How to Write Your Business Plan: The Complete Series (1 of 3)
A business plan is required to sell your idea to investors or banks, persuading them to fund you. They won’t just part with their cash, you need to make them believe in your idea as much as you do!
Even if you aren’t going down this funding route, creating a business plan gives you focus, direction and a clear path to achieving your goals. The structure and discipline required to complete a business plan ensures that you think about every area of starting a business so nothing key is left out.
The plan will also help you to keep a lot of information in your memory so that you can answer any questions on the spot. Starting a business is a large commitment with significant ramifications to your life and financial situation. You owe it to yourself to be diligent with your planning.
What will you learn in part 1?
- How to format your business plan
- Introduction to presenting your plan and tailoring it for different audiences
- Section 1: Executive Summary
- your business pitch!
- Section 2: Products and Services
- what you’re selling
- your business model
- Section 3: Market Research
- who are your target customers
- what do they want
- how will you give them what they want?
- Section 4: Competitor Analysis
- who are your competitors
- what’s your competitive advantage?
- Section 5: Objectives
- What will the business achieve and when?
Preliminary stuff 1: Formatting your business plan
Think of your business plan a bit like a CV, but instead of looking at your past successes and making the best case for you as an individual, it should create a grounded, easily understandable picture of the future of your business.
Make the key points easy to understand and clearly laid out. If you’re writing your business plan in Word or a similar text editor:
- Set the font to something neutral, for example, Arial.
- Set the line spacing to 1.5.
- Set the font size to at least 12.
- Use Headings to structure your document. Start with H1 as the title, and then use H2 for every section heading.
- Where possible, include graphics or charts to break up wordy pages and illustrate key points. If you do include charts or images, readers WILL look at them, so make sure the information is relevant and useful. Don’t just include charts or images for the sake of it.
- Include detailed reference material at the end of the business plan in an Appendix. Any figures or information you refer to in the plan should be included here. If the appendix starts to become huge (full of interviews, financial forecast statements, etc) it may be worthwhile having it as a separate document that you can provide as supporting information alongside the business plan itself.
- In most sections, you will have to refer to information in different parts of the business plan. The simplest way to do this is to list the heading and page number this information can be found on in brackets after you mention the information. For example, “We plan to achieve a profit of £50,000 in year 3 (Appendix, P&L Forecast, p.34)”. If you wish, you can leave these references out of the Executive Summary portion of your business plan to keep it clean and readable.
- Include a contents page at the start of the document, showing the page numbers for each section of the plan. Most document editors do this automatically.
Preliminary stuff 2: Consider your audience
If it’s just for you, then your audience is… you! This doesn’t mean you’re off the hook and can write the whole thing shorthand in a pink Comic Sans font (unless you really like pink Comic Sans).
The business plan should deliver to you the information you need from it – a quick reference for everything your business will do, the parts that comprise it and the agreements you have reached with suppliers and partners.
It’s a living document, one that you’ll change and adapt as time goes by. What it has to deliver to you is clarity and perspective as you move forward with your business.
If you are writing your business plan for other people to read, you need to consider how you will be presenting it to them:
- Are you going to send them the plan as a stand-alone document for them to read?
- Are you going to deliver a presentation in person, with the business plan document as a handout or followup email?
In either case, it’s important for the business plan document to be able to stand alone and deliver your message coherently without you there to explain it. It’s going to be read and reviewed without you there to join up the dots – it needs to be enticing, reasonable and includes the salient points you want to make about your business.
If the business plan document is going to accompany a presentation you are giving, then both presentation and document should complement each other. You’ll want to be making the same points in your presentation as in your business plan, both to hammer them home and make sure that there aren’t any discrepancies between the presentation and your plan.
Also, remember to send your readers a PDF version of your business plan, rather than a Word document, or another editable version of your business plan.
If you’re planning to pitch to investors, you should read this article to understand the different types of investors and which one could be best for you.
What is the reader interested in?
Your audience and what they are looking for in a business plan should determine which parts are highlighted. Think of this like tailoring a CV and covering letter for different prospective employers. Make alterations to your business plan’s tone and the emphasis you give certain parts depending on the intended recipient.
But remember, the people who are going to see your presentation or read your plan have seen or read hundreds or thousands of them. They know what they are looking for and the signals that they want to see. They need to feel comfortable from a numbers perspective, as well as gaining a feeling for you and how you approach things.
For example, you might emphasise what you will do with any funding you receive and the return on this investment when editing the business plan for an investor, while a potential colleague or partner may be more interested in the overall vision of the business.
A technical expert in the field you are doing business in may be keen to see in detail how you overcome certain tricky hurdles in the design or implementation of your business, while a salesperson will be keen to understand your business model and their place in it. So, if you want a little extra edge, find out a little about your intended audience and tailor your plan appropriately.
How long should my plan be?
It’s a matter of debate. Your plan should be as complex as your business. A good rule of thumb is to include an introductory executive summary, designed to be enticing and persuasive, followed by 10-12 pages of explanation including graphics and key visual information.
All of the detailed financial reports, design documents, interview source material and other market research data can be put into an appendix section at the end, which can be as long as it needs to be. In most situations, you’ll want to make this easily available for reference, but ensure that it doesn’t weigh down the Business Plan document itself.
Including the appendix as a separate document could create a very visual signal of how much research information you have to back up your plan. If you don’t have that much research material for the appendix, keep it as part of the Business Plan document.
Why would you approach it this way? Because someone who is looking to extend you credit or to invest in your business they will skip the “pretty” bits and go straight to the heart of the matter. While you don’t want to bog down your persuasive introduction too heavily with statistics and research, it is very important that this work is accessible, with a clear layout and contents page.
Keeping your plan focused – what should it include?
The aim of a business plan is to have written clarity of purpose, strategy and your plan of action. Writing your plan will bring ideas, challenges and opportunities to light that you had not considered before. Your business plan is not just a document you can use to secure investment in your business, it is for you. It should give you the confidence you need to go for it!
Your business plan should cover the next 5 years and needs to go into the first 12 months in great detail. You need to demonstrate your objectives and the steps you will take to achieve them.
The golden rule of business plans is to write simply and concisely but have information available to back up your statements and plans.
Here’s a rundown of what to include:
- Section 1: Executive summary
- Section 2: Products and Services
- Section 3: Market research
- Section 4: Competitor analysis
- Section 5: Objectives
- Section 6: Pricing strategy
- Section 7: Marketing & Sales plan
- Section 8: Operations plan
- Section 9: The Financial forecast
- Section 10: Appendix
We are going to go over all of these carefully in the next sections telling you exactly what you need to include in each section and providing examples along the way. And don’t worry, the dreaded financial section will be covered clearly as well, we’ve got some tricks up our sleeve to make that really easy for you!
In this part, we’ll look at the first 5 sections – which introduce your business plan and layout the groundwork for the business, what it will sell, who it will sell to, and how your business will compete with its competitors.
Finally, in Part 3 we’ll look at your financial forecasts, and how best to explain the figures behind your business.
So, without further ado…
Section 1: Executive summary
This is the beginning. It’s where you set out your mission statement, goals and what you’re aiming to achieve. It’s a summary of the key points that you’ll fully flesh out in the rest of your business plan.
Which is why you should actually tackle this section last! After all, it’s a summary of a plan which you haven’t written yet. You need to have written every part of your plan so that you are intimate with the details and are clear on what’s important.
This section should be concise, interesting and grab the attention of your reader to entice them into exploring the rest of the document. Their time is limited and if you fail to impress at this point you may not get a second chance. Don’t waste their time with anything unnecessary, make your point quickly, you’ll be able to expand on each topic later.
Your executive summary should include:
Your business name, and a quick overview of what you’re going to do.
… Ok, well that’s factual but a bit boring. The introduction to your business plan should be enticing! As much as it is a tool for delivering information, a business plan is also about putting a persuasive case for your business. What you need to start with is an elevator pitch, one that includes the basics but also sells them to the reader.
The Elevator Pitch
Sell your business in a few sentences. What problem is your idea a solution too? What do you aim to achieve? Make it clear what the exciting opportunity is here, but avoid exaggeration. “Conquer the World” is not the great start you might think it is.
This is the kind of stuff you should :
- Begin with the name of the company.
- Company’s aim for success – what does it want to become.
- More description – what is the company and where will it sell its products/services.
- Demonstrate two reasons there is a demand for the product/service
- Identify the success of similar businesses but…
- Differentiate the business from others.
- Mention the team’s special skills that will play into a recipe for success.
- Get into the detail with some clearly identifiable things you want your brand/product/service to say about the business.
Your own mix of language in your elevator pitch is up to you – there are so many ways you can go about this. Think about what makes your business special, and why it will succeed. Be as specific as possible, as realistic as possible, and as down to earth as possible. Whatever you write has to be understood by someone who isn’t a technical expert in this field.
At this stage in the plan, the very start, what your business does and why it’s going to succeed should be clear to anyone reading these opening paragraphs.
Who are you targeting?
Summarise your target market and the ideal customer.
- The types of customers the business targets.
- The factors that will make them become customers of the business.
- Why we will serve them better than the competition.
- Extra focus on a secondary market, and why the business will engage in it.
How are you going to do it?
Summarise your route to market, and your sales and marketing strategy.
- How products are sold to customers.
- The importance of the customer-facing side of the business.
- Further brand awareness tactics.
- How we plan to retain customers.
- Other routes to market – including online and the other markets we want to tap into.
The top-level numbers coming out of your financial forecast. This will naturally come out of the financial section when we get to it.
What do people include here?
- The expected revenue the business will make in the first and second years.
- The monthly running costs of the business.
- The cost of starting the business.
- Where is the business’ funding coming from?
- Does the business need to raise any money, and if so, for what?
You can find these figures in your financial plan, which we’ll look at formalising in Part 2.
If your team’s skills are particularly important for the success of the business, or if they have specific industry knowledge, list it briefly.
If your team’s skills and background are important ingredients to your business’ success, you may wish to include details like:
- Years of relevant experience
- Past successes in roles similar to this business (starting companies, leading teams, completing projects, etc)
- Assuring the reader that the core competencies of the business are met by its staff.
If it is relevant, you should also include the full CVs of key people in the business in your plan’s Appendix.
Keep your Executive Summary short and sweet. It should be no more than a couple of pages. Ensure this is well written and tells your unique story. Let your passion show but make sure it’s backed up by your research and not just empty words.
Section 2: Products & services
What you sell, in detail
Here we are talking in detail about what you are actually going to sell. So, if you are selling a product then describe how it’s sold, the quality and the convenience of the product and other salient benefits that set what your business sells apart from the competition. It’s great to go into depth here but don’t lose sight of clearly explaining the unique benefits of your product.
Remember, whilst your investors will likely be experts in business, they may not be experts in your particular industry so ensure you are highlighting the benefits of your product to the user and not just listing technical features.
Explain your business model
Two companies might operate in exactly the same industry but supply their products through completely different methods focusing on making a profit in different ways. Use this section to talk about how you will make money from the products or services you are going to provide. Explain how you will make a profit and describe the channels you’ll be selling through.
Section 3: Market research
Overview of the market
Describe the qualities of the market you will be selling to. Is it growing, high-profile or evergreen (active year-round)? Provide a general overview and then hone in on the opportunities you see in the market for your product.
You need to demonstrate that you have done your research and you are not just going in blind. The more knowledgeable you are here, the more convincing you’ll be and investors will have confidence that you have the expertise necessary to succeed.
You target customers
What are your target customer demographics? What motivates them to buy? Give rough numbers of the interested market available to your business. Explain how large a segment of the market would be interested in your product and what segment of that you think you can actually reach.
Briefly outline how you came to those numbers through your research so it doesn’t look like you are plucking numbers from thin air. Don’t write something if you can’t back it up!
Section 4: Competitor Analysis
Who are your competitors?
Provide an overview of your primary competitors. How many customers do they have and how well established are they? Give a concise analysis of your business compared to your competitors, highlighting the strengths and weaknesses of each.
This is the task SWOT analysis was made for, so feel free to use this technique. Make sure you cover several competitors to be thorough and to demonstrate your awareness of the market.
Perfect research is not possible – if something is unknown or merely probable then this should be included, with a comment on how probable these figures are, or include a range of figures or an average.
Explain how you’ll gain a competitive advantage
Now you have identified your competitors, how will you compete with them? You need to show what your company is going to do to set yourself apart from the established competition. If you are breaking into a mature market you need to be absolutely clear how you are going to capture new interest or pull customers away from your competitors.
Focus on the opportunities you see to sell your product or service in a way that will surpass your competitors. In addition, you can outline how you’ll get your brand known to encourage customer loyalty and create strong relationships.
Section 5: Objectives
Outline the short, mid and long-term goals of the business.
Make your objectives measurable and achievable. Once again, “Conquer the market” is not a good objective.
Keeping your objectives SMART (Specific, Measurable, Achievable, Realistic and Time-bound) is a good guideline. Objectives should be supported by the strategies you outline in your business plan and critically by financial forecasts from your financial plan. Refer to key statistics from your financial plan (don’t worry, we’ll get to the financials) that support your ability to achieve your objectives.
Part 1 Summary
Now you’ve made a fantastic start to writing up your business plan. You should now have your:
- Executive Summary
- Products and Services
- Market Research
- Competitor Analysis
In the next part, we are going to cover the following sections of the business plan:
- Section 6: Pricing strategy
- Section 7: Marketing & sales plan
- Section 8: Operations plan
This blog post forms part of our series on how to start a business in 90 days. For an overview of the series and all the blog posts so far click here.