Guide to writing a business plan
A good business plan is an essential part of planning a new venture. It gives you a working framework, with goals and objectives - as well as letting your potential investors know what you're all about.
Business Plans are important in the development of your company for a number of reasons:
- It forces you to work out your strategy, market and finances, and is a good tool for working methodically through all the aspects of the company that are essential for good management
- It is in itself a marketing tool that you can use to advertise your business - not only to funders, but also to customers and to businesses in your market
- It gives you a plan for the future, and sets out short-term, medium-term and long-term goals for the direction of the business.
When writing your business plan you should consider the following:
- Who is it for and what will they want to know?
- What is the purpose of the plan? (getting money, getting a loan, getting a customer?)
- What will they want out of it? (and do you want them to have that knowledge?)
This is essential for focusing your plan, so think about where and how you want to pitch your plan.
Our guide to writing a business plan is also downloadable in PDF format (21.1Kb)
Given that your audiences may be varied, there is not one template for a business plan, but you should include the following:
This should be no longer than about 8% of the whole length of the plan. It should include the following:
- The purpose of the plan
- An identification of the market to which you will sell your services and products
- A bit about what the company will be doing and how it will be set up
- Planned marketing and sales activities
- An overview of the products and/or services you will provide
- The organisation and the people involved
- High level financial information.
This should show your knowledge of your target industry and give information about the markets you have looked at. You should include:
- Description of your target market and where it's going over the length of your business plan and strategy
- Any results of market testing you've done - include the detail in your appendices
- What the required lead times are in your market - if you can provide something at half the normal time, you have a steal on your competitors - at least until they can do it that quickly!
- Competition: You WILL have competition - if there is no direct technology competition, think about the other places your customers could spend their money
- IF YOU DON'T INCLUDE A GOOD SECTION ON YOUR COMPETITION IN YOUR BUSINESS PLAN, YOUR PLAN WILL BE BINNED!
- Any problems you'll have with regulations and regulatory approval.
This should provide an overview of how your company is made up, and how it fits together to produce your products or deliver your services. Don't put in too much detail, but give enough to back up your claims elsewhere in the plan.
This is where you detail your hard work on the name of your business and a credible website address.
You should also say why your company will make it - and how.
Sales and marketing
What are you going to do to persuade the market that they should pay you to do this rather than your competitors? You should include both general and specific information:
- Overall Marketing Strategy
- Market Penetration
- Distribution Channels
- Sales Strategies
- Sales Force
- Sales Activities
Products and services
This is where you get to wax lyrical about your big idea. Remember who you're writing your plan for, and don't go into (too) technical detail. Give them enough information to think it's a good idea, not enough to bore them. Try it out on your non-specialist friends.
If you're really desperate to put in the technical detail, write it in an appendix.
You'll need to include the following:
- Detailed Product/Services Description (from the user's perspective)
- Product Life Cycle
- Copyrights, Patents and Trade Secrets (if applicable) - and that you have them, not what they say
- Research and Development Activities - now and future plans.
Operations - or how you're going to do it
Again, be careful of putting too much detail in. You'll need to give an overview of:
- Production and Service Delivery Procedures
- Production and Service Delivery Capability (annually, and against your projected growth)
- Operating Competitive Advantages (e.g. quicker time to market than your competitors)
- Suppliers who you will be depending upon for parts etc. don't forget to work out the risk implied by using them and build that into your plans and contingency.
Management and ownership
Say why you're fabulous, and why other people can't touch you for talent and management skills. Tell your reader why your management is part of your company's distinctive competence and why it cannot easily be replicated by your competition.
Explain who owns the company now. Give details on:
- Management Staff Structure
- Key Managers
- Legal Structure of the Business
- Board of Directors.
The Money Section
This divides into two: what money you need and what you're going to use it for, and then a spreadsheet about how you worked the costs out.
Money needed (funds required)
- Current Funding Requirements
- Funding Requirements over the Next Five Years
- Use of Funds
- Long-Range Financial Strategies.
Make sure your data reflects the information you've written in the rest of the plan (it's easy to change the spreadsheet, and forget to change assumptions elsewhere, or vice versa).
You can also provide a number of data sheets for various prospective scenarios.
- Historical Financial Data
- Prospective Financial Data (next five years)
- Analysis of the costs and use of money.
Lastly, this is where you present detailed information. It supports information given in the plan for those who are realistically interested and want more detail about what they are going to put money towards, whether they are investors or customers. You can also wax lyrical about your technical product here.
Include any additional detailed or confidential information that could be useful to the readers of the plan.
Bind separately from other sections of the plan and provide on an as-needed basis to readers.
Some examples of the things you might include:
- Resumes of Key Managers
- Pictures of Products
- Professional References
- Market Studies
- Pertinent Published Information (e.g. information that supports your identification of the market)
- Patents or Intellectual Property Rights that you might have which contribute to the assets of the company
- Significant Contracts (e.g. customer contracts for your products which are signed up already).
And then get the business plan reasonably professionally drawn up, and make sure it is checked, checked and checked again. Pass it around to your friends and family for comments. Remember, in many cases the business plan will be your ONLY opportunity to impress your reader. 90% of Business Plans end up in the bin. Make sure yours isn't one of them. Good luck!
With thanks and acknowledgements to Abbie Gretton and Jo Harman from Ernst and Young UK, Southampton Office.