and forecasts
- Risk analysis
- Supporting evidence
- Writing, formatting and presentation
What is a business plan?
A business plan is a document detailing the objectives of your business and the strategies you will undertake to meet those objectives. A stranger should be able to pick up your business plan, read it through and have a very distinct picture of what your business is, how it runs and how it will succeed.
Why is it important?
Entrepreneurs repeatedly underestimate the importance of a solid business plan. It is an essential step to:
- clearly define your business idea and premise
- set out the goals of the business and its route to achieving said goals
- identify potential issues and opportunities within your chosen market or product
- determine the viability of the business
A business plan is typically produced to provide a clear roadmap to build a successful business or to secure funding to start said business. It is an essential resource for management or any potential investor, allowing them both to make informed decisions.
Aside from attracting investors or providing a clear plan to success, writing a business plan is a crucial exercise for any business owner. It obliges you to scrutinise your idea and to measure the commercial viability of your proposed business model. It will help you spot any holes in your model and iron out any issues before they arise. It should answer the questions: will my business actually work and, if so, how?
Now that you know the critical importance of a business plan, as with all complicated endeavours – the first question is simple. Where to begin? This guide will take through all the key facets of a business plan, starting with who it’s for.
Write for your audience
A business plan is no different from any other piece of writing: for it to be good, the author must know their audience. While a business plan is certainly no piece of prose – it’s critical that your plan communicates the right information for the right reader (in some cases, this can mean developing multiple business plans).
You need first to consider who you are writing for, as different information will be pertinent for different audiences.
To do this firstly, establish your target audience and secondly, identify what you want from them. This will greatly influence what you write and how you present it. At every stage, ask yourself if what you have written provides the reader with the right information. If the answer is no, you will need to figure out why. The common audiences for a business plan are as follows:
- Angel investors
- Managing Director
- Commercial banks
- Venture capitalists
- Potential business partners
- Prospective key customers
- Critical suppliers
- Strategic allies
Below is a breakdown of each with insight into their mindset/goals along with advice on how a plan should be tweaked/structured to each audience.
Entrepreneurs most commonly produce a business plan with fundraising in mind. Generally, if you are looking for an investor, you will want to focus on the low risk and great returns of your business idea.
Angel investors are the most common type of investor and are typically high net-worth individuals (from a finance, family or entrepreneurial background) who provide financial backing for new or small business ventures, in exchange for ownership equity.
Typically, angel investors look for a significant return on their investment within 5 to 7 years. One advantage of approaching angel investors is that they are almost always prepared to take bigger risks than banks. Another benefit of angel investment is that there is no obligation to pay back the investment if the venture goes under. However, angel investors are purchasing a stake in the business which equates to a degree of control in the project. They’ll have a say in how the company is run.
Managing Director (CEO)
A business plan can also be a tool to help you run your own business. Internal business plans concentrate on personnel, departments, the structure of the firm, management objectives and wider company targets rather than specific financial details.
Producing an internal business plan is an important step in helping to focus your vision, determining problem areas in how the company is run and highlighting what can be improved. By the time you’ve finished writing it, you should have a far more polished business model (the internal business plans will be covered in greater detail later on, expanding on this).
If it’s a business loan you’re after, know that innovative ideas and ambitious concepts alone don’t wash with banks.
Bankers are usually much more formal when it comes to reviewing business plans. In other words, they won’t take much stock in impressive resumes and innovative concepts; they will be more focused on the financial merit of your business plan. They want to ensure your plan is financially sound.
With commercial banks pay most attention to your financial section. Provide detailed cash flow statements and balance sheets and keep your cash forecasts realistic.
When managers inside your own company read the business plan, they will likely use it as a reminder of the company’s core objectives, or to monitor the performance of the company in specific market conditions. They will be most interested in the vision and mission statements, as well as the overview/analysis of economic factors and current industry conditions.
As explored in more detail later on, the internal business plan that managers use inside the company itself differs from the external business plan in both scope and content. While they can both make use of a shared information pool, using them interchangeably is not advisable, nor will it achieve any meaningful results. Investors are interested in seeing something different than new employees or hires when they look at the business plan of a company, and keeping that in mind is essential.
Venture capitalists (VC’s)
VC’s are professional investors who invest private capital (typically much larger than angel investment) in exchange for an equity stake. VCs are attractive as they can often offer larger sums of money and have a greater aptitude for risk.
Again, they are likely to take bigger risks than banks and again, should your start-up fail, in almost all cases you’re not obliged to pay back their investment. Venture capitalists are well connected and can also offer ample business knowledge and skill.
However, venture capitalists are looking for serious growth and return, so you’ll need to prove that your business has the scope to expand exponentially. Be aware that VCs expect sizeable returns, and will be looking for a foreseeable exit, often in the form of selling shares or acquisition.
A business plan seeking venture capital must therefore include an exit strategy and focus on opportunities for growth. Bear in mind that professional investors receive thousands of business plans. You’ll likely only be afforded a quick scan, so it’s imperative that your plan is concise, relevant and is quick to highlight your best-selling points.
Potential business partners (co-founders)
You may be after a business partner. Key issues for prospective partners centre around share of ownership, division of responsibility and what this means for the share of overall control. Business plans used to this end must focus on providing a comprehensive picture of the structure of the business.
Prospective key customers
While there are fewer reasons for end-consumers and other customers to read your business plan, they may still do so. For example, they might be thinking about forming a long-term business relationship with you or making a similarly big commitment (most common in a B2B environment).
Naturally, they will be most concerned with how your business builds relations with other customers – and potentially also suppliers. With that in mind, you will want to provide greater depth in these sections.
Above all else, as a new company, key suppliers will want to be sure your business can pay it’s bills (before providing favourable credit terms). Thus, you should include adequate financial reports and cash-flow forecasts. These will be critical if you need to negotiate a production or service contract vital to starting your business.
In this instance, quite logically – suppliers would love their customers ordering more over time. So, they will want to know details on your current financial situation and growth prospects. If you can show immense growth potential, you are more likely to negotiate a better set of terms with the suppliers.
It’s important to remember that strategic allies will approach you for a specific reason; complementary customer bases, distribution, technology, etc. So, while you prepare a plan to present to a possible ally, make sure to emphasise the appropriate aspect of your enterprise. Also, it would be quite smart to present your business plan in stages, when you’re showing it to a strategic partner and ally (showing where you are and where you could go).
Remember, a strategic ally can also become a potential competitor. So, you don’t want to provide them with sensitive details like marketing strategies or delicate financials until you’ve established trust. This sort of trust must not be built on a purely personal basis, but also protected based on a confidentiality agreement.
It may be that instead of starting your business you are instead have already built a successful business and are looking to sell it. In this case you’ll be writing a business plan for potential buyers.
In this case, you need to demonstrate how the business is a good match for them, how profitable it is and what prospective growth there is. Don’t forget to show that your business can run smoothly without you: if prospective buyers think your company can only succeed under your direction, they will not want to buy it off you.
Write for your audience
Whilst I’ve covered the main recipients of a business plan, this list is not exhaustive. Business plans can be created for many other audiences and reasons. Whoever it’s for, consider the main issues from their point of view and always keep this in mind when you write.
How to structure a business plan
Now that you understand the different possible audiences for your plan, it’s time to move onto the contents/structure of the plan itself. As you might imagine, every business has plenty of specifics that exclude the possibility of a universal business plan template. However, the core structure of any business plan is relatively similar for most businesses (titles may vary), most business plans include an:
- Executive summary – outline your business, its objectives and your proposal
- Business background – explain what your business does and how it works, how you reached your current stage in development and provide important information on your industry
- Products or services – relevant information on the product or service you offer
- Market breakdown – analyse the market your business operates in, how it is structured, your competitive edge, barriers to entry, using research on your industry and competitors
- Marketing strategy – How you plan to build awareness, market and sell your product or service
- Business operations – describe all day-to-day operations, how the business runs, map out the end-to-end production to sales line
- Management – provide a snapshot of the key players in your company and define the roles of major employees
- The proposal – this is the crux of the plan! Tell your reader exactly what you need and when and what’s in it for them
- Financial information and risks – break down your finances, including trading to date, sales projections, a balance sheet and cash flow projections, as well as a section evaluating risk
- Legal information – any legal disclaimers, contracts or permits need to come here, as well as an overview of the regulations which govern your trade
This list is the core of what you need to provide in a standard business plan. However, you may well need to add full sections for aspects that hold particular relevance to your business. For example;
- if your business revolves around a heavily regulated product such as alcohol, you should consider an extended section dedicated to compliance, necessary licences etc.
- Similarly, for technology-based businesses it is worth including a more detailed section on the technical facets of your product/business.
- If you are trying to break into an existing and longstanding market, you might need to have a section dedicated to how you are different. Your advantage might be down to your unique operation methods or your approach to management.
Whatever it is, make sure have a space to explain where your innovation comes from if it is significant to your success.
Finally, as per the previous section the exact contents will also be adjusted per the recipient. Before you start, try and map out a logical plan, section by section. Write the main aspects as key headings and lay them out in a sensical order as if you are telling a story. This will ensure a logical flow and will also save you considerable editing time at the end of the project – it’s far easier to slide sections in or move them around if the structure is logical to begin with. Now to the writing of each key component of your business plan starting with the executive summary.
In essence, the executive summary is a condensed version of your whole plan to give a busy reader all the vital information they need at first glance. It must cover all the key issues for your audience with necessary supporting evidence. It needs to be persuasive and convincing. Sustaining the interest of the audience whilst also giving them enough information to grasp the main concepts is no mean feat. We already know that your plan is probably one of many your reader has to consider.
Therefore, how good the executive summary is will likely determine how much attention your reader will pay the rest of your proposal – or indeed whether they read it at all. It needs to be concise, catch your reader’s interest, hit all the main points and sell your idea, all in one. The basic elements to include in your executive summary are snapshots of:
- the business
- the team
- the proposal
- The problem your business solves
- why it will succeed
- key financials
- what the rewards will be
- any major risks and how you plan to manage them
- what you want from the reader
- contact details
To make sure you cover all key issues, it’s advisable to write the executive summary last. Only when you’ve finished your plan will you be able to pick out the most important and convincing aspects. Write the body of the plan and try to read it over from the perspective of a potential reader. What sets you apart from competition? Which supporting evidence is most compelling? This ought to feature in the summary.
Ask and you shall receive
Crucially, your summary needs to include what you want from your reader. Get to the point: sell your idea but be sure to lay your cards on the table. Weak summaries often omit this information. Mystery will not work to sustain the reader’s interest in a business plan – investors don’t want to waste their time, so be upfront! Sound familiar? So, it should! The structure of the summary should resemble that of the whole plan.
Optimal length for an executive summary
The optimal length for a summary is one page. This allows a busy reader to get all the key information at first glance. It may seem a tall order, but any longer can lose your reader’s valuable attention. To achieve this one-page goal, write down the essential points as concisely as you can. Avoid descriptive language: remember, anything your reader wants further explained, they can find later in the plan.
However, whilst adjectives are redundant here, figures are not! You need some essential statistics to back up what you say. Find the most relevant numbers in your plan and include them to support your essential points. That said, do round them up – you can delve into precise figures later on. Here, your evidence is used for impact: an easily digestible number will leave a more lasting impression on your reader.
Logical structure and flow
It can be helpful to structure the summary in three parts. You need to guide your reader through the story without losing their interest. Firstly, how did you get to this point? Mention the research you carried out, where the idea came from, how you spotted a gap in the market. The middle part sets out your business idea and stresses what makes it special. The final part reveals what you need to take the business forward; investment, for example. This part should also acknowledge risks and tell readers how you will limit these, as well as highlight the rewards.
Remember to finish on a high. Don’t conclude with a line on the many risks of your business. If you want to include risk in your summary, frame it in a positive light, such as explaining how you plan for risks, or how they are counterbalanced by significant returns. End on something positive and powerful: how quickly your investor will make back their investment, for example, or how large your business will grow.
When you’re writing the executive summary, remember that some people will only read this synopsis. That’s why you should include any defining or game-changing details here. Has your business been given a prestigious grant? Things like this are worth mentioning even in the executive summary. Next you need to take a deep dive into your businesses’ background.
This is where you introduce your business and your market to your reader in more detail. Give them a broad idea of the who, what, where, when and why in your business. Almost everything in your business background section will be touched on in greater detail in the subsequent sections, so this section simply lays down the fundamental premise of your business and the main things to know.
Your business background should include the following:
- Industry overview – (briefly) set the scene for introducing your business
- Business overview – what does your business do and what are its aims?
- Business model – what mechanisms does your business use to operate? Essentially, how does it function?
- Company history – how was it established? Who founded it, when, where and why? Was there a Eureka moment?
- Mission statement – the essence of your idea
- Structure and Ownership – How is your company structured, who owns what?
Remember that your investor may not be familiar with your industry, so start by providing an industry overview. For all the subsequent detail in the plan to have any meaning, you need to set the scene and provide a context. Consider this section to be the foundations to your plan – any builder will tell you that a solid foundation is fundamental to constructing a sound structure. Build a solid understanding and avoid misconceptions by outlining the industry in simple terms, being sure to explain any industry-specific terminology.
A good test for this section is to ask a friend with no experience in your field to read this part through. When they’re done, get them to explain back to you what they understood. Did they get it right? If not, what did they get wrong? These bits need clarification.
With the scene set, you can now explain what your business is and how it fits into this industry. As the word ‘overview’ suggests, this part should remain relatively brief, as the purpose of the plan as a whole is to form a clear picture. Provide an overarching outline but let the remainder of the plan fill in the detail.
A business model is quite simply how your business works at a macro level, for example; the business model of an eCommerce fashion company might be, we source fashion items on trend from America and resell them through our eCommerce store in the United Kingdom.
Beyond the Marco in this sub section you should take a deep dive into how your business functions and plans to function as well as the key mechanisms your business model relies on.
How did you get to this point? What have you done so far? Tell your reader how the business idea was conceived and how it came to fruition. This section holds particular relevance for potential investors, as they will want to know what you have achieved to date. If you are a start-up, focus this section on where the idea came from and why you’ve decided to pursue it.
This should be no more than a few lines that succinctly capture your business vision. Extract the essence of your business, its goals and its underlying philosophies.
Structure & ownership
Here you should define what the legal and ownership structure of your business is. Are you a Sole Trader, Limited Partnership or Limited Company? The ownership structure is a crucial piece of data that you need to include here. Who owns specific percentages of your company? Any investors and banks will require such information laid out.
What is the product or service you are trading? Bring your reader up to speed with what your business is offering and enlighten them on product-specific issues. Explain what is unique to your product or brand. Do you own a patent or have other copyright protection? You also need to expose the practical issues of your product. Where and how is it made and by whom? Touch on issues concerning supply and distribution (you can go into detail later).
Every business needs a good pricing strategy. This can vary from short-term offers or a loyalty pricing system for long-term customers. Perhaps your pricing strategy involves undercutting competitors for certain services, or changing your prices depending on the country you are trading in. Explain your pricing strategy clearly to your reader as this is crucial in competing with big players in the market and in sustaining commercial success.
If you view your business plan as a blueprint for turning a business idea into a commercially viable enterprise, think of the market breakdown section as the evidence that supports your claim of having found an exploitable market niche. Do as much research as possible into every aspect of the business. The more precise you can be about the potential opportunity, the more credible your business plan will be.
It is all very well having a smart business model and a great product, but if you don’t know your market there’s no evidence that your project can succeed.
This section is critical. First off, you want your reader to gain an insight into the market you hope to enter. An understanding of the market coupled with sound and thorough research is key to convince investors of just how your business will succeed in its playing field. Make sure you get across the most important aspects of the market you’re in – how have these aspects informed your product?
Use this section to iron out common misconceptions of the market which could dissuade somebody from investing. Highlight the gaps in the market and show how your business exploits them. Build confidence in the product by showing how it stands out in its field. Questions to be covered in this section include:
- Industry analysis: what is the structure of the market? Who are the key players? What trends are observable?
- Target customer: who do you sell to, why do they buy and specifically, why do they buy from you?
- Competitor analysis: who are your competitors and how do they compete?
- Your competitive edge
This in-depth market analysis will not only support your pitch but become the backbone of your sales and marketing plan.
Industry analysis and market structure
Industry analysis is all about presenting relevant statistics regarding the size of your industry (like total UK sales for the previous fiscal year), as well as its growth outlook and history in the past couple of years. Is your industry growing, shrinking, or stagnating? And why?
Paint a picture of how the market operates. Does one supplier dominate the market? Are you a unique supplier or are there others like you? It might be that one big online seller monopolises 60% of the market and the rest is made up of thousands of small independent sellers who sell from small shop premises.
The market structure is important to make clear as your reader will want to know how you fit into this structure. Will you follow a proven pattern of success or will your business shake up the present market structure? How big is the market and what share do you expect to have? As with any information you provide in your business plan, consider how what you’re saying affects your business.
Your reader will always be looking for the relevance of what you say and the knock-on effect for your project. For example, if you say that the market is dominated by three large-scale competitors, you will need to later explain how you as an entrant intend to compete with companies of this size.
What trends can be observed in your market? What are the changing factors in the market and how will these fluctuations affect your business, for better or worse? Trends measure how certain factors increase or decrease, or simply change.
Important examples to include are trends in market size, trends in prices and trends in technology. If your product is aimed at a shrinking market, this will generate problems which your reader will want addressed, such as the scope for growth. Investors tend to like growing markets because it is easier to expand sales. However, growing markets attract more competitors which will have a knock-on effect on pricing. Address issues raised by changing trends and what this means for you.
If there are significant alterations in technology, the target market, or any related industries – you should provide insights. Sourcing all this information will require carrying out detailed market research.
To gather said research you can use publicly available information on your competitors, industry databases, publications, and trade association data to find the information you need (depending on your sector, government databases may hold the required information). For a business plan, you’ll find that it’s completely acceptable to use information that’s been published industry-wide.
Can you determine if there are enough customers in your given market who would be willing to spend money on the service or product you plan to offer? And what kind of price would you have to charge them to make a profit? You should answer such questions in this section while conducting a systematic analysis of the market your business wants to reach. You need to demonstrate a working knowledge of who your customers will be.
Who is your product aimed at? Describe your target consumer. How do you know what they want? What research have you conducted? Provide a customer profile: you need to tell your reader exactly who your customer is and why they will purchase your product or service, include supporting evidence.
Bear in mind that your target customer is not always the same as your consumer. Your customers could be supermarket chains who buy your stock, making your consumer the supermarket shopper. In this example, appealing to the consumer is dependent on maintaining your customers, so you’ll need to tell your reader how you appeal to both.
If you plan on being consumer-oriented, do you have any demographic data that would identify a cohort of your target buyers? Also, do you possess any relevant lifestyle information on the target buyers? If you plan on selling to various types of consumers, you will need to provide separate descriptions of the defining characteristics of all groups.
Markets can be divided into segments based on different characteristics. Each segment is composed of consumers who share traits such as needs or interests and who will therefore respond similarly to specific marketing strategies. Variables include consumer age, location, gender, nationality.
If your business trades in a specific market segment, you may not be up against the same competition as in other segments of the market. Enlighten your reader on what part of the market you operate in, who the customers are in this segment, and what this means in terms of your marketing strategy, which will be addressed in more detail later on. This also affects your interaction with competition, which we’ll come on to next.
This part is important, and yet often neglected. The reason for this omission may be the fear that mentioning competitors will put off potential investors. Quite the opposite! Competition has a significant impact on all businesses.
You need to provide a thorough competitor analysis using relevant data to demonstrate that you know your competitors well and can foresee threats. Reassure your audience that you are aware of how your competitors pressure your share of the market and prove to them that you can accommodate for this.
A competitor analysis can be done in several different ways. One common and rather simple technique is to provide a competitor array, which is essentially a table which displays the main competitors in your industry, determines key success factors for competing in this industry and then ranks the competitors by each success factor. This contributes to an overall rating of each competitor to see who your biggest threats are and in what areas.
A more comprehensive method of analysing the competition is competitor profiling. This provides an in-depth analysis of your competitors’:
- Background – location of offices, size of company, ownership details, company history
- Financials – including their profitability, sales forecasts if you can find them, their profit growth profile
- Products – the products they offer, patents and licenses they own, product development
- Marketing – their distribution methods, market shares, client base, customer loyalty, pricing strategy and other marketing strategies
Having in-depth knowledge on your rivals and how they operate is a huge advantage. Try and find as much data as you can on your competitors. This is a good exercise for any company, irrespective of producing a business plan.
Existing competitors Vs new entrants
Competition is twofold. The most obvious competition comes from existing companies: who competes in the market at present? Who’s winning? Provide analysis of your main competitors; their size, how they operate, their strengths, the threats they pose to you, their weaknesses and, finally, what all this means for your business and what you intend to do to have the upper hand. Whilst it is relatively easy to assess the risks of existing competitors, new entrants present more of a threat. You know less about them and they are harder to predict. New entrants affect two sorts of industry in particular: mature industries, where the only space for new competition tends to come from overseas corporations, and technological industries: our continually evolving technology is especially susceptible to new competition.
An example of this on a broad scale was the introduction of online shopping: suddenly huge online players such as Amazon were competing in a multitude of markets. This technological advancement threw off a tremendous amount of smaller businesses who simply could not compete with the advantages and economies afforded to such a giant corporation. Is this something that could affect your business? Could new technologies develop that will threaten your competitive advantage?
Once you’ve profiled your competition, you’ll have established exactly what your competitors offer and how they attract customers. Now it’s time to show what sets you apart. This is a crucial element to the plan, and most likely reveals your biggest selling point. Anything that differentiates you from the competition or makes you a winner needs to be communicated. Your competitive edge can be anything from lower prices to better technology to innovative operation methods. When boasting your competitive edge, be sure to discuss the limitations of this advantage. Does this edge have a time limit? For example, does the patent on your innovative mechanism expire? Once other companies cotton on to your advantage, is it something they can copy, and do they have the resources to do this better than you? Flaunt your best qualities but don’t be arrogant: admit the limitations of your USP and how you can ensure these constraints won’t adversely affect your business further down the line. For example, perhaps exceptional customer service will generate customer loyalty, allowing you to maintain your hold on the market even after you lose copyright protection on your innovation. Perhaps you are confident you will be able to gain a new competitive edge by the time your current one expires. Sell yourself to your reader and convince them that your advantage is sustainable.
Barriers to entry
A barrier to entry is any factor which makes it difficult for a new entrant to break into a given industry. Such barriers benefit existing businesses by protecting them against new competition.
Common barriers include high start-up costs or restrictions on locality, license restrictions etc. If you are protected against any typical barriers for entry, bankers and investors will want to know as it offers them greater security.
So, you’ve profiled your customers and profiled your competitors. Now you need to demonstrate how you are going to reach your target customers. If it’s your product that provides the competitive edge, how will your customers hear about it? Address what sorts of marketing methods and channels you will be implementing. Detail how your advertising will be split across different media channels, what ad campaigns you intend to launch and the timing of these relevant to your trade – on the run up to a product launch, for example. Provide information on how much time, money and resources you’ll expend on marketing, too.
In the marketing strategy part of your business plan, you should present your planned approach to marketing your services and products to your customers. This portion of the plan is here to provide a high-level view of the steps you’ll take to generate awareness of your brand and get your target audience to purchase your products or services. In other words, an interested party reading your marketing strategy should get a big-picture look at your marketing objectives and how your business will market itself to the end-user. The marketing strategy should assess both the risks and merits of your enterprise.
Your marketing plan takes your marketing strategy mentioned above and develops it on a tactical level. It details how you will, in practice, reach the target consumer base with your product or service. For example, here you would describe the specific kinds of advertising you plan on using, as well as the ad timing. You’re providing the ground-level steps required to bring your marketing strategy to fruition, and the timetable for such measures to be taken.
In a practical example, would you spend more time, energy, and resources on online advertisements or traditional marketing channels? Do some of the latter, like radio, still have a sizable reach for your target audience? And what specific media outlets would you use; when would the ads run, and how much would they cost? Also, importantly enough – how do you plan on assessing if you extracted enough worth from the advertisement investment?
While you need to answer these questions, bear in mind that the marketing and sales plan traditionally included a calendar that ties in your sales and marketing activities with a specific series of operational events. For example, you should detail your schedule for an ad campaign a month before launch day, if your business plan revolves around a new product.
Also, the sales channels you plan on using are quite important as well. While there are many different ways for a product or service to reach your customers in practice; you should provide details on the specific channels that you deem as most effective in this instance, and why.
The marketing/commercial part of your business plan is here to address how you intend to make people aware of and induce to purchase your service or product; in volumes that will render your enterprise commercially viable. This section will generally include and strategic and tactical plan on how to achieve the above, in practice this means:
Marketing strategy – Which will provide a detailed description of how you differ from your competitors and what approach you’ll take to reach customers better than they do;
Marketing and sales plans – That will specify the timing and nature of your advertising and promotional activities in support of particular sales targets.
How does your company function? From attracting customers to delivery of the finished product or service, what internal processes take place? Explain how businesses in your industry typically work, and then how your business assimilates to and differs from this model. Your competitive edge may lie in the day to day practices of your firm. Perhaps your prices are not competitive, but your uniquely fast production line mean that your delivery time is far shorter than competitors’.
Focus on how your business does things differently to give them an advantage. How do you save on production costs, delivery time, administration costs? How does this improve trading conditions or customer service?
There will be many different processes at play in your company. Highlight each process involved and how it works and most importantly, why you choose to do it the way you do. To have faith in your business model, your investor needs to understand it.
Some common processes you should touch on include:
- The buying process
- Supplier selection
- Price negotiation
- Stock control; how much you have, how you monitor it (also if you have appropriate stock insurance in place)
- Product promotion; including promotional campaigns
- Store management: how many outlets or factories you have, managing staff, providing training
- Internal procedures and systems
- Stage of development
- Production process
- Location and facilities
Below you’ll find more detailed advice on the operational components above.
A big part of operations concerns supply. Supply issues include questions such as where you will buy your product from, how secure this supply is, what influences the purchase price and the knock-on effect on your selling price.
Say your business is a zeitgeisty avocado café. The security of your supply might fluctuate depending on whether avocados are in season. This might mean you have several suppliers during off-season to supplement demand, or it may mean you pay more during this period for the same amount of stock. Perhaps your café is only open in certain months of the year. How do you compensate for this in the business? Does this mean you put your café prices up seasonally or do you compensate across the year?
In this section your reader will want to know what the main inputs are and whether there are a limited number of suppliers. Highlight any constraints this may have on your ability to get supplies when you want and what this means for price. If you have contracts with any suppliers, refer to them here and attach a copy in your appendix.
How do you control these processes? Who is reviewing them and how, to ensure the operations are as cost-effective and efficient as they can be? This section is essential to build the confidence of investors. You may have a solid business plan, but your investor needs to know that if things go wrong, you have systems in place and the skills to handle it. This is where the control comes in: people getting involved in your business want to know when and how you will catch mistakes, and how they will be dealt with to minimise a negative financial impact.
Finally, how did you decide on these processes? Perhaps you have worked in the industry for a long time and are familiar with the way it works. If you are a start-up, consider that your investor may be wondering how you know that your operation strategy will work: and how you came up with it in the first place. Maybe you studied competitor companies. Share this with your reader.
Operational control also ties in with regulation. Your operations section ought to contain details of your permission to trade. This may include planning consent, liquor licenses, health and safety compliance etc. If a key part of your business depends on adherence to regulation, this is the place to reassure your reader that your internal processes comply with official requirements, and moreover that this is something which is continually monitored. This will apply to anything with a health and safety aspect: from trading with chemicals and food to renting machinery, regulation can play a key role in many businesses. If investors are not convinced that your processes toe the party-line, they are unlikely to invest. Failure to comply can result in fines or even suspension from production, which can have a drastic impact on turnover. Demonstrate you are aware of all the rules that apply to your business and show your reader how you monitor adherence. Legal compliance will be addressed in greater detail in the legal section.
As the modern world continues to advance, we are becoming more and more reliant on technology. The same goes for business. The length of this section will vary based on your industry, but any business will rely on some computer systems. A better system often means more efficient processing and reduced costs. But with any dependency comes risk. System failure can result in huge losses and, in some cases, even bankruptcy. Reassure your audience that you not only understand your system, but you understand the risks involved, and how you can prevent or foresee system failure before it happens.
Stage of development
In other words, an in-depth explanation of what you’ve done up until now to establish and maintain the operational integrity of your business, followed by a description of what else has to be done.
Within this part of the business plan, you should include a detailed, step-by-step production workflow for a specific service or product. Try to identify any critical problems you predict possibly occurring. This will provide the informational bedrock of the later section in which you’ll describe the known risks associated with your business, as well as possible interferences. If your production process entails the handling of hazardous materials, though – this is something you want to mention even now.
You also need to demonstrate that your business is fully aware of the global, national, regional, and local standards relevant to (i.e. ISO 9000). That means detailing any industry association memberships/product certifications that you plan to attain, as well as those you already have. If you need to take any significant steps to ensure compliance with industry standards, provide details on how you will achieve that.
You should also provide a detailed insight into your suppliers, their terms, conditions, and prices. If any suppliers do not prove to be adequate, describe the alternative arrangements you’re prepared to make (contingency planning is a critical component of any business plan, often overlooked). Then describe the quality control process for your service or product. If you want your company to pursue any quality control certification, describe how you intend to accomplish that.
Location and facilities
Make a list of all the resources you need to make your plan work, including premises, office space, equipment, raw materials and labour. You should describe where precisely you plan to conduct business. Will you need a building for a manufacturing plant? Or a storefront of some kind? Do you already possess the required space?
If the latter is the case, then you’ll need to explain the circumstances in which you use the space – in other words, whether you lease or own it. Also, if there is a lease on the property, you will want to describe its terms here. Make your long-term plans for any operational space quite clear, and describe what spatial needs you will need in the future.
Here you want to demonstrate your deep understanding of the delivery and production process for services or products and what key factors affect said production.
Firstly, provide a general outline of your day-to-day operations; like working days and hours. If your business is a seasonal one, that’s crucial information to mention. Here, you should also detail your business premises, and include details of lease agreements if need be. If the buildings or land your business owns or leases are essential to the proposed business plan, you should demonstrate their worth.
The above is true for any equipment. Describe the cost and worth of any equipment you need, as well as asset financing arrangements if any. Provide a list of all of your business assets; including vehicles, furniture, inventory, buildings, and land. Their worth and legal descriptions should accompany each asset.
Your business might require special permits, such as zoning approvals; or other special requirements like power and water needs, drainage, ventilation, etc. Such details need to be a part of your operating plan. Additionally, if your service or product requires any materials, name them, and detail the terms you’ve managed to negotiate with relevant suppliers.
Speaking of production – if your company is product-oriented, you should disclose the time/cost you currently need to produce a single unit, as well as improvements you can make to this process and the factors that have a significant effect on it. Think of how you will deal with exceptional circumstances like rush orders, and detail how you intend to keep track of inventory.
If you have performed any feasibility studies, price testing, product testing, or prototype testing; disclose the details here. And most importantly, provide cost estimates for all of the above.
Management is arguably the make or break of a company. Sell yourself! Tell your reader about you and your team. Who are you? What experience or skills do you have that are relevant to your project? How is your team organised? Give an overview of the key players in your management team and how responsibility is divided.
When describing your management team, impress your reader by highlighting each person’s experience, qualifications, achievements and the strengths they bring to their proposed role. You want clearly defined job roles, but you also need some crossover. The team needs to be self-sufficient enough to cope with absences and unplanned interruptions. If your Operations Executive catches the flu, can your business still function?
You want to create a good impression of your employees for your financier to trust you. Attach their CVs in the appendix to allow your investor a further nose. Provide solid references, too – venture capitalists will always follow up references before investing.
Show the organisational structure of your personnel. It may be helpful to include a diagram for this. Indicate how many personnel will be employed in each area and under the guidance of which member of management. Is this manageable? Is anybody overstretched? Be sure to dedicate a lot of time to this section. Your staff are vital cogs in your business machine.
Once your business is set into motion, many things can change. A year down the line you may be running on a very different model to the one you proposed in your plan. Markets can change quickly, operation methods are always evolving. The only constant is you and your team, which is why this must be the most convincing part of your proposal. A sound idea cannot be carried off on its own: your idea may be flawless, but financiers need to back you as a team to part with their cash.
Start with your core team
Begin with your managerial portfolio, highlighting your personal experience and skills. Then, complement this with the qualities of other team members; outlining any specific deficiencies and strengths in your current lineup. And if you don’t have a full team in place as you start working on your business plan, don’t worry.
You can use this part to provide an outline of the current organisational structure, with job descriptions and plans on recruiting additional key team members. In this case, you should also describe their future responsibilities. And be careful as you define your employees’ responsibilities, as this could make or break your company’s growth in terms of human resources.
Human resources plan
Start by providing a brief look at your HR strategy. Many investors may be wondering how you will handle your payroll, as well as the accompanying administrative costs. But apart from the brass tacks, in this day and age, they’ll also be interested in the kind of corporate culture you want to foster.
Naturally, you must provide more than the bird’s eye view. For example, you need to include details like the payscale for managerial positions, as well as other employees in your company. And if you want to stay competitive in the labour market, you will probably want to define the details on vacation time and business insurance right away.
Speaking of which, your health insurance policy is something most employees will be interested in, so state this in terms that are as clear as possible. Plus, with skyrocketing insurance prices, your investors may also want to know about the financial side of this benefit. The same goes for similar benefits: like your bonus structure, bereavement leave, small business pension schemes, life insurance, etc.
If you’re still early in the stages of getting your business up and running, defining such benefits and their expenses may seem overwhelming. However, if you’re faced with a competitive labour market, you will want to attract as many qualified professionals as you’re able to.
You’ve now laid the groundworks its time to introduce your full proposal. This is your sales pitch.
It’s time to make clear:
- What you intend to do and how, where and when you intend to do it
- Why it will succeed
- What you need from your reader
- What they can expect in return (if your raising investment)
What do you intend to do?
The proposal should be clear and concise. State exactly what you propose to do and the objectives of your project. These objectives should be measurable: what exactly do you want to achieve? Facts and figures can help here: perhaps you want to occupy 35% of the French market, or you want to have opened 100 stores across the UK within five years. Make sure your objectives are achievable. An ambitious proposition is not a problem if you can back it up, but financiers will be able to spot an unrealistic claim from a mile off and will not trust you if they think you’re unrealistic in your goals.
Why will you succeed?
Again, keep it plain and simple. Highlight what sets you apart from the competition. Underline how and why you will make money. You will have addressed many of these factors already in your plan.
What do you want?
Then, crucially for your reader, move on to what you want from them and what they can expect in return. The most common purpose of a business plan is to ask for something, usually financial backing. Perhaps you’re after a business partner or are seeking a merge. Be clear on what you want but avoid being too specific in the finer details.
If you need a certain amount as minimum, be sure to include this, but do not lay out exact terms. This too often incites a yes or no response, rather than discussion and negotiation. Negotiation can even lead to better deals than you expected, so don’t be too quick to lay out explicit terms. Ask for what you need and leave the financiers to consider their conditions.
Here is also a good place to put in how much you have invested yourself. This can assist in convincing potential investors of your dedication to the project. This investment doesn’t have to be financial – consistent investment of your time and effort, perhaps with little or no salary, is also testament to your belief in the idea and commitment to the project.
The exit (for investors)
So now your reader knows what you want from them. The next thing they will ask is, why would I invest? Now is time to convince them of why this is good idea for them. Provide a clear exit strategy.
If you’re pitching to investors, convince them of the financial return they can expect. If you’re asking for permissions, what is it you’re offering in return? Try and put yourself in the shoes of your reader and ask yourself if what you’re proposing is an attractive offer.
Give them a rough timeline, too. They’ll be far more likely to invest if they know when they are to start profiting from your business. For most investors, they will be looking for an exit in three to five years’ time.
If you plan on developing your business enough to be acquired by an industry giant or working towards an IPO some time down the line – make sure the investors know about it. That way, they’ll be able to form an estimate of when they stand to profit from your business and how much. At the end of the day, you also need to provide your potential investors with a defined exit strategy. If they know the details of how they can profit from your business idea, including at least a rough timetable; they’ll be far more likely to invest.
Finances and forecasts
You’ve set the scene, asked for what you want and convinced your reader of what’s in it for them. It’s now time to get down to the business nitty-gritty: finance. Essential financial information you need to provide includes:
- A profit and loss statement
- A balance sheet
- A cash flow projection
- A breakeven projection
Forecasts are tricky to get right. Overestimate and you risk losing your credibility for being unrealistic. Underestimate and your offer will lose its appeal. Use as much research as you can to support your forecasts. If you are just starting up or are yet to secure any venture capital, your forecasts can be particularly difficult to predict. Bankers will demand hard numbers. Remember, for most readers of a business plan, finance is their area of expertise. This is the part of the plan that needs the most thorough research.
Making any financial projections for a young company is always a double-edged sword. On the one hand, you need to do so to attract any serious investors. But on the other, such predictions are as much a form of art as they are a science. If you’re still in the process of raising seed money, predicting what your performance will be like a couple of years down the line is not easy. And yet, investors demand cold, hard numbers and facts. Don’t underestimate the amount of money you will need.
Profit and loss statement
Put simply, profit and loss (P&L) is your income less your expenses over a year period. This is concerned with your trading product or service: your income is the amount you receive for selling your goods and your expenses are the cost of your raw materials and the costs of converting those raw materials into finished goods, including labour costs for example. They can also include any overhead costs such as administration or general expenses associated with the trade. Your income less your expenses will provide you with a net profit or loss.
A forecast profit and loss statement shows the reader how profitable your business model is and how much you can expect to earn over a future period. In producing this statement, you will need a detailed breakdown of your predicted sales, a sales forecast, alongside a detailed breakdown of expenses you expect to incur. You should include these documents in the appendix of your plan.
Cash flow statement
Whilst the P&L reflects a business’ profitability and can sometimes be subjective due to accounting treatments, the cash flow statement reflects the actual movement of cash. For example, if you invested in capital items such as a new factory or machinery, the full amount would appear on your cash flow statement, whereas on a profit and loss statement it would appear incrementally over the expected life of the asset. As such, you can appear profitable on a P&L account, but you could actually be short in cash if your customers never pay within their period of credit.
The most important thing for your business to continue to trade is your healthy cash flow. Without enough cash you cannot pay your suppliers or staff and trade will grind to a halt. Essentially, your cash flow statement needs to prove that your cash inflows at least equal your cash outflows so that you always have the funds to operate.
To recap, your P&L shows your profitability but not necessarily how cash rich you are at any one time. Poor cash flow management resulting in improper timings of cash in and cash out is why profitable businesses can still go bust. Ideally, you will prepare a cash flow forecast on a monthly basis.
The balance sheet shows the assets, liabilities and equity of a business to determine the net worth of the business at a given date. Assets refer to anything of financial value owned by the company. These can be physical assets such as property or stock as well as less tangible assets such as outstanding invoices that your business is owed.
Conversely, liabilities refer to anything of financial value which your business owes to others. These can be short term liabilities, such as having not yet paid your suppliers or a bank overdraft. They can also be longer term borrowings, such as a loan from a bank or other financial institution. Equity includes any capital funds injected by shareholders and reflects the growth of the company year on year Equity is the difference between total assets and total liabilities.
A profitable business should see their equity increase as their earnings increase. Businesses typically produce a balance sheet once every year.
If it turns out that you’ve done a proper job in projecting expenses and sales, you should be ready to produce a rough estimate of when your business will break even. In other words, when your enterprise becomes profitable and earns more money than it spends.
For startup companies, this is generally not something that’s expected to happen right away. But investors will rarely want to put their money down solely on the merits of your idea alone. Instead, they will want to see a rough date at which they can count on seeing returns on their investment. Make sure that you can support such a prediction with previously-established numbers in your business plan.
When it comes to risk analysis, it’s important to realise something – any innovative idea will be filled with enough risk factors to fill ten business plans. Avoiding the mentioning of risk is not the point, as any rational investor or partner expects a plan that isn’t entirely risk-free.
With any business venture comes risk. It is far more reassuring for an investor or partner to know that you are planning for these risks to minimise their potential impact, rather than to pretend that your business is risk-free. This is also an excellent opportunity to dispel your investor’s concerns and pre-empt questions. A transparent risk analysis will prove you are capable of handling unpredictable circumstances and make you a safer investment.
Every business faces a huge amount of risk, certainly a lot more than you can touch on in your plan. Focus on the main ones and make sure you’ve considered risk from varying sources. In reality, most projects don’t succeed for a set of reasons that could reasonably be predicted well enough in advance; not coming up with a proper risk analysis means not dealing with potential problems before they arise. But since entrepreneurs have an optimistic outlook by nature, many of them always brush off the possibilities of doom and gloom and assume they’ll deal with the issues if and when they come. In actuality, though, you can avoid most dire situations with proper upfront risk planning.
And having such a risk analysis in your plan will show all investors that you’ve gone through all the possible risks and that you’re capable of planning for the most probable ones. In turn, that means they can count on your plan surviving when it comes into contact with the unpredictable.
Naturally, you don’t need to address every kind of risk out there, as you work on the risk assessment part of your business plan. Generally, there are five significant categories of risk, and we’ll explain each one here. We have gone more in-depth on the main categories of business risk below.
Markets are sensitive to the economy and fluctuate a great deal depending on environmental and social factors. In other words, your sales can dramatically reduce or increase depending on external factors beyond your control. The economy can also affect your costs and the prices of your raw materials. A good way to mitigate economic risk is to carefully watch the economy and observe market trends to predict significant dips in the economy, giving you time to plan ahead.
Put simply, the economy has the power to dash sales completely. To maintain a steady cash flow, your business needs a reservoir of cash for economy-induced sales droughts. Demonstrate in your plan how you intend to save enough money to keep you afloat during a potential recession.
Even the most straightforward businesses are subject to some form of regulation or legislation. Data protection laws, for example, have opened many businesses up to liability concerning the mishandling of customer data. Non-compliance can result in serious penalties, from monetary fines to trading suspensions and material loss, all of which equate to compliance risk. Such risk most often arises when a company is ignorant to laws which affect them.
A way to tackle this is to keep on top of governmental guidelines and consistently review internal processes. In industries which are heavily subjected to legislation, such as wineries, businesses should consider creating specific job roles to monitor compliance. All businesses however should ensure that their staff have the relevant training to adhere to the most up-to-date regulation.
A risk for any business is bankruptcy. Mismanagement of money or exhaustion of funds pose serious financial risk which can run a project into the ground. To lessen this risk, aim to keep company debts to a minimum and diversify your sources of income. Relying on one or two clients can devastate your enterprise if a client chooses to cease trading with you.
This is the risk that the actions of your competitors will prevent you achieving your targets. Competitors may develop a product with a competitive edge which wins over your share of the market. This is difficult to plan for and presents an accentuated problem for technological companies. Constant development in this field makes it difficult to sustain a competitive edge and retain customers. Ways to mitigate this risk are to keep a constant eye on the developments of your competitors and to focus on customer retention strategies.
Another factor to consider under this form of risk is the possibility of your competitors getting hold of confidential information which could expose or undermine your competitive edge. In certain industries where trade secrets are an invaluable asset, particularly in the financial sector, you may have to factor in gardening leave for senior employees who wish to terminate their contracts.
Gardening leave refers to a period of time in which employees are paid but are excluded from business and are also prevented from commencing employment in other companies. This binds the employee to their duty of confidentiality and keeps them out of action in the market for long enough that any confidential information they had is no longer in date.
This protects the company by preventing the exchange of current trade secrets to competitors. Of course, gardening leave is a costly move, but it could be worth it if the confidentiality of current information is intrinsic to the success of your business.
Just as competitors pose a risk in winning over your customers, a damaged reputation can actively push customers away. Product failure, customer service lapses or negative press can seriously damage a brand’s reputation. Social media has amplified this risk: one bad review published on Twitter can incur a huge drop in revenue.
To counteract this risk, focus on prevention. Reliable quality control checks are essential to prevent product faults. Moreover, your business needs to know what is being said about it online and offline to gauge public opinion so you can react to perceived issues. Ensure you deliver immaculate customer service and enable customers to easily give feedback and report problems. This will minimise defamation on social media. That said, businesses need an active social media presence to quickly and effectively deal with online complaints in the public domain. Devise mitigation controls as well as solutions to show your reader that you are equipped to deal with reputation risk.
Operational risk refers to any factor outside your control which has a serious impact on business operations, and thus trade and revenue. These can be:
- Physical risks such as a warehouse fire or theft which result in repair or replacement costs. They may even incur legal costs if the business is found to be in some way liable.
- Technical issues may result in website failure which can lose you significant online sales. You might lose a main supplier which has the potential to grind production to a halt.
- People can also contribute to operational risk: staff can make mistakes which can cost the company time and money.
- If your company works on a revolutionary 3-D modelling technique, the risk of losing one of the few individuals in the world that are equipped to develop it is genuine.
Address these issues as best you can by showing that you have contracts in place that cover you for such losses, or that you have alternative suppliers and backup machinery. Demonstrate that you can cope with these potential operational problems to prevent serious losses in revenue.
With all forms of risk, do not be afraid to admit that running into these problems will incur costs, even in spite of a timely and effective reaction. Your investor will be aware that their rate of return reflects some risk taking. The old saying high risk high reward certainly holds true. This section is about proving to your investor that you can handle the most probable risks, in order to justify the risks you do take to reap higher rewards.
This is something that biotech companies struggle with the most on a regular basis. Perhaps obviously, this is the risk that the product you’re working on isn’t practically viable, and thus impossible to create.
The above-mentioned cutting-edge biotech companies have this problem, as in most cases they cannot be confident that they’ll be able to complete the drug they’re looking to produce.
Investors don’t want to see a business plan with no risks – that seems like bad judgement. Instead, they’re looking for business plans that are by people who are prepared to respond to possible risks.
That’s why you want to showcase your risk management and response policies to the best of your abilities. By showing your investors that you’ve thought about such things in advance, you can boost their confidence about your ideas succeeding even if something doesn’t go according to plan.
Different businesses can be subject to differing legislation. A plethora of laws exist which affect businesses, and on top of this, a huge number concern trade of specific products or materials. In 2017, a survey was published revealing that two thirds of UK businesses were breaking basic health and safety laws. At best, companies facing legal action will receive an (often significant) fine. At worst, business owners could face a prison sentence. Legal action of any kind has repercussions for anybody involved. Potential investors want to be sure that all your business proceedings operate strictly within legal guidelines.
The government publishes regular legal advice for budding businesses and entrepreneurs which you can consult online. It is also an idea to join a trade association to help understand your responsibilities and legal requirements as a business owner. If in any doubt, consider employing the help of a consultant to do the legwork for you. This is not an area worth economising on.
In this section it is important to demonstrate your awareness of laws affecting your business as well as proof of compliance. Explanations of anything which is legally binding, such as contracts, copyrights, patents, trademarks or any other intellectual property, should be included in this section, with the relevant documents attached in the appendix.
More often than not, a business plan is produced with a target audience in mind. Venture capitalists, angel investors, potential business partners. Sending somebody a business plan reveals all the inner workings of your existing or future project and without a confidentiality agreement, there’s nothing to stop your readers from passing on or reproducing your ideas.
A Non-Disclosure Agreement (NDA) is a document which stipulates that the reader, otherwise known as the Recipient Party, may not disclose any of the contents of your plan to anybody outside of the agreement. Ensuring recipients sign this agreement before you hand over the plan will legally protect you against theft or use of your idea, preventing somebody else from appropriating your business dream. As the Disclosing Party, you will also have to sign the agreement to pledge that you too shall not disclose any of the reader’s information, or indeed anything you discuss with them in relation to the project. Each party must provide a provision for damages as part of an NDA, which states what the breaching party would be liable for in the event of a confidentiality breach. This is typically monetary damage.
In addition, in some cases it is sensible to include a preamble which protects you against future legal action based on the contents of your plan. Should the venture not go as planned after investment, investors could use something you said in the plan as a basis to sue you for misrepresentation. This preamble is essentially a disclaimer that not everything in the plan is of guaranteed accuracy and states that the plan serves as a memorandum, rather than a prospectus, and is thus not to be used as part of any contract.
Supporting evidence is critical to back up your claims and overall plan. But what kind of evidence do you need, and where can you find it? Data and statistics are most convincing when it comes to supporting evidence, for example figures on sales in your given industry, data on market trends. Some sources of data include:
- Government statistics
- Market research reports
- Trade associations
- Brochures or material from competitors
- Customer research in the form of surveys, focus group findings, field studies
Government supported figures are the most reliable place to start and are naturally most compelling based on their lack of bias. Many specialist public libraries or university libraries are a good place to look for relevant industrial data; many store market research reports, and many will grant access free of charge to non-students by request.
Outside of the library, university departments are also often open to receiving requests for data or reports. These departments can usually point you to relevant published papers or will sometimes even offer their own views which you can quote. Trade associations are also a good place to look and are also institutions that may provide you with legitimate quotes. Be mindful however that many potential investors will thoroughly research your claims: do not quote anything that isn’t true, as it possible they will verify your sourcing with the person or institution you have cited.
Sometimes, published data from competitors can serve as useful evidence. Care needs to be taken as this cannot always be reliable and will not always be persuasive, particularly if you aim to distinguish yourself from such competitors. It is certainly worth a look however, to see what sources they quote in their own material.
Try a variety of sources. The better researched your project, the more convincing. Look in physical libraries as well as online libraries and browse the internet. Websites such as LinkedIn are also great platforms for contacting people in your industry – it is well worth connecting with and messaging relevant players in your field. If they can’t help you, there is a good chance that they can point you to somebody who can.
Even if you cannot find data specific to your point or product, data can be manipulated to support your point. That’s not to say that the data is false or that you should lie. It does mean however that you can interpret data it in a way which supports your part of your claim, to give your case more credibility.
Writing, formatting and presentation
Now you know how to put together a business plan, it’s time to make it sleek! Presentation and style are important. Whilst the final verdict will come down to content, you won’t get that far if you hand your investor a scrappy document. If your plan appears polished, your reader will instantly be more confident of its contents. A poor layout and messy structure will suggest that the plan has not been thought through.
For a convincing and powerful plan, write in the active voice rather than the passive. Instead of ‘the business will have’, use ‘we will have’. The active is more engaging and centres around who is doing what and when, but most importantly, it sounds more confident. Have conviction in your idea. In this vein, avoid timid assertions such as ‘we hope to’ or ‘we want to’ and replace them with the future tense: if you can convince your audience of what you will achieve, given the right resources, you will more be more likely to procure investment. Linguistically speaking, avoid using lots of hyperbolic language. In business, flowery language is redundant: your evidence will always be more persuasive than your language.
Evidence, evidence, evidence…
As mentioned it’s very important to provide evidence! Back up what you say with facts. If you want an investor, you need to be able to convince them of what they are reading. Include facts and statistics to support what you say as much as possible. Don’t just tell your reader how they will benefit from involvement in your idea; show them with supporting evidence.
This is particularly important when starting out. Where do your estimations and predictions come from? Do you have evidence from similar ventures that can testify to the potential success of your own? If you want someone to part with their cash, they need to be convinced of the returns. You need to prove to your investor that you are worth their money and time. Whilst you should endeavour to support all claims you make, a good rule of thumb is if you’re saying something more than once, back it up. Never repeat your claims without providing hard facts or you only solidify doubts. We have provided advice for gathering supporting data below.
Repetition is sometimes necessary, and there is no doubt that certain sections will provide very similar information. Furthermore, restating the main points in a condensed format can be helpful in tying together your most important points. That said, direct repetition should be avoided: it will only bore your reader and weaken your credibility.
Be the author
Write the plan yourself! The business plan is essential for your own understanding of your company, as much as anyone else’s. More often than not, you are going to have to pitch your plan to potential investors.
It’s therefore essential to be familiar with all parts of the plan, and this familiarity will come best if you put it together yourself. Writing it yourself allows you to hone its contents, spot any holes in the plan and ensure that it’s written in a logical way.
Review, review, review. Read your plan over and over once it is complete. Then, find an external reviewer. This can be anybody, but it is important that they are not involved in the idea. Even better, somebody who is not familiar with your industry at all. This will check that your plan has clarity.
Ask for constructive feedback, particularly with how readable the document is and whether it flows well for an outsider. See if they have any concerns on your approach or tone. And finally, be sure to ask somebody honest – you want to impress, after all!
A critical tool for business success
As we have seen, business plans are a critical tool for businesses of any kind. A good plan inspires enthusiasm for a project as well as convincing its audience that the idea is robust, whether that’s its own employees, potential business partners, angel investors or bankers. Whatever the reason for its production, this will be a document that you refer back to constantly during the setting up, running and developing of your firm. Your business plan will never be set in stone – many aspects of a business will change or evolve over the course of its development. A business plan is a work in progress which requires constant adaptation and reworking. Keep it up to date at all stages of your business development and you will thank yourself later.
Many entrepreneurs don’t even consider just how big of a job writing a proper business plan is. However, they are also rarely aware of the fact that this document will usually be their most important contact with the outside world; at least while the company in question is still in its infancy. Beyond that business plans are a critical document key to driving a business forward, as one final convincer on how important/critical a business plan is take a look at the case study below as an example and goodluck writing!
Business plan case study
Linda Marie Kerr opened her Funsters Fun Factory, an indoor adventure playground for children, in 2003 after dreaming about the idea for many years. She wrote a six-page business plan and used it to get a £70,000 loan from Natwest, which together with the £80,000 borrowed from her husband gave her the £150,000 she needed to start the business in Hendy, South Wales.
Writing the business plan was hard work, but worth it, she said. “I thought that writing it was going to be a long, arduous task – and it was. It took from March to September to get all the information. I found the projections really hard. It was hard to forecast for something I hadn’t even started; I didn’t want to be over-confident, but I didn’t want to undersell myself either. One week I thought, ‘This is ridiculous’, and screwed up the plan and threw it in the bin.”
But Kerr persisted and eventually put together a business plan explaining what her venture was and her aims for it. “Now the plan has become my bible,” she said. “It has given me monthly targets that I would probably not have thought about.”