Business planning is vital to start and grow a business. Writing a business plan is a crucial first step, it will force you to think and scrutinise how best you can operate your business and maximise profit.
Join Esme as we explain what a business plan is, why you need one and exactly what it should cover.
A business plan is essentially a guide that highlights how every corner of your business will operate. It covers your objectives, logistics, sales targets, financial forecasts and marketing.
Not only is it a requirement for some lenders who offer business finance, but it also allows you to plan strategically and manage the direction of your business. It also forces you to look at the weaknesses your business could be faced with and get a head start.
Business planning is also useful for existing businesses looking to expand, move into a new market or could help secure a business loan.
A secured loan is when the lender requires an asset as security in case the borrower is unable to pay the loan back. If the loan is not repaid, the asset would be taken and sold in order to cover the funds the lender has lost. An asset could include property, vehicles and even stocks and shares.
If you’re dealing with investors, It’s crucial that they understand your business plan and be able to get a feel for your business from a quick glance. You can achieve this by including a summary of your business and how you intend it to make money, at the beginning of your business plan.
A lender might want to know how qualified you are and why they should trust you with their money. Therefore a part of your business plan should include the elements and experience you will bring to the business, including previous and future training courses.
Define your exact product or service, including what it does, when you will be selling it and where. Ensure this section is clear with language that is easily understood and targeted to the investor, rather than an industry professional.
In your business plan you should identify your target audience, where those potential customers are based and why you think they will buy your product or service.
If you have conducted any market research or found any information that supports your business idea, it’s important to include this in your business plan. Information as such provides investors and lenders the confidence that you have researched the market.
Researching your competitors and knowing who shares the market should be at the top of the list when it comes to setting up a business. It’s important to know who dominates the market and how you intend to challenge this. Lenders may want to know how your business stands out and differs from your competitors.
Your first step to identifying your competitors should be a simple google search. To give you a more accurate insight, search as if you were a customer looking for that product or service. Your initial results will most likely be national or international competitors. If your business is mainly operating regionally such as a café or hairdressers, type your search query along with your nearest city or town. Once you’ve performed some initial research, you can then delve deeper by conducting market research or surveys.
It’s important to know how you intend to deliver your product or service, and look at the potential product cycle. Will you have any suppliers or pieces or equipment that your business relies on? Will your business need any sort of transport? Does it require any specific insurance or are there any legal requirements? It’s also crucial to look at how you intend to take payment for your product or services.
For lenders, this is one of, if not the most important part of your business plan. They want to know exactly how you will be able to make money and pay a loan back. Lenders will undertake their own affordability checks, though it is always helpful to understand your costs, pricing strategy, how much you’re looking to make and your expected profit margin.
Unfortunately, start-up businesses don’t always have the best track record. Therefore, investors and lenders could want to see how you expect to recover your business if everything doesn’t go according to your business plan. You should include both a short term and long term plan that will hopefully never have to be actioned.
The Princes Trust offers a variety of business plan resources including a detailed business plan template to get you started.;