How to: Business Plans

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1 How to: Business Plans Introduction Having an up to date business plan is an essential part of running a successful enterprise. It helps you to set targets, bring together ideas and plan for the future. It is also an excellent tool for expressing to others where you want your enterprise to get to and how you re going to get there. Whether its staff, stakeholders, or investors, your business plan can help you to express all of your ideas and plans in one place. Why Write a Business Plan? The main reason for writing a business plan is so that you, your partners, staff and stakeholders all have a consistent message about what your enterprise does, how it is performing now, how you are expecting it to perform in the future and what your aspirations for it are. Business plans are also often written to attract funding and investment. Your plan can express to potential investors how your business is performing, what your objectives are and how you are going to achieve them. It is important to remember though that whilst you may be writing your plan for a particular purpose, such as funding, it is important to regularly review it and keep it up to date to make sure that you meet your targets. What should be Included in the Plan? Table of Contents Although there is no correct length for a business plan, to provide detailed information about your business in a clear and easy to read format, it is likely to be quite long. Including a table of contents at the start of your business plan, listing the main sections and page numbers will help interested parties navigate through your plan quickly and easily. If you are using your business plan for investment purposes, a potential investee is likely to get frustrated if they cannot easily find the information they are looking for, and therefore be less likely to consider your plan positively. Executive Summary Executive Summaries are used in documents to summarise the information in the proceeding pages. This should be the last part of your plan that you write as it should act as an overview of all of the other sections, giving the headline information from each. Your Executive Summary should include: Your enterprise name, legal structure & date of establishment; The nature of your enterprise and the products or services that you supply; Details of your target market and information about market trends, growth patterns and gaps. The objectives for your enterprise over the next three years, including target income, how you will fill skills gaps, how you will break into new markets, etc.

2 Headline financial information including key income projections and details of funding or investment requirements, including how much you and your partners have already invested. If you are using your plan to seek investment, you need to make sure that the Executive Summary catches the attention of potential investors. Make it enthusiastic, professional and concise. Spell out what makes your enterprise better than the completion and show how it is financially viable. Also, include details of how the investor will be able to exit your company with an attractive return. Vision, Mission, Values and Objectives In this section you need to describe your vision, mission and objects. Your vision is the driving force behind your organisation and how it will bring about the change you intend to achieve. This should be a succinct statement detailing what you are about and where you are going. Your mission will describe what you intend your organisation to do, who it will help, where and why. Your objectives should include both your financial and social objects including the social outcomes you hope to achieve. Your objectives need to be challenging but achievable, realistic and easy to communicate. When thinking about your objectives you may want to consider the SMART values. SMART stands for specific, measurable, attainable, relevant and time-bound. If you make your objective SMART you are more likely to get buy-in from potential investors. Social Purpose and Impact You will have touched on your social purpose when describing your objectives. In this section you should explain in detail what social need(s) you are aiming to address. You should include who benefits from the work you do, why there is a need and how your enterprise will address this need. You should also include the views of your stakeholders and beneficiaries (i.e. the community, investors and any governors). Once you have described your social purpose you can explain what you hope your social impact will be over the period your business plan covers, and how you will measure it. In order to measure your impact effectively, it is likely that you will have conducted research on the costs associated with the issues you are addressing. For example, if you work with young offenders, you may include the costs of keeping someone in prison for a period of time. You should include this information here. You should also include any costs associated with measuring social impact; you may have to buy in specialist services or software. This section of your plan is particularly important if you are seeking social investment as social investors will want to see how the social impact that you an achieve will increase with their investment; put differently they will want to see evidence for the potential social return on investment. Operations and People In many enterprises it s the people that are the organisations greatest asset. In this section of your business plan you should show what skills and experience your staff and partners have that will differentiate you from the competition and make your enterprise a success.

3 You should list the key people that are involved in the enterprise and provide a brief description of the skills, experience and qualifications that they have. You should include key members of staff as well as the senior management team and any advisers or mentors that you have regular contact with. You may also want to include in this section details of any focus groups, steering groups or community representation you have consulted with. Similarly, if you have worked with any external organisation in formulating you plans or delivering services, such as Local Authorities or public sector bodies then you could include them here as well. You should also include operational information in this section. This will include where you operate from and why this is appropriate, what equipment you have, key suppliers and distribution methods, and information about your insurance cover. Products and Services Whilst this may seem an easy section to complete, it is important that you really sell your products or services to anyone who is reading your plan, not just describe then. Think about each product or service you offer and describe its features, trying to express what is special about it, and its benefits, or what it will do for the customer (what problem does it address). You should then provide information on how you will deliver what you say you will and describe any after-sales services that you will provide. Costing and Pricing Having described your products and services you now need to describe your costing and pricing and how you decide on it. The cost of your product or service is how much it costs to produce or deliver it. The price is how much you will charge for it. You should include in this section both the fixed and variable costs associated with producing or providing your product or service and you should explain your pricing strategy clearly, including how your prices compare with those of your competitors and why they differ. Research Any statements or claims you are making should be backed up by your market research. If you are using your business plan to seek investment, potential investees will expect to be able to understand why you are making the claims you are, when they have read your research. If they cannot understand this relationship they are likely to think that your enterprise is not viable. Your research should include all area of the market you are operating in. This will include evidence of research into: Your competitors; Competing products or services; Your customers or beneficiaries You suppliers and supply chain; and Market trends.

4 You should include brief profiles of the areas in which you operate and how they match your target client group and detail the results of any surveys you have carried out to support the viability of your ideas and claims. Marketing Strategy and Pan Marketing strategies and plans are sometimes treated as separate documents from the business plan; however, your business plan should include key information from your marketing plan. Your marketing strategy will include targets and objectives for your marketing. These will be based on the market share you expect to achieve and how you expect to achieve it. Your marketing plan will include how you will carry out your marketing to achieve the targets set out in your strategy. Things you need to consider include: What your unique selling point is; What sales volumes you need to achieve you projected market share; The best marketing methods to use to reach your target market; Costs of marketing to your target market; How you will monitor and review progress; How you will manage the response to your marketing; and How you will schedule your marketing activity to try to avoid peaks and troughs in demand. For social enterprises there are often multiple groups to be targeted when it comes to marketing, not least because you may have clients or customers and beneficiaries. You need to segment these groups and consider the above for each segment. Similarly to your business plan as a whole, you need to monitor and review the success of your marketing plan regularly. If one of your routes to market is not successful then you should review it and, if necessary, re-distribute the money you are spending on this route into a more effective one. Business Risks For your enterprise to plan effectively and succeed, it is essential that you are aware of the risks that they might face. If you are not, then you cannot draw up contingency plans to effectively cope with any issues that come up as a result of these risks. There are many risks that can arise that will impact on your business. These can be internal risks such as key staff leaving, or external, such as changes in the economy. To identify some of the business risks that your business might face it would be useful to include a SWOT and/or PEST analysis. You can find out more about these in our How to Guide: Swots and Pests which you can find here. Having completed your SWOT/PEST analysis you should then describe the key risk areas facing your enterprise and what contingency plans you will put in place to address them. This will be particularly important if you are seeking investment as investees want to see how you will guarantee their investment if any issues should arise.

5 Financial Requirements and Information If you are using your plan to seek investment, this may be one of the most important parts of your business plan. You should include details of any investment you will need to reach the goals that you have set out in your plan, along with any finance you or your partners have already invested. If you are applying for funding, you should also include details of how you will repay the loan or meet the investor s terms. You should also include your financial projections and an explanation of how you have come to your conclusions. This should include a cash flow and income forecast for at least the next three years and in some cases five years. You can find out more about cash flow forecasts in our guide which you can find here. You may want to include the headline figures from your forecasts, i.e. income, total costs and gross and net profit in this section, and then include your full forecasts in the appendix. Appendices Including appendices in your business plan can help readers to find information more easily. Things you could include in the appendices are: CVs of key staff; Full financial forecast spreadsheets; Evidence of relevant qualifications or accreditations; Evidence of insurances; and Detailed market research information such as questionnaire s or reports used. Depending on how many documents you include and how long they are you may want to include a separate contents page for your appendices, so that readers can find the information they are looking for more easily. What Next? Once you have completed writing the content for your business plan, proof read it making sure that there are no spelling or typing errors; fonts, colours and styles are consistent and the formatting of the whole document is appropriate. Remember you want your business plan to be easy to read; otherwise people will not read it. Once you are happy with it, ask someone who is not immersed in your enterprise to read it. This could be a friend or family member, or an independent business adviser. Getting someone outside of the enterprise to read it will ensure that what you have written makes sense to those not in the field, and flag-up any jargon that you have used that layman may not understand. Completing your business plan is not the end of the business planning journey. You need to regularly review and update your plan; do not leave it in a draw or on your computer, never to be looked at again. The more out of date it becomes the harder it will become to update and you may find you need to start again. You should also be tracking your performance against what you had projected in your business plan. This will help you to measure your success and make changes in the right places. It will also help you to achieve your investment goals as it will show investors that you are aware of your enterprise s strengths and weaknesses and have viable plans for achieving your objectives.