How to write a comprehensive and professional business plan
The ability to plan is an essential skill for any business owner. Working out the steps your firm needs to take helps you to focus your efforts on finalising a project, without wasting time and resources on impossible goals.
Of course, planning requires more than just intuition. You also need a map to show you whether the direction you are thinking of taking is the right one, and that’s where a business plan comes in. In this article we’ll explain what a business plan is and how to write one that is clear and well-structured, to help prove to potential partners or financial backers that your business idea is sound.
What is a business plan?
A business plan is a document that sets out the aims of your business project, your financial predictions and the strategies you will implement to ensure the project is successful. It is therefore an investigative tool that helps you work out whether or not an idea is feasible.
More precisely, a business plan has two different purposes, one internal, within the company, and one external:
- It helps business owners to work out whether a business idea is feasible and to identify its strengths and weaknesses, and provides a guide to follow based on a precise strategy.
- It can be used by a company to present a business idea to lenders, sponsors, new business partners or anyone who is interested in investing in the project and wants to study it in detail to ensure it is feasible before parting with their money.
Basically, it is the essential first step when launching any business project (particularly if you are looking for financing). And it is also the most important step, because, just like a crystal ball, it shows you the future of the business. However, to succeed, it has to be well put together.
How to write a business plan
There is no universal template to follow – the structure and complexity of a business plan depend both on the type of business and on your motives for drafting the document in the first place. There are lots of reasons for writing a business plan. For example:
- You are a start-up looking for financial backers and you need to convince them that your idea holds water;
- You want to expand your business including raising capital from investors, so you need a plan showing how your company offers low-risk returns;
- You want to present a proposal for accessing public funding and need to highlight how the business meets the necessary criteria;
- You want to work out how to manage your business by identifying targets and focusing on the processes required to meet them.
Business plan structure and sections
Business plans tend to be divided up into three parts:
- A descriptive section that introduces the company, its background, the project you have in mind and the target market.
- A central, more detailed section that highlights what is special about the company and presents the business proposal.
- A final section that asks the reader (if you are looking for investors) for whatever you need.
Here is some more detail on the various sections you’ll need to work on (remembering to adapt the advice to the aims of your plan).
The summary usually runs to one or a maximum of two pages. It should contain the following: brief information on the business, its operations and its management team; your proposal (explaining briefly why it will be successful, what the benefits will be, whether there are any risks and how to reduce them to a minimum); and a clear description of what you are requesting from the reader (for example how much you want them to invest and what their profit will be). You could also provide some key statistics to back up the information you provide.
Start your business plan by providing readers with the details they need to understand your business and its market position. This means providing a clear answer to questions like: What is your business? What does it do? What type of product/service do you offer? How was it created, when and why? Who founded it? Has it been successful? If so, why? And if not, why not?
Provide all the information readers need to work out your target market, who your business is aimed at and which market trends you want to embrace. In other words:
- Explain how what you are offering is different, why customers choose you and what advantages you offer.
- Estimate the size of your market.
- List your main competitors.
- Explain who your target market is and who your customers are.
- Talk about distribution.
- Explain what technology you use.
- Describe your pricing strategy in detail.
- Highlight your competitive advantages (for example your prices, the quality of your products/services, your technological superiority, your distribution, etc.)
- Explain the market segmentation (i.e. how the market is divided up and your business’ positioning in this context).
- Answer the question: how do you set yourselves apart from your competitors?
- Mention the factors that reduce the risk of potential competitors entering your market.
Set out your team’s experience and your executive team’s skills in detail. Provide short biographies and explain the role covered by each person within the business.
This is where you explain what your proposal is. This should comprise:
- What your aim is – this should be clear, achievable and measurable.
- How you plan to achieve it.
- How much time and money will be invested in it.
Then explain the returns your readers can expect to receive if they invest in your project.
In this section you have to justify the costs you will incur and predict the sales you will achieve (the latter will be an estimate, of course).
A difficult but crucial aspect is estimating the impact that any increase in costs or fall in sales could have on the business. It is important to include this to show you have the situation under control and that you have a plan B in place: this will reassure potential investors and partners.
Provide details (attaching supporting data and documents) on your current and past sales (explaining the reasons for any breaks), the company’s profits and losses, its balance sheet and your financial forecasts. Explain your financial position, how it has changed over time and any sources of funding you may have. You should also declare if there are any legal procedures underway, and make it clear if there are not.
Now we’ve given you an idea of how to structure your business plan, we’ll end with a few pieces of advice on how to make it as good as possible.
Our advice for a top-notch business plan
Here are some tips for creating an easy-to-read, professional and convincing plan.
Start by sketching out everything you want to include in the plan. This will ensure that you structure the content logically. Avoid using ready-made business plan templates: every business is different, and every project needs to be described in its own way. If you don’t know where to begin, choose a template but personalise it based on your needs.
Looks are important too. Business plans tend to be directed at people who need to be able to trust you, so it is important that you make a good impression. Take care over the presentation, layout, text and graphics, and create an orderly document that is easy to browse. For example, if it is longer than 4-5 pages, add a contents list to help readers to find their way around, and spend some time on the text to ensure it is easy to read (including choosing typefaces and font sizes carefully). Images and graphics can help people understand your data better, so make good use of them.
Be clear and succinct. The document must be easy to understand and should explain your business idea simply, without unnecessarily convoluted turns of phrase. If it is not clear enough, it may not achieve its intended goal. It should also be the ‘right length’ (i.e. don’t waffle on for pages and pages), so try to concentrate solely on the important information. Otherwise it risks confusing the reader or, even worse, not being read at all.
Include a flawless initial summary. The summary is crucial because very often it is the only thing investors will read. It is therefore vitally important that it is engaging and convincing.
Use data, evidence, numbers and statistics to support your claims. Every claim you make must be backed up by data and facts. If you can’t provide details confirming what you’ve written in your plan, your project risks seeming vague and uncertain.
Attach any documents that will help interested parties find out more. For instance:
- Your team’s CVs;
- Technical data sheets for your products and the manufacturing process;
- A list of the equipment you own;
- Copies of patents, proof of copyright or trademark registrations;
- The results of market surveys or research into your sector;
- Detailed accounting data;
- Copies of lease agreements.