How to Write a Business Plan
Every entrepreneur must be able to turn business ideas into a business plan. Investors and senior employees like to see a clearly written, well laid out document that explains the nature of the business; the sales and marketing strategy; who is involved; what is required; the timescales; business development; and the financial forecasts.
A finished business plan should also act as an entrepreneur’s working guide for the establishment of a business, and a benchmark for measuring performance.
Executive SummaryThe executive summary appears first, although entrepreneurs should write it last when they know exactly what the rest of the plan contains. The summary is by far the most important part of the document: investors will often read nothing more than this section before deciding whether to look into the business further or reject it.
The executive summary is an outline of the major points contained in the plan. In effect, it gives the reader edited highlights. The summary must therefore be interesting, informative, and brief (no more than two sides long). It should leave the reader knowing what the business is all about.
The Business OpportunityThis section of the plan lays out the business ideas as an entrepreneurial vision. It includes descriptions of progress so far; relevant dates; the type of business; the existing market; and the legal structure (sole trader, limited liability company, or partnership).
The section goes on to give details about the product or service. At this point, an entrepreneur should explain why the product or service is different from the competition; its benefits; why people will want to buy it; how the product or service will develop; and whether there are any design rights, copyrights, patents, or trade marks.
The MarketThis is the section that relies heavily on market research. Entrepreneurs must cover the size and nature of the current market; describe the type of potential customer; provide information about competitors, including their market share; and give any available facts and figures about likely changes to the market.
In this section of the plan, many entrepreneurs also demonstrate their flexible approach by writing about various alternative strategies. This shows a willingness to adapt to new market conditions such as a drop in competitors’ prices, or a shortage of raw materials.
Sales and MarketingInvestors are always keen to know how an entrepreneur intends to sell a product or service. A business plan must therefore contain a sales and marketing strategy that includes pricing details; promotional and sales techniques; and methods of distribution.
This is also the opportunity for entrepreneurs to once again demonstrate their knowledge of their customers’ needs and willingness to purchase.
The TeamEntrepreneurs must show investors that they, and their teams if appropriate, are the right people to set up and run a business. Everything relevant such as experience and skills must appear in this part of the plan.
If a business is in its early stages, and an entrepreneur intends to recruit and train staff, the plan must contain all the details. These include proposed salaries, time frames, additional staffing costs, and management structure.
OperationsThis is where entrepreneurs write about the basic features of the business apart from staffing. The section must contain information about premises; production facilities; IT; and the management information systems. These details should include not just current plans, but development and expansion proposals.
ForecastsIdeally a plan will have financial forecasts for five years. If not, three may be acceptable. Either way, the first year must show the most detail.
For the majority of businesses, the forecasts should encompass sales, profit and loss, and cash flow. They must also take account of different commercial scenarios.
To give this part of a plan greater credibility and clarity, entrepreneurs should describe the assumptions behind each forecast. The section should then end with a risk analysis that considers any problems the business may encounter.
Before Submitting the PlanNo matter how good the business plan may seem, it’s wise to have a family member or friend read it through and comment on it. The reader must criticise any parts that don’t make sense, or that appear to have bits missing.
The plan will be all the better for such a strict analysis. An entrepreneur can then submit it with confidence.