Writing a business plan is one of the most important tasks when starting up a new business. It is a way of collating ideas, setting targets, planning for the future of the enterprise and confirming that the business idea is realistic and workable. The business plan is also an essential tool for attracting funding to get started. It is a dynamic document that should be reviewed regularly to help with monitoring and measuring the performance of a business.
The benefits of writing a business plan
The business plan is principally for the proprietor(s) of the enterprise and it can help them to:
- Bring together their ideas and research into a structured format.
- Decide whether or when the business will be commercially viable.
- Clarify the purpose of the business and communicate it to any partners or staff.
- Predict future scenarios and pitfalls and address them before they threaten the success of the business.
- Set out the proprietor's strategy, particularly their marketing strategy.
- Set targets and objectives, including sales and financial targets, so that business performance can be continually monitored.
How to approach the plan
If the plan is to be used to convince investors or lenders to support the business, it is crucial to understand their objectives and address these in the plan so that it will meet investors' particular lending or investment criteria.
The plan should be easy to read, comprehensive yet concise, and without any contradiction.
For example, figures included in the plan for expenditure on equipment must match those that appear in the plan's financial forecasts. All too often they do not match and so the business plan loses credibility.
It is important to identify as early as possible what any prospective investors need to know about the business and the people running it. The reasoning behind decisions (for example, why a particular business location was chosen) should be made clear so that investors are not left guessing or think that certain key issues have not been addressed. Honesty, clarity and credibility are vital.
The plan needs to be realistic and convince investors that the business can be successful. This means they will want to see evidence to back up any claims that are made (for example, the market research results that led to the projected sales forecasts). The plan will also need to show that (at least in the medium term) the business will be able to support its owners and any borrowing requirements they may have.
Hints and tips
- Software packages are available to help with writing a business plan. Some banks also offer their own business planning software free of charge to customers who are planning to start up in business. However, they tend to focus on the financial aspects, and usually provide very little space in which to set out the practical and operational parts of the plan.
- Business plans should be discussed with an independent business adviser or accountant. Advice can also be sought from an adviser at a local enterprise agency or similar business support organisation or from a bank.
- Presentation matters. A front cover should clearly identify the contact details of the business owner(s) to make the plan look professional. White space, illustrations and short sentences in the plan make the content much easier to read.
- Someone who has not been involved in writing the plan should be asked to proof read it, checking for grammatical errors, spelling mistakes and inconsistencies.
Download our full guide to writing a business plan and our specially developed template.
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