Writing a Business Plan
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- 09 May 2013
Simple is always best. So with this in mind, here’s our guide to writing a business plan that won’t make potential investors want to tear their hair out in confusion.
Even if you don’t need investment, it’s often a good idea to write a business plan to ensure you stay on the right track. When you’re faced with a hundred (or more!) decisions to make and paths to choose, and you find that you can’t actually remember what your aims actually are, a business plan should help to reel you back in.
If you need funding, potential investors will want to know what they’re giving their money to, and if it’s likely to be a lost cause. A business plan is your chance to prove that your idea is worthy of their time… and of their money.
A business plan is often made up of 6 different sections, which will cover (pretty much) every aspect of your business:
The Business Plan Checklist:
- - The Executive Summary
- - The Vision
- - The Market and Marketing
- - The Operations
- - The People
- - The Finances
The Executive Summary
Unless they’re reading your plan back to front, this will be the first thing people read, and for many prospective investors, it might be the only thing they read to make an initial decision. So, keep it fairly short (no more than two sides of letter paper), and simply provide a summary of your business.
It’s important to give your reader a simple, clear introduction. Perhaps start with an elevator statement: your entire proposition in a single sentence.
Address the problems in the market that you hope to solve, as well as customers’ desires and needs that you intend to fill. At this point, you may want to elaborate on these problems or needs, and explain why you started the business, and how long ago this was.
Include your key business milestones, and where you hope to see your business in a year. This is the perfect opportunity to provide an overview of your predicted revenue, and profits and losses.
Remember that everything can be found within the plan: this is your synopsis – a bit like a blurb on the back of a novel. Short, snappy and memorable! It’s much easier to write this last, when you’ve got all the information from your business plan in front of you.
Top tip: can’t write your elevator statement? Jump over to this article for the full low-down.The Vision
This is your chance to introduce your business in detail: where it started, where it is now, and most importantly, where you see it going.
Explain the purpose behind your idea: who needs it? What problem does it solve? Describe its unique selling points, and why potential customers will want to spend money on it. You should be able to list 5 key features that make your idea different – the things that make you stand out from the crowd.
If you can, provide details of any intellectual property rights, patents or copyrights that you have (or are in the process of getting), or how you plan on defending your idea.
Include the stage you’re at now, whether you’re market-ready, how long you’ve been trading for, and what you plan on doing in the future. Can your product grow? Is there room for any development, and what would this be? Investors may be looking for the history of your business: is it one you’ve taken over and plan to re-launch, or are you starting from scratch?
Outline the goals you will implement in order to reach your overall vision or yearly targets. Think carefully: you don’t want to over or under stretch yourself. The SMART* process is a clear, effective way of documenting this.
Finally, how is your business setup, legally? Are you a sole trader, limited company, or partnership, and will this change?
*Top tip: not sure what SMART stands for? Familiarise yourself with the process here.
The Market and Marketing
Now is the time to shout about how you plan to shout about your business - describe your marketing strategy and the channels you’ll use to reach potential customers.
What are the market conditions? You need a thorough knowledge of your market: its size, trends, and what position you will take. How will your product fit into the market? Is it a niche market, or one dominated by a handful of companies?
You’ll need to know your customers. Be clear about who they are, and why they will be attracted by your product. Try to compile a customer profile or persona: their gender, age, income, and interests.
Be sure to include information about your sales strategy. Has anyone shown interest in this idea, and how will you go about reaching more people? Do you have a pricing plan? How will you sell it: door-to-door, over the phone, in a shop, or online?
Do a little 007 style espionage and find out all the details of your competitors, and include this information: how much of the market they occupy; how your idea will fare in comparison to them; their strengths and weaknesses; what they do and how they do it; how much they charge.
Top tip: confused by customer profiling? Read this fab explanation to clear things up!
The Operations
This section of your plan should focus on where you are, what you need, how you’ll manage the business, and day-to-day running requirements.
Give information about your location: why this particular place? If you need to move, explain why. Include financial details for your current site, and any other potential options. This should make you think about the future, not just today.
Next up – list any materials, supplies, or equipment that you use now or in the future should be described, alongside where you will source them, and what they are required for./p>
Also, provide details of any management or control systems: how will you control stock, business information, and supplies? Evaluate your chosen method, including any weaknesses and possible improvements.
Your business will most likely be subject to legal implications, so outline any health & safety information that is particularly relevant, and whether you need any licences. It may sound really dull, but it’s really important.
The People
People invest in people: you and your team are one of the most important parts of the business.
Include details of who’s who, and establish the credibility of your management team. Explain who holds what position and why they’re best suited for their roles. Describe each member’s skillset and any past achievements, and how this relates to their duties within the business.
It’s a good idea to make sure any of the required skills not held by any of the team are outsourced: include any freelancers, lawyers, or accountants that you plan on using, as well as future recruitment plans.
You may also be able to provide information about connections to other companies, especially ones relevant to your business, and whether they could help you out.
The Finances
Numbers aren’t everyone’s cup of tea, but understanding them is often essential to running your business. For the purpose of your plan, your finances should comprise of two sections: the daily running costs of the company, and the forecasts for sales, profit and loss, and cashflow.
Cover at least three (and probably no more than five) years, showing when you’re likely to break-even, and when you’ll start making a profit.
It’ll be tough to think of everything, but you should make sure you’ve accounted for everything, from rent, to gas, electricity, and water bills, to salaries, internet, rent and staff supplies (like burritos, beer and cookies).
Show your revenue streams, sales forecasts, and your projected profits and losses. Make some financial assumptions, especially if you use a material that could get more expensive, and have a contingency plan. Be careful not to stretch yourself too far and put in unrealistic numbers: challenge yourself, while remaining confident that you can deliver. And just as in maths lessons at school: always show your sums… or in this case: how you arrived at your predicted figures!
Include any funding that you need, and how you aim to get it. If you’re looking for investment, outline what investors will get in return, the split of existing shareholding, and the justification behind your decisions.
Top tip: we’ve found this great article to take you through starting a business budget.
The Writing Bit
It’s vital that your plan is written well: it’s harsh to think, but people will probably be put off if you can’t provide a well-written, well-spelled, and thoroughly checked document.
Your plan doesn’t have to be boring! Try to strike a balance between being “formal” and knowledgeable, and showing your personality as well as your passion.
Make sure you keep it simple: one word is always better than three. We’d suggest avoiding technical jargon where possible – you want everyone to understand it. A good trick to figure out if your plan is too techy is to ask impartial friends to read through and give their feedback.
If you can, include visual representations: graphs and charts can often convey a message better than a table full of numbers. Include any relevant images, and keep a large amount of white space: dense sections of text are off-putting (and sometimes quite hard to read).
Use standardised formatting throughout the document: font, pagination system, heading sizes, spacing, and your logo and any branding. You don’t have to reinvent the wheel!
Finally, you’ll also need to think about how you’ll present this – will it be read entirely from a Word document, or from a PowerPoint presentation? Can you include a mix of the two?
Now that you've absorbed some of our business plan advice, we'd love to know what your top tips are for writing a killer proposal. Let us know your best business plan advice using the hashtag #MOOStartupKit