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How to write a business plan

Writing a business plan helps you focus on ways to grow your business. Learn how to write a business plan and how to use it to manage and grow your small business.

Business plans made simple

It’s common for small businesses to only create a business plan when they apply for business finance. But you can get a great insight into your goals by thinking through your business plans and then writing them down.

Planning your business strategy

It’s important to refine your plans for your business before you start working on your business plan.

Involve employees

By involving your staff in the planning process you’ll get their insights into the business and their buy-in to the plan. This helps identify priorities and build a successful, committed team.

Be realistic

An unrealistic sales forecast could result in a cash flow crisis. It could also damage your credibility among lenders and experienced business people will quickly see through overly optimistic plans.

Be professional

Write and present your business plan as if it's aimed at an outsider. Use a cover sheet and include a contents page, with page and section numbering. Get the plan proof read for clarity, spelling and grammar mistakes and then show the plan to friends and expert advisers for advice on how to improve it.

Your business plan contents

Give a brief history of your business. When did you start trading? What progress has the business made so far? Who owned the business originally and who owns it now?

Make sure you describe your product or service without using technical jargon. Explain what makes your product different and the benefits it offers. Does it have any disadvantages? What are your plans to develop the business? If you need to give technical details for people who want to know more, do it in an appendix to the plan.

Include your market and competition

Give details of your market, your customers and the other businesses you compete against in that market.

Your market

Explain the market where you operate, and then give details of the segments in which you compete for sales. Show how large each segment is and what your share of the market is. Make a note of the important trends in the market and the reasons behind these trends.

Your customers

Explain who your customers are, where they live and how they buy from you. Give a typical customer profile for each market segment you target, for example, 'businesses with a turnover of more than £3 million', or 'first time buyers'.

Your competitors

Who are your main competitors? Show how their product or service compares to yours. Look at things like price, quality and distribution. Then give details of your competitive advantage.

Specify your marketing and sales plans

Give details of your proposed marketing and sales activities, including:

Positioning

 

Give details of how you position your product or service in the market place. Look at things like:

  • High quality and high price?
  • Good value and durable?
  • A specialist product with a particular feature?

List the unique selling points of your product, and which ones you plan to concentrate on.

Pricing policy

Look at how price sensitive your products or services are. By looking at each product or market segment in turn you can identify where you make your profits and where there is the opportunity to increase margins or sales. Explain how you set your pricing.

Promotion

Show how you promote your product or service. Each market segment you operate in will probably have one or two optimum methods, for example, direct marketing, advertising or PR.

Distribution channels

List the channels you use, or plan to use, to reach your end user. Look at your current channels and compare these with the alternatives. It also helps to look at the channels used by your competitors. Give details of any plans you have to improve your distribution.

Sales methods

Examine the cost efficiency of each of your selling methods, like telesales, a direct sales force, via an agent or over the internet. If you have a direct sales force, include all the hidden costs, such as management time.

Management and personnel

Show the structure and list the key skills of your management team and staff. Identify any skills shortages and your plans to cover these.

Analyse your workforce. Break things down in terms of your total workforce and also by department. Compare the efficiency ratios with competitors or with similar industries. You might look at comparing sales, average salaries, employee retention rates and measures of productivity.

Operations

Look at the efficiency of your operations and any improvements you have planned. Do you own or lease your premises? Are there any advantages or disadvantages of your current location? Should your business expand where you are or move?

Explain your methods of production, and list any equipment you use. How modern is your equipment? Does it have the capacity to cope with your forecast increase in demand?

Also show the management information systems you have in place, such as databases, networks, servers, and accounting reports and processes. Are your systems reliable, secure and can they cope with any proposed expansion?

Financial performance

Show the historical financial information for your business covering the last three to five years. Make sure you break the figures down. For example, you might want to show sales of different types of product or to different types of customers and show the gross margins.

Highlight any major capital expenditure you made during the period, and show an up-to-date balance sheet and profit and loss account. Explain any reasons for movements in profitability, working capital and cash flow and compare them with industry norms. Read How to understand key financial documents business guide to help you present your financial data.

Forecasts

Provide forecasts for the next three years. Always use the same format as used for the historical information, to aid comparisons. Clearly list any assumptions you have made. For example, if your plan states that the market is becoming more competitive, it’s likely that profit margins will be falling. Learn more with the Benefits of cash flow forecasting interactive lesson.

SWOT analysis

Consider including a one-page analysis of Strengths, Weaknesses, Opportunities and Threats in your business plan. For example:

• Strengths might include brand name, quality of product, or management • Weaknesses might be lack of finance or dependency on a few customers • Opportunities might be increasing demand or a competitor going bust • Threats might be a downturn in the economy or a new competitor

Be honest about your weaknesses and the threats you face. Highlight any mitigating circumstances and the actions you're taking.

Future plans

Make sure you include your future business plans, and show how you intend to drive your business forward to achieve these. Include clear targets and timescales so you know exactly what you want to achieve, by when.

Updating your plan

Your business keeps changing, as does the market it operates in. Sometimes these changes favour your business, at other times they don’t. So review your plans regularly, probably at least once a year. Revising and updating your plan keeps it relevant as a roadmap for your business.

Business plan tip

Your business plan helps you create a successful small business. So don’t wait until you’re forced to create a plan – start working on it straight away.

Business plan support

  • Get feedback on your business plan from your accountant or business adviser, and make sure your cost estimates are accurate
  • Read as much as you can about writing a business plan and download this business plan template to get you started
  • Make sure you keep your business plan up to date. Make a note in your diary and update your business plan at least once a year
  • Use our interactive lesson How good is your business idea to review it
  • Read 'How to define your USP' – just one of many useful articles available through our Better Business Support service

Contact us today to find out how we could help your business.


This guide is intended as general advice only, and not intended to cover specific circumstances and needs. The information in this article is also not linked to any of the products offered by Clydesdale Bank PLC.

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