Any founder will understand the importance of a business plan for their new business. When we talk about business plans, we are talking about a written document that outlines the nature of a business and states its objectives, strategies and financial forecasts. Business plans are crucial for the success of your startup both in terms of sales but also in terms of investment and borrowing. In this article we will discuss what is a business plan is, why it is important, how to develop one and what should you include.
Why is a business plan important?
A coherent business plan is possibly the most important step in preparing your small business for market. Even the most simple business plan (which you might want to later iterate on) is crucial to help you clarify your business idea and to create a road map for execution. In turn, the development of these ideas into a business strategy is crucial for securing customers by identifying your target audience (also known as target market) through market research. A business plan is also important as it will help you identify any potential problems that your business might run into. Alongside this, business plans are important to ensure that your business sets out its goals and milestones and how success will be measured so that you can track its progress and development.
Finally, business plans are important to potential investors and lenders providers. People are not going to put their capital at risk or run the chances of you defaulting on repayment if they do not have confidence in your business. As an early-stage founder or new business owner you will not have financial information to back up your business’ success like existing businesses can show. Therefore, in order to make your business look attractive you should have a thorough business plan that outlines how your business will make money (and who from) and how it has a competitive advantage to another similar type of business.
Preparing for your business plan
When preparing your business plan you will firstly want to brainstorm your ideas and intuitions whilst making a log of those that arise. Once you have done so you will want to conduct research into those ideas and any intuitions that you have to test their validity ensuring that you take note of everything you have discovered. Once you have completed this, and any good business plan, would have thoroughly completed these steps prior, you can now begin to execute a stronger, more coherent plan into a formal document.
In order to start on your business plan, it might be useful to download a draft business plan or a free business plan template online to give you an idea on content and length.
Step by step guide for creating your business plan
Business plans should be a clear and concise summary of the intentions and ambitions you have with your business idea. In this section we discuss the different parts you should include in your business plan and how to go about conducting them.
Your executive summary provides a snippet into your business idea and its value proposition. As the first thing someone reading your business plan will come across it is important that it is coherent, concise and persuasive, summarising the main points of your plan. Many founders find it useful to write their executive summary after they have completed the other sections of their plan.
In this section of your business plan you want to provide a more thorough description of the company. You will want to explain what your company is and what you intend it to do. Aside from the end goal of producing a great business plan this section is key to helping you form your company’s values and help you differentiate from competitors.
In your company description you should outline your business structure (such as what type of company you will incorporate), the industry and how the company fits into it, business objectives and any relevant descriptive details, such as any team members.
Products and Service
Your product and service is likely the simplest part of your business plan. In this section you will want to outline what products you will be provided and if you are suggesting an entirely new product to the market then you will want to outline how it is different, what value it brings and how you intend to go about protecting any intellectual property that might arise.
You will also want to note how products or services will be provided, including material sourcing, manufacture and shipping.
Your market analysis is crucial in demonstrating the value of your business idea and this will likely take the most amount of effort. You will need to undertake thorough research into your estimated market and how your business can fit into it. You should make sure you have answers to the following questions:
- How big is your potential market?
- What does your ideal customer profile look like?
- What trends are there in the industry?
- What are other companies within the market doing?
In order to answer these questions you will want to use a variety of techniques in order to provide a clear report. You might want to start with a basicSWOT analysis of your company’s positioning in the market, drawing on its strengths, weaknesses, opportunities and threats. Once you have done so you will want to ensure you have answers to the above questions through conducting effective research so that you can continually develop your SWOT blueprint. In order to answer the above questions, you will want to look into the demographics within the relevant market segments and provide statistics and measures on them. Additionally, you will need to do a competitive analysis on other businesses currently in the market or existing businesses that might soon expand into it.
Ultimately, by the end of your research you want to have information on your ideal potential customers so that you can anticipate how you might term them from potential customers into a strong customer base.
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Strategy and Implementation
In this section you will be actioning your ideas from your market analysis. Ultimately, from your research, you need to determine in this section how to get your ideal customers using your product or service. You can divide this enquiry into two categories:
- Marketing plan
Your marketing plan will outline how you will appeal to your customers, inspired by your research. Having understood the demographics of your ideal user base you will want to consider what is the best platform to reach them. For example, if targeting younger generations you might want to consider incorporating social media campaigns into your strategy. Your marketing plan should include estimates on cost, how you will present your product, how you will promote your products and where you will sell them.
- Sales plan
In addition to your marketing plan, you will also need a strong sales plan: how are you going to push potential customers to purchase your product? You might consider referral discounts, partnerships or email campaigns the most effective way to get your audience to buy.
Organisation and Management Team
Within your plan you also need to state how your company will operate. As all entrepreneurs know, you will likely need team members and colleagues as your business grows. When making your business plan you will want to determine how the team will likely grow and expand.
Financial plan and projections
Having completed your market research, you will also want to create a financial plan. Within this, you will want to foresee your anticipated costs and profits over the next quarters, perhaps through using a balance sheet, and you will want to make financial projections, based on evidence, on how you anticipate the company to grow.
Within this section you will also want to iterate on your pricing model and plans to explain how they ultimately tie into the company's financial statements and revenue.
Finally, having completed your business plan you will want to ensure that it is clear and easy to navigate. You might want to consider adding a table of contents and labelling any graphs or images that you include in your plan. Making your report easy to read will ensure that no important information is missed and will also keep investors and lenders interested in your business proposal. Furthermore, even if you do not intend to use your business plan to raise capital, it is a key marker for you to be able to measure your company’s success as it grows and it is something you should be able to look back on easily.
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Once you have devised your business plan, it is time to start actioning it. You will need to ensure that you registered your company and opened a business bank account before you do anything else. However, once you are ready to get up and running- making your first hires or making your first deals- you will want to ensure that you get things right the first time around. Hiring a lawyer can be expensive and editing templates is risky. Legislate allows to tailor the essential agreements to hire and grow your business such as employment, consultancy and internship agreements. To create a lawyer-approved contract for only £9.95, sign up to Legislate today!
The opinions on this page are for general information purposes only and do not constitute legal advice on which you should rely.