Many business owners find the thought of writing a business plan very daunting, so much so, that many of them never write one at all. But recent research suggests that SMEs could make more profit if they had a plan in place so no matter how difficult it might seem, now is the time to write a business plan if you haven’t done so already. And, actually, it is not as difficult as you might think.
A business plan is intended to clarify what the aims and objectives of the business are and how they will be achieved. It is, of course, also essential if you need to raise a loan or other type of financing.
Here are the fundamental steps involved in writing a basic business plan:
This is the overview of your business and should include the following:
- A description of your product or service
- Openings in your chosen market for your product/service
- The senior people involved
- Existing skills and experience
- Funding requirements
- Expected sales and profits.
Who owns the business, how long has it been trading or how long has the idea been forming if it is a startup. What experience does the owner have of running this type of business? And how big do you want to grow your business?
What is your Unique Selling Point (USP) and how do you differentiate your business from your competitors. Why would customers buy from you and not a competitor? Note down any weak points here – every company has them – and writing them down is the first step to improving on those weaknesses.
Describe any new technology involved and any regulations governing the type of business.
Who are your customers; are they local, national or global; what is their typical income bracket or age group? If the business is already established describe the sales you have already made. Is the market growing rapidly or changing rapidly – if so how will the business adapt.
Describe your competitors and what makes your product/service better or worse than theirs. Explain why you think customers will switch from a competitor’s product to yours and how you will keep those customers once the competitor responds to losing customers. For instance, if your only way of attracting new customers is to offer a lower price what will you do if the competitor then undercuts you?
Sales and Marketing Strategy
Describe your pricing structure, product quality, customer services and how they compare with competitors.
Explain how the product will be sold, for instance, through a retail outlet, via a website or via a third party. If the business sells predominantly on the internet how will deliveries (and returns) be arranged?
Describe the planned advertising (print and internet), press releases, email marketing. Have you considered how you will promote your website and how you will use social media? This may be particularly important if your business offers services rather than products.
Describe the relevant skills and experience of the management team; their strengths and weaknesses. How will you deal with weaknesses in the team – employ additional staff, perhaps, and if it is a very small company will certain people have more than one area of responsibility?
As an indication of your commitment to the business state how much time and money you have, or are prepared to, invest in making it succeed.
Show the sales (real or projected) broken down by different product types or customer groups. Include a realistic sales forecast for future sales and a cashflow forecast showing the money you expect to be coming into and going out of the business bank account.
Remember the factors that will influence cashflow such as seasonal highs and lows against regular payments such as rent, utilities, loan interest and salaries. The cashflow forecast will help you to assess the risk of the business being unable to meet its financial commitments and, therefore, the need for back-up facilities such as an overdraft.
If you do not expect your business to be profitable in the first year then show when it will be and include predicted profit and loss figures for 3 years. These predictions must be backed up by figures such as estimated sales volumes.
Consider the assumptions you have made and what would happen if any of them proved not to be true. For example, if costs of raw materials rises, if sales are lower than forecast, if interest rates or foreign exchange rates rise.
Depending on the size and type of your business, and any finance that you are hoping to raise, you may need additional information included. If putting together the business plan yourself still seems too challenging then take a look at some of the sample plans available online. And remember those statistics – a business with a plan is likely to make more profit than one without a plan.
Get ready to start making money online.