What Is a Business Plan & Why Do You Need One?
A business plan is a written document that describes in detail how a business (usually a start-up) defines its objectives and how it is to go about achieving its goals. It is a written description that provides a description and overview of your company’s future. Writing a business plan can appear tricky at first. It really isn’t!
A successful business plan will lay out the roadmap for the company, including marketing , financial, and operational standpoints.
Whilst they are essential for new businesses, all companies should have a plan in place. It should reviewed and updated periodically to measure whether or not goals have been met, changed, or scrapped completely.
Business plans are important documents as they are used to attract investment before a company has established a proven track record. They are also a good way for companies to keep themselves on target going forward. As a business owner, you will be able to keep a track of the progress of your company.
The plan should explain your business idea, strategy and your key goals. You will describe how you will get from where you are now to where you want to be in the future.
All good plans should include an element of explaining your business model, business financials, business planning, and business people involved. You will explain how will you make your business profitable, how you will gain more resources/assets, what are your future growth plans are, and where you see your business in one, three or five years.
It is very rare for a company to receive any form of investment or funding without a well executed business plan.
Understanding Business Plans
A good business plan will outline all projected costs (plus possible problems) of all goals and actions that a company intends to make.
All business plans are unique to the business that created it. They are rarely the same as any other company’s plan in your niche – this gives you the creative advantage in how you describe and word your plans.
Whilst all plans are different, they do all contain near enough the same basic elements. This includes an executive summary of the business, a detailed description of the business, and the products or services it offers. It also includes the goals for the future, how they will be achieved, and the funds and resources required to see these goals through.
The plan should include an overview of the industry the business belongs to, and how it will set itself apart from its potential competitors.
Whilst as much detail as possible should be given, it is also important for the plan to be concise and to read smoothly. At it’s most basic, you should explain what you intend to do and how you are going to do it. Outline your strategies across the business, including financial projections, marketing and operational plans.
An overview of your business
Your business plan should provide a good rundown of your company, financial statement, business strategy and plan of action. You will make it easy to read and understand, with a table of contents at the beginning so readers can navigate their way around.
Inform the reader of the plan how you intend to make money, the steps you will take to achieve your goals. Outline your targets and long-term goals, and how you will accomplish them.
There will be a marketing section to your business plan. Detail in this how you plan to outperform your competitors and rise above the others in your industry. Show the results of a competitor analysis.
Your complete business plan must include a set of financial statements or projections for the business. If you opt for the projections, then these (which are often known as pro-forma financial statement) must include the overall budget, current and projected financing needs, a market analysis, customer service strategies, and the company’s marketing plan and strategy.
What should your business plan include?
All business plans should include the seven key sections below as an absolute minimum. The plan is being created to showcase your business, you must do this well.
Seven key sections are:
- Business Description: This highlights an overview of who you are as the business owner, what you do, and company ethos.
- Company Financials: Alongside the core financials mentioned below, include any financial planning and cashflow projections. New businesses should include targets and estimates as they will not have the completed set of accounts. Also include details of any budgets relating to the growth of the business.
- Competitor Analysis: Include your analysis carried out on the strengths and weaknesses of your current and potential competitors, plus the opportunities and threats you perceive from your research. Detail how you intend to profit from what you have discovered.
- Design & Development of Products & Services: You should include the products and services you offer, and consider including pricing, product lifespan, customer benefits, and perceived future upgrades or developments. Include your production and manufacturing processes, details any trademarks or patents the company may own, and document any information on research and development (R&D).
- Executive Summary: This outlines the company and includes the mission statement, along with information about the company’s leadership, employees, operations, and location.
- Management & Operations Management Plans: You will highlight all of your plans, tactics and strategies you will be using to develop your business. You will highlight your responsibilities and obligations as a business, and show the objectives you have set to be achieved.
- Marketing Strategy: This describes the strategy the business will use to become visible and reach it’s ideal potential customer. It will also highlight how it will retain the existing customer base. The advertising and marketing campaign plans will be made clear, as will the media platforms that will be used.
The financials section is very important, and should contain information such as your income statement, cash flow forecast, and balance sheet. Show an accurate picture of the current value of your company and show your ability to pay bills and make a profit.
There is no set length or amount of words for a business plan, however following a good template should see the plan consisting of around 15 to 20 pages.
Additional factors such as trademarking, patents, intellectual properties, and applications may see the business plan extend beyond this, and they should all be referenced in the main plan and included as appendices.
You need to complete your marketing analysis to know your industry inside out, and be able to explain the strengths and weaknesses, consumer demand for your products, and how easy or difficult it may be to gain a market share from your competitors.
The idea behind the business plan
The reason businesses create their business plan is so that they, and potential investors, have a clearly defined picture of the business. They will see the potential costs, strengths and weaknesses, to new business plans and decisions. This helps to suggest alterations to the business structure before going ahead with any new ideas.
A business plan is not a static document. It evolves as the business does. An annual review of the plan allows you the opportunity to see what achievements have been made and what has not been so successful.
Most people think that a business plan is only for starting a business and satisfying funding requirements. This is wrong – they can be used to monitor the growth and success of your company.
15 questions to answer when creating your business plan
What business are we in? You must know your business, niche and industry. This helps you to find your ideal customer and create the perfect strategies.
Have we set the vision and mission of our company? You must have a set vision and mission, and write a clear statement. You can prove to anyone who reads your business plan that you and your staff know your company inside out.
Who is our ideal customer? Who needs the solution that you sell? What are their problems? What are their demographics? Are they new or returning customers? How will you turn them into a loyal customer?
What does our customer value? What would make their life easier? What would make them feel that you are the business they would like to build a relationship with? You need to offer customer value for your niche or target audience.
Who is our target market? You will be aware of this once your market analysis is complete. This will help you to aim your marketing strategy in the right direction. Your ideal and not so ideal customer will be very clear to you.
What products and services do we provide? Have you made sure that your products and services are currently sought after? Is there anything you are missing out that you could be capitalising on? What can you upsell alongside your current products and services?
Have we refined our sales and marketing strategy? You must know how you are going to showcase yourself to your customers. What can you do to make yourself stand out from the crowd? This strategy should be designed to create new customers and re-engage with past ones. How will you entice them into buying from you?
Can we ride above the competition? Who else sells what you sell? Are you competitive on price? What will make people buy from you instead of them? How do your competitors market their goods?
Do we have the right team in place to help our business grow? All businesses are built around having the correct team in place. You must have the right person in the right role. Do not forget that these people represent your company – do you trust them to do this when you have your back turned? All departments must ensure maximum productivity and growth potential. Your team helps you to drive this forwards.
Can we handle employee on-boarding, development, and training? Employee development and training is crucial for businesses to expand and stay ahead of the game. Services and technologies are ever evolving – just look at the new surge in remote working since the pandemic. Do you embrace and integrate new technology? On-boarding employees, offering training, and staff retention practices, could save your business a lot of time and money in the future. Satisfied staff stay with you and usually help you to grow. Your people management skills are vital when it comes to keeping existing employees.
Do we have the plant, materials, stock, equipment, and people that we will need? There is no point in trying to grow your business if you cannot withstand the surge in customers. Advertising a product or service, and then telling customers that you are out of stock or have a huge backlog is not good practice. Not only will they turn to a competitor, they will ignore your name when it crops up again. You must make sure you have all the required plant, materials, stock and equipment that you need.
Do we have the funds we need in order to generate the profits we want? You must know your financial position at all times. Your accounts must be up to date, with your cashflow forecasts, projections, capital requirement, and budgets in place. Solid financial data tells you the current financial position of your company. It helps you to make sound business decisions, and to know when to change tact.
How will we measure our success? It is crucial for all business to now track and analyse their metrics and data on a regular basis. Many companies do this one a week, some do it once a month. We do not recommend leaving it over 1 month at a time. Metrics to score are:
- Internal KPI’s – these tell you how well (or not) your business is operating on a daily basis
- Online analytics – these tell you how well you are doing online (you should monitor your website, google and social media profile analytics)
- Customer feedback and reviews – you should ask for these on a regular basis and monitor the results. Always take bad feedback seriously – this can make or break a small business
- Autoresponder data – you should check metrics within your email marketing software. Check for unsubscribes, email bounce rates, email unopened rates (although this will be difficult with the iOS 15 update coming in autumn 2021)
What is our exit strategy? Every company needs an exit strategy. It is extremely important for a small business. An exit strategy is a planned route to leaving one’s current situation. This can either be after a predetermined goal has been achieved, or as a strategy to mitigate failure. In the worst case scenario, an exit strategy will save face. At best, it will deliver a goal worth more than the cost of continuing the doomed execution of a previous plan.
What are our short and long-term goals? All businesses must have goals in order to propel. These goals must be short and long term, written down, actionable and achievable, with specific measures in place to monitor the progression. Goals must SMART – specific, measurable, achievable, realistic, and timely. You should know when they are veering off course, and we strong enough to know when to change or alter some that will not work.
Business Plan Complete!
We hope we have given you a good understanding of why a business plan is so important for your business. There are many templates available for you to work from, HMRC has information and templates available for all to use.
If you do have any questions about creating a business plan then let us know and we will try our best to help!