What is a business plan?
Quite simply, a business plan is a document that expresses your ambitions for your business (usually for the next three years) and lays out how they will be achieved. It introduces you and your business to the reader, and answers for them five key questions:
- What do you aim to do?
- When will you do it?
- Who are you doing it for?
- How will you secure the resources (skills, personnel, facilities, finances) to achieve your aims?
- When and how those resources will be used
Why do you need a business plan?
A business plan is a vital tool that will help you define and manage your activities in order to achieve your goals. As much as it is a plan for you it is also intended to act as a selling document to others. Banks, financial institutions, as well as potential recruits into your business or board candidates will review it. It is also a requirement of the application process for a number of bodies such as Creative Scotland and Scottish Enterprise, or to attract sponsors and investors. It’s important that you consider your plan carefully, and draft a document that is clear, comprehensive yet concise, and that stands out from the crowd.
- Set aside some quiet time that will be uninterrupted. Drawing a diagram of the business might help lay out your initial thoughts, the business structure, supply chain, and the customer segments or audiences
- Work out what you think the financial model of the first year of the up and running business will be (after the set up period) – using a simple spreadsheet detailing each month, insert under the relevant months when you will incur the cost of staff (including yourself), outsourced services, materials, facilities, services such as accountants, and the income you project using realistic assumptions about production capacity, sales, seasonal differences, commissions won, and base figures on an informed knowledge of the price your offer commands in the marketplace. If the sums don’t add up what can you adjust?
- Using the above, separately detail your starting capital, your establishing costs and calculate your costs outlaid until your projected income will start to be earned, then reaches break even point and then starts to make money – this cumulative total will indicate the working capital you need to fund starting your business. Add a reasonable contingency as income may take longer to arrive and there may be unforeseen expenditures
- This is when you should pause and think – can this work? Test the robustness of your plan - think about scenarios where things may not go as hoped and make adjustments and plan for what you may need
Drafting your first business plan
- Tackle writing one section at a time based on your preparation and research
- Try to include evidence to support your ideas, and have analysed different approaches and models to inform your decisions
- Do your market research - build a picture of your audience, and where and how they will access your work
- Avoid jargon, use clear, simple language and a legible typeface
- You may add a creative element to your presentation e.g. a visual artist may include visuals
- Ensure your document is logical, that it’s prepared and presented to a high standard, and that the contents are verifiable
- Think about your target recipient and the information they need. It should reinforce business viability and be presented in a language and format they are familiar with
- Once you have a draft you are happy with ask friends, relatives, peers and/or advisers to read it and give you their thoughts and feedback
Business plan content checklist
- There are many possible layouts for a business plan, though banks, investors and funders may have their own preferred format. Here we cover a content checklist to help you form your own template.
- Title page – company name, logo and contact details and date of preparation
- Executive summary
- Introduction with background to date
- Mission, vision, aims and objectives of the business
- Description of the business and personal skills, talent, and experience
- Organisational structure, operational details and practical information about the running of the business
- SWOT analysis
- Marketing plan underpinned with market research
- Financial planning
- Legal requirements and policies, if relevant
- Appendix – organisational chart, staffing (brief CVs), key advisors, financial projections and cash flow