How to write a Business Plan?
Write a Great Business Plan
A good business plan showcases the key objectives that a business wants to achieve and outlines the strategies it must take to achieve these. It will cover marketing, financial, operational, strategic and competitive elements that the business will need to address in order to achieve success. It is for this reason a business plan will be used to onboard new business partners, investors and other important stakeholders.
You can start working on a business plan by using a template, this will give you a structure to follow, this article formulated by our in-house business advisory experts will help you to customise your business plan according to your business needs and ambitions.
Our business advisors have also included a list of factors that you should bear in mind to ensure that you are able to craft an eye-catching business plan that potential investors or businesses find extremely difficult to ignore.
Let’s begin by discussing some of the basic rules before you proceed.
Related: Once your brainstorming stage around your business idea is complete, you might want to start setting up your business. Learn how you can start your business in the UK by reading our article.
Rules to keep in mind when writing a business plan
- Communicate effectively
Communication is the key to a good business plan. In order to raise funds, add skilled co-founders or to explain your idea effectively you should try to resist using complicated terms in your business plan. The chances are that not everyone might understand the technical terms or complicated language being used which might make them resistant to the business idea.
Make things easier for everyone by describing the characteristics of your product in the simplest terms and provide an appendix of your plan for those who want to go through the full specifications of your product or services.
- Keep it short and to the point
Keeping your business plan short and concrete should be a key priority. The more you waffle in your plan by adding irrelevant information the higher the chances that readers will lose interest in the plan very early on. You want your business plan to be read and understood completely, for that, you will have to make it brief and to the point. Your business plan will have to be refined over time, so it might be a good idea to leave space for critical information that you might need to add later.
- Be Patient and Believe in your Yourself
Ideas are dime a dozen, but when it comes to formalising these ideas and executing them not everyone can do it. Writing down your ideas and execution plan can get very tedious but it’s important to record key points in a business plan, so you can revisit later and determine if you are still on track or if a pivot is required.
Let’s move on to the core elements your business plan must include.
Mentioned below are the most important components that will combine together to make a detailed business plan:
- Executive summary
- Company and management summary
- Financial plan
You should present your executive summary at the very beginning of your business plan. It is a summary of your overall business plan and your desired goals and targets. The executive summary is usually one to two pages long.
We recommend that you keep your executive summary at the start of the business plan but it is a good idea to write it at the end after you have written down other components of your business plan. The reason is that it will be easy for you to sum up everything in your summary once you have mentioned everything about your short and long term plans.
An executive summary is important, as most investors initially request a copy of this document to get a general idea about the business. This summary needs to be catchy enough to grab the readers interest, it should make investors excited about your business wanting them to learn more about the propositions. It should force them to ask for a copy of the entire business plan or the pitch deck which explains this a bit further. This is the reason we advise you to keep your executive summary as concise and concrete as possible while ensuring that you don’t skip the most interesting parts.
What to include in your executive summary?
A catchy one-liner:
One-liners or taglines are powerful perception creators. Don’t forget to define your business in a few words under your business name. Mention your services in a creative manner, keeping in mind the line should not contain more than 10 words.
Address the problem:
Mention briefly about the problem you aim to address, also mention why do you feel the need to address that particular problem. Make sure that you don’t exceed 2-3 lines when writing down about the problem.
Present your solution:
You plan to introduce a product that has the potential solution to a problem you want to address. Mention how your product will solve the target issue. Try to keep the spotlight on the problem and how your solution addresses it.
Establish your target market:
Whether you are offering hardware products or developing a software solution, you will always have a target market. Write about your target market or niche and add brief details about how you plan to enter that market.
Identify if there is any gap in the market for your product, mention the gap if you find any. It’s equally important to mention how your target market is struggling to solve the problem and also write down about competitors offering similar services in that market.
Talk about your team:
It all comes down to how effectively you execute your business idea, for this reason, investors place a significant weightage on the team you have on board. You can talk about how many employees you have onboard but avoid mentioning their designations individually. This is a very important factor for new businesses, as the team signifies how strong business will become, teams, can be the main factor which can determine the success or failure of a startup. Our guide explains how great teams can help startups succeed.
Glorify your business team in such a manner that makes your investors believe that your business team can do anything in the world.
A graphical financial summary:
We recommend that you mention the critical aspect of your financial plan by graphically presenting information about your projected sales, budget in hand, expenses and expected profits. You can also slip in some details about your business model if you want to, the business model canvas can a useful tool to do this.
Discuss your financial requirements.
This is the part where you have to provide the details about the resources required and how much of it you need to commence your operations. Whether the business plan is for acquiring a bank loan or funding for your startup, you must write something that indicates how much monetary funding you require. You don’t need to break down your expenses and discuss them in detail yet.
Establish your goals and talk about the milestones set
Investors will pay more attention to your dedication and determination. Write down the goals you want to achieve and explain what milestones have you set or fulfilled to get closer to the desired target. Mention the milestones you have covered and also discuss the milestones you plan to achieve.
Show them that you have interested customers of which some have already bought your product. This raises confidence in your business plan as well.
Related: Managing a business means you have to keep a close eye on multiple aspects all the time. The level of stress can be high and damaging to your health. Learn how you can manage your stress and stay happy by reading our article.
Video: 10 Tips To Build A Strong Business Plan
We summarized top 10 tips in this video to build a strong business plan for your business that will give your business a boost.
This section will include some of the most important content of your entire business plan. In the opportunity section, you can discuss the problem you wish to resolve and the target market in detail. You also have to provide an overview of the solution you are offering, uniqueness of your product and how it fits into the broader business landscape.
Your readers already know some details about your business plan, thanks to your executive summary, but in the opportunity section, you will have to elaborate on what you briefly mentioned in the summary before. This section will also answer all the potential questions that were not discussed in the executive summary.
Here is a list of factors to include in the opportunity section
The issue and the proposed solution
The opportunity can be unveiled by talking about the problem you intend to address. Write down about the scope of the problem and how it is affecting lives. Also, talk about the struggle people have to resolve the underlying problem. Providing a detailed overview of the problem is essential for your business concept to sound more appealing. It shows your seriousness towards your business and raises the credibility of your business idea as well.
You also need to validate the problem that you assume people face by talking to them in person. Meet different people and ask them about the severity of the problem. Once you are done with validation, there is a chance that your confidence might boost and will be able to address the problem clearly.
Once the problem is understood with supporting documentation such as polls, interviews etc, you will have to write about your proposed solution. Mention your product and its specifications, and reveal how your product will make everyone’s life easier.
Information about your target market:
Once the problem and its proposed solution is addressed in detail, you should move towards the discussion of the market for which the product is being prepared. What you write and how much you write depends upon the nature of your business and type of service you plan to offer.
Ensure that your target market is big enough otherwise it won’t be feasible for your business’s profitability. You can insert details about the size of the target market and its geography as well.
Identify your target market segments and mention them:
A wise entrepreneur is the one who conducts thorough and detailed research about their target market before they even launch their business. Quality market research and analysis will help you identify different market segments and will also provide you with an insight into the size of these segments as well.
You can’t define the market as everyone, but instead, you will eventually find that there are only a few segments in your target market that are interested in your product. You will be lucky if the customer segment is large, but if it’s really small then you might want to consider other options.
For this purpose, you can use the TAM, SAM and SOM approach to identify different market segments and it can also help you see the market size from a top-down and bottom-up approach as well. However, it’s important to understand the approach in detail first, so it’s advisable to speak to a market expert or business accountant to help you in this regard
Once you successfully identify your main target segments, move on to discuss the seasonal market trends in this section. You can also discuss your target segment’s willingness to pay and the personal preferences of the people in that segment.
Define your ideal customers:
After establishing the market segments, the next thing is to identify your key customers in each market segment. You can discuss your ideal customers by using your buyer persona. This might sound very complicated, especially after the tiresome task of identifying market segments, but creating a strong buyer persona will help you identify the optimal marketing and sales techniques required to get the attention of your ideal customers.
Talk about the competition:
You need to remember that every business that enters a market is in direct competition or indirect competition with other businesses. This component of the target market section is extremely important as your investors would be more interested to know about how many other companies are offering a similar solution like yours, how your products differ from other competitors and what are the characteristics that will get your product a competitive advantage over others?
You can always use a competitor matrix to compare your product specs and features with other similar ones. Do anything that convinces your investors that your product is the best offering in the market.
Assuming that there is no competition at all is a big ‘’no, no’’. As a business owner, you will always have competition in one way or another. In fact, there are two types of competition, direct competition and indirect competition. Direct competition is the one where your competitors address the underlying problem by offering a very similar service as yours while indirect competition is where your competitors address the problem by adopting a different approach or offering a different product than yours.
Briefly mention your future business intentions:
Every entrepreneur steps in the business world with a dream to offer something big in the future. You might want to mention your future plans for expansion if you are able to take your business to the next level, but it’s better to stick to writing about your current business plans.
You can mention your future business plans to let your investors know that you do have long term plans and you are serious about them. But don’t fluff this section by mentioning about your future philanthropic vision if you are able to generate millions.
Just concentrate on writing about your debut product or service, because there is a slight probability that your product might not even enter the market if it’s unable to get the right amount of funding.
The next chapter you will have to work on is the execution plan. The execution section will discuss every technique and strategy you will pursue to reach your desired goals and targets. You’ll be discussing your marketing and sales strategy in detail, you will also determine the criteria for the measurement of success and also the important milestones that you plan to achieve. Let’s start by discussing the marketing and sales strategy.
Related: Running a successful business is all about taking the right decisions at the right moment. Learn more about how you can improve your decision-making.
Marketing and sales strategy:
This section will highlight one of the most important aspects of your business plan, as it will discuss the ways in which you plan to sell your products to the target market. You will also need to mention the pricing strategy and also discuss your pre-planned activities and the type of partnerships you will be needing to make your venture a success story.
You will need to ensure that you determine the target market and create your buyer’s persona before you start adding text in your marketing plan. Investors will find your marketing plan of very little value if it does not contain any information about who you will be targeting with your service.
We will discuss everything that you need to include in your marketing and sales plan one by one.
The positioning statement:
Your marketing and sales plan should begin by mentioning your positioning statement. A positioning statement expresses how your product or service addresses a particular segment of the market’s need in a manner that your competitor’s product doesn’t.
However, before you start writing your positioning statement, there is a set of questions you need to answer. These questions will require you to conduct an evaluation of the market, so be ready for it. Here are the following questions you should know about:
- What extra characteristics or features does your product have which competitors don’t?
- How are your competitors presenting their products?
- What are the needs and preferences of the targeted segment?
- What makes your product unique from others? Why should customers choose your product
- What other solutions can your product provide?
You don’t have to prolong your positioning statement, just be quick in explaining how your firm is fit for the target market’s competitive landscape and what core value proposition do you offer and how it stands out from the rest.
Pricing is the next thing to do and when we talk about pricing, we don’t just mean setting up prices for your product straight away. The price you offer is a direct indicator of your positioning strategy in the market, like if you are offering a luxury product, a high price will automatically convey your message to the customers.
Pricing generally can get very confusing especially when one has to choose the most suitable pricing strategy. Here are two very useful tips to keep in mind when getting your pricing right.
- It should cover your costs:
Your price should be high enough to cover your working expenses, as it is highly undesirable to suffer from losses at the very beginning.
- Do your economics:
It is very important to keep your customer’s demand and expectations under your consideration before you decide anything. Don’t offer premium prices, this way you will repel your customers before you even let them try your product. Likewise, don’t offer a low price, just keep the balance.
We will be discussing 3 key pricing strategies to consider in this section
- Market-based pricing
- Cost-plus pricing
- Value pricing
Market-based pricing can be an ideal strategy to pursue if one studies the target market thoroughly. With this approach, you will have to study your competitors very carefully and understand the dynamics of the market competition as well. Once you are done with the research, you can decide whether you want to position yourself as an expensive or affordable-for-everyone brand in the market
If you are operating in the manufacturing industry, then cost-plus pricing is the best pricing strategy to select. This strategy lets you proportionally set the prices according to the cost incurred in the final delivery of the product. Other businesses like retailers or wholesalers can also pursue this strategy.
Value pricing is the method of determining prices based on the perception of how much value your product provides to the customers. Value pricing can be very useful if you are operating in the service industry.
Related: Learn more about different pricing strategies small businesses or startups can adopt to boost their profitability by following strategy.
Let’s now move on to discuss another critical aspect of the execution plan, the promotion. Your product promotion plan lays out information on how you intend to communicate with your potential customers. Do make a note of the projected costs and returns of your promotion plan. Design a plan that is easy for you to maintain both in the short and long run, along with ensuring that it does not affect the financial health of your company.
This section will highlight important areas that you can include in your promotional plan:
If you underestimate the power of packaging, then try your luck with a badly packaged product. Attractive packaging catches the attention of customers, it raises their curiosity and forces them to try your product. With that being said, do remember to add images of your product’s packaging in your business plan.
When packaging your product, do remember to keep the following factors in mind.
- Your packaging should match your positioning strategy
- Your packaging should communicate your key value proposition
- Design such a package that lets your product stand out from the rest
Next thing to consider for your promotional plan is advertising. Your plan must include how you plan to market your product, will you be using an online platform or utilizing traditional advertising methods? Do remember to mention how you will be determining the success of your advertising strategy in numerical figures.
You might want to publicise your product if you already have a strong social network. Giving your product media spotlight can be a very quick and effective way to cater to the marketing needs of your product. Do add brief details about your PR strategy, if you have one, in your Promotion section.
The impact of social media has been tremendous on the business world. There is hardly any business you can find these days without any social media presence. So, your social media strategy is very important and is worth mentioning as a part of your broader promotional plan.
It’s always good to keep business friends close when targeting a highly competitive market. You can always form business partnerships with other companies to penetrate different segments of the market quickly and easily.
Write down some details about your partnerships with other companies in your business plan and do add some information about the products or services your partner companies are offering.
This part will shed light on the functioning of your business and inform the readers about how your business works. It will include details about the technology you are using, the logistics for delivery and other components that keep your business engine lubricated and working.
Sourcing and fulfillment:
Do remember to add sourcing and fulfilment details about your product. Sourcing and fulfilment are pieces of information that answer where your products are coming from, how do you get your hands on them and how do you deliver the final product to your consumers.
Discuss details about your shipping plans for your product such as if you plan to deliver directly to your customers. If you are importing products from foreign manufacturers then explain about your experience working with them.
If you belong to the tech sector, then you will need to add a description of your technology and how it is unique from others. Don’t reveal your business secrets just by adding too much information about your technology, be concise in your explanation. Tell your investors about how your technology will provide the desired solution to a particular problem and also enlighten them on how that technology will add value to your business.
This section can be extremely useful for businesses offering products, while those in the service sector can skip this section.
Distribution is all about how you will deliver the final product to your customers. Different industries require different distribution strategies, so it’s wise to speak to people from your industry about how they get their distribution responsibilities fulfilled.
Speak to your accountant to see if they can recommend another client of theirs you can speak to about direct distribution, retail distribution and OEM to select the best distribution mechanism to deliver final goods to your customers without incurring any extra costs.
Metrics and milestones:
Setting up milestones and metrics:
Your business plan is just a piece of paper without any clear directions on how to get the job done. A business plan should be able to identify anything that needs to be done to achieve long term business goals. For this purpose, you have to set up milestones and metrics to measure your success.
The milestones and metrics section of your business plan is not usually elaborated in detail but it’s advisable to dedicate some of your time to plan for the future and schedule the next essential steps for the business to follow. Investors will have full confidence in your business plan if it reflects your understanding of what steps need to be taken in order to turn your business dream into a reality.
You can give a quick overview of the milestones set in your business plan. These are goals set after devising a proper plan to achieve them.
While it’s extremely beneficial for the business to employ a forward-looking approach to achieve their milestones, it’s also advisable for them to look back at their recent achievements and accomplishments every once in a while. These are termed as ‘tractions’. The traction reflects the company’s success in the past and these achievements are going to convince your investors to look at your future plans and goals. These could be things such as the number of users acquired, number of followers, preorders etc.
It’s very important to list key metrics in your business plan. These key metrics help companies keep track of their business performance. These metrics can be tracked on a regular basis to get a perspective on your company’s performance and health. Be very careful when listing down key metrics in your business plan as these are the major drivers of growth for your business and long-term vision.
Related: If you are looking for funding for your SaaS business, then you must select the best metrics to include in your business plan. Learn about the most relevant metrics to measure the performance of your SaaS business metrices.
Business team and the company overview
In this section, we will discuss how you should explain the structure of your business in your plan. We will also discuss how you should mention key employees and their defined roles in the business plan. These minute details are critical information that investors need to have on their list to determine whether the current business team employed has the potential to turn a simple business idea into a lucrative business.
It’s advisable to work on a little section that solely discusses the key employees of your company. This is an influential section and can either leave your investors interested in your idea or not. Your investors are interested to know what kind of team will put effort and time behind the business idea and how capable it is to turn that idea into a success story. It is also believed that investors would rather invest in a poor business idea with a great team than investing in a breakthrough idea with an average performing team.
The company overview and team section of your business plan is the one where you will present your business team in front of the investors and convince them that you have the right team in place to execute your business idea successfully. So, we recommend you to give yourself enough time to filter out the best people.
Your business team can play a pivotal role in the growth of your company. Learn how an effective business team on board can transform your business idea into a reality by reading our blog.
You can also speak to our startup accountants to help manage your finances and operations effectively.
You can include the company overview in your business plan if you intend to share it with people outside your company, like investors or other businesses. The company overview should be brief and should cover the following elements:
- Mission statement
- A brief history of the company
- Location of your business
- Intellectual property
- Summary of your company’s ownership and legal structure
When writing about your mission statement, do ensure that it’s not lengthy and generic. It should be brief and concise. Your mission statement should be concluded in two lines that should be able to provide a reflection on how your company is serving its customers, partners and employees.
Brief history of the company:
If you have an existing company and want to talk about its major achievements in the past, then this is the section you should be focusing on. Like the mission statement, this section should be brief and should not exceed two-three paragraphs. Company history section can be useful to provide context to the rest of the business plan and can also be utilized for internal planning.
Location of your business:
The company overview section of your business plan must disclose your current business location and other information about facilities or sites that the company owns
Your company’s ownership and legal structure:
Including a summary of your company’s ownership and legal structure is imperative. When mentioning about the company’s legal structure, do mention whether it is an LTD, a sole proprietor, a partnership or any other business structure.
Apart from the legal structure, it’s advisable to provide a brief review of the ownership of the company. For instance, if the business is a partnership, then how much portion of ownership does each partner have? on what basis the ownership is divided? Investors are eager to learn about the ownership and legal structure of the business before they invest in your company.
You can skip this section if you don’t wish to disclose information about patents and other intellectual property. But if you want the investors to know more about the intellectual property if it will help you get an edge over other competitors, then all of the relevant information must be included in this section.
Financial projections and planning:
This is the last chapter of your business plan and definitely one of the most important ones as well. If you are a startup owner then listing down your business financials won’t be as complicated as it sounds. You can seek expertise from a professional accounting firm that has this service covered in their accounting services, to help you in the process.
A typical financial plan will be composed of monthly sales and revenue forecast for the first 12 months. You also have to include annual projections for the next 5 years. You can work on annual projections for the next 3 years but it’s advisable to provide a forecast for the next 5 years.
Our business experts have listed details of the financial plan section that you must include. We have also provided a brief overview of the elements that we suggest you include in your financial section. Let’s begin with the sales forecast:
The sales forecast is a process of estimating how much sales you are going to make over the next 3-5 years. Our business advisors suggest that a typical sales forecast is broken into multiple rows with a row that includes your primary product or service that you are offering. You don’t need to drill down to minute details, just highlighting the important figures, with the help of rows and columns, will be sufficient.
We also advise you to include a corresponding row for each sales row to include Cost of Goods Sold. Cost of Goods Sold shows much expenses have been incurred while making and delivering that product or service. Ensure that you only include direct costs associated with that product and ignore other costs like rent, bills, insurance etc.
Related: Like sales forecasting, financial forecasting is one other useful tool to predict future business circumstances that are most likely to impact your business. Learn more about financial forecasting by studying our infographics.
In this section, you can mention details about how you plan to pay your employees. If you are a startup owner, you can list details of all the positions, whether occupied or unoccupied, in the company and what salary will be offered for each position.
We advise you to mention ”employee burden” in your employee planning section as well. Employee burden is referred to as the cost of an employee beyond their regular income. This cost can be insurance, payroll taxes and other associated costs that your company incurs on a regular basis
Your profit or loss statement:
A profit and loss statement in the financial section of your business plan will add value to it. The prime advantage of including your profit and loss statement in your business plan is that it provides a partial summary of your business finances by pulling all the important data from your sales forecast, employee planning and your upfront costs on a single sheet. It also gives an idea of whether the company has been previously suffering from losses or making profits in the past months.
Related: A standard profit and loss statement is composed of a range of different financial accounts that you should know about. Learn more about accounting tax terms and about these financial accounts and associate key terminologies.
Other important elements that you must include in the financial section of your business plan are cash flow statements and balance sheet. You can learn more about these essential components by speaking to our specialist strategic accountant.
Is it advisable to include an exit strategy in your business plan?
Yes, having an exit strategy in your business plan is essential because it lets the investor know the company has a backup plan in place that has the tendency to mitigate losses if things go upside down.
An exit strategy is a type of plan that considers a strategy to adopt if the business owner eventually plans to sell his business either to another company or declare the company’s assets as public. You can ignore this section If you want to maintain ownership of the company for an indefinite period without seeking support from angel investors or VC.
We advise you to keep this section as short as possible but don’t forget to include the list of firms that are looking forward or interested in purchasing your business once it gets off the ground.
Clear House Accountants are specialist Accountants in London recognized for their dedicated, professional and quality accounting and finance services. Our accountants help startup businesses set up effective financial practices, save tax and implement methodologies to grow their business.
Anam has a degree in accounting from the Prestigious St John’s University, and works as a senior director in Clear House.
Before working in Clear House, Anam worked in various commercial roles, the last one being the VP Operations for a prestigious business organisation,working on improving the organisation’s operational efficiency, growth and high level client management.
Anam manages clients ranging from software companies to large property developers and managers. Notably, she recently worked with a large property development company building large scale developments in London and the surrounding area.