The idea of creating a fully-fledged business plan can certainly seem more than just a little daunting. If you have never put together a business plan before, you perhaps have no idea where to start and so as a result, you keep putting it off.
A well-thought out business plan is vital to the success of your business and skipping this crucial step could hold your start-up back long term. When you create a start-up business plan, it provides the steps you need to work out what you need to do, what resources you’ll need and what you expect the outcome to be.
Your plan will become your business blue-print and it will help to provide direction during times when things start to become blurred. Starting and growing a business is never a linear journey and sometimes we move in directions we never anticipated.
But it provides more than just the much-needed clarity in times of confusion. If your business plan is well researched, it can help you acquire the funding you need to launch your SME, whether that is from investors, banks or alternative lenders. Not all businesses go ahead with writing a business plan, but when it comes to raising funds, you will struggle to ever find a company that managed to acquire funding without one.
Over half of start-ups are unsuccessful in their attempts to secure funding because they do not have adequate experience of making business plans. And remember that investors will certainly want to see a business plan before they decide whether to invest in a start-up or not.
Your business plan will be your main tool when seeking outside help and without it, you might find that your efforts fall short of success.
It is worth remembering that the way in which you write your start-up business plan will depend entirely on its audience. If you want to attract investors, you need to be persuasive and give them what they want to hear, which are things like exit strategies and how this investment is going to benefit them.
However, if you are writing your start-up business plan to access external funding from a lender, then you will need to take a different approach. Rather than being persuasive, your aim to is be reassuring and entirely transparent. Whilst it might seem tempting to exaggerate to begin with, this will only make your financial situation difficult at a later point in your journey.
Lenders will want you to outline your personal net worth and they will predominantly want to learn more about your financial history, if your start-up offers stability and whether you have bankable assets should things take a turn for the worse.
Before you write your plan, you will need to have access to the following:
Once you have everything you need, you will need to split your business plan into 7 important sections. This is also a good way to tackle writing the plan effectively as you can do it one section at a time, which is a relief for most business owners, especially those who are preoccupied with trying to launch their new venture.
The team at Nucleus have discussed each of the essential sections below.
1. Executive Summary
Your business plan needs to begin with an executive summary and it is exactly how it sounds. For this section, you’ll need to provide a succinct overview of what the entire document contains. Whilst this is where your business plan will start, it is recommended that you write it last.
Whilst this might seem like you’re working backwards, it actually makes complete sense. The purpose of an executive summary is to briefly explain to your reader what is included within your start-up business plan and the end goal is that you draw them in enough that they want to learn more about your SME. Think less tedious, more elevator pitch.
The most important thing to remember when writing your executive summary is that you need to capture the reader’s attention so that they continue to read on – make it convincing! Think of it as the mini version of your whole business plan – it makes sense independently of what follows and the rest fills in the details to provide the bigger picture.
Overall, your executive summary needs to briefly describe your business, what products or services it offers, your target market, an overview of finances, any critical details and of course, the purpose of the business plan – whether that is to secure funding from lenders, attract investors or simply provide clarity and structure.
If you hope to use a business plan to entice investors or persuade lenders to grant you a start-up loan, it is especially important that you get it right. Put yourself in the shoes of an outsider and remember that the reader may not have any knowledge or experience of your industry, so this section needs to bring them up to speed first.
As far as length is concerned, less is more when it comes to your executive summary. If the reader decides to delve deeper and read your entire start-up business plan, there is plenty of opportunity to add detail and demonstrate your research. But before you get the reader to that stage, you need to first pique their interest.
As a start-up, you will likely be asked to send a summary memo in favour of sending the entire business plan first. So, when you have finished writing your executive summary, re-purpose it into something punchy that is effective as a stand-alone item and then send that to investors and lenders instead.
2. Business Description
This section outlines all the must-know details about your business. It should include details about the location of your start-up, how large it currently is, what your business does and ultimately, what you hope to achieve. Think of this section as an opportunity to communicate your vision whilst providing an overview of the most important points about your start-up.
A great way to write this chapter is by using the age-old 5 W’s technique: who, what, when, where and why. Talk about the top-level information, yourself as the owner, your management team and why your product or service is unique enough to stand out from your competitors.
Must have details to include:
This section is usually the shortest chapter of any business plan, so be sure to keep it succinct whilst not forgetting any important details. This is the first real chance you will have at introducing both yourself and your SME to individuals outside of your business and remember that first impressions count.
3. Products and Services
In the third chapter of your start-up business plan, you need to talk about your products/services and why your SME meets the needs of potential customers. Whilst explaining what exactly it is you plan to sell, you need to clearly demonstrate the benefits from a customer perspective. What does your product or service help achieve or avoid for the customer? How will it impact them? What sort of customer would be interested in buying from your business?
Separate from the customer focus, you will then need to present details about the suppliers you intend to or already use, the costs involved to supply your product or service and the overall revenue your start-up expects to make from the sale of them.
It is also advisable to describe the market role of what your business can offer - what will your product or service bring to the marketplace that makes it different from what already exists currently? Is there any real demand for what you can provide and if so, at the price you plan to offer it at? The best way to increase product demand is to offer something that your market truly values, so pay attention to the needs of your customers.
If you want to break into a new market, you will need to have an edge that makes you stand out from your competitors who are already well-established within your niche. Unfortunately, not all amazing products or services come with a guarantee of success.
Regardless of how innovative your idea may be, if the demand is not large enough to make a profit, your start-up will fall short of profitability and a business that is unable to make profit is a business no-more.
Finally, it is worth noting that you might need to include any relevant copyright, patent or trade secret data within this part of your business plan. If your start-up can offer customers something that is truly unique in nature, you will need to ensure that your idea is protected.
4. Marketing Plan
For this section, you need to describe your desired brand positioning and what promotional methods you intend to use to attract customers to your products or services. Investors and lenders will be interested to hear how you intend to grow your business but the marketing plan shines light beyond how you are going to pull in the numbers.
When done properly, a marketing plan identifies who your demographic (target customers) is, how exactly you plan to reach them and grab their attention – and finally, how you intend to retain them so that you have repeat custom.
You will also need to clearly identify your unique selling point (USP) and focus your marketing efforts on whatever that is. Your USP will enable your start-up to distinguish itself from its competitors and without one, you will likely find it difficult to break into the market, especially if it is already somewhat crowded.
You will need to establish what your competitors are doing well if you intend to compete with them for market share. This is why it is vital that you know your USP so that you can capitalise on what they don’t and can’t offer your target market. Check out the marketing campaigns of your direct competitors – study their messages, their ads, their content strategy and then work out how you can bring something more to the table.
This section needs to be thorough, so aim to write three to four pages. This is your chance to explain to the reader that your start-up fully intends to take advantage of its chosen target market and you need to prove that in theory, you are absolutely equipped to do just that given the opportunity.
Ensure that you conduct as much market research as you possibly can as that is the key to creating an effective marketing plan. You need to know your market inside out, be able to beat the competition and most importantly, you need to be sure that there is a real demand for what your start-up provides.
5. Operational Plan
Simply put, this is the part in your start-up business plan where you outline your business’s goals, objectives, actions and the timelines in which they will all be completed. You will need to disclose all the tactics you have up your sleeve as no investor or lender will willingly put money into your business if your ideas don’t seem like they are ever going to come to fruition.
When you are writing about the steps your SME will take to achieve all its desired goals, it is a good idea to simplify it to address the following:
If there is any acronym you need to remember, it is the one created for the commonly-used S.M.A.R.T philosophy. Setting SMART goals will ensure that everyone in your start-up is working as effectively as they can be, including you and what business owner doesn’t want to maximise on the efficiency of their business operations?
Specific = make sure your operational plan answers what you want to accomplish; why completing each specific goal is important; who is involved to make that happen; which resources will be required and where it will happen.
Measurable = to track your goals, you will need to ensure that you have metrics in place to measure them. Ways in which to measure goals may be centred around how long tasks will take and how much they are going to cost.
Achievable = how important is this goal and how is your start-up going to ensure it manages to complete it? You need to define what tools, skills and resources are needed to complete each goal and then work out whether is it realistic that you will accomplish each of them.
Relevant = do each of your goals make sense when part of the bigger picture? Every goal needs to align with the broader business goals you have set.
Time based = each of your goals need a time in which they are to be achieved, but it is also important that each of them are realistic. Setting goals with unrealistic timelines will only create bigger problems down the line.
6. Management and Organisation
For the sixth chapter of your start-up business plan, you will need to summarise important information that includes your organisational structure, the differing duties of your business members and whatever expertise, qualifications and education they can introduce to your SME.
External parties will certainly be interested to find out how you plan to run your business, but they will also want to know what experience your start-up will bring to the industry as that will influence how successful your venture is.
The fantastic part about creating a management and organisation section within your business plan is that it will clearly document the talent and recognition members of your company have. It’s easy to forget about awards and certificates, but when it comes to preparing your media kit and seeking publicity opportunities, this section will become your immediate go-to.
Additionally, this is the part where you clearly explain your organisational structure and outline the hierarchy of your business. It’s good to breakdown management to how many years’ experience cumulatively your business has and then who answers to who.
There might be members within your business that have little involvement, such as silent partners - outsiders will want to know this. Percentages of ownership also go into this section, including the type of ownership, as well as positions within the business and previous employment.
If your start-up has a fair number of employees, consider presenting the last part in a simple table or family tree diagram.
7. Start-Up Expenses and Capitalisation
In your final section, you simply need to outline all the expected costs associated with the proper launch of your start-up. If you are already operating but intend to scale up drastically, such as changing from a home business to one that is ran from a bigger office, this section is especially important.
Investors and lenders will refer to this as one of their focal points, as ultimately the money they inject into your start-up will be spent on whatever expenses you anticipate there to be in this section.
The way to do this is to make a list of all the individual items you need. For example, if you are opening your own hospitality business, you will need to include all the expenses associated with that, such as buying equipment, stock and finding the perfect location for your start-up.
Once you have your start-up expenses, capitalisation equates to the total investment you will require, whether that is from an investor or finance lender. When you are calculating your expenses, make sure that you allow for contingencies as often, things never go quite as planned when it comes to start-up costs. Accuracy is key here, so do your research on the real costs involved and never underestimate just how much things are going to cost initially.
It is also recommended that you add 20% of the total expense amount to the final sum to allow for breathing space in working capital when you launch.
Once you have completed all the above, you will then have the perfect working business plan for your start-up. Depending on what you are using the business plan for, you can refine and change it as per the requirements of its use. A great addition to any business-plan is an appendices including all of your research, plus any other relevant information which might entice external bodies to provide your start-up with the funding it needs to flourish.
If you are experiencing cash flow challenges or want to realise your business growth plans, get in touch with our team of Funding Specialists today on 020 7839 9451 or email firstname.lastname@example.org.
1 July, 2019