A business plan is a vital document for any small business owner as it outlines the future of your company, plans for growth and the strategy for how you will get there. If your plans to scale up include hopes for funding from an investor or a loan, it’s imperative that you have a sound business plan in place to show how investing in your company will provide a strong return.
Whether you’re an existing businessowner or just about to start a new venture in self-employment, we’ve put together some of the key reasons why you need a business plan and some top tips on how to create one.
Within this article, you will learn about:
- How to set your business objectives
- Analysing the market
- Creating a basic marketing plan
- Putting together a financial plan and budget
What should my business plan include?
What are your business objectives?
It may sound obvious, but the first key section of your business plan should outline your business, its core product or service and an overview of your objectives. Your objectives must be realistic and measurable (we’ve all seen The Apprentice) in order to be achievable and help you understand what you need to do to get there. If you’re struggling to objectify these goals, remember the SMART framework:
A clear objective. What do you want your business to achieve and what will this accomplishment mean?
How will you know when you have reached this milestone? How will you track progress whilst working towards it?
Is the objective attainable? If you cannot outline how the objective will be reached or what you need to do to achieve it, you might need to rethink it.
For an objective to be realistic, you must consider the resources needed to achieve it and whether they are available, as well as who will be involved, whether individuals, teams or additional stakeholders.
Importantly – when do you hope to meet your objective? Having a timeline in place ensures the objective can be measured and tracked against. Additionally, if you’re hoping to attract an investor, it’s no good saying your business will make x amount of money if there is no timeframe in place.
Who is your target market?
How do you know there is interest or demand in your product or service? Now is a good time to demonstrate your understanding of the market in which your organisation sits, where the gaps are and how it has (or will) developed, highlighting any market research that you have carried out or existing market data you have found.
In highlighting your knowledge of the market, here you should provide a competitor analysis. This doesn’t have to be incredibly in-depth but should identify the competitors that you are aware of in your field, the threats they pose to you as a competing business, their strengths and weaknesses and, from this, the opportunities for you as a new entrant to the market.
Next, you should identify your target audience, how you plan to identify them and what you know about them i.e. demographics, behavioural factors (what motivates them to purchase?).
Your sales and marketing plan
You don’t need to be a marketing expert to have a basic marketing plan in place. It’s essentially a plan within a plan in that, using the objectives and market analysis you’ve already outlined, this section details the business’ positioning within the market and how you plan to get your message in front of your target audience to trigger a response.
- State your company’s positioning – how will you have a competitive edge over other businesses in the market?
i.e. The Shoe Emporium will be the first-choice shoe retailer for young people in their early – mid-twenties in the UK by offering the best price in the market.
- How will you reach the target audience and communicate your message?
i.e. Based on existing data on our target market’s usage of the channel, we will target our audience through organic and paid Instagram posts.
Day-to-day business operations
The operational section of a business plan concerns details relating to the day to day running of your company, such as trading location(s), employees or forecasted/future staffing requirements and any equipment or materials required to operate effectively. This would be a good place to list any details for suppliers you may be working with.
An important part of your operations should include a general risk assessment and a contingency for unexpected challenges and how you plan to overcome them.
Outlining your financial plan
Finally, the part that many businessowners find themselves fretting over. If your business is a start-up, the plan should include an idea of your start-up costs, acknowledging that you understand the initial requirements and where additional capital may need to be raised.
Your financial plan should include a cash flow forecast, detailing where any borrowed capital is coming from, predicted revenue and projected expenditure. If your business is already in operation, you should find this simpler to put together as you can forecast based on previous revenue and expenditure.
A balance sheet provides a snapshot of your business accounts for a specific period of time, encompassing the business’ current assets and liabilities, assets or liabilities over a longer period of time and shareholder capital. If you plan to pitch your existing business plan to investors or to secure a loan, you will often be asked to provide around six consecutive months of balance sheets.
How a budget can help with business planning
A lot of small business owners make the oversight of neglecting to budget when business planning due as it takes time. So why should you include one?
Having a realistic budget in place and sticking to it allows you to keep an eye on the bigger picture of your company’s growth and future, particularly in the earlier stages of business, whilst managing your cashflow efficiently. It allows better control over areas of the business where money is spent and will help identify which areas you may need to reallocate resources to or if additional funds are needed.
You may find that, as your business grows, you need to create budgets for multiple departments or areas. These can also be incredibly useful for measuring overall business or individual department performance and assist with attributing revenue back to particular activity.
If you’re reading this and still feeling stuck about financial plans and budgets, or how they work together, get in touch to see how we can help. At accounting4contractors we regularly work with small business owners, self-employed people and contractors to help simplify the process of budgeting and accounting.
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