Business planning tips
Failing to plan is...well, you know the rest
To build a successful business, having a clear mission and specific goals is vital. The best way to do this is to write a thorough business plan setting out exactly how you're going to turn your dreams into reality.
6 steps to writing a business plan
Our in-depth six-step guide can help you put together a robust business plan and set you up for success or expansion.
A business plan is a written description of your company, your aspirations and ambitions, and the methods by which you can achieve your goals.
Creating a business plan gives you a clearer understanding of what you need to do to reach your objectives. By producing a detailed business plan containing facts, figures, statistics and a summary of your skills, you will give potential investors all the information they need to buy in to your proposal.
Once you've decided to write a business plan, the next step is deciding what needs to be included. And remember, your plan should be flexible.
An executive summary exists 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.
Your business summary 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?
Product summaryIt's worth giving your product or service a section of its own. Outline what makes it different from similar offerings and discuss the reasons that you will succeed.
Aims, objectives and audience
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 vital that all of these factors are 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.
Get to know your audienceYou must have an understanding of your core demographic and how you are going to engage them. The more intelligence potential investors can get from reading the plan, the better.
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. Overlooking just one of the below areas could be extremely harmful when it comes to launching a company or seeking investment.
Areas to cover
- Location - where will you be based and why?
- Suppliers - who are they and what are the contract terms?
- Production - will anything be outsourced?
- Distribution - how will you deliver your product?
- Employees - how many do you need and what will they do?
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.
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.
- 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
How much, what for, and from where?Always consider these three questions when planning your finances, and always err on the side of caution in your answers.
Measuring success and risk
No business is guaranteed to succeed. Investors understand that handing 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.
- Operational - Operational risk can come in many forms. It could relate to employee error or a water leak that damages equipment.
- Financial - Nearly all businesses will get into debt in their opening years, but it is how that debt is managed that is important.
- Reputational - Building customer confidence in your brand and rewarding them with a quality service is an essential ingredient for all businesses.