Planning for success: how to write an effective business plan
Writing a business plan can sound a little daunting at first. But the truth is that a business without a plan is a business without purpose. Once you’ve taken the time out to articulate exactly what your vision is for the company, it will be much easier to attract investment and measure your progress going forward. In fact, most financial lenders will demand a business plan if you’re applying for a loan, so it’s a must-have for many business owners.
Research reinforces the need for planning: one surveyi of 2,877 business owners reveals that those who had completed plans were almost twice as likely to grow their business successfully or gain investment versus those who didn’t. A separate report revealsii that entrepreneurs who write formal plans are 16% more likely to run a viable business than those that don’t.
So let’s take a closer look at what you need to get started.
Planning the plan
The truth is that businesses require a great deal of planning — even relatively small companies. According to the FSB it should be concise and free from jargon. Consider your audience at all times, and what they will be looking for in the plan, whether they are potential investors, customers, suppliers or even staff. Attention to detail and demonstrating a clear understanding of the market and your financial situation should be a given whatever the reader.
According to the government a good business plan will:
- clarify your business idea
- help you to spot potential problems
- set out your goals
- measure your progress
So with that in mind, here are a few key elements you should consider including in your business plan:
Executive summary: A basic overview of your business detailing what you’re hoping to achieve. It might be easier to write this section once you’ve completed the others.
Business description: What does your business do and why? How does it operate? Who is your target audience? What products will you sell to them and how will you turn a profit? These are the questions you need to answer here.
Market analysis: Describe your main competitors and how you have an advantage over them. Try to be as focused as possible and include evidence of your research to add weight to the report.
Organisation and management: This section outlines the organisational and management structure of your business, including the responsibilities, skills and expertise of each team member. Consider also including the expenses associated with your business operation.
Sales strategy: Here you will outline how the company plans to make money. Don’t forget any sales and promotional activity carried out online, such as social media posts and search engine optimisation (SEO). Even if you’re a bricks and mortar business it pays to have an online presence to attract prospective customers.
Funding: List a breakdown of how much money will be needed to start and run the business and where it will be allocated.
Financial projections: The key final part of your plan, this will seek to convince the reader of the long-term viability of the firm. Include a forecast for the next five years, ideally with income and cash flow statements, balance sheets and Capex budgets.
A helping hand
Many business plans fall down because they aren’t based on a solid understanding of the company’s financial situation. This includes knowing your financial targets, how much you’re investing and borrowing and where the money is coming from to meet your targets. Technology platforms can help here in providing a user-friendly way to record and analyse business data. The insights they generate can really help to improve planning.
If you’re still a little unsure about how to write a business plan, consider starting from a partially pre-filled template which you can customise to suit your business.
Once you’ve finished, don’t forget to revisit that plan regularly to make sure you’re still on track for success. Business plan reviews should be scheduled every year or twice a year. With a bit of effort and forward planning today, you can look forward to a bright future for you and your business.