What Is a Business Plan?
A business plan, as the name suggests is a written document containing the key information on the direction and strategy of your business. There are two broad elements in a business plan.
1.) What you would like to achieve.
2.) How you plan on achieving these aims.
Business plans also contain information on financing, marketing, the product or service itself and the structure and strategy to grow your business.
Why Does It Matter?
Business owners know that businesses don’t run smoothly to a predefined plan. There are hundreds of ups and downs and the decisions you make along the way are what will make or break your business. So what’s the point of spending time writing your business plan in the first place?
During the event of extreme sales or lack of sales, a business plan can help keep your business on the right track. For example growing in the correct way you initially planned, and not getting distracted by setting up new sales funnels, marketing methods or new branches of your business when sales numbers rapidly increase. The number one failure for all new start-ups in the UK is cash flow, a well written business plan lets you reinvest in key areas to grow your business in a sustainable way.
When applying for small business loans or funding of any sort from either banks or investors, they will require a business plan. A well designed plan gets you through the door and closer to your funding goals. Obviously credit history and cash flow are essential in securing a loan too, but without a clear strategy for your business no one will take you seriously.
Once a company grows to a certain size, “corporate levels” start to appear. This is seen in the majority of big brands in the UK. Where a company may have upwards of ten locations, and hence every new employee will not (in some cases never) meet the CEO or owner of the business. Although growth is exactly what start-ups are looking for, the speed of growth can sometimes result in a diluting of the company’s principles and aims. A clear business plan delivered to all employees upon being hired allows them to get an idea of the direction of the business and any decisions they make should be to move the business in this direction.
What to Include in a Business Plan
What your business is/does and how you will make money from it. In this section you can also include information on what makes your business better or different from the competition. Ensure this section is concise and extremely clear. If you can’t sum your business up in two or three lines then it’s too complex.
This is the section to include your primary aims for setting up the business. These can be either short or long term goals. Ensure all of your goals have either a monetary or timely element to them, e.g. £50,000 in revenue in six months, 1000 sales a month by the end of the first year etc.
Customers and Market
In this section you should explain what the market for your product or service currently looks like. You should also include any competitors that are doing well in the marketplace and how you are going to counteract this. Below are some questions you should be asking yourself in this section.
Is your product better? Cheaper? Faster? What gives your business the edge? What do your prospective customers want? Have your researched this? Is the marketplace flooded? Or is there even enough interest? Where are your customers coming from? Is the market expanding or shrinking? What do your competitors do well? What could you do better?
The Product or Service
This describes the products you will be selling or providing to the market. Whether this is a physical product or a digital service, you will need to describe what it is you do and the prices and margins you will make on each item.
This section should contain all the marketing channels you are going to utilise. How are you going to sell to your audience? Are you going to utilise the internet? Is the local market going to have an impact? What’s the marketing budget? Where is the budget going to be spent, and why? Remember that marketing done well can support an “okay” product, but marketing done badly can kill a good product.
This section should include your current partners or members of your team and why they fit well into your business, as well as their qualifications and expertise.
This section should include all of your financial information. Balance sheets, start-up costs, the fixed costs over the next two to three years, the ongoing expenses of the business as well as other relevant financial projections. If you’re unfamiliar with the financials that go into business plans, your accountant will be able to aid you on this.
Not to be mixed up in the financing section, cash flow is how much “cash” (usually in the form of sales) that a business has. Describe when and how the business’s cash will be used, for example, take into consideration: credit lines, invoice due dates, manufacturing times etc.
Putting all the financial data together to give you a monetary figure of how much your business should be making or losing in a specific timespan. Generally two years is used, although if your business is in a particularly volatile market, then this number should be decreased.
Ensure you write a personal and concise conclusion about your business plan. Three or four sentences is usually enough and don’t be afraid to display your personal passion in this section, as well as going over the main points one final time.
Although the above information is important when writing a business plan, it’s your business and your plan should reflect this. If your long term goals are not 100% known, be honest with yourself and write this in your plan. No business successfully achieved their business plan 100%, don’t be afraid to put your own style on your plan.
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Business Plan Disadvantages
Business plans, although important, do have a few downsides.
Plans and proposals are (however you phrase them) guesses! You, along with your business partners, do not know where you will be in less than a months’ time, let along 12 months’ time, so although business plans are great for planning strategies, don’t be afraid to tweak your goals along the way.
In your business plan, you will be writing from a positive mindset, as much as you might try to stay impartial, the success of your business (in your mind) is certain. Whereas in reality, markets change, consumers change opinions and however strong your business plan might be, there is always a chance it flops, and in some cases getting out early would have been the best move altogether.
When writing your plan there will be more than a hint of bias. And as much as you try to counteract this, your plan may end up skewed and the data misrepresented. If you believe this to be the case, consider a professional review of your business plan, if your budget doesn’t allow this, then simply contact a successful business owner you know.
A business plan should be a look into your business’s ideas with a focus on research. If you’ve reached the “create a business plan” phrase then you are likely to already believe in your business. But when writing a plan, try to take a step back and look at it from the eyes of a third party or a potential investor, this will help you see what actually looks profitable and what might just be a dream.
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