A good business plan sets out what you want to achieve and how you intend to make it happen in clear and simple terms. It doesn’t have to be a hefty document and definitely shouldn’t be long-winded, especially if you’re trying to persuade your bank to fund your limited company, attract new investors, or motivate staff.
So, what are the core elements of a business plan, thinking in particular about start-ups or small businesses, and what format should it take?
Scroll down for 10 business plan mistakes every limited company owner should avoid!
What every business plan needs
For a business plan to be credible – and not come across as mere wishful thinking – it has to contain some essential information about your business. Most business plans should include the following:
- An overview of your business, stating what you do and what, if anything, makes you different. If you have a unique selling point, be sure to say what is.
- Define your goals in concrete terms. What do you want the business to achieve?
- Define your audience and the market. Show you understand who your clients or customers are and how they will access your product or services. State how the market operates and where you see your place in it, in terms of your products and pricing.
- Provide basic financial details about set-up costs, production and operating costs, and where investment is coming from. What is the break-even point for your business? Include both short and long-term goals.
- Who is on your team? People are key to the success of every business so describe your team, briefly mentioning collective experience and skills and the passion you share for the business.
Depending on your type of business, you may also want to include a marketing plan, advertising strategy or full-blown SWOT analysis, but remember to stick to the point and be brief.
Benefits of writing your business plan
Writing a business plan is not just for the benefit of would-be investors or your bank manager, but is a useful process in itself. It will help you to identify and articulate your objectives more clearly and identify what the challenges are and how you may overcome them.
By stating your short-term and long-term goals you’ll have to consider how you will measure and demonstrate progress. Writing a business plan forces you to be proactive and can be a strong statement of intent that will help to keep you on track going forward.
Choose a format and style that suits
A business plan doesn’t have to be just a bunch of facts and figures or be presented in a traditionally linear format. If you’re a start-up involved in design or one of the creative industries, for example, let this shine through in your business plan by choosing a format that reflects your creativity.
By all means uses images, charts, and infographics as well as words, whatever helps to get your message across so long as the information is easily understood.
Remember, your business plan has to be shareable by lots of different individuals, so keep it simple and use plain English, avoiding jargon, or the latest buzz words.
How to use your business plan
A business plan is not simply to clarify your ideas before launching or to help secure funding for your venture, but can play a key role in how you run and understand your business on a day-to-day basis. You can use your business plan to compare actual results with the original forecasts you made, to see if you’re on track and whether you need to revise your goals in any way.
Were you right about how customers would access your products or services, or understand your brand, and do you have to develop new strategies? Check your business plan regularly to chart your progress.
The business plan can be amended or adapted in response to change, for example, if the market reacts to external influences, or the competition is doing something different. Your business plan can also serve as a kind of manifesto that you choose to display prominently for staff to see.
There is no single right way to produce a great business plan but there are a few definite things to avoid at all costs.
Steer clear of the following ten common mistakes and you’ll increase your chances of convincing potential investors that you really do mean business.
10 business plan mistakes to avoid
1. It’s not all about you
Your personal attributes are important and may be key to driving the business forward but prospective investors are more interested in the specifics of the project. Instead of promoting your expertise, dreams or past successes, focus your business plan on delivering answers and addressing any areas of concern your potential backers may have.
2. State your objective
Don’t neglect to give individuals a reason to invest in your project or business. Be specific about what they can expect to get back in return and what your objective is for the business going forward. If you want to build up the business to sell it, then say so; if this is a one-off project or part of a long-term strategy, make that clear to investors.
3. Don’t inflate the numbers
Even if you believe your business will enjoy exponential growth, be sensible when it comes to throwing in numbers. Show you’re a strategic thinker by rounding up revenue forecasts and be realistic about what you believe can be achieved in one, two, or three years down the line.
4. Market research
Your project is not an aspiration but a well-thought-out plan based on solid market research. Data from a Google search won’t cut it, so show you’ve done your homework and understand how the market works, where the need for your products or service exists and the niche or gap you aim to fill.
You may have a great idea but you have to convince investors there’s a real demand for it. For example, if you’ve tested it on the market, explain briefly how well your product was received.
5. Don’t forget your USP
Don’t forget to say what it is that makes your business special. If you have a unique selling point, say what it is and how this differentiates you from what your competitors are doing. If what you have to offer is an improvement or iteration of what already exists, say how this will give you an advantage.
6. Don’t dismiss the competition
Even if you have an exceptional and unique product, you’re likely to have some competition – if not now, then in future. Don’t try and pretend otherwise or dismiss the competition.
Backers will be more interested in seeing that you’ve considered how competitors may react, what this could mean for your business, and what your strategy will be in response.
7. What are the risks?
There are always risks in every venture. It’s important that you show potential investors that you have considered what these are, including market demand, competition, resources, supply lines, etc., and how you would deal with a worst-case scenario. Of course, the flip side of risk is reward so don’t neglect to articulate the potential for growth by using simple graphics, where possible.
8. Don’t underestimate the resources you need
As a start-up, you may be operating from home and have fairly modest overheads, but as your business grows, you will need more resources.
Don’t neglect to factor in future costs to cover moving to bigger premises, buying new equipment, taking on staff, paying suppliers, consultant fees, and any other expenses you may incur in order to achieve the kind of growth you predict.
9. Serious investors aren’t naïve
Remember, serious investors will carry out due diligence before deciding to put money into your business, so make sure you are totally honest with them at all times. Don’t be tempted to exaggerate what the business can achieve or has already achieved to date. By all means, be positive in your predictions but never try and mislead investors.
10. Keep your business plan up-to-date
You may be lucky and get the backing you need at the first attempt but getting your business off the ground could take some time. It’s important to keep abreast of what’s going on in the market and change or adapt your business plan as required. Presenting a plan that doesn’t reflect the current market or business environment will make you look out of touch and could scupper your chances of attracting investors.