It’s a whole lot easier to write a business plan if you know what you wish to achieve. That’s why clarity is the first requirement of a business plan.
Clarity of thought
Clarity is the connection of your idea – your business proposition — to a coherent set of words, sentences, and numbers. It details what you wish to achieve — the business benefits — and why and who and when and where and how you are going to achieve them.
Firstly, let’s define a business plan. It is a written document that describes your business, your aims, your objectives and how you intend to achieve them over a given period. It’s a forecast. Nothing more and nothing less.
It describes your starting point and the strategy you need to reach your end point in one, two or three years.
It details your products, services and ideas. It provides an analysis of market demand, and details the resources you need to fulfil your goals. It defines the capability you have, the costs you forecast incurring and the income you anticipate generating.
In essence, a business plan provides sufficient information for a reader to calculate the soundness of your proposition, the credibility of your strategy and your chances of success. In some cases, it should include an assessment of the risk that someone might take by investing in your business.
So far, so good.
Where to start
There’s a lot to be said for starting with a vision. It’s a mental picture of what you wish to accomplish. It’s a dream of how you see things if everything works out perfectly. That’s the best place to start.
Next, you need to translate your vision into a sentence or two. It needs to be easily understandable to others even if they have no imagination. Your vision could relate to:
- Market perception – Leading, highest quality, best value for money.
- Market focus – No. 1 niche supplier.
- Turnover – Largest market share.
- Service – Fastest response times.
- Competition – Delivering at lowest prices.
How to prepare
You need to be able to describe three things without the slightest hesitation:
- Situation – opportunity or problem.
- Plan – how you intend to address the situation.
- Payback – the benefits.
These three elements need to be uppermost in your mind as you convert your business plan from your head into paper.
Where’s the beef?
Substance – or the beef — is key. You must be able to answer why people should buy your business, product, service, or idea, in preference to someone else’s.
Substance is your value proposition. It is about how you can deliver greater value or offer a better deal to potential customers than the current market can offer.
A value proposition should comprise a simple set of statements which:
- Describe how your business, product, service, or idea addresses the situation – problem or opportunity.
- Detail why the situation should be addressed or needs to be addressed in terms of opportunity, difficulty, or cost.
- Explain the benefits of your business plan – your business, product, service, or idea over alternatives.
- State the cost advantages of your business, product, service, or idea over competitive alternatives.
Testing your ideas
You need to have clarity about the influences on your business plan. SWOT may help you to distinguish between unimportant and important aspects that you need to consider.
In particular, you need to be clear about threats to your plan. You need to show that you are knowledgeable about the environment in which you will be trading. Never skip over areas of potential difficulty.
Highlight them and state how and why you can overcome them. Realism is desirable in all business plans.
The number of sections depends on the focus, technology or complexity of the proposed offering and may include:
- Executive summary
- Management profiles (if relevant)
- Vision statement
- Mission statement
- Your proposition – company, product or service
- Market description, analysis, segmentation, targeting and positioning
- Explanation of how the product, service or idea is different
- Outline marketing plan
- Outline sales plan and forecast
- Financials (to include ROI and cash flow)
- How to make it happen
1. Executive summary
The executive summary is the most important part of the document because it is likely to be read by all stakeholders. But don’t think of it as purely a summary of your business plan.
Think of it as an opportunity to “sell” your business idea. From your first word to your last, your executive summary needs appeal and high energy.
Your first sentence should be a benefit-focused entrée into an appealing, scene setting, first paragraph.
It should detail your vision, mission, the situation, proposal, and payback. It needs to mirror your document in the precise order of your document – from the proposition, market description, considerations, resources required and return on investment to cash flow. It needs to be well-structured, appealing, and highly credible.
Sketch out your executive summary in draft before starting your document. It should represent the skeleton of your document. Produce it in rough before writing your document and complete it after writing your whole document.
An executive summary – over one or perhaps two pages – should have seven parts:
- Proposition summary and how it meets the customer/market needs
- Situation definition – problem or opportunity
- Approach and proposition
- Financials / costings / payback
- Benefits/rationale to approach
- How to make it happen
2. Management profiles
If the business plan is to secure funding, investors will want to know the capability, experience, and track record of the people who will be driving the business. Short biographies of key people should be detailed.
3. Vision statement
State where you see your business in the future. A vision statement is a high-level overview of the business, the characteristics the business will display, and the goals that it will have achieved by a specific time.
4. Mission statement
Summarize your company’s purpose, means of operation, market and scope of activity.
5. Your proposition – company, product or service
This section should start with an outline of why you have developed your offering – the need for it – and how it fits within the market, competitively. You should position your company, product or service in the mind of the reader.
The main focus of this section is on what you will offer the market in terms of business, product or service, technically and operationally. You should include charts, diagrams, and images as necessary to enable the reader to understand your offering and its comparative capability.
Ensure that the information you give is complete, that your narrative explains essential details, and that no questions are asked.
6. Market description, analysis, segmentation, targeting and positioning
You should describe your product or service in terms of what marketers call a marketing mix. It’s a means of structuring an offering from a marketing perspective. It comprises: Product, Price, Placement, and Promotion, otherwise known as the four Ps.
Product: This is about describing your product range or service, and how you will adapt it to support your customers’ needs and desires.
You should also include guarantees, support, and maintenance. Also include product variation, differentiation, and innovation.
Price: This is the process of setting product prices. It may include discounts which relate to what you think customers are prepared to pay, and how they may wish to pay.
Placement: This might involve distribution channels, direct sales, indirect sales or eCommerce. In essence, you need to detail how you will get your product to market. Don’t go into detail here – instead, give detail at the section on sales plan and forecast.
Promotion: This is about how you will promote your product, product line or company.
Markets are divided into groups of buyers – or segments. You should describe your market in segments.
Tailoring an approach to one or more groups — or one or more segments — over others is the only way to promote your offering. That’s why airlines promote first class services differently from economy class services.
One other thing you need to be aware of is that the segment or segments you propose are valid. Provided that a segment can be identified, is of reasonable size and can be reached economically, then it is a valid marketing target.
Segments that should be attractive are those that complement your business’ strengths and where demand, profitability, and growth are favourable.
Identify the variables, and then:
- Group potential customers into segments
- Group products into categories
- Produce market/product grids
You should also detail market influences. Markets are influenced by a number of factors such as technology, economics, politics, geography, social views, and so on. Refer to your SWOT analysis. You need to identify market factors that may influence your business plan and link them to justify your approach to achieving your proposition.
Link your marketing mix to your target segment. To do so, you need to answer these questions:
- How well is our target segment served by existing suppliers?
- What would be the cost of reaching that segment?
- How compatible with our strengths is this new target segment?
- What is our competitive position?
- What is the market growth potential?
You need to think about how you compare with competitive products and services. You then need to decide how you wish to position your product or service in the eyes of your market.
Positioning is the process by which you create an image or identity in the minds of your target market. It is the “relative competitive comparison” your product or service occupies in a given market, as perceived by the market.
It is about identifying the differential advantage of your business to your target segments. For example, a Rolls Royce Dawn is positioned differently from a Ford Fiesta even though both products are classified as cars.
Your business plan may be focused on an existing product or service or developing something completely new. Alternatively, you may wish to compare what you are offering with a competitive product or service.
7. Explanation of how the product, service or idea is different
Differentiation is about a product, service or idea which is perceived by the market – not purely by you — as being different. Differentiation is the aim of most businesses.
It may relate to lower cost, faster delivery, higher quality, greater adaptability and so on. The aim of differentiation is to match your offering to customer needs, attract your market and generate market advantage. You need to be clear about how you are going to achieve this.
At this point, you should also detail the uniqueness of your offering – your unique selling proposition (USP) – which distinguishes you from the competition.
Think through each element of your offering and link it to the process of getting your offering to market.
8. Outline marketing plan
Produce an outline marketing plan – summarizing essential points. Leave full detail to the marketing plan. Digital marketing is likely to play a role in promoting your business, product or service, so you need to detail how it will achieve your goals.
A typical marketing plan includes the following:
- Positioning strategy
- Marketing mix
- Proposed marketing activity
- Financial targets
9. Outline sales plan and forecast
The outline sales plan and forecast should include essential sales information from your full sales plan, and nothing more. It should detail the tactics you intend to use to reach your sales goals. If B2B, you should specify the market segments you intend to target and the companies and people you intend to approach.
You need to provide a chart that specifies sales resourcing needs and timescales of the complete sales lifecycle. It should be designed so that it is understood at a glance.
If you have prospects stating an intent to buy, these statements should be included here. The sales plan is the sharp end of your business plan.
You should detail the resources you need to achieve your business goals – people, time, equipment and money. Specify lead times – recruitment times if relevant – and whatever else you deem essential. Demonstrate how you will achieve what you propose to achieve with the resources you propose to have.
The primary purpose of business – any business – is to make a profit. The methods by which profit will be made need to be detailed, clear and understandable at a glance.
It should be complete and presented simply and clearly, and include:
- Funding requirement, envisaged return on investment, and cashflow.
- Clear description attached to numbers and lines as appropriate.
- Tables and charts with a consistent style.
- Key messages highlighted from each table or chart.
12. How to make it happen
Include a timeline of who has to agree to what and by when.