We’ve written a 5 step guide to assist you with your business plan.
Fail to prepare… Prepare to fail. If you’ve ever heard this saying before, you’ll know it’s very true and it can apply to many areas in life, including writing your business plan.
In short, a business plan describes what you plan to do and how you plan do it. As simple as that. There are 5 key steps that you should include to ensure your business plan sets you up for success.
1. Executive Summary
This section of your business plan should give the reader a brief overview of your company’s purpose and goals. This is also your chance to state exactly what you want from your business plan, for example, if you’re taking it to a meeting with your bank with the hope of securing a loan/funding, make it clear that this is what you’re asking for in the beginning.
A good executive summary will include:
- A brief description of products and services
- A summary of objectives
- A solid description of the market
- A high level justification for viability
- A snapshot of growth potential
- An overview of funding requirements
2. Business Description
This section of your business plan should be an outline of your industry. Give a short description of the industry to begin with, ensuring you include present as well as future possibilities. Along with any future products or developments that may benefit or affect your business.
A good business description will include:
- Description of the industry (Including how your business fits within it, trends, growth and volume of the industry, as well as a projection of what the future may look like)
- Company Basics – Once you’ve given a clear picture of the industry, you can move on to the specifics of your business. The basics include; whether your company is a new or established business, how long you have been in business and your performance so far. Also answer, is your company going to be corporation, sole proprietorship or partnership, is your company retail or wholesale? Or service or manufacture? How many employees?
- Mission Statement – Your Company’s mission statement is your opportunity to define the company’s goals, ethics and culture. Start of by describing the purpose of the company, making sure you emphasize the uniqueness of your business idea. You should also include your target market, geographical focus and a brief history of your business (for example how you started, major milestones, how you came up with the idea). This is also where you can define your company objectives.
- Current and Future Goals – Talk about both short term and long term goals, these should be both quantifiable and reasonable to achieve within a specific time frame. They may include reaching a certain level of sales, plans for expansion or new marketing strategies.
3. Marketing
3.1 Market Research
Marketing plays a huge role in business and is a key area of your business plan, the first step is to conduct some market research to make sure you know your industry inside out. To do this, carry out a thorough market analysis. Areas to include here are;
- Market Needs – Why is there a need for your business in this industry? Describe the current situation of the industry you are choosing to go in to.
- Competitor Research – Who are your competitors? Discover what they are offering so you can identify the best opportunities, and tailor your product/service to differentiate from theirs.
- Target Market/Customers – Who are your customers? Identify who your business is aimed at, including your primary customer. To help get you started, answer these questions; are they socially minded and connected? Are they interested in the environment? What magazines do they read? How do they spend their time? Get to know the lifestyle” of your customer. Focus on a narrow demographic to begin with, and then expand on this as you grow.
- Consumer Research – What do your customers buy now? investigate which factors influence purchasing decisions.
- USP – What will make them buy from you? You need to explain your niche and why you are better than your competition.
3.2 Marketing Plan
For the next stage of your business plan, once you have a clear idea of your market, you can develop your actual plan. It may look something like this;
- Marketing Objectives
Use the SMART marketing approach to help define your objectives.
Specific – State exactly what you want to accomplish (who, what, why where, when)
Measurable – How will you demonstrate and evaluate the extent to which the objective has been met?
Achievable – Can you achieve this based on constraints such at time & finances.
Relevant – How does this objective tie in wit your company objectives & mission statement.
Timely – Set target dates for each of your objectives to ensure it is successful.
For Example: Follow up on every prospect/customer within 48 hours of sales call.
- Marketing Channels | Decide which ones you will use to market your company/products/services.
The main one almost has to be digital marketing. Social media & websites will play a huge role in your marketing, particularly if millennial’s are part of your target market, then it is vital that you create a strong presence online. Traditional marketing techniques such as advertisements and broadcast are also a great way of reaching out to your target audience. Make sure you’re clear in your business plan which channels you plan to use and why.
- Pricing | carefully determine your pricing to be in line with the market you are trying to reach. Various factors will influence your pricing strategies, including:
- Costs of purchasing or manufacturing goods
- Time involved in performing a service and/or making a sale
- Economic factors and market conditions
- Location
- Competition
- Consumer needs
- Availability of product
4. Operations & Management Plan
This section of the business plan is to highlight the company structure, who’s involved and how each member will contribute to the business.
Start off by naming your company structure (Limited, Sole Trader or Partnership) and continue with the names of members along with the following information:
- Percentage of ownership (Ltd or partnership)
- Extent of involvement (i.e. active or silent partner)
- Type of ownership (i.e. stock options, general partner, etc)
- Position in the business (i.e. CFO)
- Duties and responsibilities
- Educational background
- Experience or skills that are relevant to the business and the duties
- Previous employment
- Skills will benefit the business
- Awards and recognition
- Compensation (how paid)
- How each persons’ skills and experience will complement you and each other
5. Financial Factors
The last section of the business plan, but definitely not least, is the section which determines whether your business is viable or not, the financial section. This can be broken down into 3 sections, the income statement, the cash-flow projection, and the balance sheet.
Your business expenses can be broken into two categories; start up expenses and operating expenses.
Each of the costs of getting your business up and running go in start up expenses, these may include;
Registration fees
Business licensing and permits
Business premises fees
Accountant/legal/insurance fees
Website/advertising
Equipment (office, machinery, etc.)
Utility set up fees
Installations and fixtures
Operating expenses are the costs of keeping your business running each month. This list may include:
Wages
Rent
Telecommunications
Raw materials
Utilities
Loan payments
Office supplies
Maintenance
Motor expenses
These lists are just examples and will obviously differ for each individual business. A good way of forecasting your complete start up costs in your business plan would be to add up all your operating expenses, times that by 6 to give you a 6 month estimate, then add your start up costs onto that.
Now we can look at putting some financial statements together for your business plan, starting with the income statement.
The Income Statement
The Income Statement shows your Revenues, Expenses, and Profit for a particular period. It’s a snapshot of your business that shows whether or not your business is profitable at that point in time; Revenue – Expenses = Profit/Loss. Here’s a basic service industry example of how to set one out in your business plan:
| YOUR COMPANY NAME Income Statement for the 1st quarter of (year) | ||||
| Jan | Feb | Mar | Total | |
| REVENUE | ||||
| Services | ||||
| Example 1 | ||||
| Example 2 | ||||
| Total Services | ||||
| TOTAL REVENUE | ||||
| EXPENSES | ||||
| Direct Costs | ||||
| Materials | ||||
| Equipment Rentals | ||||
| Salary (Owner) | ||||
| Wages | ||||
| Pension Expense | ||||
| Total Direct Costs | ||||
| General and Administration (G&A) | ||||
| Accounting and Legal Fees | ||||
| Advertising and Promotion | ||||
| Bad Debts | ||||
| Bank Charges | ||||
| Depreciation | ||||
| Insurance | ||||
| Interest | ||||
| Office Rent | ||||
| Telephone | ||||
| Utilities | ||||
| Credit Card Commissions | ||||
| Credit Card Charges | ||||
| Total G&A | ||||
| TOTAL EXPENSES | ||||
| NET INCOME BEFORE INCOME TAXES | ||||
| INCOME TAXES | ||||
| NET INCOME | ||||
The Cash Flow Projection
The cash flow projection shows what you anticipate to flow in and out of your business over a certain period of time. Not to be confused with a cashflow statement, which shows the cashflow which has occurred in the past. The cash flow projection is an important part of your business plan as it gives you a clearer picture of how much capital investment you will need for your business.
Here’s an example of how a typical cash flow projection would be laid out in your business plan:
| YOUR COMPANY NAME CASH FLOW PROJECTIONS | ||||||
| Jan | Feb | Mar | Apr | May | Jun | |
| CASH REVENUE | ||||||
| Revenue from Product Sales | ||||||
| Revenue from Service Sales | ||||||
| TOTAL CASH REVENUES | ||||||
| CASH DISBURSEMENTS | ||||||
| Cash Payments to Trade Suppliers | ||||||
| Management Draws | ||||||
| Salaries and Wages | ||||||
| Promotion Expense Paid | ||||||
| Professional Fees Paid | ||||||
| Rent/Mortgage Payments | ||||||
| Insurance Paid | ||||||
| Telecommunications Payment | ||||||
| Utilities Payments | ||||||
| TOTAL CASH DISBURSEMENTS | ||||||
| RECONCILIATION OF CASH FLOW | ||||||
| OPENING CASH BALANCE | ||||||
| ADD: TOTAL CASH REVENUES | ||||||
| DEDUCT: TOTAL CASH DISBURSEMENTS | ||||||
| CLOSING CASH BALANCE | ||||||
The Balance Sheet
The balance sheet is the final part of your financial factors section. It presents a picture of your businesses net worth at a particular point in time. It summarises all the financial data on your business, incorporating it into 3 categories; assets, liabilities, and equity.
Here’s a breakdown of what each one means:
Assets are tangible objects of financial value that are owned by the company.
A liability is a debt owed to a creditor of the company.
Equity is the net difference when the total liabilities are subtracted from the total assets.
Here’s an example of a typical balance sheet you could include in your business plan:
| YOUR COMPANY NAME BALANCE SHEET As At __________ (Date) | |||
| ASSETS | £ | LIABILITIES | £ |
| Current Assets: | Current Liabilities: | ||
| Cash in Bank | Accounts Payable | ||
| Petty Cash | Vacation Payable | ||
| Net Cash | EI Payable | ||
| Inventory | CPP Payable | ||
| Accounts Receivable | Federal Income Tax Payable | ||
| Prepaid Insurance | Total Canada Customs & Revenue | ||
| Total Current Assets | WCB Payable | ||
| Pension Payable | |||
| Fixed Assets: | Union Dues Payable | ||
| Land | Medical Payable | ||
| Buildings | PST Payable | ||
| Less Depreciation | GST Charged on Sales | ||
| Net Land & Buildings | GST Paid on Purchases | ||
| GST Owing | |||
| Equipment | Total Current Liabilities | ||
| Less Depreciation | |||
| Net Equipment | Long-Term Liabilities | ||
| Long-Term Loans | |||
| Mortgage | |||
| Total Long-Term Liabilities | |||
| TOTAL LIABILITIES | |||
| EQUITY | |||
| EARNINGS | |||
| Owner’s Equity – Capital | |||
| Owner – Draws | |||
| Retained Earnings | |||
| Current Earnings | |||
| Total Earnings | |||
| TOTAL EQUITY | |||
| TOTAL ASSETS | LIABILITIES AND EQUITY | ||
We hope our Simple 5 step guide has helped you get started on your business plan. If you need more help or information, please feel free to call us on 01642 850 666 or email mark.porritt@wasley-chapman.co.uk
