How to write a Business Plan

If you are just starting your business, or are looking to expand with a new service or product line, you may want to approach a bank for a loan, or an outside investor for finance. If that is the case, you will need to prepare a business plan to demonstrate that you have a sound business, and are worth lending money to, or providing with investment. Nobody is going to lend you any money without one. But what should a business plan include, and how detailed does it need to be?

Business plans can vary in length and format, and also in the depth of detail required, although, as a general rule, the more money you want to borrow, the more information you should be prepared to provide. There are a lot of templates available which can be downloaded, so by all means choose one of these and adapt it for your needs. However, it is strongly recommended that you use the services of an accountant when you prepare your plan. Not only do most plans require a lot of financial information – both in the form of historical data and financial projections. There is also likely to be a due diligence phase whilst the loan or investment is under consideration, during which the bank’s loan officer or investor’s financial adviser may ask a lot of technical and financial questions. A suitably qualified accountant will help deal with these enquiries and provide some level of comfort to the prospective lender that your business finances are well-managed.

It is important to remember at the outset that, however good you think your business is, or however convinced you are that you have a winning service or product, for a third party financier – bank, investor, venture capitalist – the only thing that matters is that your business or idea has the ability to generate enough cash to pay back the loan or investment. Your business plan has to convince them of this.

Broadly then, a typical business plan would include the following:

  1. An Executive Summary. This is a concise summary illustrating the key points that are detailed in each section of the plan. The summary should be strong enough to stand on its own as a separate document.
  2. Business Overview. This offers a description of the business including:
    • Business history;
    • Legal structure;
    • Type of business;
    • Geographical location;
    • Means of conducting business e.g. online, shopfront operation, mail order etc.
  3. Operations Plan. This explains how the business will function, including the physical set-up and responsibilities for particular tasks;
  4. Market Analysis. This includes an overview of the market as a whole, with specific data, definition of the target market, and plans for catering to that niche audience.
  5. Products and Services. Describe the products manufactured or the services offered, and identify the characteristics and the strengths of each.
  6. Sales and Marketing. Give pricing and sales information. What are the reasons why your target market will want to buy what you have to offer? What is your pricing strategy? How will you advertise and market your offerings?
  7. Competitor Analysis: Describe your main and indirect competitors, and analyse their strengths and weaknesses. Demonstrate how your product or service will give you a competitive edge over those competitors.
  8. Management Team. Provide concise information and biographies for the key members of the Management Team who will help implement the business plan.
  9. Financials. Include as much financial information as possible. This should normally include historic data – profit and loss accounts and balance sheets – for the preceding two years, and future projections for the next 2/3 years (if you are just starting out and have no historic information, then an assessment of your current trading position and summary of assets and liabilities will suffice). A cash flow forecast may also be required.

Your future projections need to be as accurate and realistic as possible, based on your research, pricing of products, customer numbers, overheads, rent, staffing number, inflation estimates etc. If the financial forecasts are not accurate, do not balance, are not robust enough or are not supported by the rest of the business plan, then you are sending a clear message to the bank or potential investor – I am not serious about this plan, so don’t lend me any money.

Try and incorporate charts and graphs in your business plan where possible. Not only do they break up walls of text but they are usually appealing and can be an effective way of conveying information. Pay attention to layout, and basics such as spelling, grammar, and punctuation. Nothing can detract more from an otherwise well thought-out plan than misspellings or poor grammar.

Once the business plan is finished, the business owner or manager has got to understand it in detail. While they may have delegated part, or all, of the business plan writing to their accountant, they will be expected to know every detail of it if questioned by the bank or investor. Again it is a matter of convincing your audience. If you can’t demonstrate that you know your business, the market, the financial projections and the assumptions behind them, why should anybody risk their money with you?

Finally, it should be stressed that a business plan should be an essential document for any business, not something prepared as a one-off when loan financing or investment is required. A business plan provides a blueprint for your business, providing a framework and context for it. Having a plan enables you to test the feasibility of business ideas, allows you to plan for future events, the need for additional resources, staff, equipment etc., as well as forecast business peaks and troughs. Your plan should be updated on a regular basis as the business evolves, objectives are met or priorities are changed. Done properly, a business plan clarifies where you’ve been and where you are going.

If you need outside finance or investment to help grow your business, then you are going to need a business plan. No bank or rational investor is going to lend you money without one. Templates are freely available which can be adapted for your purpose, so there is no need to invent anything from scratch. However, there are a number of dos and don’ts to remember when preparing your plan:

  • Do include an executive summary. This needs to be strong enough to stand on its own;
  • Do check for correct spelling, grammar, punctuation;
  • Do include charts and graphs where possible;
  • Do make sure that your understand your own business plan in detail, including the financial projections and assumptions behind them.
  • Don’t prepare your business plan without engaging the help or services of a suitably qualified account;
  • Don’t skimp on detail or ignore sections of the plan. Preparing a detailed plan takes time so get used to the idea;
  • Don’t just think of a business plan as something you only need when trying to attract outside funding. Instead use it as a key document for managing your business and update it regularly.














































Leave a Reply