How to Write A Business Plan

An Introduction for Established Businesses

Knowing how to write a business plan is an essential part of thriving in an industry that is already a hugely overcrowded place.

Just like most things in life, it really is not a good idea to ‘wing it’ and instead, the better approach is to plan ahead intelligently. Failing to have any overarching goal is the reason why so many businesses, especially SMEs, fail. Running a business day to day works for the short term, but everything needs to contribute to the bigger picture.

Having a firm business plan in place is great for many reasons. Firstly, it can help owners, shareholders and higher management understand the fundamental needs of a business. It will be hard for a business to meet all of its strategic goals without a solid business plan, but there are other benefits of taking the time to write one too.

If at any point a business decides to try to access external funding, the financial lender will require access to various documents, including profit and loss statements, bank statements and a recently updated business plan.

Additionally, a business plan will also enable a company to maintain a healthy cash flow. This is a fundamental part of any successful business venture and the ones that fail to plan ahead are often the ones that become insolvent.

The Key Elements Expected from A Business Plan

Whilst it can be approached in various ways, there are still some fundamental parts that must be present in every single business plan. To have a business plan that succeeds in attracting financial support, it needs to tick numerous boxes, which include:

1. An executive summary
   2. A description of your business
   3. Extensive market analysis
   4. Accurate financial projections

Whilst it is tempting to go overboard with descriptions, simplicity is actually key when it comes to putting together a good business plan. The plan itself needs to be tailored towards a specific target audience and it is essentially a more extensive version of an elevator pitch.

Do not waffle on. Keep it short, concise and to the point, as there will be plenty of opportunities to elaborate at a later stage. The point of a business plan is that it can be referred to on a regular basis – if it is too lengthy and drawn out, the reality is that no one will want to read it, meaning it inevitably becomes a waste of time and resources.

If there is a need for more detailed information, it is best to include this in an appendix. For example, for companies who are trying to seek external funding, lenders may expect to see some extra evidence as to why the business requires financial support.

Be Honest and Realistic

Whilst an over-exaggerated business plan might look attractive to shareholders, it ultimately becomes void if it is not an accurate representation of what has been and what can be achieved.

Do not aim to be overly optimistic with sales forecasts as this will only end badly. A business may end up becoming stuck in a financial rut with a disastrous cash flow problem, all because financial projections were over ambitious.

Identify any potential threats and openly discuss weaknesses. This will only help a business to thrive and overcome any challenges, because they are being addressed head on, rather than being buried in the sand, only for them to rear their ugly heads again at a later point.

Discuss the Business – Provide A Brief History

Writing a business plan that is prevalent with industry specific jargon will do no one any favours. Keep it simple and comprehensive so that it can be easily understood by individuals that are not necessarily familiar with that particular industry.

Including a history of the business is a good place to start. It does not have to be too detailed – just outline when trading first began and what progress it has made since then. If there has been a change in ownership, mention that. And to conclude, summarise the current ownership structure so that readers fully understand the current situation.

Then it is time to address the business directly – this means discussing its Unique Selling Point (USP). What makes this service or product different to all of the others out there? Why should customers, investors, lenders etc. choose to engage with this business?

Also, include a list of both the advantages and disadvantages. Remember – honesty is key!

Market Analysis

Every good business owner knows that the key to standing out from the competition is to understand the competition. Any business that is at the top of their game has remained that way because they constantly assess the market and take the time to understand what their competition is doing well, so that they can do it better.

In a business plan, you need to take a step back first. Before you fully address the competition, it is important to first outline the market and more specifically, what part of the market the business best serves.

Once this has been addressed, it is then best practice to discuss what market share the business has. Are there any obstacles in the way that could potentially harm the future of the business? Are there any trends that are set to make huge waves within the industry? If so, a business plan should state how the business is going to ride this wave, rather than succumb to it.

Get to Grips with The Financial Aspects of The Business

This is arguably the most important part of a solid business plan. The finance section needs to be spot on as any business will inevitably fail if it is not clear about how it intends to make a profit.

Whilst it might take a little time and effort to perfect, it will be worth it in the long run as securing investment opportunities and external finance will be a lot easier.

Below is a checklist containing the top 10 things we at Nucleus Commercial Finance like to see in a well-formed, solid business plan:

1. Executive summary
   2. A mission statement
   3. Outline of ownership and location
   4. An external analysis
   5. SWOT analysis
   6. Well researched objectives
   7. Key action plans
   8. A profit and loss account
   9. A cash flow forecast
   10. A balance sheet

Business plans for Startups

Launching a startup business, especially if it is your first time round, is an extremely big deal. The first hurdle you will face is accessing funding, whether it is through traditional means, Government loans, or, as is becoming increasingly common, an alternative financial lender. Regardless of who you approach to secure the funds for your startup, they will expect to see a well presented business plan, and as a result, understanding how to write one should be a top priority.

While established businesses seeking funding can rely more on their track record to demonstrate to lenders that they are a reliable client, brand new startups will need to present a thorough and well thought out plan to convince lenders that their venture will be a success. There is a lot to include in a well drafted plan. Demonstrating a watertight and comprehensive understanding of the industry you hope to become established in, along with a convincing vision of your future, means you will be taken seriously by any lender you approach.

Executive Summary

The executive summary is presented at the very beginning of your business plan, and should give an overview of the main points found within. Ideally it will focus on a brief description of your business’s purpose, who your target market is, and demonstrate how your brand is going to bring something new or unique to fill a market gap.

A well written executive summary should aim to catch the attention of a lender and convince them to read further into your business plan proposal. Focus on writing something that is to the point, contains key details, and allows your unique vision to be understood from the go.

Business Overview

Brand and Identity

The brand of your business is anything related to your name, image and identity, including logos, slogans, colours, proposed building architecture, or even sole products. Using a restaurant as an example, it would be important to give a ‘feel’ of your business and its aesthetics, from the storefront, to the indoor theme, to what food will be for sale and what kind of service you will deliver.

Business Direction

The direction you aim to take your enterprise in is demonstrated in the vision and statements of your business plan. A vision statement should clearly lay out the ideas you have for your brand’s future. Depending on the industry, it is important to focus on ideas that are unique to your niche, and show your knowledge of what is important. Perhaps you have a distinctive or quirky take on customer service, you want to be the most popular restaurant in your location within a year, or maybe the most improved IT service over 6 months of business. Be clear and bold in your intentions.

A mission statement on the other hand should demonstrate your knowledge of exactly what your business is for, what it actually does, and who its intended clientele will be. Clear objectives should be given, with explanations of how they will be achieved.

Organisational Structure

When laying out the organisational structure of your startup, a number of vital details need to be covered to give potential lenders a clear understanding of your intentions and business structure. It also gives you an opportunity to prove you know how your business will work, from its ownership and legal structure, to the team and their roles, and the values you intend to embody.

First, you need to establish if your business will operate as a sole proprietorship, LLC, partnership, or corporation, as this choice will directly affect ownership division and what stakes are held. Certain business ventures may be better off having a board of directors, depending on the scale and complexity of operations, while SMEs with a more localised focus can thrive through the strength of a single driving force with a clear vision. Lenders will look to assess the management structure of your proposal to determine the risk potential of the venture and investment value.

With the ownership established, an organisational chart can precisely detail the internal framework of roles and responsibilities amongst different tiers of staff to explain how your operations will be performed. Laying out a clear and concise workforce structure goes towards demonstrating how effective your business will be, and shows investors you know how your industry works and what it requires to succeed.

Highlighting the company’s values will also demonstrate to investors what kind of culture you intend on fostering. Producing ownership details for transparency and accountability, while giving a commitment to modern business values and how your workforce will operate will all collectively enhance your plan’s credibility.

Products and Services

Regardless of your industry, a clear explanation of the service your business offers will be necessary for lenders, you should also detail any products you intend to offer, explain how you will solve customers’ problems or provide for them, and what makes your own brand unique in doing this.

Giving a detailed breakdown of the benefits your services will bring to customers should be one of the cornerstones of your business plan and the ‘products and services’ section. Explain how your business enhances customer’s wellbeing, and depending on your industry, how it will perfectly address their needs more effectively than the competition. Showing off the fact you know your customers inside out, and are intent on a customer-centric approach to success, will enhance the overall attractiveness of your proposition. Investors will understand you are fully aware of your target audience and the value they bring.

With regards to production or manufacturing methods, you should make it clear on how you intend to produce the products you will offer. For example, if you aim to sell small hard-plastic devices which need to be mass printed through a third party company, having a devised plan of when batches will be produced for sale, from who, and where the operation will take place, will help to create a roadmap for how you see your business consistently achieving its operation aims.

This is also a good time to note how your brand will adhere to industry standards regarding quality control and regulations. Demonstrate how you intend to maintain your brand’s reputation to both customers and investors. Your knowledge of product and material source options, including supply chain management for goods and raw materials will prove you have done your due diligence across all areas of your intended market.

Proprietary information

If you are building a brand based on a single product, investors will want transparency, and confidence their money is going towards a business model that is sustainable. So, if your product is patented or not, or if a patent is pending, it is wise to include it in your business plan. If you have secured any exclusive sales agreements, for example a shop chain that might put your product out for you, this can also be noted as it may increase your chances of success.

Market Analysis

Your market analysis will detail your assessment of the market you intend to target, as well as demonstrate your knowledge of the competition in your niche. Producing a detailed analysis means you can create realistic projections, and help bolster a potential lender’s confidence in your business plans. Going forward, if you succeed in getting your startup off the ground, you will have a groundset of analytics, and a roadmap to address risks and make informed business choices.

Market Dynamics

Market dynamics will dictate the behaviour of all market participants in your industry, and inadvertently lead to constant changes in market conditions. Proving an understanding of the size of your industry and its trends allows you to explain how your enterprise can expand into a flourishing market. To do this you must understand its size and what is currently popular, as well as customers needs within the market, and suggest ways in which your service can evolve to keep up with prevailing innovations. This may cover anything from emerging AI technologies, to new health and fitness trends, or new supplements and medicines arriving on the market depending on your industry.

Some other important metrics to note when detailing the market dynamics are potential startup challenges and barriers. If you are planning to establish yourself as a printing publisher, the necessity for machinery is going to be large compared to building a brand on dropshipping. Companies that will require a vast amount of specialised technology, or operate in a unique way, should note the intentions for their funding, and offer solutions to explain why their business is worth investing in, regardless of those barriers.

Market Research

Data for market research into your industry can be sourced from a variety of places, and the more niche your product or service, the more necessary it becomes to do your due diligence. You likely would not want to establish a new restaurant that sells Japanese food exactly where one had just shut down due to a lack of interest six months ago. This type of first hand data can be obtained through direct surveys and interviews to understand what a local community would like to experience. Secondary research can also be done through census data and industry reports, or even through trade journals, depending on your trade. The more data you can collect to bolster your plans, and show to lenders, the more likely you are to succeed across the board.

A startup should be able to explain to investors how and why it will succeed in its niche. If relevant, why the location you are choosing will help deliver the service, that you understand how you will adapt to the market in the face of shifting trends, regulations, and technology, and most importantly, your research will show you understand the target market.

Marketing and Sales Strategy

A marketing and sales strategy should comprehensively outline how your startup is planning to reach its target audience. Not only this, it should detail how you are going to obtain them and turn them into repeat customers. This will involve advertising campaigns and how you intend to outreach them. This will of course depend on your industry, however it’s safe to say in 2023, digital marketing is a must regardless of your sector. Networking, word of mouth, and referrals will likely always remain the most powerful marketing there is, however without the initial outreach nobody will know you exist.

Once marketing frequency and choice of platform has been decided on, with a clear vision on how you are going to consistently push your brand’s visibility, you need to consider how you will position your product for best visibility in comparison to your competitors. This again needs you to demonstrate a strong understanding of your unique niche, and should be articulated with precision, highlighting distinctive values that will set you apart from others.

As an example, a luxury makeup brand might lay out its intentions to focus Facebook groups of their target audience, along with Instagram and Tiktok. They can reach out to social media influencers to get product reviews to build an image of what your product represents or is for. Perhaps it is an organic product, and you want to double down on your interests in eco-friendly customers, though beware not to isolate any parts of your audience with potentially edgy messaging. The purpose in that case should be to show how your product is unique in the industry, and how it can be inclusive to all potential buyers whilst having the silver lining of being eco-friendly.

Operations

Day-to-Day Operations

Within this section of the business plan you can lay out the scope of your operations, activities and daily functions. From management, to the shop floor, or chef’s kitchen to the waiters, and boardroom to installers knocking at your customers’ doors. Proving how you will manage inventory, staff, employee tasks and operations will be vital. The difference between a startup’s successes and failures rests on its ability to streamline their activities down to the smallest details. With a well-oiled machine, a company can set itself up to flourish and reach economies of scale.

Along with this section of your business plan, a detail of the resources required for your day-to-day operations to function will be required, namely capital, and any equipment needed for the operation to function. Team sizes and allocation, along with time management that will ultimately make for a smooth and successful operation should be noted. A lender will want to see you understand each of these elements, as they will help convince them your brand has long term sustainability potential.

Assets, Credit, and Stock

A checklist of necessary assets for your startup to thrive should be written up and presented to any lender you seek a facility from. Any number of relevant assets, credits, and stock assets, both tangible and intangible, should not be skimmed over.

Fixed assets, such as the premises of your business and any necessary machinery that will be required for operations, need to be noted in your business plan. It is also worth mentioning if your startup will already owe another party money for any reason, perhaps another startup loan, or any kind of fees that have gone into creating the brand. Further than that, a startup’s initial financial position, recognised by its open day balanced sheet, along with the financial stability of any CEOs, will go a long way to creating transparency and confidence for your lender. A well detailed assembly of these items can generate a great amount of credibility, and lean heavily in your favour.

Financial Planning

Providing a comprehensive financial plan to lenders will assist further in building confidence in the overall business plan for your startup. Demonstrating a knowledge of your goals, as well as the key financial insights that go into creating those goals should increase your chances of success in both securing a facility and maintaining a lucrative business.

The ultimate goal should be procuring financial insights that will not only push lenders towards investing in you, but also aid in your business’s future, as every projection you can accurately generate, especially in the early stages of the startup process, will ensure a smooth transition into larger and larger stages of growth.

Key Financial Insights

Well collected data for financial planning and creating financial insights aids businesses across all sectors, particularly when they are already trading. From taking advantage of unexpected chances, securing new capital, to sudden loss of staff employment for any number of reasons, financial insights can prepare you for any scenario. Such metrics can only be projections for a startup, however should be included in any business plan:

Turnover: Projected turnover helps lenders get an idea for your startup’s potential for sales and revenue growth. You will naturally be confident in your own brand or product to generate sales, but do not purposely try and overestimate generation. Demonstrating an understanding of realistic earnings will create more confidence in an investor than exaggerated numbers that may point to you not having done your due diligence.

Gross Profit Margin: Gross profit margin takes into account your gross profit divided by your top line, and is expressed as a percentage. The size of your gross margin will generally be dependent on your industry. Having researched your market, you should be able to provide a realistic idea, and also help yourself in gaining an understanding of what to expect once you have secured your finances.

Net Profit: Whilst figuring out projected financial metrics, net profit is important as it is vital for gauging an enterprises overall health, and its ability to manage costs. Demonstrating how your business will maintain a positive net profit and continue to be a sustainable model will leave lenders without any doubts as to your ability to repay a loan. Proving that you understand net profit also promotes trust, and will increase your chances of securing more favourable loan terms.

Sales Margin: Another powerful indicator of your brand’s potential profitability is your sales margin projection. Show lenders how well you know both your product or service, and the industry in which you intend to function. It is the measure of the profit you make on sales after related costs are accounted for. A greater margin is of course positive, but this is another metric that you should not artificially inflate, as experienced lenders will be aware, and will ultimately hurt your credibility.

Breakeven: A break even point will tie neatly into your other financial projections, and equates to the amount of sales that an enterprise needs to completely cover its costs. Including a breakeven point is vital, as it demonstrates an understanding of when you expect your startup to begin making a profit. For investors, this is important as it gives a clear timeline towards profitability and certainty of your startup’s ability to repay a facility.

Funding Request

Explaining what you intend to do with your funding, and exactly why you need the funding is important for lenders. Covering your capital expenditure plans provides clarity regarding long term asset investments, and creates a picture of how a loan will be utilised, and how those funds can help impact a brand’s growth and identity. Funding requests are scrutinised heavily by investors, so should be thorough, realistic, and as accurate as you can make them.

Financial Documents

Startups won’t yet have any historical data to provide to lenders, so it is important to have a number of projections and forecasts that demonstrate you have done your due diligence, and are aware of what realistic numbers will look like. The following documents should offer a comprehensive picture of your brand’s future financial health, along with growth potential and its viability within your industry. Through these financial documents, lenders can make an informed decision as to whether it is viable for them to invest in you. 

Profit and Loss Account: Profit and loss projections will demonstrate a realistic expectation of your startup’s financial performance over a period of time. You should cover expenses and revenues to let investors understand your brand’s potential profitability.

Cash Flow Forecast: The data in a comprehensive cash flow forecast will be vital for visualising your business’s potential to manage finances and maintain liquidity. Along with this, lenders can get a grasp on how efficiently your brand can ensure an ongoing operation.

Balance Sheet: Balance sheets cover the business’s projected assets, liabilities, and equity, and will tie in to your documents to provide a detailed view of what your enterprise’s financial health and stability will look like. A clear balance sheet with realistic data will also provide transparency for lenders.

Risk and Management

The risk and management section of your business plan should aim to showcase a comprehensive understanding of potential risks, what you are expecting to achieve with your brand and when, and most importantly for investors, your exit strategy from the loan you are seeking.

Risk Management

Your risk management can start with basics such as an acknowledgement of the necessity for insurance or liability, then, depending on your industry, you should explore relevant potential risks that have historically affected your sector, and may do so again.

There are countless problems that can arise across the business landscape, which is why you need to hone in on your own brand and demonstrate foresight and preparedness. If you start in construction, you should have contingency plans for escalating material costs. Brands based in the hospitality industry may demonstrate resolutions for scenarios involving food contamination. IT firms should outline how they intend to keep up with new technological developments, and all industries should be prepared for supply chain issues.

There are always unpredictable dangers to SMEs across all sectors, regardless how well you plan. For example, during 2020-21, thousands of businesses were forced to close due to Covid-19. Noting such problems, as well as demonstrating a clear knowledge of more realistic risks that may come your way will put confidence in your lenders, as they will see you have proactive measures ready to ensure you do not fail. 

Milestones and Timeline

Defining a clear set of objectives with a realistic timeline of how you will achieve them will help determine whether or not you are a safe investment. Your objectives should offer a vision of your startup’s intentions and ambitions, while milestones might involve product launches, reaching a certain number of sales, expansion achievements, or customer count to name a few. Your startup vision should be ambitious, but not overly, potential lenders will expect to see honest and achievable goals. Be detailed, and show confidence and knowledge.

Exit Strategy

An outlined exit strategy will give investors a better picture of how they will recoup their investment, and ultimately obtain a positive return from the transaction. Your strategy can help persuade investors that their money is in good hands as you present a long term plan for both growth, and on delivering returns. Consider this section just as much a plan for your investor than something you should intend to adhere to as you establish your startup and begin business.

Sustainability and Impact

Giving lenders an idea of how you intend to keep your business environmentally friendly and sustainable can help to sway their decision, as it is a sign of goodwill, and gives peace of mind that your brand is more likely to be accepted by customers if they are aware of your efforts to maintain healthy business practices.

Environmental Impact

Understanding the methods of mitigating the environmental impact of your startup should not just be something you present as an important plan to your lenders, but will also be relevant to regulations within your industry. Proving awareness of how your startup may affect the climate, as well as potential pollutants to the surrounding environment, and exactly how these can be avoided, means your brand will remain in good stead with the community in which you become established.

Sustainability

Sustainability is the second vital metric which should be discussed in your plan to demonstrate the long term viability of your business model. While it is related to the environment, it should also explain how you intend to use resources in a sustainable way. This could be through promoting the use of sustainable foods in the hospitality industry, large scale recycling for manufacturers, or simply the promotion of biodegradable packaging if you intend to be a single product brand. Bringing forward ideas for sustainability will suggest to lenders that your startup is forward thinking, and willing to adapt depending on the current awareness of how businesses can impact the environment.

Customer Engagement

Giving details of your intentions towards customer engagement will further bolster the quality of your business plan. Detailing communication methods, such as social media outreach or emailing newsletters will help emphasise your intentions to make your brand approachable and capable of retaining customers. You may be considering loyalty programs, discounts for repeat trade, or avenues to gather comprehensive customer feedback, to name a few methods that demonstrate your plans. Within your business plan, it will also be valuable to note any prior agreements or referrals you have secured that will boost the launch of your startup’s operations.

Letter of Intent:

A letter of intent proves an already existing customer base and tells your investor there is an interest in your product or service prior to your launch. It will help convince lenders that your startup is going to succeed and also serves as proof that the market demand is already there.

Referral:

Referrals from existing names in your industry or from prior customers should suggest to lenders that your name will be quick to get established, as your competition or potential customer base has already acknowledged and endorsed your services. It can help show that you understand the importance of organic growth, and the willingness to outreach to others to help build your enterprise, ultimately giving lenders confidence in your ability to create, maintain, and grow.

Appendix

Finally, we reach the appendix of your business plan. This is a collection of any additional information about your brand which may not have fit into the structure of your plan, however is still relevant to present to potential lenders to help secure funding. There may be details about market research studies to give additional proof that your venture will be a success, or even building leases and other contracts that prove you already have an established base from which you intend to launch. Anything that supports your plan and can help further instil trust in an investor should be included.

Drafting up and then completing a comprehensive business plan can be a daunting task, especially as a startup. Being as thorough as possible and having field experts look over your plan will go a long way towards convincing any potential lender that you are serious about the future of your business, and leave them little doubt that you are well researched and have the capability to pay back your loan.

Once you are an established name, it should continue to be an aim to update, revisit, and adhere to the business plan you drew up, to ensure you remain on course towards the vision you had at the start of your venture.

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