Every business requires a plan. Whether you’re a fledgling start-up or an established conglomerate, a clear and concise outline of your business’s goals, operation strategies, future progress and potential problems is an important and necessary tool. Not only does the business plan represent a valuable insight into your company’s approach to growth, but it also acts as a contingency plan in the event of an emergency.
Generally, a business plan is a prerequisite for companies looking to secure investment or funding from a bank, so if you’re not paying for the costs of your entire operation up front, chances are you’ll be required to have one drawn up. There are a number of different aspects that make up a business plan and preparing such a document can be an arduous task.
For small businesses across London who aim to grow with the right business finance solutions, a robust business plan is key. At Berley, our specialist small business accountants have been helping clients outlining the best practices when creating effective business plans and we are happy to share our experience with you.
What should you include in a business plan?
There are a number of elements that contribute towards a comprehensive business plan, and all of them should be addressed when this document is being drawn up. The plan should provide an overview of your business’s aims for entering and operating in your desired industry/market; it should also provide extensive insights into the following:
An executive summary: business, aims, financial summary
- This should be a pitch to any potential investor that summarises the business plan, including the overall business, business aims and financial summary.
Background of the business owner/proprietor
- An overview of why you’re seeking investment in this business, why you want to start the company, your previous work experience and your qualifications and education background.
The goods and services you will be trading
- This section should detail what your business will be dealing in, a description of the goods or services you will provide, as well as any different varieties or types. If you are going to release a range of products incrementally, give specifics as to why this is.
- Here you should provide insight into who your customer base/target market is, a description of them, where they are located, why your product will appeal to them and whether you have already made sales to this audience/have got customers waiting for your product. It should also touch on other forms of market research including field research in the form of customer questionnaires.
- Analysis of the strengths and weaknesses of any businesses competing with you for a share of your target market, as well as an outline of who your competitors are, what they provide, what their price point is.
Your marketing strategy
- Provide an overview of your planned marketing strategy, including a specific breakdown of exactly what the strategy entails, why you’ve chosen this method and how much it’s going to cost.
The logistics of your business operation
- One of the most important aspects of the plan, the logistics of your business operation should account for the production, delivery and payment methods and terms of your operation. It should also discuss your supplier relationships, the items they supply you with, payment arrangements and the reasons for using them.
- Moreover, you should include a description of your premises, as well as the equipment required for operations, any transport requirements, legal requirements, insurance requirements and a manifesto of management and staffing requirements.
Detailed costs and pricing breakdown
- Here, you should describe in minute detail all of the costs you stand to incur, the prices of your products and the profits you stand to make on the sale of said products. This should include a price breakdown for products in components, as well as cost per unit, price per unit, profit margin, markup and profit percentage.
Financial forecasts, including a 5-Year Financial Plan Projection
- Here you should outline all operational costs for the first five years of business, leaving nothing out. This should also include a realistic assessment of any profits you are making through sales and a projection of the business’s finances for this time period. The first three years should be broken down into months with years 4 and 5 detailed annually.
- You should also include a personal budget, which details all of the estimated costs for the first 12 months of business, as well as your estimated income for this time period.
- A cashflow forecast detailing the amount of money coming in from investments and funding against the amount of money being paid back to loan sources is also a requirement, as is a costs table.
Contingency measures or a back-up plan
- As is good practice, you should conclude your business plan with a short-term, long-term and an alternate plan.
For a more detailed breakdown of the requirements of a business plan, or for a template, which you can use as a guide, Government resources are the best port of call and can be accessed here.
How should you write a business plan?
The key to a successful business plan is concise, specific information that provides no room for interpretation. Your statistics and facts should be rock solid and you need to provide evidence for substantiation by the bank or another financial institution. In essence, it should provide an accurate and detailed account of your business’s plans for the operation, taking into account all financial and economic matters for the next five years.
The tone should be formal and professional, taking into consideration that this plan needs to be able to explain your business to other people. In terms of the business plan’s intentions, it should be easily digestible and the information should be discernible for both the layman and a financial professional. Any superfluous information should not be included, only what is relevant to the business and its dealings. If you have supplementary information that you want to include, this can be added in an appendix.
Do I only have to write one?
While the initial drawing up of a business plan is one of the cornerstones of an early-development business, revising this document is an on-going process and businesses are advised to update their business plan annually in order to remain relevant to the market and the future goals of the business.
Once your business becomes more established, it may be necessary to re-evaluate the targets and aims laid out in your initial business plan. If your forecasts weren’t ambitious enough, or in the unfortunate event that they weren’t realistic enough, you should come back to the original document and draw an updated business plan to better align yourself with the future of your business.
How can Berley help?
As specialist chartered accountants focused on helping small businesses across London, we understand that when it comes to growth, you need a robust business plan. This will put you in good stead for securing business financing, as well as providing a comprehensive outline for your business’s future – clarifying your goals and targets and how you can realistically achieve them. We have over 30 years of experience in promoting advice on business growth, and we have the insights you’re looking for to help you establish a solid foundation and strategy for growth this year and beyond.
Call us on 020 7788 8261 to talk with someone from the Berley team to discuss how we can assist you in growing your business.