A business plan can be daunting for new business owners, but it is very helpful to ensure you’re clear about the purpose of your business. Writing a business plan for your business will not only clarify your business ideas but also define your long-term objectives.
Why write a business plan?
Having a specific aim when you’re writing your business plan is crucial. When you are in the final process of buying an established business it can be a good idea to start writing up your business plan, as this way you know exactly what the business will be doing over the next few months and you can prepare beforehand.
It may sound difficult and time consuming, but there are good reasons for doing so:
• It can provide a blueprint for running your business
• It can act as a checklist for your progress
• It is vital for convincing your bank and lenders that you've thought about all aspects of the venture
• It can help build your business by attracting more investors and high quality staff; it can even help key customers and suppliers to support you.
Read on to find a clear structure you can follow when writing a business plan:
Even though this is the first page of the business plan, it is the last section to be written. It should outline all the key elements of the business plan and discuss the following:
• The advantages of your product or service
• Your market opportunity
• Management team
• Financial projections
• Any funding requirements
In this section you need to explain the background of the established business. What sector and industry is it in? What are the trends in the relevant market? How long has the business been running? What are the strengths and weaknesses, opportunities and threats? What are the Unique Selling Points? What does the future hold for this business?
Discuss how the business can be developed, e.g. extending the property or renovation or if there is the prospect of creating new products or services.
Location and the property
This is a huge factor for walk-in trade or destination trade so ensure you describe where the business is and how it can affect trade. Discuss the advantages of the location, e.g. if there is access to parking or further development. Detail any agreements in place, if there are any restrictions and describe the buildings and fabrics. In this section, discuss the costs of any refurbishments and how the business can expand or add value.
Explain the types of customers you plan to target, who’ll use your service and why. Outline the benefits you can give to customers. Discuss the different segments of the markets and whether they are growing or declining. Illustrate the trends and outline the key characteristics of the buyers using demographics.
Record all your main competitors including their market and location. Describe their strengths and weaknesses. Show you understand where your foremost competition will come from and discuss how your product or service is better than theirs.
Sales and marketing
Explain how your business will advertise and promote the products or services. This gives your reader a good indication of the business’ chances of success. Identify your target audience and choose which marketing communication tool you will use to reach them – public relations, direct mail, e-mail marketing, advertising, sales promotion and the use of social media should all be considered.
Discuss how the business is run, define the different management roles and if they use specialist staff. In this section also explain your opening hours and state how much time you will be putting into the business personally.
Staff and resources
When it comes to assessing how many staff you’ll need and to calculate your staffing costs, there are questions to ask:
•Who are the most important staff, managers and advisers?
•Who are the people that already work in the business and what are their roles, skills, qualifications, background and experience?
•Costs of restructuring staff (new employment terms and unfair dismissal)
•Management information systems and procedures should be identified. Management accounts, sales, stock control and quality control also need to be taken into account.
Discuss what could go wrong and why. What insurance and indemnity you need to cover the business. Explain the major liabilities of the business e.g. loans, wages and rent.
Indicate if the business needs any additional resources; consider any potential limits to production capacity. Discuss the suppliers in this section, and how money is collected. Is your product or service based on capital, materials or labour?
Financial information, cash flow and balance sheet
Answer the questions of how much money is needed, projected profits and costs, how much money is owed, etc. The financial information is very important for the business plan. For more information read our financing the purchase of a small business guide. Things to focus on in this section are:
• Realistic financial forecast
• Profit and Loss forecast
• Projected balance sheets
• Financial requirements
Supporting your claims
In the final part of your business plan it is important to use any materials that can support your claims, and give any other relevant information like:
• Location maps
• Pictures of your established business
• CVs and references of key personnel
• Market research data
• Demographic information
• Architect’s plans
• Target customers
• Potential marketing strategy
• Licensing and registration requirements
The more evidence you give the better the business plan will be. Presenting it in a simple and informative way will help the reader, as they may not have time to read through all the details. It is crucial to keep your business plan short and simple, and focus on what the reader needs to know.
Test the business plan yourself; show it to friends and expert advisers and don’t be afraid to ask them for comments. Ensure your plan gives the reader a good feel for the business. The business plan aims to deal honestly with your bank manager, investors, customers, suppliers and staff, be clear about what you want from these people and what you can promise them in return.
To read more guides like this, visit our Knowledge Hub and find out more about the buying process.