Write a business plan: step-by-step
It is essential to have a realistic, working business plan when you're starting up a business.
A business plan is a written document that describes your business and:
- its objectives
- its strategies
- the market it is in
- its financial forecasts
It has many functions, from securing external funding to measuring success within your business.
This guide will show you how to prepare a high-quality plan using a number of easy-to-follow steps, including what a business plan should include, your business markets and competitors and marketing and sales. There is also a downloadable business plan template.
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Access free start-up business support from your local council. They will organise one-to-one mentoring sessions with your local business adviser and provide tailored guidance to develop your business plan.
Complete a short enquiry form or call 0800 027 0639 to register for this free advice and guidance.
What a business plan should include
Your business plan should provide details of how you are going to develop your business, when you are going to do it, who's going to play a part and how you will manage the finances.
Clarity on these issues is particularly important if you're looking for finance or investment. The process of building your plan will also focus your mind on how your new business will need to operate to give it the best chance of success.
Your plan should include:
- An executive summary - this is an overview of the business you want to start. It's vital. Many lenders and investors make judgments about your business based on this section of the plan alone - read business plan executive summary.
- Your vision and business idea - a short description of who you are, what you plan to sell or offer, why and to whom, your business goals and key selling points - see your business, its products and services.
- Your marketing and sales strategy - provides details on customers, competitors, market trends and tactics (eg pricing, distribution and promotion) - see your business markets and competitors and marketing and sales.
- Your management team and personnel - your credentials and the people you plan to recruit to work with you - see business plan: your team's skills.
- Your operations - your premises, production facilities, your management information systems and IT - see business plan: your operations.
- Financial forecasts - this section provides details of cash flow forecasts, profit and loss accounts and balance sheets - see financial forecasts for your business plan.
Watch the short video below for an overview of what to include in your business plan.
The audience for your business plan
There are many benefits to creating and managing a realistic business plan. Even if you just use it in-house, it can:
- help you spot potential pitfalls before they happen
- structure the financial side of your business efficiently
- focus your efforts on developing your business
- work as a measure of your success
A business plan is a document that can be used to secure external funding. Potential investors, including banks, may invest in your idea, work with you or lend you money as a result of the strength of your plan.
The following people or institutions may request to see your business plan at some stage:
- external investors - whether this is a friend, a venture capitalist firm or a business angel
- grant providers
- anyone interested in buying your business
- potential partners
You should also bear in mind that a business plan is a living document that will help you monitor your performance and stay on track and will therefore need updating and changing as your business grows.
Regardless of whether you intend to use your plan internally, or as a document for external people, it should still take an objective and honest look at your business. Failing to do this could mean that you and others have unrealistic expectations of what can be achieved and when.
Business plan executive summary - the dos and don’ts
Follow these executive summary dos and don'ts to create an engaging and persuasive executive summary
The executive summary outlines the key points of your business plan and is usually the first section that people will read.
The executive summary sets the tone for the rest of your business plan. Here you should succinctly capture the main points of your document. It is also your opportunity to stand out.
Follow our dos and don'ts to help you create an engaging and persuasive executive summary.
Executive summary dos
- Explain what your business is selling in the opening paragraph - outline the most interesting thing about your company and what you are doing that nobody else is. You want to engage your reader from the very beginning with your unique selling point.
- Provide a synopsis of the key points of your entire plan - make sure you include highlights from each section of the document.
- Be clear and concise - no longer than two pages at most. It's advisable to write this section of your plan after you have completed the rest.
- Use engaging language and tone - your executive plan needs to draw the reader into the rest of your business plan and ultimately your business idea.
- Tailor the executive summary to the reader - if you want to engage with investors, highlight how much investment is required and focus on how your business is a great investment opportunity.
- Write the executive summary in the order of the business plan - this provides a straightforward outline of the information that is included in the business plan and creates a flow to the document.
Executive summary don'ts
- Don't include jargon or technical language - don't assume that the reader will understand the technical aspects of your business or sector.
- Don't include an extended table of contents - this won't engage the reader and is a replication of the contents page.
- Don't include information that is unrealistic and can't be substantiated in the rest of the plan - an experienced investor or business person will recognise hype and this will undermine the plan's credibility.
- Don't forget to proof read - ensure that you double check your executive summary for errors. Have it reviewed by someone who was not involved in its creation.
Your business, its products and services
You must be able to clearly describe what your business does, whether you are writing the business plan for your own purposes or if you want other people to provide funds through investments or loans.
This part of the plan sets out your vision for your new business and includes who you are, what you do, what you have to offer and the market you want to address.
Start with an overview of your business:
- when you started or intend to start trading and the progress and investment you have made to date
- the type of business and the sector it is in
- any relevant history - for example, if you acquired the business, who owned it originally and what they achieved with it
- the current legal structure
- your vision for the future
Then describe your products or services as simply as possible, defining:
- what makes it different
- what benefits it offers
- why customers would buy it from you instead of your competitors
- how you plan to develop your products or services
- whether you hold any patents, trade marks or design registration
- the key features and success factors of your industry or sector
Remember that the person reading the plan may not understand your business and its products, services or processes as well as you do, so try to avoid jargon. It's a good idea to get someone who isn't involved in the business - a friend or family member - to read this section of your plan and make sure they can understand it.
Your business markets and competitors
In this section you should define your market, your position in it and outline who your competitors are. In order to do this you should refer to any market research you have carried out. You need to demonstrate that you're fully aware of the marketplace you're planning to operate in and that you understand any important trends and drivers.
You should also be able to show that your business will be able to attract customers in a growing market despite the competition.
Key areas to cover include:
- your market - its size, historical data about its development and key current issues
- your target customer base - who they are and how you know they will be interested in your products or services
- your competitors - who they are, how they work and the share of the market they hold
- the future - anticipated changes in the market and how you expect your business and your competitors to react to them
It is important to know your competitors' strengths and weaknesses as compared to your own - and it is good practice to do a competitor analysis of each one. Remember that the market is not static - your customers' needs and your competitors can change.
So, as well as showing the competitor analyses you have undertaken, you should also demonstrate that you have considered and drawn up contingency plans to cover alternative scenarios.
Business plan: marketing and sales
This section should describe the specific activities you intend to use to promote and sell your products and services. It's often the weak link in business plans so it's worth spending time on it to make sure it's both realistic and achievable.
A strong sales and marketing section means you have a clear idea of how you will get your products and services to market.
Your plan will need to provide answers to these questions:
- How do you plan to position your product or service in the market place? For further information - see create your marketing strategy.
- Who are your customers? Include details of customers who have shown an interest in your product or service and explain how you plan to go about attracting new customers - see know your customers' needs.
- What is your pricing policy? How much will you charge for different customer segments, quantities, etc? See price your product or service.
- How will you promote your product or service? Identify your sales process methods, eg direct marketing, advertising, PR, email, e-sales, social marketing - see sales & marketing.
- How will you reach your customers? What channels will you use? Which partners will be needed in your distribution channels? See reach your customers effectively.
- How will you do your selling? Do you have a sales plan? Have you considered which sales method will be the most effective and most appropriate for your market, such as selling by phone, over the internet, face-to-face or through retail outlets? Are your proposed sales methods consistent with your marketing plan? And do you have the right skills to secure the sales you need? See the sales process.
Business plan: your team's skills
Your business plan needs to set out your own background and skills and the structure and key skills of both your management team and your staff. It should identify the strengths in your team and your plans to deal with any obvious weaknesses.
The management team
If you're looking for external funding, your management team can be a decisive factor. Explain who is involved, their role and how it fits into the organisation. Include a CV or paragraph on each individual, outlining their background, relevant experience and qualifications. Include any advisers you might have such as accountants or lawyers.
If you're looking to satisfy your bank manager or other investors, you need to demonstrate that your management team has the right balance of skills, drive and experience to enable your business to succeed. Key skills include sales, marketing and financial management as well as production, operational and market experience.
Your investors will also want to be convinced that you and your team are fully committed. Therefore it's a good idea to set out how much time and money each person will contribute (or has already contributed) to the business and the salaries and benefits you plan to draw - see use your business plan to get funding.
Give details of your workforce in terms of total numbers and by department. Spell out what work you plan to do internally and if you plan to outsource any work. Other useful figures might be sales or profit per employee, average salaries, employee retention rates and productivity.
Your plan should also outline any recruitment or training plans, including timescales and costs.
It's vital to be realistic about the commitment and motivation of your people and spell out any plans to improve or maintain staff morale.
See what to include in your business plan for further resources and useful videos.
Business plan: your operations
Your business plan also needs to outline your operational capabilities and any planned improvements. There are certain areas you should focus on.
- Do you have any business property?
- What are your long-term commitments to the property?
- Do you own or rent it?
- What are the advantages and disadvantages of your current location?
Producing your goods and services
- Do you need your own production facilities or would it be cheaper to outsource any manufacturing processes?
- If you do have your own facilities, how modern are they?
- What is the capacity compared with existing and forecasted demand?
- Will any investment be needed?
- Who will be your suppliers?
- Have you got established procedures for stock control, management accounts and quality control?
- Can they cope with any proposed expansion?
- IT is a key factor in most businesses, so include your strengths and weaknesses in this area.
- Outline the reliability and the planned development of your systems.
For more information see an introduction to IT.
Financial forecasts for your business plan
As part of your plan you will need to provide a set of financial projections which translate what you have said about your business into numbers.
You will need to look carefully at:
- how much capital you need if you are seeking external funding
- the security you can offer lenders
- how you plan to repay any borrowings
- sources of revenue and income
You may also want to include your personal finances as part of the plan at this stage.
For further information on how to fund your business, see business financing options - an overview.
Your forecasts should run for the next three to five years and their level of sophistication should reflect the sophistication of your business. However, the first 12 months' forecasts should have the most detail associated with them.
Include the assumptions behind your projection with your figures, both in terms of costs and revenues so investors can clearly see the thinking behind the numbers.
For further information see calculate how much money you need to start your business and managing business finance during the start-up phase.
What your forecasts should include
- Sales forecast - the amount of money you expect to raise from sales - see forecast and plan your sales.
- Cashflow statements - your cash balance and monthly cashflow patterns for at least the first 12 to 18 months - see cashflow management.
- Profit and loss forecast - a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads.
For financial forecast examples, download a spreadsheet containing cashflow forecast, profit and loss forecast and sales forecast templates.
Alongside your financial forecasts it is good practice to show that you have reviewed the risks your business could be faced with, and that you have looked at contingencies and insurance to cover these. Risks can include:
- competitor action
- commercial issues - sales, prices, deliveries
- operations - IT, technology or production failure
- staff - skills, availability and costs
- fire or flood
See risk management.
Tips for presenting your business plan
To make sure your business plan has maximum impact, there are a number of points to observe.
Keep the plan short - it's more likely to be read if it's a manageable length. Think about the presentation and keep it professional - even if you only intend to use the plan in-house. Remember, a well-presented plan will reinforce the positive impression you want to create of your business.
9 tips for presenting your plan
- Include a cover or binding and a contents page with page and section numbering.
- Start with the executive summary.
- Ensure it's legible - make sure the type is ten point or above.
- You may want to email it, so ensure you use email-friendly formatting.
- Even if it's for internal use only, write the plan as if it's intended for an external audience.
- Edit the plan carefully - get at least two people to read it and check that it makes sense.
- Show the plan to expert advisers - such as your accountant - and ask for feedback. Redraft sections they say are difficult to understand.
- Avoid jargon and put detailed information - such as market research data or balance sheets - in an appendix at the back.
- You may have detailed plans for specific areas of your business, such as a sales plan or a staff training plan, but it is best not to include these, though it is good practice to mention that they exist.
While it is sensible to seek advice from external advisers, it is not a good idea to get them to write the plan for you. Investors and lenders need to have confidence that you personally understand your business plan and are committed to the vision for the business.
Make sure your plan is realistic. Once you have prepared your plan, use it. If you update it regularly, it will help you keep track of your business' development - see business budgeting and prepare a business plan for growth.
Download a business plan template
Our business plan template is an interactive form designed to simplify the process of creating your business plan.
Business plan preparation
The business plan template asks a number of detailed questions about your proposed business, so it's worthwhile to carry out research before you complete it. Consider:
- your business goals
- legal requirements for your business
- your business market and competitors
- financial forecasts
- sales plans
- potential suppliers
- staff and premises
For further support to create your business plan see what to include in your business plan.
Business plan: dos and don’ts
A list of dos and don’ts to consider when creating your business plan
A business plan focuses on your business strategy and what you need to do to achieve your goals. It can help to gain investment. A business plan can also monitor progress and success within your business.
When creating your business plan, consider the following list of dos and don'ts.
Business plan dos
- Know your audience: Always consider the purpose of the plan. For example, do you want to target a supplier or are you hoping to get funding from a bank or an investor? If funding is your priority, the audience will be interested in what they will get for their investment. You must adapt the plan to the reader. Ensure that they key messages resonate with them.
- Be engaging: Outline your business idea in a persuasive and positive tone. You want your proposal to stand out. Ensure you highlight your key/niche selling points.
- Be clear and concise: Make the business plan easy to read. Structure the document into meaningful sections and use headings.
- Show thorough knowledge of your market: Demonstrate clear knowledge of your target market, your customers and competition. Show a clear understanding of the potential size of the market. Conduct research and include credible data sources to illustrate that your idea has the potential to maintain long-term growth.
- Provide detail and answer important questions: Address how you are going to develop your business, when you are going to do it, who is going to play a part and how you will manage the finances.
- Know your numbers: Demonstrate a consideration and understanding of costs, price points, markets size and profit margins. Attempt to provide accurate numbers in your financial forecasts. An investor will be interested in if the business is scalable and whether there is an opportunity to grow. Alongside your financial forecasts it is good practice to show that you have reviewed the risks your business could be faced with.
- Present in a professional format: Use images, graphics and tables to illustrate key information where appropriate.
Business plan don'ts
- Be vague: Avoid including information that is unrealistic and you cannot substantiate.
- Include technical jargon: Don't assume that the reader will understand the technical aspects of your business or sector.
- Exclude the essentials: Don't leave out important details, facts and figures.
- Make things complicated: Avoid making your business plan overly complex.
- Dispense with your business plan: Don't forget to regularly review and update your business plan - it's a working document that will help you to focus on your vision and objectives.
Developing an up-to-date business plan - AKC Home Support Services
Darren Jones launched his care business, AKC Home Support Services, in 1991 with his wife Sharron. Although writing their business plan was one of the first things the couple did, Darren admits he originally saw it as a bit of a chore. Now, he takes a different view, believing it has helped the business stay on track and true to its goals.
What I did
Write the plan
"When we started the firm I knew we needed a business plan but saw it more as a document for everyone else than something to help us. If I started another business tomorrow I would write one much more willingly as it brings a number of benefits - from helping you secure finance to keeping you focused on your goals.
"We got help from our local enterprise centre, looked at examples from other businesses and a template from the bank. We mixed and matched bits from these sources because not everything applied to us. For example, because we were going into a new market we couldn't write about our competitors but needed a lot of information about the market for care services."
Consult the plan
"We used our business plan to set out the financial and strategic goals we wanted to achieve in the short and long-term. We review it annually now unless there's a significant shift in our market and then we use it to immediately re-evaluate our goals.
"Our business plan has also helped us to avoid expanding too quickly. Early on, we were offered work in another county. This seemed great but when we looked at our business plan - and particularly our cashflow forecasts - we realised it was important to establish a firm base in one county before taking on work in another otherwise we would overstretch ourselves."
Use the plan
"We purchased a residential unit four years ago and our business plan definitely helped us demonstrate why the bank should lend us the money. Without it being put down on paper I don't think it would have sounded like a very viable suggestion.
"The home added a different dimension to the business in which we had no trading record so the bank lent us the money according to our past performance. We could also show that we would offset some of the cost by using part of the new building as office space.
"Our plan also helped us to get support from Shell LiveWire - the organisation that assists 16-30 year olds to start and develop businesses - as you must have a business plan to enter its competitions. We were awarded prizes twice - not only bringing in extra money but publicity too."
What I'd do differently
Work on the plan's presentation
"I would have tried to get more assistance and perhaps made the document look a bit more professional. It's your way of gaining support for your business and is the one thing that your bank manager will remember apart from how you were dressed."
Get as much help and advice as possible
"Show the plan to an independent third party - such as friends or family who have run their own businesses - who will be able to point out if anything is missing. It's much better to make mistakes on a practice run than when it really matters."