How to write a business plan

Tuesday, 27 August 2019

Having the best idea for a company, brand or product isn’t enough. Without a well-thought-out business plan, investors won’t be prepared to provide the funding you need. Here’s your five-step plan to writing the perfect plan . . .

For every budding entrepreneur, whatever the sector, the real test comes when you sit down with would-be investors who will go through every line of your business plan with a fine-tooth comb. It’s the single most important document that any aspiring business owner will produce. So, how do you go about making one that can transform an idea into a solid strategy? Follow these five steps to find out…

 

1. Know the purpose of your plan

It may sound obvious, but you need to understand the purpose of a business plan – because if you don’t understand it, how will your investors? Use this six-point checklist:
* Does your business plan show how your idea makes sound business sense?
* Does it set out your business, sales and marketing operations? In other words – how will anybody know this business exists and how will they purchase your goods or services?
* Does it identify where the potential problems are and how your business will overcome them?
* Have you included projected financial returns?
* Can the reader view how much money you will need to make the business sustainable?
* Will it attract investment?

 

2. Clear. Concise. Compelling.

Every step of your business plan needs to deliver information that will keep a potential investor reading through to the end.

 

Think of a business plan as a story you’re telling to a group of strangers. It must be compelling enough to hold their attention. The story also needs to be clear and consistent but it must also be concise. You don’t need to give a detailed breakdown of your marketing strategy – it’s more about the investor knowing that a strategy exists.

 

Remember that investors are forever looking at business plans and one that goes on forever will be greeted with a heavy sigh and a trip to the recycling bin.

 

3. Presentation

Over two (maximum three pages) set out your executive summary. Within that summary you must be able to answer the following questions:

• What is the purpose of your business?
• How well do you know your market and its trends?
• What are you going to offer that nobody else is currently providing, or how can you do it better?
• How are you going to make a profit or build on your existing turnover?
• Who do you currently employ or plan to employ?
• Can you show evidence that people are either a) willing to pay for your goods or service, or b) already paying and that your customer base is growing year on year?

 

Remember, this is meant to be an overview but it’s also your pitch. If you don’t get this right then nobody will read the rest of your plan.

You can subsequently address all of these questions in more detail after the summary. That will include:

• The history of you and your business
• Financial forecasts
• The skills within your team that will help to deliver that plan
• If necessary, any technical specifications
• If necessary, proof of patents (or patents pending).
  
  

4. Avoid obvious mistakes

Spelling. Nobody is expecting a body of work worthy of a Pulitzer Prize but investors do expect you to get the basics right and business plans have been known to fail simply because of bad grammar. It’s worth contacting a friend (or a friend’s friend) who proofreads or checks other people’s written work.

 

Clarity. Again, it’s worth asking friends to read your plan first. They don’t have to be number crunchers but your proposition should be clear enough for most people to understand it.

Reality. A business plan is full of assumptions and nobody can accurately know what will happen next year let alone in five years’ time. But so long as your projected figures appear achievable and realistic, an investor will factor in the other variables.

 

5. Keep it updated

Much like a CV, a business plan should be regularly updated. Consider the current economic and political climate, keep an eye on trade deal status and economic forecasts.  For example, UK entrepreneurs will need to address the Brexit issue. Potential  investors may well want to see plans for a no-deal Brexit so be prepared to demonstrate that you are on top of everything and the business won’t be exposed in the event that the UK leaves the EU without a deal.

 

For example, will your business be employing EU nationals? Will your supply chain be disrupted? Alternatively, could it weaken one of your competitors and therefore provide a competitive advantage?

And finally…

Remember that when your business plan is in good order, you need to be prepared for a grilling. Seek out the advice of anyone with experience in assessing business plans and ask them to interrogate you on the sort of questions you will be expected to answer, so you’re prepared for what might come next. Potential investors will want you to be confident in what you’ve proposed.