Writing a business plan; the dreaded task looming over anyone starting a business, but one which doesn’t have to be as daunting as you think. Once your long-term financial objectives are set, your business plan will provide measurable goals to benchmark against. It will be a source of motivation, put your aims into focus as a blueprint to fuel the growth of your Startup.
Our 10 stage guide will make this landmark stage of your Startup journey as manageable as possible.
1) Executive Summary
Kickstart your business plan with an ‘Executive Summary’; a general outline of yourself, your business idea and what you want your business to achieve. You should include:
- Personal Details
- Your business idea
- The type of business you want to set up
Briefly summarise what sort of business you want to start and why you want to start it. Now’s the time to decide whether you want to be a sole trader or limited company, and you’ll have to declare your business name – just make sure it hasn’t been taken already!
2) Describe your Business
Here is when you delve into the roots of your business idea. Where did the idea come from? In more detail, describe what your product or service is and how long you’ve been developing the idea for. Think about where your business will be based, and the advantages/ disadvantages of this location. Describe what you hope to achieve in your first, second and third years to show you have the ambition to grow and can realistically achieve these targets.
Emphasise your Unique Selling Points (USPs) – what makes your business stand out amongst the rest. Show how you’ll differ from competitors and what makes your Startup special.
3) Pricing your Product
Your product needs to cover the costs of production, make you profit and customers need to be willing to pay the price. Priced right, your product or service will ensure your business grows. Write down your;
- Price per item
- Direct costs of the item
- Gross Profit (Price – costs)
- Gross profit margin (Profit/price x 100)
- Overall overhead costs for year one
Then, work out your overhead costs/ profit margin for the minimum amount you’ll have to sell to make a profit. If this seems unrealistic, have a rethink of your pricing or costs. Check out competitors to see how they’re priced for comparison.
4) Know your Market
Prove you know your target market inside out by exhibiting your expertise of your customer base. These four questions should form a strong backbone to your market research.
- Who are your customers?
What is there age? Where are they located? Are they male, female or both? You need to show you know your customers and are selling something relevant to them.
- Why will they buy from you?
The only way to find this out is solid market research. Prove you’ve taken the time to thoroughly understand your customers and why they need your product or service.
- How many customers will you have?
If you have customers in the pipeline, brag about them. You’ll have to estimate how many more customers you’ll acquire over the next few years and how you’ll reach them, whether its word-of-mouth or online/ local advertising.
- Is the market growing or declining. Why?
Perhaps there’s new legislation that’s spiking demand for your product or service? Following the sugar tax announcement in the 2016 Budget, Hugh Thomas and Joe Benn decided to launch Ugly Drinks, selling zero sugar sparkling water. They knew the drinks market would have to change, and opportunistically launched their product to meet demand quicker than giants such as Coca Cola could.
5) Know your Competitors
Weigh out the advantages and disadvantages of your competitors to show how you’re different. Yes, your direct competitor may have the advantage of size and funds, but perhaps your business can offer a specific service they can’t.
Emphasise why customers would be likely to move. If you’re cheaper, more specialised or even geographically closer to your customers than competitors, shout about it. Back your statements up with market research to convince the reader you’re seriously worth their time or money.
6) Sales & Marketing
- How will you position your product?
Are you selling high-end dog accessories? Or are you the only café in town specialising in afternoon tea? Pick an angle to sell at that strikes in a different direction to your business rivals.
- How will you sell?
Outline whether you’ll sell mainly through a website, shop or over the phone etc.
- Who will be your first customers, and how will you identify further ones?
If you already have loyal clients who will follow you when you set up, mention these here. Many hairdressers leave salons to set up by themselves, and take their happy customers with them!
- How you will promote your product
Talk through your advertising strategy, from local flyers to social media, display your plans to show off your business to the world.
- What is your budget?
All of the above must fit into a budget you can afford to ensure your business is still profitable. Remember, you can increase this budget for the second and third years if you grow.
7) Operations & Management
Whether you’re a one-man band or are have a team besides you, investors will want to know who’s in charge of what and if they’re capable. Sales, production, marketing, finance and administration all need to be managed, so explain why your skill set can cover all of these or if not, why whoever is looking after it can. For example, if you can afford an accountant this will reassure banks that finance is covered.
8) Financial Forecast
The crux of your business plan will realistically prove it is financially viable. You’ll have to translate all your writing into hard numbers to prove the maths adds up. If like some people, maths wasn’t your strong point at school don’t worry. Banks with start-up advisors and your local small business support organisation such as the National & Local Enterprise Networks can help create your forecast for free.
You’ll need three statements which have monthly projections for the first year; Income, Cash Flow and Profit & Loss.
- Sales Forecast: Realistically break down your monthly sales and state where they will come from
- Income and Profit Forecast: First, add up your monthly income from sales and investment. Then take away all your expenditures such as cost of goods and operating costs. You’ve now got your net profit. Calculation these for the next 2-3 years for a solid profit forecast.
- Cashflow Forecast: Show the business can keep its head above water and identify when it will have more money coming in than going out. Explain where the money will come from, whether its sales or investment and cover all your expenditure from salary to tax.
9) Funding & Costs
Next, work out how much funding you’ll need to make these forecasts work, where it’s coming from and what it will be used for. Consider your;
- Fixed costs: Rent, wages, loans etc.
- Variable Costs: Production of goods or services such as materials or labour.
- Burn rate: Your burn rate is how quickly you’ll use up your cash reserves. It might take a while to earn cash back from customers, so you’ll initially be running on your cash supplies, either from your personal finances or investors. You need to show you will have enough cash to keep going if you’re making a loss, and how long for.
- Current assets: Equipment you already have.
- Future assets: What else will you need to buy?
Now outline where the funding will come from. Write down any grants, loans or personal funding you already have, then state how much money you might need from investors such as banks.
10) Exit Strategy
Finally, if you ever do want to sell the business you’ll need a safe exit strategy to ensure minimal losses for you financially. Again, local small business organisations can help you plan this free of charge if you need the help!
Your business plan will no doubt be an integral part of getting your Startup off the ground. Not only will it ensure the financials are realistic and achievable, but it will serve as a steadfast rock to refer to throughout the first year or so. Use it as a resource to check all difficult decisions against and benchmark targets you have to meet. More than anything, your business plan will be a motivational document to power you through the gritty times when you’re feeling down, and prove to you that your business dreams are certainly achievable.