So you’ve got the brilliant business idea, you’ve researched your market and you are about to start your business. Now get a blank piece of paper and a pen, close the door and sit down in a quiet room. You have a business plan to write.
What exactly is a business plan?
A business plan is a written document that describes a business, its objectives, its strategies, the market it is in and its financial forecasts.
Why you need one?
For many would-be entrepreneurs, the idea of drawing up a business plan is rather daunting, and it is tempting to convince yourself that you will be able to make it up as you go along.
But having a written business plan is extremely useful for several reasons – it can help you secure external funding for your business, whether from a bank, venture capitalist or private investor; it can provide a potential business partner with detailed information about your venture; it can help you clarify what you are trying to achieve with your business and how you are going to achieve it; and it can help you set financial targets.
What a business plan looks like
You should aim for 8-12 pages of clear, concise information, typed on one side only and well laid out, so it is easy to read. Keep it simple – put additional information such as market research data in an appendix. Quantify as much as you can – your business plan is likely to be read by people used to dealing with figures.
And begin it with an executive summary outlining the key points of your plan – this is important because sometimes potential investors will make their initial assessment on this part alone.
What to include in your plan:
- The business opportunity – who you are, what you plan to sell and why
- Your objectives – personal and business
- Your production methods, where the business will be based, how many staff you are likely to need
- The market – what it is, how big it is, where your product or service fits in, how you intend to sell it
- The competition – who your main competitors are and how your product or service differs from theirs
- Your management team and staff
- Your sales and marketing strategy
- Your production costs and who your suppliers will be
- Any relevant qualifications or experience you have
- Financial projections – profit and loss forecasts for two to three years, a cash flow forecast and balance sheet
- How much money you will raise, what it will be used for, and how and when you intend to pay it back
How to get started
- If an empty computer screen or blank sheet of paper is too daunting for you to get started, talk your plan into a recorder and transcribe it
- Be realistic. If it doesn’t work on paper it is not going to work in real life, so don’t waste time pursuing dead ends
- 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.
- Make a list of all the resources you need to make your plan work, including premises, equipment, raw materials and labour
- Make sure you have thoroughly researched the financial side of the business. Don’t underestimate the amount of money you will need.
Things to consider
A business plan is not set in stone. It should be regarded as a work in progress that will change as new opportunities open up. Your business is unlikely to grow in precisely the way you expect so be prepared to update it and rework it as you go along. Remember your business plan is there to serve you, not the other way round.
Top tip one
While it is sensible to seek advice from external advisers, it is not a good idea to get them to write the plan for you. Investors and lenders need to have confidence that you personally understand your business plan and can talk about it in depth.
Top tip two
Most high street banks provide business advice on what a business plan should look like on their websites – so if you are applying to one of them for a loan, read their guidance first and make sure your business plan is written in a way which matches their outline.
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.”
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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.”