How to ... Write a Business Plan

A business plan is a document, which sets out your strategy and vision for your new business.

It's a good idea for all businesses to have a business plan. Writing one helps you to:

Clarify your business idea
Set objectives
Identify priorities

There are 2 kinds of Business Plans, one for yourself that helps you to develop your internal thinking, and one that you show to other people if you are seeking investment. The process of developing your Business Plan can be more important than the Plan itself.

The following guide is generic, consequently some sections may simply not apply to small media companies, or use the wrong language, eg Senior Management Team, when you need to talk about your Key Creative Team, ie Cast/Crew etc.. If sections do not reflect the work you do, just skip over them; if the guide uses business language, respond in Creative Terms that apply to your business.

This needn't be an onerous activity, keep it short; for the internal Business Plan you may only need to produce a couple of pages.

What the plan should include

If you need to show your Business Plan to other people, eg banks, other lenders or investors, they will want to see your plan to assess the viability of your business and whether or not they should lend you money.

You may also need to use your plan if you are attracting business partners such as distributors or agents or hiring new members of senior management. It is important to be clear about how you will use the plan so you can tailor it to your target audience. You may find it useful to have different versions of your plan for this purpose.

Your business plan will need to have sections covering the following basic areas:

An executive summary setting out the key points and purpose of the business plan.
Your business and its products and services.
The market you plan to sell to and your competitors
How you will market and sell your products or services.
Skills of key managers.
Your operations, eg premises, production facilities, management information systems.
Financial forecasts and requirements.

You may also want to include a page highlighting any risks your business faces, considering a range of what-if scenarios. This will help you test the validity of your business idea and will also give you greater credibility in the eyes of lenders and investors. And you can explain what you intend to do about such risks.

The Executive Summary

The executive summary is a crucial part of your business plan. It summarises the key points of the plan and is normally no more than one to two pages long. The executive summary forms the first section of your plan after the contents page, but is the last section to be written. It should include:

Your competitors
Your opportunity in the market
Your management team
Your track record to date
Financial projections
Breakdown of any funding requirements and how the lender would be repaid or the returns an investor could expect

The executive summary is the section of your business plan most likely to be read by other people. Lenders and outside investors will often make provisional judgements based on it, so the information will need to be concise and persuasive. If it isn't up to scratch, they may not bother reading on.

Your business, its products and markets

This section of the plan needs to give some background information about your business and its products and services. It sets out:

How long you have been developing the business idea
The work you have carried out to date
Any related experience you have
Who will own the business
Description of your products or services - and how they differ from other products or services - When describing products and services try to avoid technical jargon if at all possible
What customers will gain from buying your products or services
How the business can be developed to deal with customers' changing needs in the future
Any key features of the industry
Your markets and competitors

The next part of your business plan covers the market in which you sell and who your competitors are. Unless you have a viable market and you know how you will beat the competition, your business will be vulnerable.

You need to outline:

What your market will be
The size of the market and whether it is expanding or declining
Current trends in the market
Who existing customers and key targets are
Details of the main competing products and suppliers - how they compare with yours and why you will be able to compete effectively

Marketing and sales

Your business plan needs to show how you will market and sell your products and services. In this section it's a good idea to set out how you plan to position your product or service in the market place. This means showing how your price, quality, design, response time and after-sales service will compare with competitors - and how you will market these features.

Price

Describe how you intend to price your product or service. Charge too little and you may lose money; charge too much and you will lose or not gain the customers you need. Identify where you expect to make your profits and where there may be scope to increase either margins or sales.

Customers

Explain who your first customers will be. Show which customers have expressed an interest or said they will buy from you and set out how you plan to identify other potential customers. Remember: unless you've got a clearly defined base of target customers, you could struggle to get your business off the ground.

Promote

Identify the sales methods you'll use to promote your product or service. This could be through direct marketing, advertising, PR, email or a website - it will depend on the type of customer you're targeting.

Sell

Finally look at how you intend to sell to customers, eg by phone, a website, face-to-face or through an agent? Set out the key selling points for your product or service and try to predict how long each sale will take.

Your team's skills

This part of the plan should outline the management skills of your team. Including this information allows you to spot any gaps in the team's skills and then take action to plug them. It also helps outsiders reading the business plan to have more faith in your new business by showing a good management team is in place.

You should start by defining each management role and explaining who will fill it. The idea is to show the strengths of the team and how you will deal with any weaknesses. Describe the background and experience of each person. Also explain how you will cover key areas such as production, sales, marketing, finance and administration. Remember to refer to the skills of any mentors or advisers you have access to.

If banks and other investors will be reading your plan, they will want to be sure that you and other members of the management team are fully committed. Therefore it's a good idea to set out:

How much time and money you each intend to contribute to the business
What salaries and benefits you will draw from it

If you are starting a new project that needs new skills then the plan will need to show how you are going to get those skills. If existing workers need to be trained you must explain the costs and time needed for the training. If new employees are to be taken on then the recruitment time and costs should be factors in the plan.

Your operations

Your business plan needs to include details of how things will work on an operational level. In this section of your plan you need to cover:

Premises

What premises the business has
What production facilities there are
What management information systems you will put in place

Explain the pros and cons of the location the business will be trading from. State whether you own or rent the property and state how long you are committed to it.

Production facilities

Give details of the production facilities you will have and how production will be organised. Analyse whether the capacity of the facilities will be enough for your needs.

Management information systems

Set out what your procedures will be in areas such as management accounts, stock control and quality control.

Financial forecasts

You'll need to include a number of financial forecasts in your business plan, translating what you've said about your business into figures. Advisers at banks, Business Links and enterprise agencies can often help you with this. List all your key assumptions, eg price, sales volume and timing for each forecast.

Sales forecast

Your sales forecast is how much money you expect to raise from sales. It forms the basis for all your other figures. Break the total figure down into different component parts, eg the sales you expect from different types of products or from different types of customer.

Cashflow forecast

The cashflow forecast shows how much money you expect to come in and go out of your business and when. You need to show that the business will have enough money to survive. Make it clear you have considered the key factors affecting your cashflow such as the timing of sales and salary payments.

Profit and loss forecast

The profit and loss forecast shows the level of profit you expect to make, taking into account your expected sales, the costs of providing your goods and services and your overheads. It can help you work out the level of sales you need to break even, which you can then compare with the sales you are forecasting.

Your financial requirements

Having produced cashflow forecasts you should know if your business requires outside funding, and how much. In this section of the plan you need to say how much finance you will want, when and in what forms, eg overdraft, or a fixed-interest loan.

Outside lenders and investors will want to know how much they are being asked to put into the business and for what reasons. They will also be interested in what security they will have for the money. Explain what the finance will be used for, such as buying equipment or working capital.

Give evidence that you will repay any money, and provide a repayment schedule. Let investors know how they will be able to sell their investment. If the business is your main or only source of income then you will need to show in the plan how you intend to cover your own needs as part of the cashflow forecast.

Tips on preparing your plan

Keep the plan short, focusing on what the reader needs to know and avoid waffle and jargon. Include any detailed information in an appendix, eg balance sheets, CVs of key personnel or market research data.
Be realistic and look at potential weaknesses and threats. Over-optimistic financial forecasts can cause problems and outsiders are likely to see through them.
Produce a cover page including your business name, contact details and the
date.
Include a contents page with numbers of pages and sections.
Edit the plan carefully and get at least two people to read it, checking for accuracy and sense.
Ask advisers such as your accountant for their comments on your plan.
Once you have completed your plan, keep it regularly updated. It will help you keep track of how your business is developing.

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