A business plan is one of the most integral steps in your journey to running a successful small business, whether as a sole trader, partnership or limited company. It's where you'll turn your dreams into an action plan.
We’ll look at what a business plan is, why you need one and how it can shape your business.
What is a business plan and why do I need one?
A business plan is an essential written document that provides a description and overview of your company’s future. All businesses should have a business plan. The plan should explain your business strategy and your key goals to get from where you are now to where you want to be in the future.
- How will you make your business more profitable, gain more resources or increase your assets?
- What are your plans for growth in your target market?
- Where do you see your business in one, three or five years?
It can also be an important tool for an established business that’s moving in a new direction. Writing your plan is a good opportunity to define SMART goals (specific, measurable, achievable, relevant, and time-bound objectives) to guide your strategy. Read more about how to set SMART goals for your business here.
What should your business plan aim to do?
At its most basic, your business plan outline should explain what you intend to do and how you are going to do it. You should outline your strategies across the business, including financial projections, marketing and operational plans.
An overview of your business
Your business plan should aim to give a good outline of your business, your business strategy and your action plan.
- How will you make money and what do you need to do to achieve your goals?
- What are your targets and how will you meet them?
Knowing your long-term goals will help you to take steps towards them in the day-to-day running of your business.
It should also act as a benchmark for the performance of your business. Look at your competition in your industry and think about why your business will succeed where others might fail. You might want to carry out a competitor analysis to give you a greater understanding of your space and where there have been recent changes or innovations.
You know your business best
Your business plan will show that you have a clear understanding of your business and the market it will operate in. It should set out how you expect it to perform in the coming years and how you will overcome any potential obstacles. It should also be a useful tool to:
- Focus and develop ideas
- Identify your business priorities
- Think through options, identify opportunities and make the most of them
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Explaining your funding requirements
Most banks and lenders will require a detailed business plan for loans, including start-up loans, so financial planning is a must. An in-depth plan will help you to convince banks, potential investors and other key contacts to support and fund you to grow your business. Our guide to finance for start-ups takes you through what you’ll need to consider when writing a plan with finance in mind.
Attracting talent
As you grow, you might look to hire employees and expand your resources. The plan can also be important for attracting new senior management, business partners and distributors.
- What is your company’s vision?
- What is your mission statement?
- Why would someone want to work with you?
How to write a business plan
Writing a business plan may seem daunting, but breaking it down into manageable steps can make the process easier and more effective. Here’s how to get started:
A step-by-step guide to writing your business plan
- Executive Summary: Write a concise summary that outlines your business idea, goals, and the steps you will take to achieve them. This section should grab the reader's attention and provide an overview of your business.
- Business Description: Provide details about your business, including the products or services you offer, your target audience, and your unique selling points (USPs).
- Market Research: Conduct a thorough analysis of your industry and competitors. Identify your target market and explain how your business will meet their needs.
- Marketing Strategy: Outline how you plan to promote your business. This could include online marketing, social media, traditional advertising, or partnerships.
- Operations Plan: Describe how your business will run day-to-day. Include details about your location, suppliers, technology, and staffing requirements.
- Financial Plan: Provide financial projections, such as income statements, cash flow forecasts, and balance sheets. Be realistic and use accurate data to demonstrate your business’s potential for profitability.
- Appendices: Include any additional information, such as resumes, legal agreements, or product illustrations, to support your plan.
The section containing your financial factors should include your income statement, cash flow forecast or statement, and balance sheet. This should aim to provide an accurate picture of your company’s current value and your ability to pay bills and earn a profit.
Practical tips for writing a business plan
- Use clear and concise language to make your business plan easy to understand.
- Tailor the content to your audience - whether it’s for internal use, potential investors, or banks.
- Review and update your business plan regularly to reflect changes in your goals or market conditions.
Updating your business plan
A business plan is one of the big steps when you start a business, but it shouldn’t be forgotten. By revisiting and updating your plans regularly, it becomes a tool for measuring your success or supporting you in moving in a new direction.
Creating a business plan for the New Year is always a great way to refresh goals and plans. You can read more on how to create a New Year business plan here.
Ready to start your business plan?
Get your business off to a flying start with the Federation of Small Businesses. Our members get access to a detailed business plan template as well as 24/7 legal advice and over 1,400 legal documents, templates, and guides.