We’ve already shown you how to tell if your business idea is viable, how to conduct market research for as little money as possible and the different ways you can fund your small business. https://www.cwa.ac.uk/2019/05/new-business-series-explore-the-different-ways-you-can-fund-your-small-business/
This next article will explain why you need a business plan, the different types of business plan and how to go about writing one. We’ll also share some useful tools and resources to get you started.
What is a business plan?
A business plan defines the future of your business - your objectives, what you will need to do to achieve those objectives, and the time and resources you need to do so.
Why you should write a business plan
- If you’re planning on applying for funding, either from a bank loan, an Angel Investor, a Venture Capitalist, or even from family or friends, they’re likely to want to see a detailed business plan. You can find out more about different types of investment here.
- Even if you’re not applying for funding yet, a business plan is useful to help you focus on what you need to do to succeed, every step of the way
- It helps align the goals of everyone else in the company, so you’re all on the same page
- It helps avoid costly mistakes in the future (and helps you realise if your business was doomed to fail form the start). Click here to find out how to tell if your business idea is viable
Different types of business plans
The type of business plan you write can depend on the industry you’re going into and the purpose of your business plan. As well as the traditional business plan, there is the Lean Canvas which is popular in the start-up world and Internal or Strategic Business Plans, which shift focus towards the inner workings and goals of the company. There are many other examples too, so it will be up to you to research the one that’s right for you and your company.
Let’s take a look here at a traditional business plan, which you are likely to need at some point.
Traditional Business Plan
This is the type of business plan normally requested if you apply for funding. Below we've outlined what is typical to include - however every investor is different so you should read their guidelines carefully before you submit it to them just in case you need to add anything.
What to include:
Executive Summary - name and location, products or services, mission statement, purpose of the business plan
Company description - legal structure, brief history, overview of the demand you’re planning to fill and why, summary of company growth, summary of short- and long-term business goals
Products and services - details of products and services, focussing on customer benefits, suppliers, revenue, relevant copyright or patent details
Market analysis - target customers, industry description and outlook, evaluation of competitors
Strategy and implementation - marketing strategy, operations, logistics, costs and pricing, operating hours, facilities, etc
Organisation and Management - key employees, stakeholders, details on owners plus their CVs and main responsibilities, board members, accountants, lawyers, etc
Financial plan and projections - historical financial data, income statements, balance sheets, forecasted profits, cash flow, investment needed
Applying for funding from an Angel Investor can be slightly different. They will still want a full-length business plan as above, but as you’re appealing to a person rather than a corporation, they often expect a more personal touch. You also need to outline the investor's role and what is expected from them, and their potential exit route.
The UK Business Angels Association has shared some great tips for what they look for in a standout business plan. These can essentially be applied to any business plan if you want it to stand out from the crowd and be effective.
Here they are summarised:
- An investor is looking to invest in the entrepreneur, not just the financial aspects of the business, so don’t be afraid to show your personality and who you are
- You should be able to get your idea across in 20 pages or less
- It should be well-presented and without mistakes and typos and be well-organised into chapters
- Avoid having too much technical jargon - treat readers as “intelligent amateurs” who have good business sense but may not know a lot about your industry
Gov.uk has shared a detailed guide on writing a business plan, which includes a great template and example business plan to get you started.
Next time, we’ll go into more detail about how to write a Lean Canvas business plan