Business Plan

A failure to plan is a plan to fail. As the old adage goes, we’ve all heard it and of course the countless variations which basically stipulate the same. You are destined to lose/fail without a plan.

On the contrary this isn’t strictly true. Ideas without resolute plans have a gone on to be a great success. However such ideas have often had a significant amount of luck underpinning their journey and may well have made it to their destination faster should a plan have been in place.

Typically however the hypothesis holds and many entrepreneurs/businesses fail to plan their ideas comprehensively enough. Missing key pieces in the business puzzle and ultimately ending with an unsuccessful outcome.

This section is designed to guide you through the key areas of a business plan, including:

1. What should be included and the key information required in each area
2. The key uses of the business plan
3. Tips on displaying information clearly and concisely

What should be included in your Business Plan?

Your business plan is a key aspect in not only fully exploring your idea and the various potential opportunities and pitfalls, but it is also vital in attracting any outside investment that may be required. From that regard your business plan needs to be concise, well-structured and easy to follow. Along with having the necessary level of detail for a would-be investor to make an informed decision.

Executive Summary

Those versed in the art of writing an executive summary will be familiar with the format and the typical trick of always writing this section last. The executive summary provides a concise overview of all of the key material. From the perspective of a business plan therefore the executive summary should cover the key details and conclusions. Which should include conclusions relating to the opportunity, the market, the competitive landscape, the strategy, the risks and the financial forecasts.

Relevant skills and experience

Typically when you come across an idea it will be within a field that you are familiar with. Therefore it is important to try and demonstrate your knowledge and transferable skills in this section. That’s not to say you need very significant experience in the particular market/area your idea is in and it really depends on the nature of the business idea as to how much weight this section needs to have. Having direct and significant experience in the relevant sector is vital for certain concepts. For example, setting up and attracting investment for a new construction firm would be pretty difficult without prior experience in the construction industry. However, other markets do not necessarily require such experience. Instead, this section should focus on how your relevant skills will contribute to the success of the idea.

Business Plan – Market analysis 

A market analysis is vital in helping you to understand the dynamics of the market you are looking to enter including the size, market potential, growth rates, key players and customer demographics.

Market sizing:

With market sizing, you always want to start at the very top and dilute down to where your niche sits, this gives a thorough overview of the total market and enables you to easily assess the overarching potential as well as other niches you can look to expand into in future.

For example if I was attempting to launch a new piece of fitness equipment I would initially look at the size and growth rates of the global market for health and wellness , from this you can then derive the size and growth rates of the  geographical market within which you wish to locate and from there derive the fitness equipment segment.

Market sizing like this will give you full scope of the entire market and with the respective growth rates in your arsenal you will be able to see the emerging niches and how your company fits. Having that knowledge will ensure you are aware of the risk of related market niches which may impact on your market and/or present a good opportunity for partnerships. For more information on market sizing and some tips and tricks on finding and presenting information please visit our cheat sheets tips and tricks to sizing a market here.

Market Dynamics:

When we talk about the dynamics of a particular market. We are generally considering a number of key variables that underpin the makeup of the business environment. It is important within your business plan to provide a summary of these market dynamics. along with a consideration and key conclusions as to how you will operate within the market from a strategic point of view.

• Growth rates – The projected future growth of the market is an extremely important aspect to analyse when assessing your idea. A market characterised by high growth rates and high future growth potential is a far more attractive prospect to enter than one with stifled growth or worse still, one in decline. High growth rates will generally mean there is potential for new market entrants to not only enter the environment, but also gain some traction and market share with plenty of opportunities to attract a growing customer base. A market characterised by slow growth rates or a declining market base is going to be very difficult to enter. The large players will employ strategies to protect their existing market position and a decreasing or stagnant customer base presents little to no opportunities for traction.
• Key customers – Depending on the nature of the market, there can often be some significant key customers you should target. This is especially true for organisations specialising in business to business operations. A clear overview of who these customers are, their budgets, their requirements and their key contacts will all be useful information when attempting to build a strategy to get them buying from you rather than any competition.
• Customer niches/Market segmentation – Market segmentation is vital to understand the full dynamics of the environment. Generally market segmentation focuses on large consumer markets in which core customer characteristics such as age, wealth, education, values etc (demographics) make up various niches. Specific organisations and/or targeted marketing material can address such niches. For organisations specialising more in business to business operations, they can employ similar exercises.. Such exercises would need to focus on areas such as size, industry function and values.
• Key partners – Is the market characterised by many mergers, acquisitions or joint ventures? If so look at the key deals that have taken place and understand whether more market consolidation is likely. Such deals can present significant opportunity, but also create bigger risks if an organization creates a monopoly in the market.
• Key players/nature of competition – Knowing who you are up against in the market as well as their key products/services is vital. Understanding and tracking what your key competitors are doing will keep you ahead of the game and also provide significant potential opportunity to outmaneuver them on various market developments.
• Key trends and future trends – Knowing the key and future trends both in terms of services/products directly attributable. As well as other innovations which could make existing processes in non-core areas more efficient e.g. automation software. Is essential when keeping informed on market developments.

Business Plan – Assessing the Competition

When thinking through a new idea, you definitely need to know your enemy. Fully assessing the nature of the competitive environment and the size and resources of your direct competition is therefore a very useful exercise both initially and on an ongoing basis.

Such an exercise will allow you to understand their position in the market and frequently benchmark your organisation. This can make for quick reassessment of your market position and strategy in order to react to the competitions maneuvers. The following key areas provide a useful template of what you should be looking for when assessing your competition:

Market reach – Revenue and Profit (if possible segmental breakdown of current revenue streams)

Current Clients – If applicable and as far as possible – often information may not publicly available

Service Offering – Main products/service offerings along with omissions (what don’t they address?)

Market segments – What are competitors focusing on (any upcoming areas that seem to be a trend?)

Contract Wins – If applicable, what, if any major contracts have your competitors won in previous months

Mergers/Acquisitions and Partnerships – Has your competition shown appetite to invest in such activity? Is the market consolidating in any way?

Portfolio Innovations – Have there been any key portfolio innovations by competitors in the recent past? Do they have any in the pipeline?

Business plan – Sales and Marketing

Once you have completed a thorough market and competitor analysis as per the above steps. You should be in a pretty strong position to understand which customer profiles will find your offer most appealing.

This is then when a strong Sales and Marketing strategy needs to be developed. Such strategy should be designed to specifically target the sections of the market that are most likely to purchase. If your customers are big social media and technology users, there is probably little point in throwing out a Newspaper article. Likewise if your target customers are less tech savvy, a digital marketing strategy may not be the best idea.

This is definitely a core component of your offer, if the right people aren’t aware of it, you will never get any custom. Marketing is imperative in getting the word out there. That being said however care needs to be taken to ensure you are getting return on investment from marketing materials. Often many organisations waste money on somewhat useless material. See our Marketing section for tips and tricks on how to get things right.

Business plan – Operational and legal considerations

It goes without saying that you are going to need to think through exactly how your business will operate on a daily basis. Especially from the perspective of software and systems, logistics, HR, locations and of course cash management. In addition to those general considerations you will also need to understand and plan out any legal considerations. For example copyrights, trademarks, customer contract templates, supplier contract templates etc. Have a look at our Basics of Commercial Law section to find a more detailed view of the legal considerations.

Business Plan – Business Risks

A risk section is also a core component in a well-developed business plan. Good risk planning ensures you consider both the direct risks and the potential risks concerned with your business concept.

For example, you may decipher that seasonality will impact your business and, consequently, inhibit your revenue. As a result you may look to relieve the burden on cash flow by securing the use of a suitable financial instrument e.g. an overdraft facility.

Business Plan – Structure

From a structure perspective you need to consider two elements, company structure and managerial structure.

Company structure is a vital aspect to consider and can affect a wide range of core areas. Including how much you pay in taxes, your ability to secure financing, the paperwork you need to file and your personal liability. Researching how to secure any relevant permits, licenses and tax information is a key first step in deciphering the company structure you wish to choose and careful consideration needs to be taken when understanding the advantages and disadvantages of the various business structures that can be adopted. See our Business Structure section for further details on the types of structure you can go for.

From the perspective of managerial structure, this is more concerned with Human Resources and how you manage staff. Here, you can adopt hierarchical or a more fluid matrix solution. Again there are advantages and disadvantages of the various managerial structures on offer. Careful consideration should be taken before deciding therefore.

Financial plan and pricing model

Naturally everybody’s favourite topic…But it is absolutely essential that you have a hold on the numbers when planning your idea.

There are many considerations when putting together your forecast financials and you will need a firm understanding on areas such as break-even, ROI and cash flow. In basic terms though, you will need to understand whether your idea has the potential to generate a return and the level of cash reserves that will be needed to function on a day-to-day basis.

For some tips and tricks on how to go about forecasting and the typical statements you will be looking to produce see our Financial Forecasting and Price Modeling section.

From Business Plan to Reality

So you have carefully crafted the perfect business plan and now have a good understanding of the potential customer you want to go after as well as the competition and opportunities in your market

….What now?

Use your business plan as a guide

Your business plan should act as an initial guide to get your ideas structure in place. Throughout the research you have conducted. You should have identified what your goals are and have a much more detailed knowledge of the market and competition. The plan will also help you with the following:

• What business structure is best – From here you can then research how to go about setting up such a structure in the area you wish ensuring you abide by legislation and tax rules
• How to market to your target customer base
• What legal considerations you need to be mindful of e.g. Copyright, trademarks, standard terms and conditions etc
• What assistance you may require (e.g. consultancy) and what help for new business or SME’s exists in the area.

Adapt your business plan to suit reality

Things change and can change very quickly so being flexible is paramount in business and you need to set aside time each month to review progress against your forecast and plan. This will allow you to identify issues and pivot quickly to alleviate any issues or take advantage of opportunities.

With that in mind your business plan is a “living document” which you need to regularly review to match reality. Through the process of review you will have time to gather your thoughts and analyse what is working and what isn’t. In turn this will ensure you can continuously point your business onto the path of success.

Next Section: Creating a Business website

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