You have the big idea – but before jumping in feet first, investing your time and hard-earned money launching a new venture, you’ll need a business plan to steer its direction and make it a success.
With a mix of excitement and trepidation, it’s natural to pour all your resources into choosing the company name, logo, staff and whether to register as a limited company or sole trader. But if you fail to prepare, you must prepare to fail too, or at least make a few costly mistakes along the way.
What is a business plan?
A business plan is the foundation of any successful enterprise and is essential if you want to avoid running into financial trouble. Even so, finding the time to write one can quickly fall down the list of priorities, especially when your diary is filling up with supplier meetings and other urgent tasks. Perhaps you already have a clear vision or want to keep your options open without committing pen to paper. Or, if you’ve no previous experience of running a company, you might just be wondering where to start.
“A business plan is basically a document that provides a written description of your company’s future. The plan should explain your business strategy and your key goal to get from A to B.” – fsb.org.uk
But writing a business plan will help you in those challenging early months, and it doesn’t have to be a headache. By setting out your goals, you can gear every activity towards achieving them – whether it be marketing, product development or targeting new customers.
Another reason to write a business plan is that you’ll immediately spot potential problems and be able to address them. You might find, for instance, that the initial projected costs are too high, so you need to cut back, or that a customer group is not as valuable as first thought. Just as important is researching the market to see if there’s demand for the product or service in the first place, and where the competition lies.
Last, but not least, a business plan reassures investors and lenders that you’re a professional who will not act recklessly with their money, so they can be confident of a strong return.
Running any company always carries some risk, and while nobody has a crystal ball, a business plan helps you avoid any nasty surprises and allows you to make the most of every opportunity. Whatever questions you have on writing one, whether it’s how do I write a business plan? or why is a business plan important? our guide aims to answer them.
What should I include in a business plan?
When putting together a business plan, avoid writing too much and try to use corporate or technical jargon sparingly. Keep it clear and succinct, but make sure you have included enough detail to guide your decision-making, identify any barriers and satisfy lenders and investors.
Business plans differ depending on your ambitions and the type of company you run. A sole trader may focus on building a loyal customer base in the local area and expanding their range of services, whereas a tech start-up founder could be aiming to get through several rounds of funding.
Whoever your readers are (the bank, investors or yourself), the plan should include the following:
A strong mission statement sets out exactly what your business is and stands for, providing focus for your activities and giving everyone, from investors to staff and customers, a reason to support you. In a nutshell, it captures the company values and vision in powerful language that motivates you and your team to do more.
We all have goals like ‘make a living doing something I love’ or ‘get rich quick’ but it helps if you can define them in concrete terms. By setting SMART objectives (specific, measurable, achievable, realistic and time-bound), you’ll make even the biggest tasks smaller and more manageable.
Alongside your long-term goals around growth, think about what you’d like to achieve in the short-term, such as coverage in a relevant magazine, or a target for followers on social media. Your SMART objectives enable you to monitor your progress at every stage and stay on track.
Whether you’re employing just one other staff member or building a team, a business is only ever as good as the people behind it. Use this section to demonstrate the skills, qualifications and experience of the workforce, if and how you intend to grow and what the management structure will be. Specify the total number of employees, as well as any external consultants and suppliers you want to work with.
Products and services
A business plan is a chance to showcase the thing you are most proud of – your product or service. Bear in mind that readers won’t have been through the painstaking process of developing your offer, so provide as much relevant information as possible, such as key features, USPs, patents and market positioning. Also think about your product or service range, and if this is likely to grow and/or diversify in the coming years.
Having a written record of what you offer is an effective way of getting investors and other supporters onboard, but it also helps position and market your products or service. Another benefit is you’re able to identify any issues, such as whether a lack of patent will make the business vulnerable to competition.
Without a marketing plan, it’s easy to waste money on activities that don’t deliver results. Before investing in expensive brochures and ads, think about who your target market is (in terms of age, location, income and so on) and what they’re likely to respond to.
Social media is an effective way of engaging customers, and although platforms are free-to-use, consider whether you’d get a better return with paid-for targeted ads.
Email marketing is another good way to reach thousands of potential customers – but where do you start when you don’t yet have a database of potential customers? Identifying quality marketing contacts can be achieved quickly using tools such as Experian B2B Prospector. The service, developed especially for smaller businesses, helps you segment and target business-to-business customers. If needed, we can also design and send emails on your behalf and, importantly, we ensure all data is processed in accordance with the General Data Protection Regulation (GDPR).
Along with digital marketing, consider what investment would be needed for a leaflet drop in the local area, a series of radio ads or inviting a journalist to write a review. Most firms choose a mix of digital and traditional marketing, plus word-of-mouth recommendations, but what the split is depends on your target demographic, goals and budget.
Competition is a fact of life but that’s not to say you can’t stand out and build a successful business in a crowded marketplace. The first step is understanding exactly who your competitors are by completing some market analysis – look at how long they’ve been running, where they operate, their market share and who their customers are. Then decide what you can do differently, maybe carving out a niche, offering a lower price or winning customers with impeccable service.
Funding and finance
Broadly speaking, you’ll need to provide sales, revenue, cash flow and profits forecasts for the next 12 months and coming three to five years. Anyone putting money into the business wants their investment to pay off, so make sure your financial projections are ambitious but realistic and include as much detail as possible to put their minds at ease.
Let them know what funding or finance you’ve secured so far and how much you’re budgeting for staffing, premises, materials, marketing and anything else to help you get off the ground. Just as important is providing evidence for your financial forecasts, linked to your market research and costs.
If your business depends on customers paying their invoices on time, explain what measures you’re putting in place to reduce the risk of late payment and bad debt. This could include using Experian Business Express to run a credit check on any company you work with to make sure they’re not experiencing financial difficulties.
What happens if my plans change?
A good business plan provides a clear roadmap but don’t worry, it’s not set in stone. As the company evolves, it’s likely you’ll want to adapt it and set new goals. If this is the case, simply revise it in line with the above guidelines, setting SMART objectives and making realistic financial forecasts.
Your business plan should be a working document that allows you to be both flexible and adaptable. By having this degree of flexibility, you’ll be able to respond promptly to changes in the market, whether that’s new trends emerging or external factors. An economic downturn or sudden surge in demand could dramatically impact your business, so be prepared for unexpected challenges and opportunities along the way.
Rather than burying your plan away in a folder on your laptop, take time to review it monthly or weekly particularly during the first year – and especially during times of change or uncertainty.
Remember too that you wrote the plan before the business was launched when you didn’t have any costs, sales or revenue data. Once you’re up and running, and this information starts to come in, you can compare it against your initial projections and update them. This should help you in future funding rounds and/or when you’re applying for business credit.
At this stage, it’s worth using Experian My Business Profile to keep an eye on your business credit score and see what you can do to improve it – if need be, in order to access better rates on finance.
Where can I get help?
Many people struggle to write a business plan, so you’re not alone. The trick is to keep it simple and make sure the language is professional but easy for anyone to understand. If you’re not sure, ask a friend or family member, unconnected with your industry, to check it reads well and highlight any typos.
Enlist any further support you can from the wider business community, at networking events, with a coach or on LinkedIn. As long as they aren’t in direct competition with you, many will probably be willing to give you their advice and tell you about their experiences, both good and bad. They may even share their own business plans with you and explain what worked well and what didn’t.
Finally, there’s no need to reinvent the wheel. A quick online search will return countless business plan examples and templates that can be easily adapted to reflect the ambitions of your business, like these ones gathered by gov.uk.
At a glance
We’ve looked at what you should include in your business plan – so here is a round-up of our top tips:
- Clear and succinct. Don’t use unnecessarily complex language or corporate jargon – you are setting out a plan, not writing a novel.
- Comprehensive: Include all relevant information, such as vision and goals and what you need to achieve them (e.g. staff and marketing).
- Get your finances in order: All costs should be accounted for, along with sales, revenue and profit projections. Explain how you will protect cash flow and avoid bad debt.
- Review regularly: Remember your plan is a dynamic working document, so remember to consult it (and amend if necessary) once your business gets off the ground.
- Don’t reinvent the wheel: There are plenty of templates online to use as a basis.