Business plans | NatWest

Business plans

Planning to help your business succeed

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Add your signposting title hereā€¦ Writing your business plan

A robust business plan can set your business up for success or expansion and can help you arrange funding.

Use our six-step guide to help you put together your plan and make sure you cover all key areas. As well as helping you have a clear idea of where you want your business to go, your plan will help outline this to potential investors, partners and employees.

The online business plan tool has now been replaced with hints and tips below to help you create your business plan.

Six steps to writing your plan

Introduction

A business plan is a written description of your company, your aspirations and ambitions, and the methods by which you can achieve your goals.

 

By creating a business plan, you gain a better understanding of what you need to do to reach your objectives. The plan forms the foundations of a strategy. It details the resources, abilities and facilities you have at your disposal from day one, and outlines what needs improvement, enhancement or development going forward.

 

The purpose

A comprehensive plan helps you define what your firm looks like now, and what you would like it to be in the future. By writing down your offering (be it a product or service) you can establish key targets, such as you audience and how best to engage with customers.

 

You will also be in a good position to create a timeline based on how, and when, you want your company to grow. This will prepare your business to react to market trends and factors that are out of your control. Most businesses will, at some point, have to compromise or adopt new methods if they are to succeed in the long term.

 

Your proposition

You believe in your idea and plans, but getting other people to show the same faith, passion and drive can often be a challenge. You are already invested in your concept whereas they are not. By producing a detailed business plan containing facts, figures, statistics and a summary of your skills, you will give potential investors, partners and employees all the information they need to buy in to your proposal.

 

Getting started

Once you've decided to write a business plan, the next step is deciding what needs to be included. It's also worth remembering that a plan isn't set in stone - if during the course of writing it you come up against issues you hadn't previously considered, or want to expand sections, you should do so. Your plan should be flexible.

 

Executive summary

Some people decide to make the executive summary the first thing they write, while others will leave it to the last. Regardless of when you choose to get it down on paper, the content and aim remains the same - to summarise your ambitions and approach in a concise way. This is not always an easy task, but it's a good way to ensure you remain focussed on both the bigger picture and your core ambitions.

 

Business summary

In this section you should:

  • Describe your business - how you want it to grow, the niche you fill, why you think it can succeed
  • Describe the sector it sits in - if the sector is strong, where will you fit? If it's performing poorly how will you buck the trend?

This will help you focus on determining your objectives, but will also give potential investors and employees a more robust understanding of why your business came into being. It will also strengthen your ability to foresee potential obstacles and plan accordingly. The more aware you show yourself to be, the more confident everyone involved will be that your business is able to meet its targets and achieve success.

 

Product summary

This can be included in the executive or business summary, but if you want to go into more detail, it's worth giving your product or service a section of its own. Describe your offering in a way that is both engaging and thorough. Outline what makes it different from similar offerings and discuss the reasons (based on research) that you are confident you will succeed.

Aims, objectives and audience

Your plan must do more than just state the purpose of your business, it should detail what you hope to achieve, how you are going to reach your goals and the audience you are focussing on. It's also worth giving this information in a short, snappy way - the use of bullet points is a good way of displaying information and will help people reading the plan.

 

Aims and objectives

You should cover:

  • Where do you want your idea to go and how are you going to get there?
  • In a year's time what shape will your business be in?
  • Will you have secured investment, or hired additional members of staff?
  • Will you be able to cope if you fail to hit projected financial targets?

It's absolutely vital that all of these factors are thoroughly assessed prior to launching or expanding a business. Research carried out by the Chartered Management Institute (CMI) has discovered that over half (54%) of all UK businesses that fail within the first three years of operation do so because of poor management.

 

By listing your key aims and objectives, you not only focus on how your targets can be reached, but you will be able to better understand whether they are realistic. Sometimes goals will have to be revised once they've been studied in more detail, but this is much better than striving for unrealistic results.

 

Audience

You must know your audience and have an understanding of why they are your core demographic and how you are going to engage them. Your plan should outline marketing methods, strategies and channels, and should note what information your audience will find relevant. The more intelligence potential investors can get from reading the plan, the better. This will show that you've thought long and hard about both your concept and the processes that will ensure its success.

 

While your business plan should be written first to provide you with a base on which to build your venture or expand your business, it should also appeal to potential investors, employees and partners. Even if you feel something doesn't need to be put on paper because it's at the forefront of your mind, there's a good chance that someone who could significantly shape your business' future will read the document. Produce a plan that not only guides you, but provides assistance to others.

Operations and organisation

It's good to have a solid concept, strong product and ambitious goals, but to grow a successful company, you will also need a detailed understanding of job roles, company structure and the day-to-day running of your operation.

 

This section of the plan is often the most detailed, there are many considerations that must be taken into account, overlooking just one could be harmful when it comes to launching a company or seeking investment.

 

Operational checklist

 

Location

  • Where will your business be located?
  • Why have you decided upon this location and for how long do you expect to be there?
  • Are you going to buy a building outright or will you rent?
  • Are you considering working virtually?

Determining location is key, not only because it means you can allocate budget accordingly, but because it allows potential lenders to understand your situation. Do you have room to expand, and who will be responsible in the event of a fire etc? These are the questions investors will want answers to.

 

It may also be worth mentioning the convenience of your location too. Note the nearest train/bus stations, as well as how long it takes to reach major motorways and airports.

 

Suppliers

  • How have you chosen your suppliers and what will they bring to the overall operation?
  • Are they the only choice?
  • Are you tied into a long-term contract, or could you switch suppliers should a better deal come to light?
  • What are the contract terms?

When discussing suppliers, you must show that all necessary bridges have been crossed, all considerations have been taken into account and all transactions can be justified, both in terms of finance and necessity.

 

Production

This section will include suppliers, but its main purpose is to highlight the overall production process:

  • Will anything be outsourced?
  • Is there potential for delays or technical hitches?
  • Have you fully considered how many units you wish to produce?
  • Are all suppliers in a position to provide what you want?

Getting all of this information may require some additional legwork on your part, but it's essential that all sections of the production line have been investigated.

 

Distribution

  • How will you distribute your products and where will they be stored?
  • Do you have additional warehouse facilities?
  • Are you going to be selling the product online or will it be placed on supermarket shelves?

 

Employees

It is vital that you understand:

  • How many employees you need
  • What their roles will be
  • How you will recruit them

You may have financial constraints such as how much you can offer in terms of wages, but you must also assess the potential number of staff against the number of tasks they can carry out. Consider if some tasks that would traditionally require two people be merged into one role for example.

 

Departments

This section will cover:

  • Employees
  • Their roles, responsibilities and constraints
  • Where there's room to develop once the company matures

You may not need someone to run your social media output on day one, for example, but after a year of solid development this may be required. By understanding the company's different departments and what roles they will play, both you and your potential investors will have a far better idea of strengths, weaknesses and growth opportunities.

Financial considerations

All aspects of your business plan are essential in their own right, but it's important to make sure the financial elements are accurate and in order. Money is the lifeblood of any business, without it you cannot operate.

Some entrepreneurs make the mistake of believing that because they are determined to succeed, they will be able to fund business growth by reinvesting the business' profits. However this rarely works, suppliers need to be paid prior to the customer getting their hands on the goods, meaning you will need some kind of initial investment or loan to cover supply costs.

 

Consider:

 

  • What kind of financing you need
  • How much money you require
  • Whether you are willing to give away equity in the business in return for funding
  • When you will be able to pay back any loan you take out

When it comes to planning financially, it generally makes sense to be conservative. Plan, research and assess the market, but be realistic. Being overly optimistic will put you on the back foot from day one, while being overly cautious will leave you with less money than you actually need.

 

Financial checklist

 

  • What do you need money for? Figure out what you actually need to finance. It may be that you can carry out some work yourself that you thought you would have to pay for, or you may realise that some costs cannot be justified at such an early stage of your company's life

 

  • How much money do you need? This may seem obvious, but it's most certainly worth noting. If you've ever watched Dragon's Den, you'll know that nothing turns off an investor faster than a business owner who isn't fully aware of their financial situation. By committing to thorough research, discovering what's essential to the running of the business and being able to justify borrowing requests, you improve your chances of being taken seriously. Lenders will be hesitatnt to get involved if there are financial holes or things that haven't been accounted for

 

  • Where will funding come from? Do you want a loan, funding from investors or are you planning to put all the money in yourself? Many lenders and investors like it when the business owner stumps up a significant sum of money as its hows they have faith in their business. If you are thinking of approaching a bank you must also consider how you want to access the funds, do you want a lump sum or do you want to take money as and when it's needed? Being fully aware of what you ened the money for helps a great deal when determining the type of bank loan you need

 

  • Check everything twice - Make your calculations, run the numbers, write everything down and then go through everything thoroughly. When it comes to financial predictions and estimates, precision is crucial

 

  • Speak to an accountant - Discussing your financial plan with an accountant is advisable. They will be able to help you better understand what you need money for, and can offer advice on short and long-term projections. They will also be able to assess whether or not your forecasts are realistic. Many accountants specialise in helping small businesses, so approaching one that has experience of this process is often a wise move

    

Measuring success and risk

It is important to be able to measure success, to see what is working, what isn't and what can be improved to make sure all activities are carried out effectively going forward.

 

It is vital that there is a carefully considered plan when it comes to measuring and analysing progress. While it's important to list the targets and goals you wish to achieve, and to outline the steps that will be taken to make those ambitions a reality, it is also essential you understand that some goals are easier to achieve than others. Be realistic yet flexible, being able to adapt is essential when navigating those tricky first few months and years of starting or expanding your business.

 

Risk

 

No business is guaranteed to succeed. You can have the best concept, the most dedicated staff and huge investment, but if the customer isn't attracted to what you're offering, your business won't succeed. Investors understand that handling any amount of money over to a startup is a risky decision, but it's important to reassure them. Highlight that you are aware of the risks, have plans in place to avoid pitfalls, and are willing to change course or adopt different methods should you need to.

 

Types of business risk

 

  • Compliance - If you fall foul of laws and regulations, your business could fail before it has a chance to properly grow. In business, there are numerous legal aspects that must be taken into account, and they are not always obvious. If you have ambitions of trading outside the UK, there are even more regulations to be considered

 

  • Operational - Operational risk can come in many forms. It could relate to employee error - such as putting the wrong figure on an invoice - a water leak that damages equipment, or a flu virus that means you are unable to work at full capacity. These risks can generally only be fully assessed once they happen, but having a plan in place means potential issues are covered as far as possible

 

  • Financial - The health of your finances will ultimately make or break your business. Outlining this particular risk and detailining how it will be avoided is vital when trying to woo investors. Nearly all businessess will get into debt in their opening years, but it is how that debt is managed that is important. Similarly, you must also state how you will cope should the worst happen. If a large customer decides not to renew their deal, what will you do to ensure survival? If the rent on your office increases, will you be able to cope? If employees ask for a pay rise, will you be able to accommodate their demands? The financial aspects of running a business can be complex and varied, but it pays to prepare for all eventualities

 

  • Reputational - Building customer confidence in your brand and rewarding them with a quality service is an essential ingredient for all businesses. If you get involved in a lawsuit, or accidentally send an email containing sensitive information to the wrong person, your character could be called into question. Because of the power of social media, negativity can spread in a matter of seconds, leaving you with fewer customers and less income. Though it can be diffcult to plan ahead for problems, it is worth considering what you would do should such an incident occur
Next steps

There are many other sources of information available to help you with your business planning.

Entrepreneurial Spark Additional support from NatWest
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