Step 4 of my Top 20 Tips for Small Business Start Ups is the one that may make you want to hide under the duvet! A business plan sounds like something that involves 60 pages, a serious amount of work and something you’re actually not going to need any time soon.
A business plan is simply a written-down version of what you're going to do, how you're going to do it and how you'll know it's working. It's your roadmap. And just like a map, it's a lot more useful than trying to find your way by gut instinct alone.
Even if you never plan to ask a bank for any kind of loan, I'd still definitely write one.
Why bother?
GOV.UK's guide to writing a business plan says a plan helps you clarify your idea, spot potential problems, set out your goals and measure your progress. I'd add three more reasons from experience:
• It exposes the gaps. It's amazing how many holes you find when you have to write things down. How much you haven’t actually thought about when writing down how you’ll actually operate. Better to sort it out now.
• It keeps you focused. When a shiny new idea tempts you off course (and it will, in my experience), your plan reminds you where you're heading and brings you back on track.
• It could open doors. If you do want a loan, a grant or an investor later, you'll need one anyway. Having it ready makes the process far less painful.
How long should it be?
For most start-ups, a few well-thought-out pages is plenty. Nobody needs War and Peace.
What goes in a business plan?
There's no single right layout, but most good plans cover the same ground. Here's the structure I'd use:
1. The summary. Your business in a few sentences: what you sell, who to, and why they'll choose you. Write this last, even though it goes first.
2. About the business. What you do, your structure (more on that in Step #11) and where you'll operate from, whether you need employees etc.
3. Your customers and market. Who exactly you're selling to (your target market), how big you estimate that group is, and what you learned about demand when you tested your idea in Step #2.
4. Your competitors and your USP. Who else is out there, what they’re good at and not so good at and what makes you different (that's your work from Step #1).
5. Your products or services and pricing. What you'll sell, what you aim to charge and why.
6. Your sales and marketing plan. How customers will find out about you and what it will cost to promote your business. We'll go into this in Step #17.
7. How it will run day to day. Suppliers, equipment, systems, premises, and who does what.
8. The numbers. Start-up costs, expected sales, running costs, profit and cash flow. Don't panic, we'll look at cash flow in Step #12.
9. Risks and your back-up plan. What could go wrong, and what you'll do if it does. Lenders like seeing this, and so might you at 2am when something goes sideways in the future.
10. Your goals and milestones. What success looks like in three months, a year and three years.
Free templates to get you started
I find it much easier to use an existing template, even if you have to amend it to suit you, rather than from a blank page. Here are some free templates for you to choose from:
• Start Up Loans business plan template, with a guide containing notes from their business advisers on what to include. It also comes with a cash flow forecast template and a personal survival budget template. You don't need to be applying for a loan to use them.
• GOV.UK: write a business plan, which points you to further templates and guidance, including one from The King's Trust.
Tips for writing a plan you'll actually use
• Write it in plain English. If you can't explain it to a friend over a cuppa or a pint, it's too complicated. (you know how important I feel jargon-free is!)
• Be realistic with your numbers. It's tempting to be optimistic, but a plan built on fantasy sales figures won't help anyone. Use your research from Step #2 and be honest about how long things take.
• Show your working. Note where your figures came from, such as competitor prices, quotes or customer feedback. It’s useful to look back on, really.
• Plan for the quiet months. Most businesses have seasonality. Think about what your January or August looks like.
• Get a second opinion. Ask someone you trust to read it and tell you where it doesn't make sense. Even better, ask someone who'll be honest, critical even, rather than polite.
• Treat it as a living document. This is important. Put a date in your diary every three months to review it. If you've changed direction, amend the plan. Really helps with steering your path.
Don't forget your personal finances
Your business plan covers the business, but you also need to know what you need to live on. The personal survival budget template from Start Up Loans is a handy way to work that out, and it ties in with Step #3 (keeping the day job while you build).
How to tackle this one
Remember, you don't have to do everything today! Try this:
• ☐ Download one of the free templates above
• ☐ Write a rough one-paragraph summary of your business
• ☐ Fill in the sections you already know the answers to
• ☐ Highlight the sections you can't answer yet, and turn them into your to-do list
• ☐ Book a date in your diary to review the plan in three months
Not your bag. Just want someone else to do it?
That’s what I'm here for – I can either help you figure out where to start in a free discovery call, lasting up to 30 minutes. Or I can take on the task for you. I know it’s not everyone’s cup of tea to write your own business plan.
Next up in the series: Step #5, Plan Out Your Timelines to Launch. Because a plan without dates is just a wish list.
