When you’re starting a business or planning to expand, having a business plan can help to get you on track and get some detail behind your ideas.
However, many businesses don’t have a business plan. So what are the advantages of business planning and how could it help your business to succeed? Read this article to find out.
Here’s what we cover:
- What is a business plan?
- Benefits of writing a business plan
- Reasons people skip business planning
- The best format for your business plan
- What to include in your business plan
- How to use your business plan
- Where to get help with your business plan
- Business plan FAQs
What is a business plan?
A business plan is an important written document that describes your company and covers an overview of what it’s future will look like.
It covers the purpose of your business and its mission, market research, financial projections, details on your products and/or services, and how you’ll take your business to market.
It’s used to highlight the strategy of the business and the goals required to get you to where you want to be in one, three or five years (or whatever duration you’d like to focus on).
A business plan is vital if you want to secure funding, for example.
But even if that’s not on the radar (yet), having a plan in place will help you as you look to grow your business.
Once your business plan has been created, make sure you don’t just leave it in a drawer or a folder on your computer. Keep referring to it and refreshing it as you achieve your goals and create new ones.
Benefits of writing a business plan
Jennifer O’Toole, senior partner at accountancy firm Thomas R Dixon, says: “A business plan is like a flight path.
“It lets you know where you want to go, what you want to achieve, what you have in order to achieve your goals and, probably most importantly, what problems you can expect along the way.”
“Being able to identify potential threats, problem areas that could affect the business, and to be able to develop coping strategies in a proactive manner rather than in a reactive stance, is key to business survival.”
It’s also a great way to share information about your business, to develop your thinking and test scenarios before you make any changes (such as leaving your job and going it alone), and it gives you a way to measure how things go when you do start up.
And if you’re looking for finance, then a business plan can make a difference.
Rebecca McNeil, CEO at Close Brothers Motor Finance, says: “A strong plan can help applications for finance from a business loan to alternative forms of finance and investment.”
Reasons people skip business planning
If it’s so helpful, why don’t more people choose to have a business plan? Here are some of the common challenges:
- Time: If you’ve thought through your business, it shouldn’t take long to create your business plan. Keep it short and simple and choose a format that works for you.
- Uncertainty: It’s true that you can’t know what will happen until you start a business but a plan can help you spot potential pitfalls and helps you to understand the finances behind your idea.
- Lack of agility: Some people think business planning stops businesses evolving. But a good business plan should be current and adapt as you test and learn. It needs to be part of the business, not left in a drawer.
The best format for your business plan
Many people assume a business plan will be a hefty document containing lots of facts and figures, but it doesn’t have to be. The key thing is to choose a format that will work for you and your business. That would be:
- One you’ll use: Something that can become part of your day-to-day business rather than something you’ll never refer to. Have your business plan on the wall as a manifesto or mind map, make a presentation or create a visual guide – whatever works for you.
- One that makes it simple to express your views: If you’re a writer, you may be happy with a document; a designer might like a more visual medium. Your business plan should excite and inspire, so pick a format that lets you do that.
- One that’s shareable: A business plan will be seen by lots of people, from your bank manager and accountant to prospective investors or employees, so pick a format that makes it easy to share.
“A strong plan can help applications for finance from a business loan to alternative forms of finance and investment” – Rebecca McNeil, CEO at Close Brothers Motor Finance
What to include in your business plan
What should a business plan include? Every plan is likely to be different but there are some common pieces of information that are often included:
- An overview of the business: What does it do and what makes it different?
- Goals: What does the business want to achieve? This should set some SMART (specific, measurable, achievable, relevant, timely) objectives that will quickly show if the business is succeeding.
- Your audience and the market: Who will your business supply and how will it reach them? How big is the market and who are your key competitors?
- Products and pricing: What will you be selling and how will your prices be set? How does this compare with your competitors?
- Who is involved? Many investors say they invest as much in the people as they do in the business. Share some information about people’s roles, experience and passions.
- Financials: Provide details about sales, costs, break-even points and where investment will come from. If you’re looking for people to invest, you should include information about likely returns. If you’re looking for alternative ways to finance your business, crowdfunding is a good place to start.
Some business plans will include other sections, like a SWOT (strengths, weaknesses, opportunities, threats) analysis or a full marketing plan.
You might find these useful for your business, so feel free to include them too if you wish.
How to use your business plan
Many business owners invest time in producing a business plan and then never look at it again.
While it’s valuable to get your ideas clarified and to test your thinking before you launch your business, it’s even better if your plan is embedded into your day-to-day business too.
As Jennifer says: “Business planning is a continuous process – from the initial start up of any business to stage two of developing and growth of existing sales and creating new income streams.
“As established businesses mature and diversify, business planning continues to play a fundamental role in ensuring that the company’s long-term strategies are being met.”
Here are some ways your business plan can work for you:
- Take the sales, cash flow and expense predictions, and measure them against your actual figures. This helps you spot whether you’re on track and if things need to be revised.
- Revisit your goals every month to how you’re progressing.
- Keep updating your business plan to include customer input and quotes. Real feedback is essential for keeping a business on track.
- Revisit your plan once a year to see if changes to the market, technology or competition have had an impact. Businesses need to continue to evolve to survive in the longer term.
Where to get help with your business plan
Sometimes you’ll need additional information to pull together your plan. You could:
- Speak to your accountant. They don’t just help you with the financials, they can also offer advice about planning your business.
- Talk to your bank. Many have small business experts who can help.
- Use business planning templates. A simple template will help to make the process easier.
Business plan FAQs
How do I write a business plan?
Once you’ve settled on a business idea, it’s time to get some notes down and get organised.
If you need a little guidance, just download our small business toolkit. It comes with a template to help you get started.
Each section is full of handy tips to help you through the process.
What questions should my business plan cover?
No matter what layout you choose for your business plan, it should answer these seven core questions:
- What need does your product/service address?
- Who are your customers?
- Who are your competitors?
- What makes you different?
- How much money do you need to get started?
- How will you promote your business?
- How will you measure success?
What is the best business plan template?
The best business plan is one that works for you.
It doesn’t need to be a lengthy document bursting with facts and figures. The template in our small business toolkit outlines everything you’ll need to include, but you could even trim things down to a couple of pages if that’s feels more natural for your business.
Make sure it’s a plan you’ll use, that makes it easy to express your ideas, and that is easy to share.
Editor’s note: This article was first published in January 2019 and has been updated for relevance.
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