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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.

Your business plan acts as a road map for your start-up’s future growth. It helps you to clarify your objectives, identify strategic directions, and set targets. It can also assist you with growing your business and securing funding.

Planning your business strategy

Before you start working on your business plan, refine your goals.

  • Involve your employees. Let them in on the planning process to get both their insights and their buy-in to the plan.
  • Try to be realistic. Keep your business plan realistic. Unrealistic sales forecasts could result in a cash flow crisis.
  • 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.

Your business plan contents

Although there’s no set formula for writing a business plan, most business plans cover three broad areas:

  • A synopsis of the business, its vision, and its objectives.
  • Market analysis.
  • Financial data and projections.

Highlight your target market and competitors

Outline your target market, your customers and the other businesses you’ll compete against in that market.

Your market

Define the market in which you plan to sell and then focus on the segments of the market in which you compete. How large is each market segment? What’s your market share?

Your customers

Describe the nature and distribution of your existing customers. Give a typical customer profile for each market segment you target. For example, you might target businesses with a turnover of more than £2 million.

Your competitors

Define your principal competition. What are the advantages and disadvantages of their products and services compared with yours? Cover issues such as price, quality and distribution. Then explain your competitive advantage.

Outline your marketing and sales plans

Summarize your proposed marketing and sales activities, such as positioning, pricing and promotion.

Positioning

Explain how you’ll position your products or services in the market place. For example, are they:

  • High quality and high price?
  • Good value and durable?

What unique selling features do your products or services have and which of these features will you concentrate on?

Pricing policy

Explain how price sensitive your products or services are. Look at each product or market segment in turn. Identify where you make your profits and where there is scope to increase margins or sales.

Promotion

How do you promote your products or services? Do you use direct marketing, advertising or online marketing?

Distribution channels

What channels do you plan to use to reach your potential customers? Compare your planned channels with your competitors. Outline any ideas you have to improve your distribution.

Sales methods

Analyse the cost efficiency of each of your selling methods, such as telesales, a direct sales force, agents, or the Internet. If you have a direct sales force, include all the hidden costs like management time.

Operations

Analyse the capacity and efficiency of your operations and your planned improvements. For instance:

  • Do you own or lease your premises?
  • What are the advantages and disadvantages of the present location?
  • Should the business expand or move?

Management and personnel

Set out the structure and key skills of your management team and staff. Identify any skill shortages, such as IT skills, and your plans to cover these.

Financial promotions

Set out the historical financial information on your business for the last three to five years (if applicable). Break the sales figures down. For example, show sales of different types of products or to different types of customers and highlight the gross margins.

Emphasise any major capital expenditure made in the period and provide both an up-to-date balance sheet and profit and loss account. Explain the reasons for movements in profitability, working capital and cash flow and compare them with industry norms.

Forecasts

Provide forecasts for your next three years in business. Use the same format as for the historical information, to aid comparisons.

Clearly state the assumptions behind your forecasts. For example, if your plan states that the market is becoming more competitive, profit margins will probably be falling.

SWOT Analysis

Consider including a one-page analysis of strengths, weaknesses, opportunities and threats (SWOT) in your business plan. For example, your:

  • 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.

Future plans

Include your future business plans and how you intend to drive your small business forward. Define clear targets and timelines for these so that you know exactly what you want to achieve, by when.

Update your business plan

Review your plan at least once a year – revising and updating your plan will keep it relevant as a road map for your business.

Next steps

  • Ask your accountant or business advisers to give you feedback on your business plan, to ensure your cost estimates are accurate.
  • Download our business plan template to get you started.
  • Keep your business plan up-to-date. Make a note in your diary to refresh your business plan at least once a year.
  • Take a look at Clydesdale Bank’s small business solutions that can help your business succeed.

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 Yorkshire Bank.

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