Having a business idea is a great start, but more often that not, you need a sound business plan to turn that idea into a reality. Especially, if it requires significant investment.
Business plans are invaluable tools for staying on track, attracting investors or securing funding from government programmes, banks, or other creditors. The key to success is tailoring your business plan to its specific purpose. In this article, we'll explore the essential elements of a business plan and how to adapt it to different scenarios.
The Main Structure of a Business Plan
Every business plan, no matter where it is intended to go, needs a standard structure. Below are the core sections you should focus on.
Cover Page
Your business plan cover page should include:
The proposed business name
A subtitle
Your name
Your business logo (if you have one)
Your business website (if you have one)
The date the plan was created
That's how you make a professional first impression.
Contents Page
Business plans are usually lengthy documents, so a contents page helps reviewers quickly navigate the document. List all the sections in your business plan and the corresponding page numbers.
Executive Summary
Think about it as a short pitch of your idea. It needs to capture the essentials:
What problem your business solves
Who the target audience is
The market size
The management team
Financial highlights
Requested funds and how they'll be used.
Write this section last, even though it opens your document. A concise, punchy and persuasive summary sets the tone for the rest of the plan.
Company Statement
This is your first large section, usually split into several subsections. Here you need to talk about your company's mission, vision and objectives. Demonstrate that you understand what it takes to run a business and aren't just brainstorming ideas.
You will also need to talk about your organisational structure - how many people will be involved, what will be their roles and their skill sets. Last but not least, you will need to present your planned revenue streams. Clearly explain how your business will make money.
Product/Service
In this section you should go into as much detail about your product as possible. Explain the following:
What is it and why is it needed?
Who needs it?
What features and benefits does it offer?
How will customers access it?
Discuss pricing structures and strategies, too. How can you justify the proposed pricing? Does it cover the cost of production and sale? Does it create room for profit? Equally important - what is your evidence that your target market will buy into your product at the proposed price?
Market Research
This leads you straight into the next section, which will take the most time to develop. Market research is incredibly important in any case and scenario because it paints a clear picture on the need for your product or service. But when it comes to writing a business plan for government funding programmes and start up loans, it is absolutely crucial.
When preparing this part of the document you will need to take two separate avenues.
Primary Research:
Conduct a series of surveys, interviews and discussions with your target audience. The benefit of it is a direct insight into the potential interest and success of your business idea.
Secondary research:
This is collection of information that has already been published in the form of statistics and data. For example, what is the size of the market you are entering? Has it been declining, rising or stalling? What are the future trends for your industry in the next 3-5 years?
All this will help you clearly define your target audience and prepare pen portraits or consumer personas of your ideal client. To put simply, these are the most common characteristics, interests and behaviours of the people who are most likely to become your business customers. Consumer personas are a useful tool to include in the appendices of your business plan.
Once you know your ideal client, it's time to identify and analyse your competitors. These would be organisations that have products or services similar to yours and target the same group of people you do. You will need to find out what's their market share and prepare a SWOT analysis (strengths, weaknesses, opportunities and threats). Once you have done a SWOT on each of your two or three competitors, you should do one on your business idea, too. This will help you determine your USP (unique selling point) if it wasn't very clear at the start of your business creation journey.
Marketing Plan
Your marketing plan is another part of the document that is very important. And not only in the cases where you prepare to apply for funding, but also when you develop a business plan for your own use, to navigate you through your entrepreneurial journey. This is a complex section that will describe your strategies for positioning, promotions and customer retention. It is useful if you are familiar with terms like 7 Ps of marketing, sales funnels and content distribution.
Having done a sound market research will come in handy when you prepare your marketing strategy. The results you have collected from your surveys and interviews will give you ideas how to introduce and promote your products and services. Knowing and understanding the market will show you how to best position yourself and reach your ideal client. Also, you don't have to invent the wheel. Get inspiration from your direct competitors on how to run your marketing campaigns. Only make it better!
Once you decide on what marketing mix (the channels and types of marketing techniques) you will be using, create a content calendar. This is an extra tool that can go in the appendices and show your creditors you really have thought about how you will market your business.
!! Don't forget to factor all the marketing cost! This will be one of your biggest expenses, especially in the first year of business. Don't be naive to put a small budget. Any investor and loan provider knows this is unrealistic. It's more important to show how your will get a high ROI (return of investment).
Operations Plan
Of course, you can't run a business without a proper operations plan and structure. Your business operations include everything from production to customer service.
In this section you need to describe:
Your relationships with suppliers and manufacturers
Stock and distribution management
Compliance with legal requirements (e.g., licensing, insurance, data protection)
Have you developed policies, such as health and safety, terms and conditions, safeguarding, human resources, equality and diversity, and so on? If this is outside of your area of expertise, have you contacted specialists who can help with this?
Management Structure & Human Resources
Talk about your team, their roles, skill sets, qualifications and responsibilities. Investors are drawn to a clear company structure, where people work within their expert area and share the load of building a sustainable business.
Start with the management team and describe their education, training, transferrable skills, talents and traits relevant to the business. Attaching CVs in the appendices is always a good idea!
The next step is discussing any professional advisors you plan to use. For example, if no one in the team is experienced or qualified in marketing, you may seek a marketing specialist to join you as an external provider. You may also need a regulations consultant or a financial advisor.
Lastly, outline your hiring plans. How many people do you need to launch your business? What type of positions can you offer and how do you intend to expand your team after 1, 3 and 5 years of operations?
Financial Plan
This is the heart of your business plan! Here you will need to provide your profit and loss forecast and projected sales. The wording in this section doesn't have to be a lot, but it's important you present the highlights. The calculations and presentation of financial data happens in a separate document that accompanies the main business plan. This document is your balance sheet. It usually spreads over a period of one year and details all the expected costs and revenue by month. In it you will need to include the funds you are requesting and repayment schedule.
Banks, government creditors and investors will also look at your personal income streams and expenses to make sure you can cover your living costs if the business fails. This then leads to the last section of your business plan, which makes up for more than 50% of the final decision of your potential creditors.
Exit Strategy
You won't get funding or a business loan if you can't prove you can return the investment. Your exit strategy explains how the bank or investor can be assured they won't lose their money. Of course, in reality this happens often, but for the sake of your loan approval, you must show you can recover the funds. This could include income from a job, a separate venture that's already doing well or tangible assets that can be liquified and turned into cash.
Supporting Documentation (Appendices)
We already mentioned several tools and documents that will strengthen your business plan and can be attached to the bottom of it. It's always easier and clearer when you have them in a list, so here it goes:
CVs of the management team
Training certificates, licences and business insurance
Price list/menu
Product prototype
Website wireframes or branding materials (if available)
Survey results
Interviews with target audience segments
Pen portraits/consumer personas
Content calendar
Business contracts with suppliers and stakeholders
Quotes for commercial premises leases
Balance sheet
Sales projection by month and income stream
Personal survival budget
Now that you know what really is required in a good business plan, perhaps you feel more confident to create it yourself. Or perhaps, you've just realised you might need professional help.
Like we said at the beginning, not all business plans are created the same. Certain sections will have more weight depending on the purpose of that document. Private investors would be drawn the most to innovative ideas and clearly outlined market potential. Government funding programmes will pay attention to the depth of your market research, marketing strategy and financial projections. Banks won't approve your loan request without a convincing exit strategy. They may not require a 15,000 word document but would like to see clear structure, sound decision making and reassurance their investment is safe.
In the next blog article we will explore whether ChatGPT can write a good business plan for you and which sections of it you can trust AI with. So, if you haven't subscribed yet, it's a great time to do it. This might save you time and money on your entrepreneurial journey!
Final Word
The terms and tools we discussed in the article may be confusing or unfamiliar to people with limited business and marketing knowledge. If you want to understand better how to write your business plan sections and get ready for a life as an entrepreneur, consider my Udemy course, How to Start and Run a Successful Business. It's two hours of on-demand video with lifetime access and supporting materials - available for just £14.99 through this link. The offer is valid for only 30 days, so make sure you don't miss out.
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