A business plan is a document that details the objectives of a business, and how it plans to fulfil a set of goals.
Essentially, a business plan provides you with a written roadmap regarding finances, marketing, and operations. They’re used by businesses of all stages, from very young startups to well-established corporations.
So, who is the business plan for? Through the course of your business journey, there are many people that will want to see it – internally and externally.
For example, a business plan is required by investors and financial institutions, from Pre-Seed stage right the way through to Series B, C, and IPO. In-house, a business plan is vital for keeping company executives on the same page regarding making decisions, actioning strategies, and meeting goals.
To get the most out of a business plan, it’s best review it periodically to consider whether your targets or budgets have changed.
Should you decide to diversify your business, or branch out in a whole new direction, creating a new business plan can be the best way to re-energise your team and provide a fresh perspective.
Now that we’ve clarified what a business plan is, at surface level, and what it’s used for – let’s run through what you need to include when writing one.
If you’re planning on creating your own business plan, and aren’t sure where or how to start, just follow the steps below:
1. Executive Summary
The first thing to feature in your business plan is your executive summary. The executive summary is an overview of your business, and a condensed description of your plan.
Top Tip - Even though the executive summary should appear first, it can be easier to circle back and write it last, once you’ve clarified the details on a more granular level.
The executive summary should be in enough detail to act as a stand-alone document that covers the core components of your plan. But not so long that it exceeds a couple of pages.
It’s commonplace that investors ask to only see the executive summary when they’re making a decision about your business. If they’re happy with your executive summary, they’re likely to follow-up by asking for your entire plan, a pitch deck, and more in-depth financials.
That’s why it’s crucial to spend time getting your executive summary in the best shape possible!
Your business plan’s executive summary should include a brief overview of:
The problem you are looking to solve;
A description of your product, process, or service;
How your product, process, or service will solve said problem;
An overview of your target market;
A brief description of your team, a summary of your financials, and your funding requirements (if you’re fundraising).
2. Your product, process, or service
This chapter of your business plan is your opportunity to sell your product, process, or service.
Here, you should go into detail about the problem that you’re solving, and how your product, process, or service offers the solution – as briefly touched upon in your executive summary.
If you had to undertake research and development (R&D) in building your offering, now’s the time to mention it! R&D is all about overcoming scientific or technological uncertainty – so evidence of this is a sure-fire way to represent your business’ uniqueness and innovation.
In this section, you should also outline the milestones and metrics along your growth timeline, to provide an overview of the next steps that you need to accomplish to reach key checkpoints, such as becoming ready to sell, launching, and so on.
Next, you should detail how your offering fits (or stands out) in the existing competitive landscape.
When it comes to outlining your competition, it’s best to be upfront. If you’re seeking to enter a saturated market, don’t try and wish competitors away by not mentioning them. It’s almost a certainty that investors will catch on to this.
Even if your business plan is for internal use only, you’d still be doing your company a disservice by not taking an in-depth look at your competition.
Don’t be afraid to discuss who else is offering solutions that try to solve your target customers’ pain points. And then, detail all the advantages that give your business the competitive edge – such as IP, patents, innovative software, data, etc.
4. Market Analysis
As mentioned, any business needs a good understanding of its industry and its target market/consumer base.
You can do this in two steps.
First, paint a picture of your target market (the group of people that you plan on selling to). The more specific you can be, the better. But for commercial reasons, be cautious of pigeon-holing your demographic to the point where it stifles your opportunity.
Secondly, showcase the market analysis and research that you’ve conducted up to this point. If you don’t yet have any data regarding your target market, now’s the time to focus on building that out. Don’t worry if this is an area you aren’t familiar with, there are numerous specialist agencies that can help with technical market research.
At surface level, it’s useful to have an understanding of certain market research terminology, and methods of analysis. Three particularly useful metrics for describing your target market are:
Total Addressable Market (TAM) - the total market demand for a product, process, or service. TAM is the maximum amount of revenue a business can generate by selling their product or service in a specific market. Total addressable market is most useful for businesses to objectively estimate a specific market’s potential for growth.
Serviceable Addressable Market (SAM) - Limitations of your business model (such as specialisation or geographic limitations) mean that you will not likely be able to sell to your TAM. Serviceable addressable market is most useful for businesses to objectively estimate the portion of the market they can acquire.
Serviceable Obtainable Market (SOM) – Again, you most likely won’t be able to capture 100% of your SAM. Even with just one competitor, it would still be hugely challenging to motivate an entire market to exclusively buy your offering. Measuring your SOM is crucial in determining how many customers would realistically benefit from buying your product, process, or service. SOM is most useful for identifying short-term growth targets.
Overall, a great business plan will illustrate how the market you’re going after is due to change over time, and how your business is positioned to roll with the punches and adapt accordingly.
5. Marketing Strategy
This section explains how your business will access its customer base, how it will compel them to buy, and how it will retain them as consumers.
Here is where your business plan should outline a clear distribution channel, an overview of proposed advertising and marketing campaigns, and the media channels those campaigns will use.
This section could also include your pricing plan, any sales strategies you might have – such as partnerships, lead generation, events, etc.
6. Company structure / team
Alongside great ideas, a business plan should showcase the passion of the team behind the wheel. Investors, particularly, look for well-rounded, enthusiastic teams to elevate the business to its full potential.
This chapter of the business plan should describe your current team, as well as any positions you’re hiring for. In addition, briefly mention the legal structure of your business, location, and history (if you’re up and running).
When it comes to describing your team, stick to relevant details regarding industry experience that will benefit the business. You should also feature a summary of your company’s current business structure, such as Limited Company, Sole Trader, LLP, etc.
In this section, your business plan should provide detail on how the business is owned. For instance, do you own 100% of the business? If not, do all Co-Founders own equal shares of the business? How is the ownership of shares divided? Whatever ownership may look like, potential investors will want to be privy to this information.
A business plan should close with the financial section, outlining your business’ financial planning and budget allocation.
You should feature your company's finances and projections in the form of financial forecasting. A financial forecast will look very different depending on whether your business is early-stage or well-established.
A standard financial forecast should include:
Sales/revenue projections – monthly sales and revenue forecast for the first 12 months of trading, and annual projections for the remaining 3-5 years.
Profit and loss statement – also referred to as an income statement, where your figures come together to show if you’re turning over profit or are in the loss-making phase.
Cashflow statement – contrary to calculating profit and loss, the cashflow statement shows how much capital your business has at any given point in time.
Balance sheet – a list of your business’ assets, liabilities, and equity. Essentially, the balance sheet provides a diagnosis of the financial health of your company.
Alongside market research, formulating a strong financial forecast often requires the help of a specialist Accountant.
At Jump Accounting, our Chartered Accountants are experienced in producing comprehensive, personalised financial forecasts for startups and SMEs to enrich their business plan and secure funding.
The financial section of your business plan should also detail your budget, and how it’s allocated in relation to team salaries, research and development, manufacturing, marketing, or any related business expense.
Top Tip - If you’re approaching a funding round, be sure to dedicate a brief section of your business plan to how you plan on using your funding, should investors offer it to you. This section should be labelled as ‘use of funds.’
An additional financial fundraising tool is to clarify if your business has obtained SEIS or EIS Advance Assurance. This certification from HMRC allows potential investors to benefit from an income tax break of up to 50%, should they go ahead with the investment.
At Jump Accounting, we secure SEIS and EIS Advance Assurance for startups and SMEs, to help them attract investment. Click here to find out more!
By following these seven steps, you’ll have produced a solid business plan. Once your first business plan has come together, it only gets easier. As mentioned, you can update or change sections accordingly as your business grows and your needs as a company change.
Though writing a business plan can be daunting at first glance, it’s worth taking the time to tackle each section, one at a time, and rely on expert support if needed.
Your business plan is a gatekeeper of investment and a roadmap for growth. So, if there’s one area of your business to invest time (and, if necessary, funds) into – it’s this one.