Writing a business plan - part one

The tips I give are ones I have picked up myself writing documents and procedures over the years.

So what is a business plan?

The plan is a document which outlines everything you are going to set out to do to make the business successful. There are around eight steps in a business plan, such as an introduction to the business, finance planning, marketing strategy and much more. Some parts of the plan will need to be handed over to your bank or your accountant to prove that you have done the thinking and are serious about progressing.

The steps below do not necessarily represent each section of the business plan, they are a guide to how you should structure and think about it. For example you may have a section for market analysis, and then another section for demand analysis. The steps just represent the thinking process you need to go through but if you want, you can add in additional sections, although you need to ensure that the document does not get too big. As a guide, I would make the document approximately 20-25 pages from beginning to end. Here are the steps:

Introduction

Business objectives

Market analysis, and demand

Environmental, competition and company

Marketing strategy

Measuring success

Financial analysis

Conclusion

For some people these steps may seem quite foreign in their nature, especially if you have never been involved in a business before, or studied business courses at school or college. However, they are very logical and straight forward. They are easy to understand and ensure that you think about every single step that is needed.

Step 1. Introduction

This is the header page and title and date. Use nice simple formatting and don't complicate things.

You should include basic information about yourself, your contact information, your business name (if you have it yet), where you are based, how old you are, what your general skills are, and your qualifications.

The contents should also be included in this section.

Step 2a: Objectives

The objective should explain what the business plan is setting out to achieve. Why are you writing this? What is the intention? Have you spotted a gap in the market? Do you have a new product you could sell? Are you expanding ?

TIP: Keep this simple, brief and if necessary use bullet points.

For example you may want to use something like this:

"Over the past five years, a gap in the market has arisen and a product which we produce can fill this gap in the market."

Don't go into what experience you have, or what your product is yet. Just explain why you are writing the document as there are other sections to explain the areas of the business.

Step 2b: Business Review

Along with the objectives, the business review contains information about your business and your target markets.

Here you can write about what the product or service is. Which market it is going to target? This point is needed for your bank as they require to know which sector you are going to work in.

What investments are required here? Why are they required? What are the predicted results over the next 12-24 months, or longer if needed?

Keep this short and simple and straight to the point. For me, I focused on IT services and the ever-changing IT market, which requires more people offering expertise in many areas. This helps businesses, rather than companies having to pay for people with a niche skill and limited ability in other areas.

Remember, don't go into detail here. It is still part of the 'objectives' section. The reader should know what your business is about by now. Also they should feel confident that you know how to proceed with the business and it makes sense.

Tip: don't use words like 'if' and 'may' and 'probably', sound sure and positive of your plans.

Step 3. The market and its demand

Here we start to get into the details. This section is important if the business is going to be viable, and determining which sections you need to invest in.

Define the following sections:

The market – what the market is, or the people and organisations which make up the market.

Geographical data – Where is the business going to aim in terms of geography? If you are based in the UK but want to trade with Europe, then this will have tax implications so this needs to be clear.

Consumer needs – Explain the behaviour of the consumers. Who are the consumers? Why do they need it? When does the need arise?

Market segment – Different consumers have different requirements. Explain the segmentation of the market and the different types of segmentation. For my business there are many different segmentations. For example, although everyone today uses IT in business, a retail business has different requirements than a legal entity from an IT point of view.

The demand – Here we mark out the demand that the business can cope with.

Potential demand – This is the demand forecast for the business which you could provide as produce or services and measures your maximum demand output.

Actual demand – This is the demand for the product or services for this year, or last year, based on actual transactions. If you have no data then previous experience can be used to make an estimate.

Future demand – Use the information in the actual demand and work out a percentage increase for the following year.

Demand evolution – Here we get into clever forecasting and numbers based on future employment of staff, business suppliers, and product opportunities in the market so you can work out your future based on other factors as well as your own business success. A spreadsheet will allow you to do these calculations and create graphs.

Tips: Be realistic. Consider a new business as slow and the success yield will be bigger as time goes on. Don't be too optimistic.

Step 4a: Environmental Influence

Here, you need to explain the environment influences that might impact your business. More often than not, there are other factors which you may not have thought of that will directly impact you.

Consider the following areas:

Economic

Social

Cultural

Technical

Legal

Demographic

Political

Religious

Think about issues like new political legislation, for example the recent Scottish Referendum, or cultural issues, like the origin of people in a given area which you plan to sell your product to.

Monitor the news, recent reports and business publications in your areas to ensure you are up to date on current events that may affect you.

Look at the changes in society, for example the mobile and tablet shift in the last 10 years and how this works in conjunction with your business.

Step 4b: Competition analysis

Competition is a very important factor in business as this could pave the way for your success or failure.

Think of your USP (unique selling point). What can you offer that nobody else can?

Understand your competitors: Can you work with them, or do you need to avoid them altogether?

Include information on the competition. This is useful.

Ask yourself questions like: What differences will you have to competitors ? How do you plan to change the market ?

Step 4c: Company analysis

Here you need to have a clear understanding of the operation of your business and how it is constructed. Think about presenting your business, and its capabilities.

Consider factors such as:

Departmental layout - What will your structure look like ?

Number of employees - Will it just be you, or are you planning to take more people on ?

The management team - Who is going to be making the executive decisions? Emphasise these people as they need to be trusted with any investment.

Products and services - What products do you have to offer? How do they work? Who is involved?

Company history - You could even include relevant work you have done for another company.

Strengths and weaknesses: It is essential you highlight your strengths. Remember that a strength can be a weakness – for example a single point of failure in a business.

Technology and infrastructure: Can your company use technology? Does it use technology? Do you need email and a website? Have you looked at Microsoft Office 365? If you have offices, have you thought how much you nee to invest into technology there?

Transport services: There are many considerations here. Do you have a car? What are the logistical challenges you will face. Do you need commercial transport? Do you have an Oyster Card if you need to travel in London?

Tips: Be optimistic about the capabilities and focus on the strengths. If you have weaknesses, then address a plan of action to resolve these.

The rest of the business plan will be covered in Kevin's next post.

You can read the original blog post on Kevin's site Worton Tech.

Part two of the business plan.