Business planning

Planning is important for established businesses and start-ups, to help you achieve your goals.

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Our business plan template outlines all the essentials you should include.

Your plan should outline your strategy for the next year or two. It could be used to help guide your way through the current Covid crisis or to support an application for finance or business grants. The business plan template helps you to explain your goals and what you need do to get your small business from where it is now, to where it needs to be.

Getting ready

The planning process will help you get your ideas in order and identify your priorities, saving time, and effort. It will give you a clear sense of direction and a benchmark enabling you to measure progress.

Keep to the point

Focus on the essentials and leave the fine detail for your other plans (such as your marketing plan) and be realistic. Overly ambitious cash flow forecasts and profit estimates could affect your credibility with lenders and other stakeholders.

Be professional

Write the plan as though it's aimed at someone from outside your business, even if you only intend to use it internally. If you use our template, make sure that you use a tidy heading structure and even add some images and color if appropriate.

Outline the key points and purpose of the plan at the start (Executive summary). Charts and tables can be added where appropriate and add appendixes that include finer details or product description etc (for example your brochures can be used here).

Consult your team

Get some input from your employees and business partner. They will have valuable ideas and will be more supportive of a plan they helped create. Use your friends, family, and advisors to gather feedback. People from outside the business may spot things that you have overlooked.

Completing your plan

Executive summary

The executive summary is where you traditionally ‘sell’ your business by getting straight to the point and promoting the critical information you need to get across to your audience. You’ll touch on many of the key issues later on, so don’t go into great detail – just give the reader an idea of the potential of your business and a taste of what’s to come.

Rather than start with the executive summary, it’s best practice to complete the rest of your business plan in detail before tackling the executive summary with all the details and important points in place. When you do, make sure you write no more than a few paragraphs and use non-technical language.

Think about your idea and your audience when considering whether to use an executive summary in your business plan. If your readers will be experts or specialists in your field or industry, they may skip the executive summary to check out the finer details of your plan.

Current position

Outline the current position of your business: where is your business in the business life cycle (introductory phase, growth phase, mature, declining)?

Explain what industry you operate in and where it sits in the business life cycle (emerging industry, growth industry, mature industry, declining industry). If you haven’t started yet, outline what you are doing at present and how it is relevant to your business.

Competitive advantage

Complete the competitor analysis section of your business plan before answering this section by listing and detailing your core competitive advantages that give you a leg up on your competition.

A competitive advantage can be anything from a unique skills base to a wider marketing reach or more distribution channels.

If you’re part of a strategic alliance or you own any intellectual property (IP), this is also the place to detail it and explain how you’re going to use it.

Holding any IP (such as a trademark, patent or registered design) is a competitive advantage in itself because it gives you the sole license to profit from the idea.

Growth plan

Explain how you plan to increase your business’s capabilities (its skills and offerings) and its capacity (rate and scale of production). In addition, outline why you’re confident your business will continue to grow and be sustainable.

Business background

Detail the history of the business (or the development of the idea) to date, and outline your business track record to provide the reader with a context for your current activities.

Business strategy

Describe your business objectives and goals for the next one to five years (make sure they’re specific and measurable).

Tactics

Cover the main practical steps you have to take to get your business from where it is now to where you want it to go. What extra resources will you need?

Strategic impact

Outline the external threats or opportunities that could arise from your strategy and impact your business during the next one to five years. If you’re unsure, complete the SWOT section before completing this section.

E-commerce and technology

Explain how you’re using (or planning to use) e-commerce and technology to improve your business. E-commerce and technology can be used to lower costs, speed up business, access new markets, build sales, and so on.

Core values

Describe the core values that underpin your business. Explain why these core values are crucial to your long-term business success, how they will affect customers (the benefits) and how they will help motivate you and your staff.

Credibility and risk reduction

Explain your tactics for increasing the credibility of your business and reducing the customer’s risk in doing business with you.

My team

Management structure

Outline your business’s management structure and detail the individual roles assigned to each manager.

Current team

Introduce your current team and provide details of the qualifications, expertise and track records that act as assets for the business.

Vacant positions

Detail the positions that need to be filled to enable you to grow the business.

Retention and recruitment policies

Detail the best practice solutions you will use to retain key staff and compete for skilled workers in the job market, to maintain and improve your business’s capabilities. This is often an area overlooked in business plans, but you should lay out your retention and recruitment solutions to readers. This will give them confidence that your business won’t be hamstrung by a high turnover of staff or any other human resources issues.

Mentors and business support

List the business support resources you can rely on and the specific assistance they can provide your business to make it more competitive. Business support can come in many forms, so make sure you include all the support you receive, whether it’s from a mentor or your local chamber of commerce – it all adds to the viability of your business.

SWOT and critical success factors

SWOT analysis is a method for gauging your business’s health by looking at its Strengths, Weaknesses, Opportunities, and Threats. List them in the left columns of the tables and detail what you could do to maximize or minimize their impact in the right columns.

While Strengths (such as a strong brand) and Weaknesses (such as low cash flow) should be internal factors, Opportunities (like a trade show) and Threats (such as a new competitor) should be external to your business and your influence.

SWOT summary

Once you’ve completed your SWOT analysis, you can use it to help you choose a strategic direction for your business by comparing the Strengths, Weaknesses, Opportunities, and Threats you’ve identified.

There are four SWOT strategies:

S–O: Exploit your internal Strengths to maximize your external Opportunities.

W–O: Minimize your internal Weaknesses by exploiting your external Opportunities.

S–T: Exploit your internal Strengths to minimize your external Threats.

W–T: Minimize your internal Weaknesses and evade external Threats.

If your SWOT analysis has suggested a course of action, write down the strategy in the chosen strategy box and detail how you can put it into action. You can then make a list of the critical factors for the strategy’s success in the next box.

If you’re planning on showing your business plan to others, this section will show them you’re using long-term strategic thinking in your business rather than just focusing on the day-to-day operational issues. However, you can also keep returning to this section as a living document to update it and help you take stock of where your business should be going.

Market research

Explain what market research you’ve done to build this plan and the methods you used, and outline how ongoing market research is built into your daily business operations.

Market analysis

Market opportunity

Describe the opportunity in the marketplace that you’ve recognized. Go into detail about how visible this opportunity is to your competitors (whether it’s a gap your competitors are also actively looking to fill or you think it’s largely unrecognized by the market) and the potential revenue the market opportunity represents.

Market structure

Describe where your business fits into the marketplace or supply chain structure and any efficiencies you plan to implement to usurp the status quo. For example, you could start selling directly to customers online if the accepted structure in your industry is to sell to wholesalers and retailers – this would provide you with cost and time efficiencies that represent competitive advantages.

Market size and outlook

Place all the relevant statistics here to describe the market. The readers will need to know how large the market is in consumer/business numbers and the potential value of the market derived from spending habits.

Once you’ve established the parameters, provide evidence for the changes you think are taking place and the direction you think the market is taking. No market ever stays the same; market influencers (such as the economy and changing demographics) always play a part in market growth and contraction. You need to show you’re analyzing the market correctly to recognize the opportunities and threats that could exist.

Future markets

Detail the markets you’ve identified that could provide future growth for your business.

Target market

Within the marketplace should be a certain type of customer you’re targeting with products and/or services designed to meet their needs. Describe the size and potential value of this target market (as you have done in the previous section for the overall market), including all the relevant statistics for your business.

After you’ve described the target market, fill out the next two boxes by describing the factors that influence your target market’s purchasing habits (such as seasonal occasions or economic influencers) and how your products and/or services respond to these conditions.

Having a target market is incredibly important, but many businesses ignore this fact. Without knowing what type of people will be most attracted to your offering, you won’t be able to build a true picture of your business’s viability. And without targeting the people most attracted to your offering, you’ll never be able to maximize the real potential of your business.

Competitor analysis

Use this section to identify your competitors’ strengths and weaknesses and formulate a strategy to combat the former and target the latter.

Your choices should be based on sound competitor research that gives you an accurate picture of the experience your competitors offer the customers you’re both targeting. This means you should purchase products/services from your competitor to gain first-hand knowledge of their offering so you can compare it with your own without making any assumptions.

If you will be recognized by your competitors, don’t use this as an excuse to limit your research to their website and advertising – consider sending in a friend as a mystery shopper.

Financial plan

Start-up costs

Summarize the start-up costs of your business. Account for as much detail as possible. The more accuracy and honesty you provide at this stage the better, because if you sugar-coat the costs you face now, you’ll just be setting yourself up for problems later on. You need to pause and spend time digging down into the figures to give you a realistic costs basis to build your break-even analysis on.

Funding

Detail your sources of funding here. It’s up to you how much detail you go into, but if you’ll be showing this business plan to potential investors, they will want to see how much you’re backing your business with your own investment and who else has already invested in the business.

Break-even date

Carry out a break-even analysis and enter the resulting date in the space provided. A break-even analysis estimates when your business could break even and start to pay its ongoing costs. To find a break-even date, you need to a) estimate the sales volume you need to reach to break even and b) estimate how long it will take you to reach that milestone given your capacity limitations.

  • Estimate your break-even sales volume:
    1. Separate all your costs into type, fixed or variable.
    2. Tally up your total fixed costs.
    3. Tally up the average variable cost per product sold or service delivered (your variable cost per unit).
    4. Subtract your variable cost per unit from the unit sales price to find your profit margin.
    5. Divide your total fixed cost by your profit margin to find your break-even sales volume.
  • Estimate your business’s average production or service capacity per day (or week if that’s more relevant). Make sure you dig down into the details to account for the entire supply chain from production to point of sale. Once you have an accurate estimate, divide the break-even sales volume by your average production capacity to give you the number of days (or weeks) ahead until you reach your break-even date.

If you charge an hourly rate for a service, you can take a short cut to the break-even calculation by calculating your break-even point in hours. Divide your fixed costs by your hourly billing rate to find the number of hours that need to be worked to reach break-even, and apply the result to the average number of hours worked each day by the service technicians in your business.

Profit and loss forecast

Present a summary of your profit and loss forecast for the next year in this segment before attaching a detailed forecast to your plan.

Forecasting profit and loss can be quite difficult for existing businesses, let alone start-ups with no track record to go on. If you’re still in the start-up phase, you need to base your figures on your market research by estimating the value of the market and the share of it you could take from your competitors as your business develops.

Try finding industry data or using publically available statistics to support your forecasts. You can also provide pessimistic, realistic and optimistic forecasts rather than just one to promote your objectivity.

Cash flow forecast

Summarize your cash flow forecasts for the next three to five years, before attaching a detailed forecast for the next year to your business plan.

Few businesses enjoy consistent levels of cash flow throughout the year, so unless your industry or business model can justify that prediction, you’ll need to drill down into your market research to identify the peaks and troughs in income that you can expect.

Balance sheet forecast

Summarize your balance sheet forecast for the next three to five years, before attaching a detailed forecast for the next year to your plan. Balance sheets account for all the assets a business owns for the calculation of its net worth, which is the value of the business’s assets minus its debts (or liabilities). They also show how the assets are financed if they’re not owned outright by a business or individual.

Potential investors will compare your cash flow forecasts with your balance sheet forecasts to see when the business’s income is likely to balance out all the debts incurred buying assets in the start-up phase. This is different to a break-even analysis, which estimates when the business will generate enough income to cover its ongoing costs rather than its total debts.

Marketing strategy

Detail your strategy for taking your product or service to the target market.

Marketing is the umbrella term for the overall strategy of taking your product and placing it in the hands of your customers, so marketing strategies often entail the coordination of everything from product design and pricing to sales and advertising.

The core segments of a marketing strategy are often referred to as “The 4 Ps”. The more coordinated these four elements are, the more likely it is that your strategy will be a success.

The 4Ps are:

  • Product – Designing features into your product or service that meet the needs of the target market.
  • Price – Using a pricing strategy that reflects the values of your product and brand and appeals to the target market.
  • Place – Choosing the right distribution channels to make sure the product is sold at the right place and time to meet your target market and choosing the correct delivery method to meet their needs.
  • Promotion – Choosing promotional and advertising tactics to appeal to your target audience to maximize sales.

All four elements must work in conjunction – if the promotional methods emphasize value but the pricing emphasizes quality, for example, then they won’t complement each other.

You should split your promotional strategy into two categories – launch and ongoing marketing – because they will require two different sets of tactics. The former will be gauged to attract new customers while the latter uses a mix that contains more tactics for keeping existing customers.

When it comes to budgeting your promotional and advertising efforts, you should measure and keep track of your expenses as you would do in any other part of your business. Use break-even analysis to measure the level of business that needs to be generated before you see a return on your investment, and compare that with the costs as you strategize. If the ROI is unrealistic, try to find more cost-effective ways of marketing your business.

Launch budget

Place your launch marketing budget in this space. Few businesses make their name purely on word of mouth; they need to promote their business to effectively set up their niche in the marketplace. The budget for this should be part of the start-up costs mentioned in the Finance section (9a) and reflect the total cost of the launch marketing tactics outlined in your marketing strategy.

Marketing budget

Once you’ve launched your business and gained recognition for your start-up’s brand, you’ll most likely need to continue marketing to keep the brand ‘top of mind’ with your target market.

Only businesses that can generate consistent and powerful, positive word of mouth can normally forgo this cost. However, the fact remains that many businesses continue to promote themselves only on an ad hoc or opportunistic basis to save costs rather than committing to an effective long-term strategy.

Therefore, the budget for your ongoing marketing strategy should use tactics that are financially sustainable within your forecast cash flow. If your marketing budget needs half of your monthly cash flow to sustain it, go back to the drawing board.

Business ownership structure (companies)

If your business is a company with directors and shareholders, outline the ownership structure in this section along with their investments, liabilities and share of profits. If you’re in a partnership, include details from your Deed of Partnership. If you’re a sole proprietor, delete this section from the template.

Compliance

Legal and regulatory considerations

Delete either the sole proprietor or companies section, whichever is not appropriate, and tailor the list of completed compliance tasks to your situation.

Compliance is perhaps the least interesting part of any business plan, but it’s crucial because compliance – or the lack of it – is actually a common area of risk. You need to show your business complies with national and industry standards and practices so it can avoid any negative fallout from non-compliance, such as fines and bad PR.

Insurance

Detail your business insurance arrangements to show you’re mitigating the risks to your business continuity. Business insurance can include:

  • Premises insurance
  • Asset/Vehicle insurance
  • Employer’s liability insurance and Worker’s Comp (in case of workplace accidents)
  • Public liability insurance (third-party injury or death)
  • Professional liability insurance (cover against claims arising from your professional advice)
  • Business interruption insurance
  • Commercial property insurance (covering property and equipment)
  • Legal expenses insurance
  • Stock insurance.

IT and equipment

Business premises

Detail your premises situation. Do you (or are you going to) lease premises to save money on your capital costs or do you own your business’s premises as an asset that accrues value?

IT

Explain your IT requirements and how you plan to manage them, including solutions for any specialist human resources or security issues.

Equipment

Explain your equipment requirements and how you plan to manage them, including solutions for any machinery, vehicles and equipment costs. For example, is it more in your business’s interests to purchase or lease certain equipment?

Template

To help you create a business plan, try our business plan template (Word, 143KB). don't miss anything.

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Disclaimer

For informational purposes only. There is NO WARRANTY, expressed or implied, for the accuracy of this information or its applicability to your financial situation. Please consult your financial and/or tax advisor. Full legal disclaimer