An effective business plan will help you plan, track and amend your idea before starting up. Elsa Caleb outlines what it should include.
Time set aside to write a business plan is time well spent. This is mainly because a business plan is not a document that should be written in chronological order. Once you start researching your market, you will come across a number of pieces of information that will fit more comfortably under a different section, such as start-up costs, marketing or even the cash flow forecast.
The best approach is to have a series of headings or mini-folders and file the information under each heading that relates to the plan.
The comprehensive business plan is usually split into three main sections: marketing, operations and financial. Other headings, such as an executive summary, are typically at the beginning, and appendices are placed at the end.
To kick-start your business plan, you may want to consider identifying a template that is linked to the lending organisation you plan to approach for finance. If you just want to write a plan to assist you with overall planning and direction, try and identify one you feel comfortable using.
An executive summary, although located at the beginning of the plan, is usually the last section to be written.
It is a summary of the entire plan. You need to be able to grab the reader’s attention and at the same time highlight the main reasons you are starting a business.
Deal with the type of business you plan to start and how much profit you plan to make in the first year. Remember to focus on your projected turnover in the first 12 months, three years and over five years. Identify how much you need to borrow to get the business started, how you plan to run the business and with whom.
Be clear on your business objectives. Start with the next 12 months, then three years and then think longer term over the next five years. Consider including a mission and vision statement. A simple key that will ensure you stay focused is to include a couple of useful tools: a SWOT (strengths, weaknesses, opportunities and threats) analysis, along with a PESTLE (political, economic, social, technological, legal and environmental) analysis.
Conducting in-depth market research is the best place to start. You need to know if there is a market for what you plan to sell. Be real, honest and open to receiving information from potential customers as this will help shape your offering. Listen carefully to what they have to say, and try to keep your business idea flexible at this point. Your customers will usually shape your final proposal.
We recommend taking these steps:
Identify where potential customers purchase products and services
Consider the demographics of your target market
Find out what value for money your target audience actually wants
Conduct a survey of the target market to find what is important for them: price, convenience, brand or quality
Identify the latest trends for this sector
Develop a brand for your business
Take the time to research your competitors. Key points to consider include:
Who your competitors are
Their strengths and weaknesses
What opportunities or threats they pose.
You should also identify businesses that offer the same or similar services/products and their price ranges. Try to learn from them – especially those well established with a proven track record
As part of your marketing plan, think about advertising. This can include conventional techniques such as press releases, newspapers, radio and social media. Be clear as to your plans to raise the profile of your business.
It’ll be beneficial to include the costings and the timeline, so that you can plan.
This section of the plan focuses on how the business will operate on a day-to-day basis. It includes the location of the business, facilities, staffing, equipment, production, insurance, and so on.
You will need to describe what you have done so far to get the business started. Include your skills and experiences within this area of business and where you see the business going in the future. At the same time, explain how you propose to get there, and outline the financial costs and risks that relate to the development of your business.
Decide on the appropriate legal status for your business, whether starting as a sole trader (self-employed or freelancer), in partnership or as a limited company. However, if you are planning to trade internationally or prefer to remain a entity separate from your business, starting up as a limited company might be more beneficial.
Within this section, a number of separate documents will assist you in gaining a clear view of the financial side of the business. You will need to consider the minimum amount that you can live on while building up the business and how you plan to budget for this. It’s usually called your personal survival budget.
It may be tricky, but we’d suggest that you try to estimate how many sales each item will bring in over a period of 12 months. This should give you an overview of the expected busy periods and the months when you may need to consider introducing new products or services. This document is called a sales forecast.
Finally, we’d recommend that you estimate the income and expenditure of your business within the first 12 months. You should be able to see at a glance where additional income will be required and where a bank overdraft could be injected, and it will give you an idea as to whether the business is making a profit or a loss.