Whether you’re starting a new business, or looking to expand or launch a new product, having a strong, well-thought-out business plan is crucial for your business success. It’s going to be difficult without one when it comes to maintaining a vision for the future and the steps you need to take for what your business needs to be. A business plan is also crucial if you are looking to raise funding, either through loans or bringing on a business partner.

However, writing a business plan isn’t easy and not everyone knows exactly what the business plan should outline. This blog goes into the two types of business plans (Traditional and Lean Start-Up) and the way they are structured.

Before you begin writing…..

Know your audience! Your business may operate in a very niche space, but using niche and complex language may not be understood by lenders or investors who don’t have expertise or knowledge in that space. Keep it simple so that your main points come across clearly and succinct.

It’s also wise to keep the length of your plan in mind when it comes to your reader. The aim should be to keep your plan as short as possible, but certain lenders or investors might want to see more details while others might want only the high-level information. For example, a potential business partner will likely want to see a bit more details than an underwriter evaluating your business.

Traditional or Lean format?

As mentioned before, there are now two ways you can write your business plan. The traditional version, and the most common, is likely what you’ll be using. The traditional plan contains far more detail and should be used for most scenarios. Alternatively, you can write a lean startup plan, which are one-pagers and detail your business only at the highest level. This is ideal for businesses that are likely to change quickly or are on a short timeline.

Writing a Traditional Business Plan

A traditional plan is typically comprised of seven sections that are each crucial for explaining a different part of your business. The length and detail of your plan will vary with the audience of the plan and how mature your business is. You’ll use a business plan to sell your business to investors or qualify your business for a loan with lenders. Having a solid plan is always useful and can also help keep your actions as a business owner on track.

Step 1: The Executive Summary

Probably the most important part of the plan, this is where you create interest in your business. You must get the reader to believe in you so really sell your business and explain why it matters. Support this with a high-level summary of your plan and operating model and it should be a maximum of 2 pages.

Step 2: Write a description of your business

Remember, this is the first time that the reader has seen your business so really go into detail of what your business does, how you stand out from your competitors, how your business is different, the target market and the opportunity you are capitalising on.

Step 3: Competitive and market analysis

Your reader will want to understand the market you are entering, the threats from competitors etc, so it’s important you do your research into the market you are entering, highlighting the opportunities your business will take advantage of. Illustrate the competitive landscape. What are your competitors doing well and not so well? Why are you moving into this space, and what’s the weakness to be exploited in the industry? How will competitors logically react? Are you going to take competitors’ customers? How?

Step 4: The structure of your operation

This part gets into the tangible details of your business. How will your business operate on a day-to-day basis? Your plan should really detail this out.

What’s your business’s legal structure? Is it a sole proprietorship? Include this as well. We’d recommend putting together an organizational chart if there are multiple stakeholders to not only show who’s involved but to also show how everyone brings something to the table.

Step 5: Describe the product

Write in detail what’s your goods or service that’s for sale? Be sure to describe your product and how it is differentiated from similar ones. How will it be priced, and how does that play in the market compared to competitors? This section will likely be a bit longer than the others because of its importance.

Also include a marketing or promotions plan here. You could have the best product in the world but it won’t matter if no one knows about it. Identify your target market and really detail out how you’ll make that market aware of your product. What’s the message you want to promote and why does that resonate with your specific product and the target audience? How will you build awareness and retain loyalty?

Step 6: Raising Capital

If you intend for a prospective investor or lender to read this, you’ll want to include a section here on your funding request. Be clear with how much you’re asking for and why. You don’t want to ask for a £200,000 loan or investment without a clear plan as to what exactly that money would be used for. On top of explaining what the funds would be used for, also clearly state the projected ROI.

 Step 7: Financial Analysis and Projections

You’ll want to do two things here: Explain your business’s performance in the past and show it will grow in the future. Use charts and images to help make the experience easier.

If your business has already been operating for a few years, demonstrate stability through your finances. But if your business is newer and not yet profitable, be clear and realistic with your projections. For example, if your sales have been increasing at a steady 5% every quarter, you don’t want to suddenly assume 50% sales growth per quarter for no reason (think The Dragons Den here!).

Research industry norms and look up how comparable businesses have performed. Include income statements, balance sheets and cash flow statements for 3-5 years if possible. When showing your financial outlook, project your vision out over at least three years. Clearly state the logic behind your projections, and you can also tie this section back to your previous section on raising capital if applicable.

Step 8: Appendix

If you have any remaining pieces of information such as relevant patents, licenses, charts, CVs of the team or anything else that wasn’t able to fit in organically in the plan elsewhere, feel free to include those here. Don’t use this as a space as a document dump. Instead, be absolutely sure that every piece of information that goes here goes toward supporting your business plan.

Writing a Lean Start-up Business Plan

The rationale behind lean start-up plans is that every business plan can be divided into nine segments. You can describe each of those segments at a high enough level where they can be listed out on a single page. Compared to the traditional business plan, this allows for far more flexibility in case your business drastically changes quickly.

Here are the basic components you’ll need in a lean start-up plan:

Customer Segments. Describe your target audience(s) that your business will appeal to. Most businesses will have multiple segments listed here and it’s important that you properly identify them.

Value Proposition. Your business may appeal to different customer segments in different ways. If that’s the case, you should list out the different value propositions for each segment clearly and succinctly. If that isn’t the case, you can list out the single value proposition your company will have.

Channels. How is your value proposition going to be communicated to your customers? Detail out brand awareness as well as ongoing communication channels with your customers.

Customer Relationships. Once you’ve explained how you’ll be communicating to your customers, think about the kind of relationship you’ll want to maintain with them. Will communication be ongoing? Will you personally be contacting them or sending automated emails?

Revenue Streams. How will your business make money? At what point in the relationship with your customers do you start to recognise revenue? Most companies will have multiple streams although if your business is just starting out, you may only have one. That’s alright, but just be sure to demonstrate you know exactly where your revenue will come from.

Key Resources. You’ve described how you’ll be capturing revenue from your customers, but what will the infrastructure look like that will support it? Supporting resources may include but aren’t limited to staff or capital.

Key Activities. What are the absolute necessary activities in your plan for your business to be successful? Detail them out here and show why they’re important.

Key Partnerships. As a newer business, you likely won’t own all of your key resources and won’t be able to do all of the key activities yourself. What other entities are you working with? Consider suppliers, vendors and anyone else you’re planning on doing business with.

Cost Structure. Now that you understand your business’s infrastructure and needs, you can detail out the total projected costs of your business or at least identify the biggest costs you have in your plan right now. What is your plan to ensure you’re maximising the value out of those costs?

Summary

Writing a business plan will take time but make sure you are efficient with your plan – ensure every single word, graph or image serves a purpose. Be really honest with yourself too. Don’t inflate projections – use industry or sector benchmarks to determine realistic measure. If you are looking for help with funding or writing a business plan then talk to us. We’ve been helping businesses for many years and have access to an array of funding and financial investors that could kick-start your business.