Whether you’re starting, managing, or buying a business, you’ll need an effective business plan. Find out how to prepare and present one – and why committing your business plan to writing is essential.
How to write a business plan
A business plan outlines your strategy for the next couple of years. It’s a valuable roadmap for business growth that can assist applications for finance and grants.
More importantly, writing a business plan helps you focus on your idea and recognise the opportunities and pitfalls you might not otherwise have seen. It gives you vital direction.
Your written plan should be to the point and accessibly readable. Focus on what the reader needs to know and reserve technical jargon for an appendix, if needed. You want anyone to be able to pick it up, understand it, and be engaged by your business’s proposition.
Be realistic in your predictions to protect your credibility and present the final plan professionally – with a cover, a contents page, and page and section numbers.
Use charts, if relevant, and include business or product literature as an appendix. Ensure you get it proofed so it’s free of any embarrassing, credibility-affecting errors.
The first section of your plan will be the executive summary that outlines the key points and purpose of your plan, but leave that to the end. Write the rest of your plan first, so you can hone and polish it before tackling the executive summary.
Explain who you are and what you do. Start with a brief history of your business, by asking yourself:
- When did it start trading?
- What progress has it made to date?
- Who owned the business originally?
- What’s the current ownership structure?
Describe your product or service and what makes it different from the competition – what are the benefits? Detail how you plan to develop your business.
Management and personnel
Set out the structure and key skills of your management team and important staff. Identify any skill shortages and your plans to cover these.
Explain your recruitment and training plan, including timescales and costs. Analyse your workforce in terms of total numbers and by department – If possible, compare efficiency ratios with competitors or similar industries.
Useful figures might be sales, average salaries, employee retention rates and measures of productivity. Spell out any plans to improve or maintain motivation.
Outline your market, customers, and other businesses you compete against.
Define the market and the segments you compete in by asking:
- How large is each market segment?
- What’s your market share?
- What are the important trends?
- What are the key drivers affecting each important market segment?
Describe the nature and distribution of your existing customers. Profile the customer types you target in each segment, for example, businesses with a turnover of more than €1 million.
Are you reliant on sales to a few large customers? If so, how do you plan to diversify your sales?
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.
Explain why customers will buy your product or service instead – in other words, what’s your competitive advantage?
Include a one-page analysis of Strengths, Weaknesses, Opportunities and Threats.
Be honest about your weaknesses and the threats you face. Spell out mitigating circumstances and the actions you’re taking.
Marketing and sales plans
Outline your proposed marketing and sales activities.
Explain how you’ll position your product or service in the market place. Will it be a premium or specialist offering based on unique features – or a value offering based on price?
Outline your pricing policy based on comparisons with competing products or services, and where there could be scope to improve margins or sales.
Explain how you’ll promote your product or service. Each market segment will have one or two optimum methods (like direct marketing, advertising or public relations).
Explain your choice of distribution channels (such as retail or online) and why they’re best suited to reaching your target market.
Use this section to translate your planned strategy and tactics into numbers.
Set out the historical financial information on your business for the last three to five years, by:
- Breaking the sales figures down into component parts – showing sales of different products or services (or to different segments) plus the gross margin for each.
- Highlighting major capital expenditure made in the period.
- Providing an up-to-date balance sheet, and profit and loss account.
- Explaining reasons for movements in profitability, working capital and cash flow.
Provide profit and loss, sales and cash flow forecasts for the next three years. If your business owns many assets or has significant capital requirements, include a balance sheet forecast.
Use the same format as for the historical information – to aid comparisons and state any assumptions you make in the forecasts. Your forecasts need to tie in with the statements you make in the rest of your plan.
Investigate how projected performance varies along with changes in the key assumptions on which the projections are based. By creating a given set of scenarios, determine how changes in one variable will impact the target variable.
Operations and compliance
Show you have the right systems in place, by:
- Analysing the efficiency of your operations and outlining your planned improvements.
- Giving an overview of your IT systems.
- Evaluating operational systems reliability.
- Identifying any standards (such as health and safety, or environmental) that you need to comply with.
Establish where you realistically want to be in three years’ time, the objectives you need to complete to get there, the key ingredients for success, and the critical issues you need to overcome.
Updating your plan
Economies, markets and your business will keep changing – sometimes favourably, sometimes unfavourably – so don’t forget to review your plan at least once a year.
Revising and updating your plan will keep it relevant as a roadmap for your business.