Planning for success – a guide to your first business plan
At Brixx, we work with a lot of startups and SMEs, still being run by that single entrepreneur who truly believes in the business. This is the wonderful thing about entrepreneurs, they are all so brilliantly passionate and optimistic about their business, you can’t help but feel excited about it. But some are so passionate that they dive headlong into business without having plans in place for everything… and unfortunately, this is one of the reasons that so many startups fall apart. If you are looking to step out on your own and become your own boss – do not skimp on writing a business plan.
Despite their usefulness business plans seem to be falling out of fashion at the moment. Or rather, formal business plans are. Business owners who are so passionate about their business that they just start running it will often struggle to grow their business past micro level, purely because they have no plan in place to do so. And while some business owners will write a business plan just to get their thoughts straight, many more will jot a few thoughts down on a piece of A4 paper and call it a day. Sometimes being forced into writing a business plan makes the whole process seem like a chore rather than a benefit. Many banks will still insist on seeing a business plan for a startup before they will offer them a loan, for example. But while business plans are increasingly being just a box-ticking exercise on the path to financing the business, the reality is that a business plan can be so much more. This simple document (and it can be simple) is how you plan for success in business and get ahead of your competition. Yet still, the biggest questions we hear from startups are: Why do I need a business plan? And what the hell do I put in one?
Well, Why Do I Need A Business Plan?
The point of a business plan, no matter what stage of business you are at, is to set out your goals, strategy and action plan for achieving them. A typical business plan will cover the next 3 years, though they will sometimes go as far as 5 years into the future. It details all your objectives in the business, and the steps you will take to make those objectives a reality.
It’s an oft-repeated myth that 90% of new startups will fail within the first year. But entrepreneurs are, by definition, optimists, so very few let scary statistics spook them anyway. But though the figure isn’t as high as 90% it is true that most startups that do fail do so within the first 18 months. And the reason is – lack of planning. Instead, they will have a lot of ideas in their heads or maybe scribbled on a notepad, and that’s where they will stay. For some people that approach works, but for most, it means a disorganised approach to setting up and running a business that could result in problems further down the line.
The biggest advantage of a business plan is that it helps you understand your business inside out from every angle, not just the physical part of doing the job. You may love creating websites, but there are hundreds of other elements to running a web design business than the actual building of websites for clients. Your business plan forces you to think about finance, logistics, operations, competition and marketing, and creates a complete, detailed picture of how your entire business will work. It helps you work out what products or services you want to provide, if you want to start with everything or phase some in and it helps you figure out the bugs and challenges you will face so that you can be ready for them.
But the benefits of writing a business plan go beyond just having something in writing. Creating it forces you to think in detail about every element of your business, even the ones you may have forgotten (or that you’re avoiding thinking about). If you’ve never run a business before, a business plan will help you to focus your ideas and develop your brand more fully from the word go, allowing you to skip a lot of the mistakes startups make while they are finding themselves. You can clearly identify your priorities and move non-priorities to the back of the line, allowing you to spend your time on more valuable activities. Once your business plan has been written, it provides a benchmark for the performance of your business moving forward. It keeps you accountable to your own plans and helps you see where things are maybe not as realistic as you thought.
In general, businesses who have a solid business plan in place tend to have a much clearer idea of what they are offering to their customers and a strong strategy to deliver that offering. They also tend to be more focused, not make as many mistakes and become profitable a lot quicker than businesses who are working it out as they go along. So, put simply, you need a business plan because it will give you a clear destination, a direction to go in, and a roadmap to get you there.
What Should My Business Plan Include?
In short, everything you could possibly need to run your business. Your business plan is essentially a blueprint for how your business will run. So even if someone has no experience with your product or service, they will still be able to start the business and get it running. There is no such thing as too much detail here because all this information will help you run your business effectively. Business plans typically range from 20 to 50 pages in length, but generally, all contain the same sections. These sections cover outlining your business idea, what you will be selling, to who and how. Everything you plan to do in your business, from where your products are coming from to how you will do sales follow up – all of it needs to be in your business plan.
Some key areas to be included are:
- Your basic concept
- Your strategy and actions to make it happen
- Your products and their competitive advantages
- The markets you’ll be selling to
- Your finance needs and predictions
Sounds scary right? But I promise you, it’s not. All it takes from you is a little time and a fair bit of research.
But How Do I Write One?
If you’re not familiar with how to write a business plan, there are plenty of templates and guides available to walk you through the process. But if you’re feeling ambitious, you and start from scratch, using the information below. Your business plan should have around 10 sections, including (but not limited to):
Section 1: Executive Summary
The very first section of your business plan should be your executive summary. This is a short description of the essential information about your business. This includes details such as your business name, an elevator pitch, a summary of your business idea, your business aims and a financial summary. At this stage, this is a brief overview, as each point will be explained in detail later. Often, this is the last part of the business plan to be written, because as people work through the other elements, they find things changing or new information altering their decisions. So, we recommend you put the bare bones down at first, but leave the fleshing it out until later.
Section 2: Products And Services
Section 2 should be an extensive explanation of your products and services, in detail. Start with a 1 line summary that explains if you are selling a product, a service or both. Follow that with a bullet point list of each individual one, split into sections depending on whether they are a product or a service. Underneath that, you should go into detail about what is involved in each of those products and/or services. If this is a product, it will be a description of the products, dimensions, purpose, and any other details. For a service, it will be more about what the service is, what it entails and how it will work. If you know that in a year you will be selling 10 products, but you only want to start the business selling 5 – still include all 10. Just split them off into a different section, explain what they all are, why they will be sold later and when that later date will be. For example, if you are a candle maker and you have a range specifically for Christmas, you will want to sell those in the months running up to Christmas, but probably not all year round. Include all that detail in the plan.
Section 3: Target Market
Your third section is all about the market you’re breaking into. Start out by identifying your target market and your typical customer. This can be a real challenge for some businesses, as it will vary wildly, but do your best to get as much detail down as you can. Some of the information you should include is:
- Where they are located
- What prompts them to buy
- What their unique problems are
- What helps them choose what to buy from where
- Their job title
- Their age
- Their financial background (both personal and business)
Honestly, too much detail here is better than not enough. This target market description will be invaluable when you’re choosing how to market your business. For example – you will find that mums with kids aged 1-3 will act, shop and be found in different ways than mums with kids aged 10-15.
Section 4: Market Research
Section 4 is all about market research. This stage is crucial, as it helps you understand your market in detail. Many business owners starting out thinking they understand their market already – maybe they were once part of that market themselves – but I assure you, nobody’s knowledge is all-encompassing. A combination of desk and internet-based research and field research is the only way you will be able to tell if there is a sufficient demand for your offering. It also reveals other things to you – like maybe you were aiming your product at the wrong age group? Or maybe your ideas for pricing were all wrong. Your real-life market can differ hugely from the one in your head. A well-researched market research section shows potential investors that you’ve have done your due diligence and truly understand who you’re selling to.
Section 5: Competitor Analysis
Next, you need to look outside your own business and at your competitors. Your competitors are the perfect way for you to look at how a business like yours can do when fully operational. So, choose at least 4 competitors (and by all means do more) to analyse in detail. You will need to look at their branding, their positioning, how they market themselves, their tone of voice, and most importantly, their profitability. Most of this can be easily done by just spending some time online checking out their business – from their website to their accounts (which are freely available from the Companies House website at no cost). It can be helpful to make a table of your competitors, including their business name, location, business size, products or service offerings, price, strengths, weaknesses and USPs.
Section 6: Marketing Plan
This section should detail your marketing strategy in its entirety. This is a commonly missed element, but it is the one that sets many clued-in businesses apart. Here, you can use all the information you have gained through your market research, target market model and your competitor analysis to create a solid marketing strategy. You should include any digital marketing you will be undertaking, and a brief rundown of how you will tackle them. You should also include your offline marketing ideas, such as newspaper or magazine advertising, banners, leafleting, networking and any other activities to promote your business. As well as detailing what the platforms you will be using are, you should also give a brief strategy outline and a rough idea of how much each one will cost.
Section 7: Sales Plan
Closely linked to your marketing strategy, the sales strategy is all about how you will convert prospects into sales. While your marketing needs to make people aware of your services and draw them in, your sales plan needs to address how you will convert those interested parties into paying customers. Are you going to be employing a salesperson to handle all your customer enquiries? Will you be engaging in telesales efforts, or going door-to-door? The ins and outs of how you will physically sell your products and services all need to be outlined here. And more than that – you also need to consider your after sales process. What will happen after a customer has bought from you? Will you send them an email checking that everything is ok and asking for a review? Will you have an ongoing relationship with the customer from the time of purchase? If you’re selling large, high value or luxury items, will you send a thank you gift, such as a bouquet of flowers, as part of your sales follow up and customer relationships? These things need to be thought about and written down here.
Section 8: Operations Plan
The operations segment of your business plan is where you need to go into detail about the nuts and bolts of how your business will run. This is where all the nitty-gritty details of your day-to-day operations will go. Writing this section is usually one of the most beneficial because it makes new business owners really think about how the business will physically work. An element often worked out as they go along. This section needs to include details like:
- Productions Processes
- Delivery Methods
- Delivery Logistics
- Payment Methods
- Legal Obligations
- Staff and Management
- Sales Processes
And anything else that will impact how your business works. Depending on the industry you’re in and the product/service you’re selling, this list could look very different. For example, if you are running an office based accountancy firm, you will need to focus a lot on the legal obligations and experience of your employees, but logistics won’t really impact you. So, when you’re putting this together, you may find that there are a few elements that are more specific to your business you need to include and some that you don’t need. Make sure you note them all down and detail how you plan to handle them.
Section 9: Pricing
Section 9 is all about costs and pricing. This section is where you work out the detail of the costs involved in creating and selling your products, and how much you need to sell them for to make a profit. If you have created a profit and loss report for your business, this is the perfect place to include it. By doing this, you will know exactly how much profit you want to make, and you can work out how much you would need to sell your services or products for to make that profit. If you are reselling, how much will you be to mark-up your products or services to make your profit?
Section 10: Financial Forecasting
The final section of your business plan is a fully developed financial forecast for at least the first year of business, ideally with a 3 and 5-year plan included. This will include your personal survival budget, a detailed cash flow forecast, profit & loss forecast and balance sheet forecast. Anything to do with finances needs to be included in this section, as this is the piece lenders are most interested in. If you need investment or finance to start your business then plans for obtaining and paying it back (if relevant) should all be detailed here. These documents show that you have put a lot of thought and planning into your business. They demonstrate that the business can not only make money but remain securely cash positive. This section of your business plan will also help you understand how your business will look financially, and if you need to make any changes to your model before you get started. Do not be afraid to change your ideas based on your financial model – it is much better to run a solid business than a shaky business!
Depending on the type of business you are starting up you might need to add or remove sections, but in general these are the basic elements every business plan should include. The key to writing a good business plan is to be detailed, relevant and concise. For example, if you are setting up a decorating supplies store you probably don’t need to talk about each individual shade from each brand of paint you will be providing, but if you are a decorator you might need to express your preferred brand for paint and speculate that colour choices depend on clients. A business plan doesn’t have to be 100 pages long, it simply must cover the points above in enough detail to give an external party (and yourself) a clear understanding of what your business is and how it will work.
At Brixx, we help startups understand exactly what it will take for them to succeed, and that starts with financial planning. Our free app allows you to easily forecast your cash flow, test new business ideas and see the effects of your decisions before you make them. We understand that when you are first starting out it can be difficult to work out what you need to do and the idea of looking a year ahead can feel almost impossible. But with some support from people who have done it all before, as much information as you can get your hands on and the right tools to present it, anyone can write a successful business plan.