If you want to start your own business, writing a clear and well-structured business plan can really
help take that entrepreneurial idea you have and pave the path for it to become a reality.
But you might be thinking, what exactly is a business plan,
what benefits will it provide me as an entrepreneur and how do I write
one which is going to help me to start and run my own successful business?
Well, in simple terms a business plan is a formal document which is created by an
entrepreneur and contains details about all the essential ingredients
which are key to your business being successful.
Helping you as the entrepreneur to identify and consider the strengths and weaknesses of your
business idea as well as what is required to make it successful and minimise any potential risk.
A business plan also provides you with the foundations to understand the financial
side of your business and help you as an entrepreneur to obtain finance as you are
able to formally provide potential lenders and investors with a clear,
concise overview of the business and a vision of its future progress and profitability.
It’s important to note, that there isn’t just one standard template for a business plan,
and it is often adapted to suit the business and the potential stakeholders who it is intended for.
However, it’s common to see the following ten key areas
covered across several sections within any good business plan, these include:
1. The business idea 2. The aims and objectives of the business
3. The market 4. The location
5. Personnel 6. Buying and production
7. Premises and equipment 8. Financial forecasts
9. Marketing 10. Sources of finance
Let’s take a look at each one of these key areas in more detail to help you to complete a business
plan and increase the chances of turning your entrepreneurial dream into a reality.
So first up, it’s the business idea. This section is very important as it is where you provide an
overview of your business idea including, the name, the legal structure of the business and
the general concept of what the business does. Sometimes you will see the term executive
summary used, but this is just a fancy word for summarising the points about your business idea.
Following this, you should outline the aims and objectives of your business,
essentially what does the business want to achieve in the immediate future and in the long term.
Any aims and objectives which are set should be SMART and allow the entrepreneur to
measure progress and performance over time. The third section explores the market which
the business will be operating within. This includes the size of the market,
a description of the customers who the business will be targeting
and who the main competitors are. It’s likely that your findings from any market research you have
conducted about the market would be included here. Next up, it’s important that the location where
the business will operate from is confirmed and what channels of distribution will be used.
For example, will the business sell directly to consumers online or utilise retail stores?
Up next, it’s personnel, within this section the people who will run the business are identified,
which could just be the owner, as well as the roles and responsibilities of any employees.
The methods of buying and production are covered in the next section of the business plan,
which allows you as an entrepreneur to discuss where you will buy your supplies such as raw
materials or finished goods from, alongside the methods and costs of production if applicable.
Importantly, every business is likely to require a premises and equipment for their business to
function effectively. So it’s important that the requirements and costs of any premises
for example a retail store or head office and equipment such as a computer or machinery
which are required for the business to function are explained in full in this section.
Now, we move onto what could be argued as the most important section, it’s the financial forecasts.
This is the section which allows you as an entrepreneur to calculate and analyse a series of
key financial indicators for your business such as forecasting the revenue, costs, and profit,
alongside producing a cash-flow forecast and a break-even analysis.
Following the financial forecasts, the entrepreneur would then cover any
marketing activities for their business which can be completed effectively through using the
marketing mix model, allowing the entrepreneur to consider and analyse how factors such as price,
promotion, product, and place will influence buyer behaviour and sales revenue.
The final section of the business plan allows you as an entrepreneur
to identify the required sources of finance for your business
such as how much is required to start and run the business and where this money will come from,
for example this could be personal savings, bank loans or from investors etc.
Now that we’ve explored the key purpose and benefits of writing a business plan,
alongside the key areas which are typically involved, it’s important to be aware of some
potential limitations and drawbacks when writing and using a business plan for your start-up.
Firstly, it’s only a plan, therefore it’s likely that what you put down on paper and forecast won’t
be the exact result. But you are allowed to pivot and adapt your business plan over time.
In fact, it should be viewed as a working document as you and
your business develop and grow overtime. In addition to this, if you are writing a
business plan for the first time, there’s a danger that any forecasts are going to be inaccurate.
For example you could overestimate revenue and underestimate costs
which could lead to serious cashflow and liquidity issues further down the line,
meaning you need to obtain more finance or the business ceasing to exist long term.
So that’s it, a quick introduction to business plans. If you’ve found the video helpful,
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