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Many people think of a business plan as a document used to secure external funding. But it’s not its only purpose. When you write your business plan, you outline your business and its objectives, strategies, market and financial forecasts.

How to prepare a business plan

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There’s a lot to consider when writing a business plan, but you shouldn’t feel daunted. This guide explains what’s required step by step.

Further support is available if you attend one of Business Gateway’s free start-up workshops. We can help you develop your ideas and business planning skills to let you get your new venture off the ground.

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Your audience

You may use your business plan externally, or only in-house. Either way, it should be realistic. An honest and objective look at your business will ensure that expectations are sensible and achievable.

A realistic business plan can:• helpyoutospotpotentialpitfalls before they arise• structureyourbusinessfinancesefficiently• focusbusinessdevelopmentefforts• actasameasureofyourprogress and success.

Potential investors, including banks, may invest in your idea, work with you or lend you money as a result of the strength of your plan.

Yourbusinessplanmayberequestedatsomestageby:• banksyouapproachforsupport• grantproviders• externalinvestors–whetherafriend, venturecapitalistfirmorbusinessangel• partiesinterestedinbuyingyourbusiness• potentialbusinesspartners

You don’t need to know everything before you start writing. Your business plan will grow and evolve. You’ll be prompted to explore areas you might not have thought about previously. And you’ll update your plan as your business develops.

See our videos and e-learning resources to create your business plan www.bgateway.com/createyourbusinessplan

What your plan should include

Your business plan should provide details of how and when you’re going to develop your business, who will be involved and how you’ll manage the finances.

It’s particularly important to be clear on these issues if you’re hoping to secure finance or investment. The process of creating your plan will also focus your mind on how your new business must operate to give it the best possible chance of success.

Your plan should include:• anexecutivesummary• ashortdescriptionofthebusiness opportunity • yourmarketsandcompetitors• marketingandsalesstrategy• yourmanagementteamandpersonnel• youroperations• financialforecasts

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What is the executive summary?It’s an outline of the key points of your plan. It should include highlights from each section of the rest of the document, from key features of the business opportunity through to elements of your financial forecasts.

Its purpose is to explain the basics of your business in a way that both informs and interests the reader. After reading the executive summary, a manager or potential investor should understand what the business is about and be keen to know more.

The executive summary

This is a synopsis of the entire business plan, and it’s vital that you get it right. Lenders and investors may consider your funding request on the strength of the executive summary alone. Positioned at the front of your plan, the executive summary will be the first part to be read. (It may even be the only part that’s read.) It should be concise – no more than two pages at most – and engaging. As a summary, it makes sense to write it last.

Whatisthesummarynot?• abriefdescriptionofthebusinessanditsproducts–it’sasynopsisofyourentireplan• anextendedtableofcontents–sticktoplanhighlights,don’trestatedetails• hype–youmustengageandinformwithoutunderminingtheplan’scredibility

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Your business and its offer

This part of the plan sets out your vision for your new business. It covers who you are, what you do, what you have to offer and the market you want to address

You must be able to describe clearly what your business does. You should also outline here whether the business plan has been written for your own purposes or to source funding through investments or loans.

Start with an overview of your business:• whenyoubegan–orintendtobegin trading–andprogressmadetodate• typeofbusinessanditssector• relevanthistory–forexample,ifyou acquired the business, details of its originalownerandachievements• currentlegalstatus• yourvisionforthefuture

Then describe your product or service assimplyaspossible,covering:• whatmakesitdifferent• thebenefitsitoffers• whycustomerswouldbuyfromyou ratherthanyourcompetitors• howyouplantodevelopyourproduct or service• whetheryouholdanypatents,trademarks or design rights• keyfeaturesofyourindustryorsector

Not every reader of your plan will understand your business and its offer or processes as well as you do, so try to avoid jargon. Ask someone who isn’t involved in the business to give it a ‘sense check’. It could be a friend or family member.

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You must demonstrate awareness of the marketplace in which you’re planning to operate and an understanding of key trends and drivers. You should also show how your business is able to attract customers in a growing market, despite competition.

Key areas to cover include:• yourmarket–itssize,historicaldata aboutitsdevelopmentandcurrentkey issues• yourtargetcustomerbase–whothey are and how you know that they will be interested in your product or service• yourcompetitors–whotheyare,how theyworkandtheirmarketshare,plus anticipatedchangesinthemarket and how you expect your business and competitorstoreacttotheminthefuture

It’s important to understand your competitors’ strengths and weaknesses compared with your own. So it’s good practice to conduct a competitor analysis of each. Include these in this section of your plan.

Themarketisn’tstatic–yourcompetitorsandyour customers’ needs can and will change. Make sure you also demonstrate that you’ve considered and drawn up contingency plans to cover likely alternative scenarios.

Your markets and competitors

In this section you should outline your market, your position in it and your competitors. This is the place to refer to any market research you’ve conducted.

For further information, see our guides on Marketresearchandmarketreports and how tounderstandyourcompetitors.

Download a guide on getting to grips with your competitors from the Chartered Institute of Marketing website www.cim.co.uk/filestore/resources/10minguides/competitors.pdf

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Marketing and sales strategy

Here’s where to describe the specific activities you’ll use to promote and sell your product or service. It’s often the weakest link in a business plan.

A strong sales and marketing section means you have a clear idea of how you will get your products and services to market. It’s worth spending some time on your strategy to make sure that it’s realistic and achievable.

Your plan must provide answers to the following questions:• howdoyouplantopositionyourproduct

orserviceinthemarketplace? For more information, see our guide Howtocreateyourmarketingstrategy

• whoareyourcustomers? Includedetailsofcustomerswhohaveshownaninterestinyourproductorserviceandexplainhowyou’llattract newcustomers.Seeourguide Knowyourcustomers’needs

• what’syourpricingpolicy? Howmuchwillyouchargefor differentcustomersegments,quantities,etc.?Seeourguide Howtopriceyourproductorservice

• howwillyoupromoteyourproduct orservice?Identifyyoursalesmethods,e.g.directmarketing,advertising, PR,email,e-sales.Seeourguide Sales&marketing:thebasics

• howwillyoureachyourcustomers? Whatchannelswillyouuse?Whoelsewillbeinvolvedinyourdistributionchannels?

Seeourguideonhowtoreachyour customerseffectively:www.bgateway.com/reachcustomers

Otherthingstoconsider

How will you do your selling? Do you have a sales plan? You must consider the most effective and most appropriate sales methods for your market. It might be telesales, online, face-to-face or through retail outlets. Are your proposed sales methods consistent with your marketing plan? Do you have the skills to secure the sales you need?

See our Guide on the sales process www.bgateway.com/salesprocess

See our videos and e-learning resources to develop your sales and marketing strategywww.bgateway.com/salesandmarketingstrategy

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Include details of your own background and skills, plus the structure and key skills of your management team and other personnel. Highlight team strengths and identify how you’ll deal with any obvious weaknesses.

Your management teamIf you’re hoping to secure external funding, you must satisfy your bank manager or other potential investors that your management team has the right balance of skills, drive and experience to enable your business to succeed.

Explain who is involved, his or her role and how this fits into the organisation. Include a paragraph on each individual, outlining background, relevant experience and qualifications. Key skills include sales, marketing and financial management as well as production, operational and market experience. Also include any advisers such as accountants or lawyers.

Your investors must be convinced that you and your team are fully committed. So it’s also a good idea to set out how much time and money each individual will contribute to the business and the salaries and benefits you plan to draw.

You can find more practical tips in our guide on how to use your business plan to get funding www.bgateway.com/plantogetfunding

Your personnelGive details of your workforce in terms of total numbers and by department. Set out the work you will complete in-house and what, if anything, you plan to outsource. Other useful figures you might want to include are: sales or profit per employee, average salaries employee retention and productivity rates.

Your plan should also outline any recruitment or training plans, including timescales and costs. It’s vital to be realistic about the commitment and motivation of your people –makesureyoudescribeanyplanstoimprove or maintain staff morale.

Your team’s skills

Your business plan must set out both your own credentials and those of the people you plan to employ.

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Your operations

This section outlines your operational capabilities and any planned improvements. There are certain areas you should focus on.

Location• Doyouhavebusinesspremises?• Isthepropertyownedorrentedbyyour

business?• Whatareyourlong-termcommitmentsto

theproperty?• Whataretheadvantagesand

disadvantagesofyourcurrentlocation?

Producing your goods and services• Doyouneedyourownproduction

facilities or would it be cheaper to outsourceanymanufacturingprocesses?

• Ifyouhaveyourownfacilities,howmodernarethey?

• Whatisyourcapacitycomparedtoexistingdemandandforecastsforthefuture?

• Isanyinvestmentrequired?• Whowillbeyoursuppliers?

Management information systems• Doyouhaveestablishedproceduresfor

stockcontrol,managementofaccountsandqualitycontrol?

• Cantheseprocedurescopewithanyproposedexpansion?

For more information, see our guides on stock control and inventory and financial and management accounts: the basics. www.bgateway.com/stockcontrolwww.bgateway.com/accounting

Information technology• Akeyfactorformostbusinesses,so

include IT strengths and weaknesses • Outlinethereliabilityandplanned

developmentofyoursystems

For more information, see our guide providing an overview of IT and e-commerce.www.bgateway.com/itoverview

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You will need to look carefully at sources of revenue and income. If you’re seeking external funding, you must also address:• howmuchcapitalyouneed• whatsecurityyoucanofferlenders• howyouplantorepayanyborrowings

You may also want to include details of your personal finances at this stage.

Financial planningYour forecasts should cover at least the next three years and possibly even five years. Their level of sophistication should reflect the complexity of your business. But the most detailed forecasts should always be those covering the initial 12-month period of trading.

Include with your figures the assumptions, both in terms of costs and revenues, on which your projections are based. This will allow potential investors to see clearly the thinking behind the numbers.

Whatyourforecastsshouldinclude:• Salesforecast–theamountofmoneyyou

expecttoraisefromsales.Seeourguideonhowtoforecastandplanyoursales.www.bgateway.com/salesplan

• Cashflowstatements–cashbalanceandmonthlycashflowpatternsforatleastthefirst12to18months.Theaimistoshowthatyourbusinesswillhaveenoughworkingcapitaltosurvive,somakesureyou’veconsideredkeyfactorslikethetimingofsalesandsalaries.SeeourguideCashflowmanagement:thebasics

www.bgateway.com/cashflow• Profitandlossforecast–thelevelof

profityouexpecttomake,givenyourprojectedsalesandcostsofoverheadsandprovidinggoodsandservices. Downloadasampleprofitandlossforecasttemplate

New businesses often forecast over-optimistic sales and most external readers will take this into account. But it’s sensible to include subsidiary forecasts based on sales being significantly slower than you predict. One such forecast should forecast sales starting three months later than expected and a second should forecast sales 20 per cent lower than predicted.

Financial forecasts

You will need to provide a set of financial projections as part of your plan. These translate what you have said in previous sections into numbers.

Risk analysisIt’s good to show alongside your financial forecasts that you’ve reviewed the potential risks that your business faces. You should also demonstrate that you’ve looked at contingencies and insurance to cover these.

Risks might involve:• competitoraction• commercialissues–sales,prices,deliveries• operations–IT,technologyorproductionfailure• staff–skills,availabilityandcosts• actsofGod–fireorflood

See our guide on managing risk: www.bgateway.com/managerisk

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Presenting your business plan

To make sure your business plan has maximum impact, keep it professional and brief. A well-presented plan will reinforce the positive impression you want to create of your business. And it’s more likely to be read if it’s a manageable length.

Tips for presenting your plan:• Includeacoverorbindingandacontents

listwithnumberedpagesandsections• Leadwiththeexecutivesummary• Foreaseofreading,makesurethetype

sizeisatleasttenpoint• Useemail-friendlyformattingincaseyou

want to send it electronically• Writetheplanforanexternalaudience,

even if it’s intended for internal use only• Edittheplancarefullyandhaveatleast

twopeoplecheckitmakessense• Askforfeedbackfromexpertadvisers

such as your accountant and lawyer, and redraftanysectionstheyfinddifficulttounderstand

• Avoidjargonandputdetailedinformationlikemarketresearchdataorbalancesheets in an appendix at the back of the plan

• Don’tincludedetailedplansforspecificareas of your business such as sales or staff training, but it’s good practice to mentionthattheseareinplace

While it’s sensible to seek advice from external advisers, it’s not a good idea to ask someone else to write your business plan for you. Investors and lenders must be confident that you personally understand the plan and are committed to the vision for the business.

At every step, make sure your plan is realistic. And once you’ve prepared your plan, use it. If you update it regularly, your plan can help you to keep track of progress.

See our guides on budgeting and business planning and how to prepare a business plan for growth.www.bgateway.com/budgetingwww.bgateway.com/businessplangrowth

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Further help and advice

Your bank or accountant, if you have one, can offer support. Business Gateway can help you at any stage of business planning – for free. You can get in touch with your local Business Gateway by calling 0845 609 6611.

Whatever stage you’re at, we look forward to helping you take your businessideatothenextlevel.Itcouldbethebestmoveyouevermake.

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