Writing a business plan can feel a bit daunting, yet having some sort of plan is essential to set yourself on the right track, analyse your business environment, clarify what you expect from your venture, and to use as a tool to review and evaluate your performance. A business plan can also be a way of attracting investment, though many investors prefer solid evidence of your current success rather than future aspirations. The key is to keep your plan simple and user-friendly so it works for you, and to be flexible in adapting or moving away from the plan to meet the needs of a constantly changing economic environment. There are plenty of business plan templates and examples to use. These five simple steps provide a framework that you can adapt to suit your business.
Step 1: Describe Your Business and its Industry
Describe your business in the following terms:
- The services or products you provide and the unique selling proposition that sets you apart from your competitors
- The nature of the operation, means of distribution and support systems
- Your current and potential customers
Describe the industry in which you operate, including:
- The overall industry size, the main players and the customers
- Potential entry barriers to a new business
- Typical profit margins
- The current national, economical and technological trends that are likely to have an impact on growth
- Any regulations or legislation that have to be taken into account
You might also find it helpful to carry out a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to identify your business’s strengths and weaknesses, and the opportunities and threats it faces in the external environment.
Step 2: Describe Your Target Market, Competitors and Marketing Strategy
Demonstrate that you have a thorough knowledge of the marketplace in which you operate along with trends and drivers. Consider:
- Your target customers in terms of gender, age, income, location
- The size of this target group and the share you hope to gain
- This group’s perceptions of your product/service
- Your strategies for gaining this share, for example a pricing strategy or advertising campaign
- Whether this target market is growing or declining
Research your competitors to ascertain their market share, along with their relative strengths and weaknesses.
Outline your marketing strategy. You might find it helpful to structure your thoughts using the 4 Ps approach, which analyses your product/service, pricing, promotion and place.
Step 3: Describe Your Business Operations and Organisational Structures
Set out your management team and organisational structure and include details of key managers’ backgrounds and experience.
Provide an operational plan that describes:
- How your business’s production, operations, marketing, human resources and finance departments function
- Who your suppliers are and any contingencies you have in place should they let you down
- Quality control and assurance systems
- Your approach to risk management
Step 4: Financial projections
Show that your business is financially viable. Ideally include three years of projections for the following:
- Cash flow
Including key performance indicators such as break even, rate of return and liquidity ratios can help demonstrate that you have a clear grasp of your company’s financial situation.
Step 5: Write Your Executive Summary
Although this section actually appears at the start of your plan, you can only write it once you have completed stages 1 to 4. Your executive summary introduces your business, summarises the highlights of your plan and spells out your requirements.
The content and complexity of your business plan and the tools you employ to write your analyses depend on the nature of your business and your plan’s target audience. Adapt the basic format to suit your needs and remember, it’s not fixed in stone. In today’s fast-changing business environment, you should plan to revisit and update your plan regularly.