How to write a simple business plan
A simple business plan is a must for businesses in Glasgow. You can use them for effectively attracting investment or as a benchmarking tool to schedule targets. Your plan should clearly outline what you want your business to achieve and when. For busy business owners and entrepreneurs faced with thousands of decisions on a daily basis, it is easy to lose sight of what your business aims are. A business plan should help to keep you and your team keep on the straight and narrow.
A business plan can be used for a number of reasons and will determine the amount of detail you put into it. However, when looking for business funding, it should include enough detail to convince potential investors they will make a profit and your business is not going a lost cause.
If you are thinking of approaching a bank for funding, they will want to be assured your enterprise will be successful enough to repay the loan, or that you have assets you can sell to cover the loan if the company fails. A business plan is your chance to prove that your idea is worthy of their time - and more importantly their money!
Drafting a business plan
The purpose of a simple business plan is to give you and your readers a roadmap of your business model. A typical business plan should cover six areas which cover every aspect of your business, namely:
Business Plan Checklist:
- The Executive Summary
- The Vision
- The Market and Marketing
- The Operations
- The People
- The Finances
1. The Executive Summary
The Executive summary is arguably the most crucial. This is likely to be the first page investors read so needs to sufficiently engage them otherwise it could be the only page they read. Keep it short (no more than 1 page of A4 paper), but precise, essentially a summary of your business model. It should mention who you are and what your qualifications or experience is to run your business.
Start with a simple, clear introduction, an elevator statement that pitches your entire proposition in a single sentence.
Address the problems in the market and how you intend to solve them. Include your key business targets and where you see your business in the next few years. This is the perfect opportunity to provide an overview of your predicted financial results with turnover and profit figures. Remember the detailed information can be found within the plan; this is your opportunity to promote your business idea in a short and snappy way.
Before you start writing the executive summary it is a good idea to have a brainstorm and make a note of everything you want to include in your business plan. To save time, write the executive summary last as it is essentially the section in which you summarise the rest of your business plan.
2. The Vision
This is your first chance to really sell your commercial ideas. Do this by introducing your business in some detail: how it started, where it is now and most importantly how you see your business developing in the future.
Explain the purpose behind your idea: what your product is and what benefit it offers customers; does the product solve a problem; who the targeted market is and why? Any unique selling points? Back up your argument with evidence to support why your company, products and services will be a success. Where possible include reports, white papers, market research and evidence you have gathered from previous experience.
In your vision statement it is important to highlight five key features which make your business stand out from the crowd? Why should customers and investors choose you rather than your competitors? Do you provide better value, superior quality, guarantees or a better location? Can you show investors that you have reduced risks?
Include the stage you’re at now, whether you’re market ready, how long you’ve been trading for, and what your plans for the future are.
Outline the targets you will implement in order to reach your ultimate goal.
How is your business set up? Are you a limited company, partnership or sole trader?
Your marketing strategy is another key factor to determine your map to success. You need to define the sales channels you will use to create customers. This should explain how you will find customers, how they will pay and whether there are any opportunities for cross-selling or up-selling. Estimate how many times you expect repeat customers to buy from you in a typical year.
Investors will expect you to have significant knowledge of your industry, the market, and the trends. Where will you enter the market and are there any major competitors who dominate the market?
What is your sales strategy and how will you go about reaching new customers? How will you sell it: in a shop, over the phone, door to door or online?
Compile a competitor analysis, their strengths, weaknesses and how you compare?
Again, any physical data you can provide to support your marketing claims should be used to back up your argument.
This section should focus on how you will manage the day to day running of your business. Where will you be based? Have you secured business premises? Have you committed to a lease on the premises and have you established the rateable value?
You should also detail whether your chosen premises will be suitable for future growth or will you need to invest in a bigger facility to achieve your targets at a later date? Will you need to purchase any capital equipment and how will this be funded?
Does your business require additional equipment or control systems such as security measures or a CRM system?
Examine the running costs of your business; how much it takes to produce your product or offer a service. Include overheads such as utilities, materials, tools etc…what are the costs immediately after start-up and what are the ongoing weekly/monthly costs?
Are there any legal implications for your business involving health & safety? Do you require any licences or professional subscriptions (eg VOSA operator’s licence)?
5. The People
People invest in people! Your management team are the most important part of your business and this is your opportunity to show you are surrounded with capable, knowledgeable and qualified leaders.
Use this section to include a mini CV for all your key staff and the roles for each member. Outline their credibility and highlight qualifications and experience. Explain who holds what position and why they’re best suited for their roles.
It’s a good idea to make sure any of the required skills not held by any of the team are outsourced. This section should therefore include freelancers, lawyers, or accountants that you plan on using, as well as future recruitment plans.
6. The Finances
Numbers aren’t everyone’s strong point, but understanding them is essential to running your business. For the purpose of your plan, your finances should comprise of two sections: the monthly running costs of the company, and the forecasts for sales, profit and loss together with cash flow.
Cover at least three (and probably no more than five) years, showing when you’re likely to break even, and when you’ll start making a profit.
It’ll be tough to think of everything, but you should make sure you’ve accounted for everything, from rent, electricity, rates, insurance, and stationery to staff costs and parking.
Show your revenue streams, sales forecasts, and projected profit and losses. Make some financial assumptions, especially if your business is vulnerable to price fluctuations from suppliers or currency variances. Make sure your sales forecasts are achievable based on capacity and anticipated customer base. Include a section for key assumptions and how you arrived at your predicted figures.
Include any funding that you need, and how you aim to get it. Funding may come from external lenders such as bank overdraft, bank loan, invoice finance facility, government loan and director’s loan. Include repayment of any external funding and timescales for repayment. If private investors are being sought then what return on their investment are they likely to achieve.
The Narrative Section
It’s vital that your plan is written well: it’s harsh to think, but investors will probably be put off if your business plan is poorly written and littered with spelling mistakes and grammatical errors.
It also helps if your plan is not boring. Try to strike a balance between formal and knowledgeable, but also showing you have a personality and a passion for what you do.
Make sure you keep it simple and don’t over write unnecessarily; one word is better than three. Also avoiding technical jargon wherever possible – you want everyone to understand it.
If you can, include visual representations: graphs and charts can often convey a message better than a table full of numbers. Include any relevant images, and keep a large amount of white space: large volumes of text are off-putting.
Finally, use standardised formatting throughout the document: font, page numbering, heading size, spacing, together with your company logo and any branding.
Gordon Ferguson Chartered Accountants are specialists in preparing business plans for funding requirements. Should you require any assistance please call us on 01698 440330 and we will be happy to help.