Does every start-up need a business plan?

Start-up enterprises can get away without having a proper plan, although those who trade without one are usually reacting to events as they occur rather than shaping their future in a strategic way. In order to forge a successful enterprise with long-term viability planning is essential, so read on on to find out what you need to know about business plans.

Defining a plan for a business

There is no one way to come up with a good plan. Different sorts of enterprises need different sorts of plans. What may suit a start-up enterprise will not necessarily be appropriate for a growing business in its fourth year of trading, for example. That said, most businesspeople agree that a proper business plan must be written down and not something you hold in your head. It should include operational, financial and marketing matters. It does not, however, need to be a document that goes into huge amounts of detail.

An overview of the business and how it intends to make money is all that is required. Anyone reading it, including potential investors, should be left with a sense of what your enterprise is about once they have finished, without the need for further clarification. If more questions are asked about the business, then these ought to relate to details and not to your overall commercial strategy.

When should you start a business plan?

For new business planning to be effective, it really ought to start as soon as possible. If you are starting a small business from scratch, then writing out your plan even before you begin trading is highly advisable. Remember that your plan can be changed if you find some strategy in it is simply not working or can be improved upon.

You might also write a new business plan because you are moving into a new area of commerce. This could be providing services as well as products or operating in a new sector, for instance. Some people find it beneficial to come up with a new strategy by planning to operate in another territory, too. If you have a new product that you are going to launch, then a new business plan based around the target market for it may be appropriate.

The key thing is to write your plan well before your are looking for finance or investment. Whether you use a template or come up with your own approach, the important aspect of planning is to focus your mind. By defining the scope of your activities, you are in a much better place to meet your business objectives so set these early. If you do it later – or not at all – then your objectives tend to become very wishy-washy and don’t really define success, or even your break-even point.

What are the key elements of a sound business plan?

Not every business plan needs to have the same component parts. Some may be aimed as a pitch to encourage investment from potential investors, while others might be internal documents which provide a private financial overview for future sustainable growth. Nevertheless, you’ll find all of the elements you need in a typical business plan template. Just use the sections of the template that seem the most relevant for your purposes. Those you might find include:

• An executive summary.
• An operational business overview.
• A market segment outline.
• Competitor analysis.
• A management team summary including an outline of business partners.
• A sales and marketing plan.
• Funding requirements.
• Supplier analysis.
• Financial forecasts.
• SWOT analysis.
• A mission statement.

How to make a business plan

A good business plan is not successful because it contains in-depth analysis of all of the elements listed above. In fact, it can be a good idea to leave some out depending on your target audience. However, no venture will be truly successful unless the person or people running it have formed a plan from which they can define their business goals accurately.

As such, there is no step-by-step guide for creating a great business plan. Some people start with an executive summary, for example, while others choose to add it as a one-page overview at the end of the plan. Others leave it out altogether. What is important is that you know when it might be required and who would like to see it.

For example, you might want to include one, along with a more detailed financial plan if you are going to share your business plan with your bank manager in the hope of securing a new loan to finance expansion. Your balance sheet and long-term financial planning may also be needed to obtain grants from other funding streams, such as government or regional agencies.

In many cases, it is advisable to make a new document every time you need to produce one. This doesn’t need to be bespoke on every occasion, however. You can complete an entire business plan template with the information that is necessary to understand the day-to-day operations of your business and then simply cut and paste the most relevant sections as they are needed. Not everyone needs to see your current cash flow statement, after all.

Indeed, shared business planning ought to be more focussed on things like novel approaches to marketing or brand awareness that is designed to attract potential customers than it should be on potentially sensitive financial data. You can always share your current set of accounts with would-be investors down the line. Most investors are more interested in the potential of your business at first, anyway. They’ll only want to see the rest of your plan, including your forecasts, once they have been hooked into what you are doing the first place.

Finally, it is a good approach to keep your business plan as short as possible. Even though you might know your business inside out and want to convey a great level of detail to the reader, this is not what business planning documents should be about. You ought to provide an overview and not detailed analysis. Bullet points for the salient data are all that is needed to make your plan as easy to read as possible.

Top tips for a great business plan

• Focus on your preferred target market as much as possible. If you have a scatter-gun approach to attracting customers, then your reader may think that your business goals are too wide in terms of achievability.
• Place emphasis on your marketing even if you have never been involved in sales before, because this is the lifeblood of your business. There are plenty of ways to harness the internet and social media to market your company even if you have no advertising budget.
• When you describe your business, make sure you include the sort of structure you have. This might be in the form of a partnership, as a sole trader, or as a limited liability company. Detailing whether you already have shareholders with equity is also important if you are seeking inward investment.
• Detailed financial analyses and overly ambitious forecasts are not required for a good business plan. However, you should include your current turnover figure even if you don’t want to reveal your full profit and loss accounts. This gives a sense of the size and viability of the business to anyone from outside of your organisation who reads it.
• Make sure you consider all of your potential revenue sources, not just your current client base. Always look at areas for potential expansion and for carving out a greater market share from your competitors.