Posted: Tue 12th Apr 2022
The purpose of a business plan is to explain what you want to achieve and how you're going to make it happen.
This guide will walk you through how to create your own business plan and includes a detailed business plan outline for you to follow.
It's easy to get excited thinking about a new business. A business plan helps test your idea and gives you a clearer understanding of what needs to happen to make it a reality.
It provides a roadmap for the work you need to do, and gives you a chance to flesh out key areas before you start building your new business.
Completing the different sections of a business plan makes sure you've thought about all the different aspects of running a business.
It's a great motivational tool, too. When you've written down the steps you need to take, you know how to start moving forward and therefore hold yourself accountable.
Keep in mind that most finance lenders will want to see a business plan before they give you money. If you're writing a business plan for a particular organisation, make sure you've checked what they want you to include.
The main type of business plan is a written document, which is what we cover in this guide.
You can use a template or follow a business plan outline to know what to include (more on that in a moment).
Another type of business plan is the Lean Canvas. This is a one-page (usually A3) document. Each section covers a topic that's important to building a business.
Problem: What customer challenge does your product solve?
Solution: What does your business do?
Key metrics: How will you measure success?
Unique value proposition: What makes your business stand out?
Unfair advantage: What do you have that your competitors don't?
Channels: How will you market your product?
Customer segments: Who are you selling to?
Cost structure: What expenses will you have?
Revenue streams: How will you generate sales?
The Lean Canvas takes about 30 minutes to complete. It's a great way to quickly test a business idea or potential new product.
Do a Google Images search for 'Lean Canvas' to find examples.
The aim of a business plan is to understand how you'll implement an idea. That means it's important to cover the different elements involved in starting and running a business.
The following sections explain what to include in each part of your business plan.
What's your business idea? It's important to be able to explain your business in a succinct way. The executive summary should do exactly that.
Start with a summary of your business and the product or service it's going to sell
Include short summaries of the other sections of your business plan – particularly how you're going to generate income and make a profit
Identify the key people involved, emphasising their strengths (this can include advisers and partners)
Highlights from your progress and upcoming milestones
A page or two should be enough to convey all the information that's needed.
If you struggle to explain your business to people you meet, or to write it down in an executive summary, invest more time in trying to break down the concept. Having a solid 'elevator pitch' helps with sales and marketing.
Why are you starting a business and what do you want to achieve? You're likely to have a mix of financial and non-financial goals – for example:
acquiring five clients in your first six months of trading
generating enough profit to go full-time on the business in year two
growing traffic on your e-commerce site to 5,000 monthly users
It can be helpful to split these into short (12 months), medium (one to two years) and long-term goals (three years and longer).
Make sure goals are S-M-A-R-T: specific, measurable, achievable, realistic and timely.
Your executive summary, vision and objectives have helped set the scene. But what kind of opportunity is there?
This section includes your target customers and your competition.
Start by describing the types of people you'll be selling to. Useful information includes age, gender, income and location.
Try to be specific. Saying you'll target "other business owners", for example, doesn't help you understand how to market to them or how much they're likely to spend.
Instead, go into detail about the sector and size of businesses, the challenges they face and how you're going to help them.
A social media agency might start this section by saying:
"We will primarily help restaurants in Manchester and the surrounding area with their social media marketing. The owners are responsible for marketing and use social media, but are time-poor and aren't getting enough value from these marketing channels."
Think about buying triggers, too. A café might target commuters walking to a local office complex first thing in the morning and be pushchair-friendly for new parents arriving mid-morning.
Creating customer personas is a useful way to better understand your target market if you're struggling with this section.
Understanding the potential of the business is important for financial planning and goal-setting – and getting motivated!
Once you know your target market, you can start to think about the size of the opportunity.
Estimating the size of the market and how much you can capture is difficult. Start by looking for statistics that relate to your target customers, such as the number of independent restaurants in Manchester, and any information on how much small restaurants spend on marketing.
Doing original research is really useful. Draw up a questionnaire and start talking to potential customers. Most people want to help, particularly if you start by talking about the challenge you're solving.
You'll need to include details of your competitors, too. Don't fall into the trap of thinking you don't have any!
Try to find three or four businesses offering similar services and write a short section detailing:
its unique selling point and differentiation
its strengths and weaknesses
If you're offering something completely new, there's likely a reason it doesn't exist already, so understanding your customers' challenges is doubly important. And, you're still competing for your target audience's time and money.
Throughout this process, you should be thinking about this from your customers' point of view – why will they choose you over your competitors?
The opportunity analysis section should have answered these questions:
What evidence do you have that customers will buy from you?
Who are your competitors?
Do you know enough about the opportunity to build a marketing plan?
What changing economic or market factors will affect your business?
When you understand the opportunity, you can start thinking about how to sell your products.
You can't take an "if you build it, they will come" approach to starting a business. You need to clearly define how you're going to reach potential customers. That includes the time and money that needs to be invested into different marketing channels.
Write down your key marketing channels and how you plan to use them. This should be heavily influenced by conversations with potential customers – where do they find information about products? – and will evolve over time.
Potential sales and marketing channels include:
It's helpful to go into detail about two to five key marketing campaigns. Include the cost, timing and what you hope to achieve.
For example, you might have a launch event at a newly opened shop or promote a partnership with a related product.
It's important to understand what suppliers and partners you need to make your business a success.
The business plan should include details of what type of partners you need and any current relationships.
Include any equipment, the workspace you need and the costs involved, too. That will help you understand the costs to get up and running.
The final section covers finance. Your vision, customers, the opportunity and your route to market all influence costs and income, so it makes sense to do this last.
That said, it may lead you to revise other areas of your plan – treat writing a business plan as a learning process.
You need to understand your costs to start up and trade. Every business is different, but key areas to consider are:
stock or raw materials
Thinking about fixed and variable costs helps make sure you've identified everything. Fixed costs have to be paid no matter how many sales you make (e.g. rent, wages or an accountant). Variable costs depend on the volume of sales you make (e.g. stock and shipping).
Look for opportunities to beg, barter and borrow!
Partners may be able to help get you access to workspaces or other support.
You can present costs as a simple list that shows how much you'll need to get started or you can create cash-flow forecasts and profit and loss reports that go into much more detail.
Cash-flow forecast: Shows the money going in and out of the business every month, with costs assigned to different expense types such as 'advertising' and 'rent'
Profit and loss forecast: Shows how much money the business makes each month
If you need funding to get started, include details in this section.
A business plan template provides structure when you're putting all this information together.
Enterprise Nation has created a start-up business plan template you can use, which includes a series of questions to ask yourself about starting a business.
It's unlikely you'll have a complete understanding of the opportunity when you sit down to write your business plan, so go out and do research when it's needed.
This means speaking to customers, analysing competitors (try their products!) and speaking to suppliers.
Once you have a draft, show it to people in your network or other business owners who can provide feedback.
If you'd prefer to speak to a business expert, here are 10 advisers on Enterprise Nation who will help you write a business plan.