Writing your business plan

A business plan outlines your vision for the future of your business. It sets out your business goals and how you plan to achieve them. It helps you understand the steps you need to take to launch, run and develop your business. And it is an important asset when discussing your business with your bank manager, potential investors and customers. It demonstrates that you are looking to the future and you are aware of the environment your business operates in.

The benefits of a business plan

Many businesses fail because they don't have a clear strategy and objectives. Writing a business plan forces you to address the details of your own business proposal and clarify exactly what you have to do to make it a reality.

Any shortcomings or potential problems will soon become obvious if you take the time to look at your business idea objectively. In this way you make your mistakes on paper rather than in reality.

A good business plan will:

  • give you a sense of direction and an action plan
  • keep you and your staff focused
  • demonstrate the seriousness of your intentions to banks, investors, colleagues and employees
  • enable you to identify problems early on and take appropriate action
  • set targets and measure your success
  • help you recruit better, higher-level employees.

A business plan is not only for business start-ups. It's an evolving document that should be reviewed regularly. It will always be a useful tool to persuade others to invest time, money and effort in your business.

To help you write your plan, Lloyds Bank Commercial Banking has teamed up with Sage, one of the UK's leading suppliers of business management software, to offer you their Sage Planning for Business software free. Don't forget, you can get some very practical help by downloading a free copy of Sage Planning for Business software see our useful links below.

What should be included in your plan?

A good business plan answers four simple questions:

  1. Why does your business exist? (Your purpose or mission statement)
  2. Where do you want to take it? (Your objectives)
  3. How will it get there? (Your strategy)
  4. What will it cost? (Your budget)

Purpose

You should be able to sum up your purpose - why your business exists - in a couple of sentences. It should clarify what you want your business to achieve, beyond simply making a profit.

Objectives

While purpose is general, objectives should be SMART:

  • Specific - objectives should specify what you want to achieve. For example, winning four new customers every month in the first year.
  • Measurable - you need to be able to measure if you are achieving your objectives so that you can react accordingly.
  • Achievable - are you in a position to achieve the objectives or do you need to make changes to achieve them?
  • Realistic - can you realistically achieve your objectives taking your skills and resources into account?
  • Timed - when do you want to have achieved your objectives?

You may have a number of different objectives, but they should complement each other and be prioritised.

Strategy

While your strategy may be flexible and able to adapt to fit changes in the market or the economy, it should always be grounded in thorough market research. You should investigate:

  • potential customers and competitors
  • economic and market conditions
  • how trade works in your chosen sector
  • who the suppliers are
  • the staff, facilities and equipment required
  • trends and emerging technologies that could transform the marketplace.

Ask yourself what are your business's strengths and weaknesses:

Strengths:

  • Why will customers buy from me rather than the competition?
  • What does my business do better than the competition?
  • What makes me different from the competition? What's my unique selling point (USP)?

And conversely, weaknesses:

  • Why would customers buy from the competition rather than me?
  • What does the competition do better than me?

Ask yourself as well about opportunities and threats.

Opportunities:

  • What are the opportunities available to my business and am I making the most of them?

Threats:

  • What could change that could have a negative effect on my business?

Listing your business' strengths and weaknesses, the opportunities that the market presents and also any threats to your business will help you make sense of your research. (This is also called a SWOT analysis - Strengths, Weaknesses, Opportunities and Threats).

Budget

The success or failure of your business rests on its ability to make a profit and anyone thinking of investing in your business will scrutinise your budget closely.

In most businesses, cashflows in and out, and you should include a cashflow forecast in your plan to assure yourself and others that your business will be solvent. This means you'll need to have a good idea of how much cash will come in and go out of your business, where it will come from or go and when.

Cash coming into your business could be from sales or investment, including capital you put in yourself. Cash going out could be on stock, equipment, wages or tax. Show an estimated 12 months' cashflow in your plan.

Then you'll need to show what profit you expect to make. Profit is what's left after expenses, costs and taxes have been paid. You'll need to include a profit forecast in your plan as well - show an estimated two-year profit projection.

Break down your cashflow and profit into monthly figures, showing the main areas of expenditure and income.

Remember to include contingencies in every area to cover unexpected costs. While you need to show confidence in your business, unrealistic projections are likely to do more harm than good. It's safer to be pessimistic than wildly optimistic.

Do you plan to leave the business?

It's not essential, but if you have a plan to build up your business and then leave it - perhaps selling it on - including details of any proposed 'exit strategy' in your plan demonstrates the thoroughness of your thinking.

Writing your plan - the essentials

Executive summary

Start your business plan with an 'executive summary' to provide readers with a quick overview of the whole report. This is best written last.

Language and structure

A good business plan should be:

  • clear and concise
  • free of jargon
  • well-researched
  • achievable.

Don't be put off if you don't have all the information you need from the start. A basic outline can be filled out as more details become available and even a simple financial forecast can highlight any shortcomings in your proposal.

The structure of your business plan

As a basic starting point, divide your plan into four sections:

  • Where are you now? Include details of your line of business and the products and/or services you offer, as well as your growth to date if applicable.
  • Where you want to be by (date). Include a brief outline of your vision.
  • Your strategies for getting there.
  • Actions required, by whom and by when.

For each of these sections, consider the following areas:

  • staff
  • cashflow and profit
  • positioning
  • your business profile.

You may find that a more in-depth plan is necessary, but avoid including very detailed figures as these will be more likely to change and your plan will become out of date. Don't forget, you can get some very practical help by downloading a free copy of Sage Planning for Business software see our useful links below.

When using these services your agreement will be with the relevant third party and their terms and conditions will apply. Lloyds Bank shall not be responsible or liable to you for any failure by the third party to provide these services or in relation to use by the third party of any confidential information supplied to them by you.

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