In business, planning is everything. Whether you’re starting in business for the first time or you’ve got years of experience under your belt, one thing remains true: you need to have a thorough business plan. There’s so much else to do that it’s easy to put this to one side, but it’s an absolute must-have.
There’s an old saying: “Fail to prepare, prepare to fail”. Even the best business idea won’t get anywhere without preparation. A business plan can help you set your new startup or small business on a healthy trajectory of sustainable growth, as well as equipping you to navigate challenges you’re likely to encounter along the way. In this guide, we’ll look in detail at how to create a great business plan.
What is a business plan?
A business plan isn’t just about a balance sheet, as important as that is. It’s a written document where business owners outline their key activities and objectives and sketch out a general strategy for reaching them. Both new startups and established firms looking to expand use business plans to attract investment.
Your business plan can help you identify and understand your target market, devise reliable financial projections, create a roadmap for the future and provide an executive summary of what you’re trying to do. They also allow entrepreneurs to list key objectives and explain to potential investors how they intend to realise them.
Business owners should revisit their business plans periodically. This is because circumstances can change, often quite rapidly, and render business plans outdated. They should therefore rework their business plans so that they’re in line with current targets and expectations.
When and why do you need a business plan?
If you’re looking to entice new investors to put cash into your business, you’ll need to convince them that it’s going places. After all, seasoned investors—including venture capitalists—need to see that you have a credible vision for your business. A good business plan can go a long way to convincing them that it’s worth their while.
Potential investors will also be looking for proof that you’ve undertaken a proper competitive analysis, have a credible marketing strategy and that you understand your potential customers’ demographics. This can provide them with the reassurance they need to provide the firm’s capital for future scalability.
Of course, business plans aren’t only about external investors. They’re also useful for internal teams, giving a clear sense of direction to any decisions undertaken. Even if you have all the funding you need, you should still have a business plan in place to ensure you’re heading in the right direction.
Business plan components
Now we know why you need a business plan. But what exactly goes into one? Let’s take a look at the core components your plan needs.
An executive summary provides an overview of your business and what you’re hoping it will achieve, including a concise summary of the other sections of your plan. As such, you should leave writing it until last so that these summaries accurately reflect the contents of their respective sections.
Don’t forget to include your value proposition, which encapsulates what your business is about and what makes it stand out from its rivals.
Mission statement and objectives
Next, you’ll need a company description covering three key areas: your business’s history, mission statement, and key objectives for the future. You don’t need to be exhaustive here—instead, it’s better to be concise. Your objectives, too, should be realistic, concrete, and measurable. Otherwise, they won’t be credible either to investors or employees.
Your business plan must include solid market research. Think about who will comprise your customer base and their demographics—including age, location, class background, hobbies and so on. To be precise, otherwise, investors are likely to look at your analysis with some suspicion.
Next, you need to look at who your prospective competitors are. As daunting a task as this might sound, you need to know what your business’s rivals are doing. This might include their approach to marketing, their social media output, their standards of customer service, how frequently they launch new products, how they perform in customer reviews, and other vital details.
Your product offering
In your plan, you need to explain what products and/or services your business will offer. This must include the specific benefits, how new products are produced (including how raw materials are sourced), pricing, intellectual property (where relevant), and what makes your offering distinct from those of your competitors. Investors need to be convinced of both the viability and profitability of your product.
A marketing strategy is crucial to getting new businesses off the ground and expanding them. You should recap your growth strategy and target market before explaining how you intend to market your business. This marketing plan can include online promotion, loyalty schemes, media ads, and customer retention strategies.
Your business plan must address the financial aspects of running your business. If you’re launching a brand new startup, you obviously won’t have past financial records to discuss. However, you should still cover budgetary issues in your plan.
You’ll need to include income statements, balance sheets, cash flow statements, and profit and loss statements for established businesses. Three years of reporting is ideal, if possible. Needless to say, you must ensure that all figures are accurate and reliable.
Management and staffing
It’s important to address staffing in your business plan. Talk about your existing team and, where applicable, where you’re looking to recruit additional talent. You should also address your legal structure, whether you’ll be forming an LLC or incorporating your business, and the cost of hiring legal experts and accountants to ensure compliance.
Tips to make business planning easier
When you’re starting a business, there’s a lot to do! Writing a comprehensive plan for your business might sound like quite an undertaking, but there are some things you can do to make the whole thing less strenuous. Firstly, you should keep it concise. Truly comprehensive business plans need to cover much ground, but they don’t need to be epic in length; 10 to 20 pages should suffice.
Your plan should also be written in plain and straightforward language. Could you not make it impenetrable? Don’t forget that investors and others receive many business plans, and they only have so much time in their day. Please get to the point, and make sure your plan is divided into clear sections so that it’s easier to digest.
Finally, make sure your goals and objectives are clear in your own mind. You need to know what you’re looking to achieve with your business and over what time frame. You might well find that your objectives change as you progress through the writing of your business plan, and that’s okay: you might learn new things in the process!
Business plan templates
There are plenty of business plans which you can find online, and it’s worth reading some of these to help you get a better idea of what you need to include in yours. Let’s take a look at a couple of examples by way of explanation. Here’s the first:
One-page business plan
A one-page business plan provides a quick overview of what your business is and what it does. It effectively condenses your full-length business plan into key points. This is particularly useful to potential investors, as it allows them to digest the ideas and strategies underpinning your business easily. Here what it needs to include:
- Business overview. This should cover your central vision for the business and the products or services it will provide in no more than two or three sentences for each.
- Market research. Talk briefly about your competitors and what sets your business apart from them. Please list your main rival businesses and, again in no more than a few sentences, summarise why your business meets certain consumer needs better than its competitors. It’s worth noting your audience’s demographics here.
- Marketing and sales strategy. Which marketing channels and materials do your business intend to use? What about its pricing strategy for marketing? Provide a concise discussion of these points in this section.
- Objectives and metrics. List three key objectives which you have set for your business and the metrics you will use to measure its progress in meeting them.
2. Comprehensive business plan
A comprehensive business plan needs to detail what your business aims to achieve and why investors and lenders should back it. We’ve already listed the key areas you’ll need to address in the last section, but here’s a summary of what needs to be included:
- Title page and table of contents. List your business’s information—its address, contact details, website—and the date on which the plan was produced on its title page. You should also include a table of contents listing the various sections included in the plan and their respective page numbers so that readers know where to find them.
- Executive summary. While your executive summary should be included at the start of your business plan, it needs to be written last, as we’ve mentioned. It should be no more than two pages long. Discuss your company’s mission, introduce its management, and explain what products and services it offers.
You should also summarise your market research and provide an overview of your financial projections for the coming years. If you’re launching a startup, you’ll also need to discuss its initial financing requirements.
- Market overview. Provide a bird’s-eye view of the wider market you’re operating in. Discuss relevant trends, as well as sales and revenue statistics. Please explain how your business will find a distinctive niche in this market and how it will succeed.
- Market research and competitor analysis. Demonstrate to potential investors that you’ve undertaken a thorough analysis of the market you’ll be operating in and the competitors you’ll be up against. Define your customer base and explain how your products and services will give you a competitive advantage over your rivals.
- Marketing and sales strategy. How do you intend to attract customers? This section should cover four key areas: your product or service offering, pricing strategy, sales and distribution, and marketing.
- Ownership structure, management and staffing. Discuss your firm’s legal structure (including ownership), management and staffing requirements, as well as external services and expertise such as lawyers and accountants.
- Operating plan. Your operating plan must cover your business’s physical requirements, including office, warehouse and retail space, equipment, supplies (including where these are sourced from) and so on.
- Financial plan. As far as prospective investors are concerned, this is the key section of your business plan and the one they’ll be paying the closest attention to. You’ll need to include projected cash flow statements, financial statements and a balance sheet.
Investors will be keen to ensure that your business is potentially profitable before deciding to invest in it, so you should also include a breakeven analysis illustrating what it would take to make a profit.
- Appendices. If you have other documentation that needs to accompany other sections of your plan—CVs of owners and management staff, detailed competitor analyses, owners’ credit histories or further information about your products and services, for instance—then make sure you include it as appendices at the end of the plan.
How to revise your business plan
It should go without saying that your business plan will need revisiting every so often. As businesses evolve, their plans should evolve with them. You should continually revisit your objectives to see how far you’re meeting them and reassess what your rivals are regularly doing.
Revising your business plan is an opportunity to assess whether you’ve met existing objectives and pursue new ones. As we’ve mentioned, the reality of running a business often diverges from the plan that’s on paper. Therefore, you should tweak your plan periodically so that it more accurately represents where your business is at and where it’s going.
Useful tools for writing a business plan
Numerous tools can help you in writing your business plan. The US Small Business Administration has created a ‘Build Your Business Plan Tool’ that provides a step-by-step guide to writing a plan. You can write it section by section, saving your progress and returning to it later (it’ll be stored for up to six months).
You can also find resources to help you build your business plan on the gov.uk, the UK government website. It’s also worth looking at business plan software, including the following:
- Enloop: A tool that automatically writes your business plan for you based on your specific details. Features include shared users capability and automatically generated financial reports.
- Rocketlawyer: An interview-based online tool that guides you step-by-step through the creation of your business plan. Answer a few questions, and your business plan should be ready in minutes.
- LivePlan: Business plan software with instructions showing you what you should include at each stage of writing your plan. It also features a library of more than 500 sample plans you can use for guidance and inspiration.
- BizPlan: A guided business plan builder who has been acclaimed for its user-friendly design. Once you’ve drawn up your plan, you can share it directly with investors or via Fundable, an online capital-raising tool.
- PlanGuru: Business plan software that makes it easy to set financial goals for your business and monitor its performance. Its integrated income statement, cash flow statement and balance sheet allow you to make more accurate long-term forecasts.
- Wrike: Project management and business planning software used by more than two million entrepreneurs across 140 different countries. Ready-made templates help you get your business plan into shape.
- Platinium Pro: A strategic business planning tool with a range of useful features, including automated contents tables, sample business plans, a user-friendly dashboard and a host of relevant educational resources.
Make your business phones work smarter with RingCentral
RingCentral’s cloud-based business phone system can help your business boost productivity through better connectivity. It allows you to take calls with HD audio wherever you happen to be, as well as to route incoming calls to a human agent or a virtual receptionist. Calls are protected by enterprise-grade security, with a 99.999% uptime SLA.
What all this means is that you can provide an even higher standard of customer service—keeping customers coming back, time and time again.