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How to write a business plan for small businesses?


Throughout business history a business plan is seen as the only way of starting a business and therefore, business success. Usually entrepreneurs will have a solid business plan before bringing together co-founders, team members, securing a startup bank loan or financial investment.


However, the modern business world may require something slightly different for long-term business success.


The following post will outline the current thinking behind a business plan, how you could change your business plan for the better and some recommendations to help you improve your plan in the future.


What is a business plan?

A business plan is an actionable and written description of your business idea. The document provides a detailed account of your business idea, business model, customers, financial model and introduction to your co-founders and team.

Your task as an entrepreneur is to create a business plan that demonstrates your business can realistically operate and works for your business and is not a wasted document that you do not.

Business model

Your business model typically describes how the different areas of your business interrelate, the resources require, the customers and their relationship to your business.


Financial model

Your financial model is part of the business model and describes in numbers (i.e. money) how your business will use money to provide a product or service to your customers and generate income from the products or services.


Customers

Understanding your customers and community and doing your business research will mean you will have detailed information about your customers. You will know their wants, needs, likes, dislikes, forums, groups and clubs, which would all go into your business plan.


What are the essential sections in a good business plan?

You will find plenty of business plan templates online, but the best templates will include the following sections. Each section is briefly described, so you have the details and can provide your business with the best chance of initial success by getting the foundation correct.


Introduction and executive summary

The introduction and executive summary sections break down the key points of the business plan for a senior management or executive audience.


The executive summary provides the main points from each of the sections to demonstrate your business idea is valid, you have a solid commercial foundation, you understand your customers and you have the correct people in place to make your business a success.


Key business insight

The readers need to understand the reason why your business exists. Do you have a specific problem you’re trying to solve or is there a need you have identified where you can provide your product or service.


Including your company mission within this section will ensure you have included why your business exists. This means you focus on the core areas of the business throughout the document.


Founder and key team member bios

Sometimes placed at the end of the document, but the founder and key team members should be described within the business plan.


The details for each of the founder members encourages the reader to believe that the co-founders and founding team have the skills, operational knowledge and experience to start the business and make it a success.


The individual bios should provide enough detail to demonstrate the different areas of the business, such as technical founders or similar company experience if you have a key employee or partner who would be responsible for a certain area of your business.


Products, services or both

This part is the easy one and shows that you have thought about what you will provide to your customers.


What are you going to sell to your customers? Is your business a product or a services business? Do you have a unique product or a special service that your customers have not seen before? Are you improving on something that has come before? Either way, you have to provide all of the details of the product, service or both within this section.


You should provide details about suppliers and raw materials if you need to manufacture a product or provide partnership information if you rely on other third parties to get your products out to your customers.


The business plan will require all of the information that you have in your head and you have researched about how you will bring your product or service to life from drawing board and intended functionality or operation to customer sales.


Customer information and wider market information

The market is described as how much similar customers purchase across the entire industry. Therefore, you should have a sense of how much spent each year on similar products or services and how much of that market you could realistically gain with your business.


Gaining customer insights through industry analysis or your research will help you to get more accurate details on your customers and their needs and wants. Sometimes using your own research will provide customised data, which would not be available for other competitors within the same market. This customised information might provide you with a unique perspective on the market, which you should detail within your business plan.


You should also include information about how you believe your business will compare against others similar businesses in the same market. For example, would you see your business growing 2x faster than the nearest competitor? If so, you have to present your reasoning behind this assumption and where you have information or data to prove that you could outgrow the competition as a new entrant into the same market.


Distribution (or getting your product or service out to your customers)

How will you get your product or service to your customers? Will you sell directly to your customers or do you have to work through intermediaries? If so, how will the agreements work with each of the different parties involved?


Your business plan must include details of your anticipated contractual agreements or anything you have to prove how you will work the relationships.


Marketing and other customer-facing details

As with any business, marketing is a fundamental part of providing your customers with a product or service. This means that it’s almost impossible to provide the product or service to customers without some form of marketing.


Will you market directly to your customers, through groups, your community or would it be word of mouth. Either way, you will need to describe your marketing plan and how this will achieve your forecasted results.


If you can describe where your business has a marketing opportunity ahead of the competitors will show that you have reviewed the industry, market and understand your position in comparison to the other businesses in the same space.


Do you know how you will price your product or service? Can you also detail the strategy behind your pricing?


Some of the more detailed aspects of marketing might not be easy for you to provide a thorough description of how your business will operate. However, it gives you a good chance to seriously think about how your business will work, so you’re clear on your business and customer interactions.


Setup money (capital) and financial model

If you’re a small business owner or side-hustle entrepreneur, you will know that it’s impossible to start a business without resources. Some businesses are funded by savings, day job salary, freelancing or consultancy. Whereas, others fund their businesses through investors, bank loans or business enterprise grants.


Either way, your business will require funding of some kind, even if you believe you’re not actively spending any money. You’re always spending money somewhere. If you’re working on your project for free right now. Free resources is unrealistic over the long-term.


You will need to show your plan for paying team members, freelances and other collaborators on your project. This team costs rolls into the full costs of the business, so you can show how much it would cost you to run every aspect of the business and when the payments would be due.


Are you paying monthly for any software or other products or services, which would be required to keep your project operational? If so, all costs need to be documented and understood, so you can maximise the use of resources and reduce the financial outlay.


The costs are not in isolation, they need to be considered with your income (or revenue). If you can include when your customers will pay you, with delays and over what terms, so you can illustrate how your business is likely to make money and where that money will come from.


Finally, using costs and income, you can show you when you’re likely to return a profit. Helping you demonstrate when your entrepreneurial project will become self-sustaining. Will you need additional funding at specific intervals before your business can operate on its own? Or will your side-hustle turn into a long-running business after a few years of hard work. These numbers will describe exactly how the business could perform based on your current knowledge of your product, service, costs and the market.


Risks

A section that is self-explanatory, but provides the reader with the details that you have researched and demonstrated that you understand your business.


Every business has risks associated, some of the risks are straightforward to identify, but others will be much more difficult to understand. That’s where you need to continue your research, review competition and understand historical, legal and regulatory factors that could affect your business.


For example, is your business in danger of breaching privacy regulations under GDPR or CCPA (California Consumer Privacy Act)? If so, do you have to do anything specific to ensure that you’re complying with the privacy rules? Questions like this will form the basis of your assessment of risk throughout your small business or side-hustle.


Improving your business plan using a modern approach

In the modern flexible working world with gig workers, side-hustlers and small businesses. The business plan could evolve and take a slightly different form.


The business plan is a foundational way to carefully think and consider your business, so you can make better decisions with all of the available information and data. However, decisions you make today might be different to the decisions you make tomorrow. That’s why a static business plan might not work for every business.


The changing world might require something different to the business plans of old. It suggests a more dynamic approach to thinking about your entrepreneurial idea (or current small business), how things work today and your future plans.


Using your current knowledge can produce an accurate business plan for external people to view, but you should remain aware that your plan is only as good as the information used to create it. If that information changes, it could make your plan unrealistic. That;s why you should consider your business plan as a living and breathing document that changes and develops with your business.


Good luck!







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