Trying to start or grow a business without a solid business plan is a bit like going on a road trip without a GPS or map. You might get lucky and find your way, but it’s definitely a safer and smart bet to have some guidance to make sure you don’t take too many unnecessary detours or land up completely lost. A well-thought-out business plan can help you achieve your business goals by providing direction, clarity, and focus. In the UK’s competitive business market, having a good business plan can make the difference between success and failure. It is also a useful thing to have that you can share with potential investors or funders. In this blog, we’ll share what a business plan is, why it’s important, where you can find templates and examples and we’ll also give you step-by-step guidance on how to make your own business plan.
What’s a business plan?
It sounds pretty straightforward, but let’s take a closer look at what a business plan should actually include. A business plan, simply put, is a written document that outlines the goals, strategies, and financial projections of a business. It’s a comprehensive plan that provides a roadmap for the business owner, investors, and other stakeholders, to understand how the business will work, how it will earn money and how it will grow. At its most basic, a typical business plan in the UK includes an executive summary, a description of the business, an analysis of the market and competition, a breakdown of the products or services offered, details about the management team, a marketing and sales strategy, and financial projections.
Why do you need a business plan?
When you apply to register your business through Companies House in the UK, one of the requirements is that you share your business plan.The government will evaluate everything from your business idea to your market analysis, sales strategy, and financial projections. They want to see that you have a clear understanding of what you’re getting into and that you have thought through every aspect of your business before they grant you permission to operate. Of course, this will also help you define your business idea and goals.
Here are some of the many advantages of having a business plan in place:
- Helps you define and achieve your goals: A business plan forces you to think through the goals and objectives of your business. By writing them down and developing a plan to achieve them, you increase your chances of success.
- Provides a roadmap for your business: It eventually becomes a roadmap for your business, outlining the steps you need to take to achieve your goals. It will be a useful document you can keep referring back to and adapting.
- Attracts funding and investment: Investors and lenders will want to see a well-written business plan before considering investing in your business. An impressive business plan has the potential to demonstrate the viability and scope of growth of your business, making it more attractive to them.
- Helps you understand your market and competition: As a business owner, you would want to gain an analysis of your target market and competitors. A well-laid plan helps you understand the industry, market trends, and competition. With this knowledge, you can develop effective strategies to differentiate your business and stand out in the market.
- Facilitates decision-making: It can also be a valuable tool for making informed decisions and allows you to evaluate different scenarios and determine the best course of action for your business.
- Financial institutions and regulatory bodies require a business plan: They use the plan to evaluate the potential of the business, the likelihood of success, and the risks involved. Additionally, some regulatory bodies require a business plan for certain types of businesses, such as those in the healthcare or financial sectors. Having a solid business plan can help you meet these requirements and avoid any regulatory issues.
What should your business plan aim to do?
A good business plan is realistic and based on market research and analysis. The more information you can provide about your target market, competitors, and potential growth areas, the stronger your plan will be. Additionally, it should be clear and concise – investors don’t have time to read a novel!
Regardless of the size or nature of your business, make sure you are outlining all relevant information, including an overview of your business, potential problems that might arise, funding requirements necessary to start and run your business, and how to attract the right talent for your company. Let’s get into a bit more detail on this below.
An overview of your business
Your business overview should offer a clear and concise description of your company. Think of it a bit like reading the blurb on the back of a novel. You want to quickly draw people in so that they’re interested in investing their time (and in your case, money too!) to read more. It should give the reader quite a broad idea of what the company does and how it is different from its competitors. The style of writing should be accessible to a wide readership and should be easy for anyone to understand, even those not familiar with your particular industry. Think of including the following details in your business overview: Business concept: What does your business do? This could be a brief description of your products or services, and how they help solve a problem for your target market.
- Company history: How did your business start, is it a family business, is there a fun story behind it? You can provide a brief history of your company, including when it was founded and any major milestones that you have achieved.
- How will your business make money: You should provide an explanation of your pricing strategy, including how you determined your prices and how they compare to those of your competitors. It is also a great idea to include any other potential revenue streams that you plan to explore.
- Target market: Who are your customers? Here you should share who your intended target market is and how you might reach them.
- Competitive advantage: What is the unfair advantage? This section should describe the unique value proposition (USP) of your business, including any advantages you have over your competitors, such as lower prices, higher quality products or services, or better customer service.
Potential problems in business
You will need to think through all the risks involved in starting your own business. If you’re prepared for potential problems, it is likely that you’ll be able to deal with them much better as they arise. Do a risk analysis exercise particular to your business and its environment. Here it might be helpful to look at industry reports, do some of your own marker research and consult other experts in your field.You might also want to figure out the potential strengths and weaknesses of your business and its operations, and identify areas where you may be particularly vulnerable. Here are some common areas where potential problems can arise:
- Market conditions: Changes in the market can affect your business in unexpected ways, such as changes in consumer behaviour, economic conditions, or the entrance of new competitors.
- Operational challenges: Operational challenges can arise due to factors such as production issues, supply chain disruptions, or staffing shortages.
- Financial risks: Financial risks can include cash flow issues, unexpected expenses, or changes in interest rates or currency values.
- Legal or regulatory risks: Legal or regulatory risks can arise from changes in laws or regulations that affect your industry or your specific business, such as new taxes or licensing requirements.
Laine Redpath
Explaining your funding requirements
As a new business, you might not know the exact amount of money you’ll need, as there are probably still many balls up in the air. It’s a good idea to be realistic and try to have projections of all your financial requirements though. In your business plan, this section on explaining your funding requirements is aimed to give you an overview of your financial needs, including the amount of funding you require and most importantly, how you plan to use the funds.
Here are some key considerations to take into account when explaining your funding requirements:
- Start-up costs: If you’re just starting your business, you’ll need to identify the costs associated with getting your business up and running. This may include costs for equipment, inventory, legal fees, and marketing expenses.
- Operating expenses: Once your business is up and running, you’ll need to cover ongoing operating expenses such as rent, utilities, and payroll.
- Cash flow projections: You should provide detailed projections of your expected cash flow, including your revenue streams, expenses, and any anticipated changes in the market or competitive landscape.
- Funding sources: You should identify potential sources of funding, including loans, grants, and equity investment. Consider explaining the terms of the funding, including any interest rates, repayment schedules, or ownership stakes.
- Collateral: If you plan to take out a loan or other form of debt financing, you may be required to provide collateral, such as property or equipment, to secure the loan.
- Exit strategy: Decide how you’re going to repay your investors and exit your business should you ever need to. This will include a timeline for when you expect to repay any loans or provide a return on investment to equity investors.
Laine Redpath
Attracting talent
As your business grows, you’ll most likely need to hire more people to work with you. How will you attract and keep the right people for your company? It’s useful to explain your strategy, both for potential investors and as part of your company culture. This will show your intentions to contribute to the local community and economy and can also help to build credibility with potential investors – they will see you’re committed to building a strong team to support your business.
Here are some important considerations for attracting talent:
- Job descriptions: Provide clear and accurate job descriptions for the positions you need to fill. This will help potential candidates understand the skills and experience required for each role.
- Compensation: Offer competitive compensation and benefits packages to attract the best candidates. Consider the market rates for each position, as well as the unique skills and experience required for your business.
- Company culture: Build a positive and supportive company culture that attracts and retains top talent. This can include offering opportunities for growth and development, fostering a collaborative and inclusive workplace, and creating a strong sense of purpose and mission.
- Recruiting channels: Identify the best channels for recruiting top talent, such as job boards, industry associations, social media, and professional networks. Consider using a mix of channels to reach a broad pool of candidates.
- Retention strategy: Once you’ve hired the right people, it’s important to have a plan in place for retaining them. This can include offering opportunities for advancement and professional development, providing regular feedback and recognition, and fostering a positive and supportive workplace culture.
Step-by-step guide to developing your business plan
- Executive summary: This is the first section of your business plan, but it is usually written last. It should be a brief, one- or two-page summary of your entire business plan, highlighting the most important aspects of your company, such as your mission statement, business concept, target market, financial projections, and any unique advantages you have over your competitors.
- Company description: Here you should provide a more detailed description of your business, including its legal structure, history, and current status. It should also explain what products or services your business offers, your target market, and your unique value proposition.Market analysis: Lay out a detailed analysis of your target market, including size, demographics, trends, and growth potential. This will also include an overview of your competitors and their strengths and weaknesses, as well as any external factors that may affect your business, such as economic conditions or regulatory changes.
- Marketing and sales strategy: Draw a rock solid strategy that explains your marketing and sales strategies for reaching your target market and generating revenue. You should outline your marketing channels, pricing strategy, and sales process, as well as any advertising or promotional activities you plan to use.
- Product or service line: Here you will share a detailed description of your products or services, including their features, benefits, and unique selling points. You can also highlight how you plan to develop and improve your product or service over time.
- Financial projections: Your financial projections include an in-depth analysis of your revenue, expenses, cash flow, and profitability. This should be projected through income statements, balance sheets, and cash flow statements, as well as any assumptions you used to develop your projections.
- Funding requirements: Probably one of the most important steps is to explain your funding requirements, including how much money you need, your plan towards fund allocation, and your blueprint to repay any loans or investments.
- Management team: With this step, you will be able to forecast the type of team you want to work with. While explaining this section, include an organisational chart and explain how responsibilities will be divided among team members.
- Appendices: This section should include any additional information that is relevant to your business plans, such as market research data, resumes of key team members, or legal documents.
Tip for reviewing your business plan
It’s possible that after a while, your business might pivot or change directions entirely. That’s why it’s important to review and update your business plan regularly, making sure that it always accurately reflects your business’s current situation. In general, you should review your business plan at least once a year (broken down into four quarterly plans) or whenever there are significant changes in your business, such as the addition of new products or services, major changes to your management team, or significant shifts in market conditions. But, if the business is heavily sales-driven, it may be smarter to have a monthly operating plan supplemented with weekly targets. Reviewing and updating your business plan on a regular basis can help ensure that you’re always focused on achieving your long-term goals.
The final note and business template
Even the best business ideas can fail if you can’t formulate, execute and implement a business plan. So be sure to invest time and energy into drafting a detailed and relevant business plan. You are probably juggling many things while trying to establish a business, but it is important to get your business plan into the best shape it can be in. To make things a bit easier, you can download a free template from the gov.uk website and explore some examples of what makes a good business plan. It is super easy and has everything to get your business ready for success. Once your business plan is ready, you might want to start registering your company.
wamo Business Account
You can contact us via email on support@wamo.io or through the chatbot on our website. We’re big into human-centred customer service and a wamo team member will happily talk you through the steps of opening a business account with wamo. We hope this detailed guide to creating a business plan as a new entrepreneur has inspired you to create your roadmap to a successful business!
