Introduction
Any business, small or large, needs a guiding light plan that is written down and available for reference. This is the function of a business plan. It’s a formal document that outlines business goals, strategies, target market, financial forecasts, and operational structure. It serves as a roadmap for the business and is essential for securing funding, guiding growth, and measuring success. In fact, the more up-to-date the business plan is, the quicker it is to respond to opportunities for funding (e.g., grants, loans, equity investment) because the information is available on tap.
NOTE: The business plan is a confidential document and must be kept safe. Some good protocols include using password protection on the document itself, two-factor authentication for signing into computers/cloud data repositories, and only telling those who need to know where to find it.
Business plans can and should change in response to customer needs, customer tastes, what’s going on in the larger economy (more simply put, trends), and it’s a good idea to stay abreast of developments in your industry via appropriate social media channels, conferences, growth hubs, and special interest groups. This is necessary in order to identify opportunities, threats, and establish industry benchmarks. It’s also useful to keep people focused.
Key Components of a Business Plan
Executive summary
This is the ‘elevator pitch’. Ideally, 1-1 ½ pages long outlining the mission and vision of the business and a summary of how these will be achieved. A mission statement is what your company is doing right now, while your vision statement is what you hope to achieve in the future – where you are in this moment versus where you’re going. Starbucks’ mission statement is “To be the premier purveyor of the finest coffee in the world, inspiring and nurturing the human spirit — one person, one cup, and one neighbourhood at a time”. Microsoft’s mission statement is “to empower every person and every organisation on the planet to achieve more.” And from 1975, their vision statement was “put a computer on every desk and in every home”.
The executive summary must also include key milestones and targets, for example, a target revenue, customer base, set of services, set of products, what the figures are, and by what date the business aims to achieve them.
Business description
This states what the nature of the products or services the business delivers and, just as important, what it does not deliver (what game you are playing in and what you are not, for example, we produce and distribute health juices for retail sales in supermarkets, we do not source and distribute whole foods). The nature of incorporation of the business must be listed here, e.g., limited company, sole trader.
Management and Ownership Structure
The simplest way to do this is with an organisation chart. This is a simple, hierarchical diagram showing the directors and their shareholding, any shareholding by other legal entities (i.e., other businesses), the senior leadership team, and the departments under them. Key roles must be included, and show significant outsourced services
Market Analysis
This is a very important section to keep up to date. Here, you describe your products and services and any features that make the business unique (your unique service proposition). This is a very data-driven section, and you want to be clear about the problems (pains, gains) you are solving for clients and how you are solving them (pain relievers, gain creators). Common data to include is the TAM, TOM, and SOM. TAM or Total Available Market is the total market demand for a product or service. SAM or Serviceable Available Market is the segment of the TAM targeted by your products and services, which is within your geographical reach. SOM or Serviceable Obtainable Market is the portion of SAM that you can realistically capture.
Products or Services
Here you describe very clearly what the client needs the products or services for. There must be a clear plan (set of activities, what and when) that shows how alignment between customers' needs and products or services is constantly measured. This is guided by the market analysis.
A good way to depict this is with a diagram that shows the client personas. A persona is a fictional, yet research-backed, representation of a target user or customer (e.g., anxious Anne, hungry Henry, or Eager Edward). It encapsulates key characteristics, goals, needs, and behaviours to help businesses understand and empathise with the people they are designed for.
Marketing and Sales Strategy
Simply put, Marketing focuses on creating demand and attracting potential customers, while sales focus on converting those leads into actual buyers. Both components take their lead from the market analysis you have already done and the customer personas. These will dictate the messages your marketing activities create and when and where they are communicated in order to generate interest and direct clients where to go. Sales then picks up the leads and, again, considering the needs, pains, and desired gains of the customer, presents an easy and effective way to obtain access to the product or service.
Financial projections and funding requirements
A simple spreadsheet showing the projected level of sales (separated out by product/service/region) and the related costs is your departure point. The departure point is a detailed spreadsheet showing the planned sales and costs (at least for the next 18 months). The revenues must be realistic and based on the market analysis, and the costs must be validated by, for example, desk-top research and quotations.
The financial forecasts must align with product or service release timeframes (milestones) to make sense, and so must the funding requirements. Cash injections must be shown on the spreadsheet and in any summary document, indicating when money is needed to come in. Ideally, the nature of the funding should be indicated (grants, debt, equity investment) so as to allow the business to plan.
Step-by-Step: How to Prepare a Business Plan
Tools, Techniques, and Templates
Get help. Business plan templates are available from sources like GOV.UK, the British Business Bank, Growth Hubs, and some financial institutions. Spreadsheets and accounting software are very useful for projections, measuring actual financial performance, and what-if analysis. Online business plan builders, SWOT analysis templates, Business Model, and Value Proposition Model Canvases are great for planning.
Get a trusted advisor or mentor to sense-check the plan.
Tips for a Successful Business Plan
Common Mistakes to Avoid
How the Hertfordshire Growth Hub Can Help
We provide:
Contact us at enquiries@hertsgrowthhub.com or call 01707 952777 for tailored support.