For small business owners, startup entrepreneurs and creative freelancers alike, building a business plan is daunting, and often, it’s difficult to know where to start.
According to Accountancy Age, two-thirds of SMEs don’t have a business plan in place. That means many small business owners are in danger of losing direction and missing out on valuable financial forecasting, and cash flow planning.
Understandably, many new business owners thriving in the first few months of a new venture fail to see the value of a business plan at all. For that reason, it becomes easier to put off the inevitable or even avoid building a plan altogether.
You may well dismiss the need for a business plan if you’re just starting out, if you are a freelancer, if you’re not seeking investors or if you feel your business model simply doesn’t require a ‘rigid’ or ‘restrictive’ plan.
But, here’s the thing: a business plan isn’t just for those looking to secure financial backing. Realistically, if you are self-employed, using a business plan should be a key part of your routine. Not only does a business plan set you on a clearer path to success, putting your business plan together opens your eyes to risks and highlights opportunities, sparking ideas and giving you a stronger sense of purpose along the way.
What is a business plan?
We’re going to start with the basics. A business plan is, in essence, a roadmap for your business, covering financial forecasting, strategies, tactics, and objectives. Arguably, the most important aspect of your business plan is outlining your goals.
Once you’ve set your business goals, your business plan is a framework which outlines the actions that allow you to reach them in a manageable, tangible way. Essentially, a business plan is a structured document that helps you to navigate through your business journey, helping you to implement a viable, sustainable and goal-focused timeline; and stay aligned with your business objectives.
The benefits of business planning
When questioned on the reasons for writing a business plan, members of the Young Entrepreneur Council in New York cited: developing a better understanding of the market, reaffirming the figures and measuring success as some of the key drivers.
Regardless of what your business model is, who your customers are and what your business does, you will find using a business plan is helpful in keeping you on track and keeping your finances healthy. Here are our top three benefits of business planning, outlining why we believe you should seriously consider getting started with your business plan sooner rather than later:
Viewing your business holistically
Planning your business can help you to see the bigger picture. Whether you’re a home-based baker using a subscription model for your customers, an accountant or a freelance designer, getting all your plans on paper can help you to see any pitfalls or weaknesses that may arise. Documenting risks, threats and opportunities within your respective market can help you to mitigate challenges early and ensure everything is aligned in terms of your marketing, sales and financial planning.
Setting a focus
It’s often difficult to see where your core focus should lie when setting up a new business venture. Having a set business plan allows you to see more clearly where you might want to focus your immediate strategic activity, setting short term goals, then longer-term objectives into manageable timescales.
Remember, every business is different. If you’re a baker, your profit margins will be small and focus will be on reaching as large a market as possible, if you’re a freelance writer, remember you’re selling your time, so you’ll need to ensure each client project brings you a worthy profit in accordance with your valuable time. In essence, whether you’re launching a membership-based coworking community, a sustainable fashion brand, or simply looking to monetise a side hustle, making a profit should be the core focus, so work out what the most impactful strategies and tactics should be in order to reap those financial rewards for the long term.
Preparing for change
If nothing else, the global pandemic has taught us that we can never really predict what challenges may lay ahead of us. Establishing a ‘bottom line’ income, the amount of money you need to make per month in order to live should be a baseline starting point for any business plan, building on this to ensure profit can be made each month. Setting a plan to ensure your business has a financial foundation in place, be it a savings buffer, additional funding, or a secondary revenue stream you might have up your sleeve, agility is key in this new era of change.
Our step-by-step guide to writing your business plan
Step 1: Start with your goals and work backwards
Begin with the end in mind. How do you want your audience to view your business brand? What is your value to them? What is the reason for your business’s existence? From here, establish a measurable, realistic goal. Give your goal a time scale to help make it measurable.
It’s often a good idea to first, define what you do, then set a 12-month goal. From that 12-month goal, break it down into quarterly or monthly achievement aims to ensure you stay focused on working towards your business goal on a daily basis.
Remember, when outlining each of your goals, be sure to make them SMART (specific, measurable, achievable, realistic and timely)
Step 2: Draft up an executive summary
An executive summary will form the first section of your business plan, outlining the basics of what your business does, current financials, where you want your business to be within a five-year period and why it will succeed.
In this section, you will need to identify the ‘problem’ your business is solving, your value proposition and your target audiences, but remember, you’ll go into more detail on these later on in your planning.
While your executive summary is the first section of your business plan, it’s a good idea to come back it at the end, to make sure it truly sums-up your full plans. Be sure to make any changes and additions where necessary.
Step 3: Conduct your market analysis
It’s important to address challenges and risks your business may face upfront. Conducting your market analysis is a good way to assess these challenges on paper so that you may be prepared to pivot and mould your plans if necessary.
Market analysis is particularly important if you are looking for funding, as it will help your potential investors to feel confident that you have done your research and you are aware of the changing environment of your industry.
Your research should include details on the industry in general, market size, target market size and your potential market share. In this section, you may also want to conduct a SWOT analysis, outlining strengths, weaknesses, opportunities and threats for your business within your market, and the broader economic environment.
Step 4: Profile your customers and outline your marketing strategies
You’re going to need to give a detailed outline of your prospective customer, to give your marketing plans a place to start from. Who is your typical customer? Where are they? What are they passionate about and what kind of disposable income might they have?
Establishing buyer personas in the first instance is a good place to start if you want to build a strong marketing pipeline for your business, so getting a deeper insight into your target audience is an essential milestone in terms of driving new business.
Once you have profiled your perfect customer, put together a plan to attract them- documenting your intended marketing tactics and strategies that might best attract your customer.
Step 5: Financial plans and projections
Being transparent about your businesses financial health from the outset is essential, particularly if you are seeking funding. While your finances section often comes at the end of your plans, it is arguably the most important.
Outline what your financial state is currently, highlight your forecasting, and map out how you would like your financials to look in the future. Again, you’ll want to set SMART objectives for your financial growth, making sure your goals are achievable within your set time frame. While it’s important to aim high, don’t set your business up for failure by setting unattainable milestones. Being ambitious while remaining candid is key to setting long term, achievable growth goals.
Putting your plan together
Putting pen to paper in the first instance is the key to drawing out a successful business plan. Try not to get bogged down with the detail initially and break it down into manageable chunks of research and writing, so you do not become overwhelmed by the enormity of the task.
Don’t forget that your business plan, for the most part, will be for your own benefit, so don’t feel the need to use jargon or excessively colourful language. Be specific, stay focused on only the necessary details, and remember you can revisit and expand your plan further down the line if needs be.
In fact, it might be a good idea to start out by restricting your business plan to 1-2 pages, to help you focus on clarity and keep things concise.
Stick to the plan
It may sound blindingly obvious, but many of us are guilty of building a beautifully crafted, thoughtful plan, and letting it gather dust in the annuls of our filing system. It’s a good idea to put regular notes in your calendar to revisit your plan. That way, you will be forced to assess whether you have achieved this month’s goals and whether you’re still on track for financial growth.
Set reminders in your calendar or diary, outlining any deadlines for your short-term and long-term goals too. That way, you’ll ensure these remain front of mind.
Finally: Remember to be flexible
Your business plans are unlikely to stay the same as they were when you started. Two months down the line, you may have developed a secondary income stream, your financials may be above, and beyond what you expected, your target audiences might have changed. The key is to remain flexible, move with the times. Your customer’s needs will often change, which means you need to be prepared to be agile too.
It’s a good idea to wheel out your business plan at least every two months and review it against your current circumstances. Tweak, amend, pivot and flex. The most successful businesses are those that have the foresight and wisdom to change with the times.
Keep an eye on our upcoming Coupay blog posts for more insight and advise on kick-starting your new business, and in the meantime, check out our invoicing services for any support with your online payment processes.