What is a Business Plan and How Do You Write One?

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What is a business plan?

A business plan is a written document detailing your business’ plans for the future. The aim is to outline your company’s strategy and objectives, and the steps you’ll take to achieve your goals. It will also explain how you plan to measure progress and what success will look like for your business.

If you’re planning to apply for a business loan from a bank, they’ll ask to see your business plan to gain insight into what you’re looking to use the borrowed funds for. They’ll also want proof of how you plan to grow your business, to see if you have a higher chance of paying back the money you owe. For more information, take a look at our guide to business loans.

Why is a business plan important?

As you may have pieced together, a business plan is an important step in becoming an entrepreneur.

Here are just some of the benefits of having a business plan:

Offers direction: Your business plan works like your business’ sat-nav - there to guide you through each stage of your company’s journey. It serves as a strong point of reference if you need to remind yourself of how something works, as it should detail all the key elements of running your business, from your shareholders’ details to your goals and objectives.
Holds you accountable: If you set yourself a goal, you’ll want the satisfaction of achieving it, right? A detailed business plan should outline your objectives and plans, to inform the choices you make for your business. If the going gets tough or you lose motivation, you can refer back to your business plan to remind you of why you started your business and what you set out to achieve.
Helps you secure funding: As mentioned, your business plan can help you get funding or bring on new investors. Investors will want to see your business plan to know you have plans in place for success. Banks will ask to see your business plan before lending you money too.
Helps you understand your customers: Your business plan can explain exactly who you’re looking to target with your product or service. What do your customers care about? What are they looking for from your business? Understanding your buyer can help you connect with them and appeal to their interests and values.

Top tips for creating a business plan

Now you know the value of writing a business plan, you’re ready to start putting your document together. Here are some tips to keep in mind before you get started.

Be concise

Your business plan doesn’t need to sound formal or complex. After all, it’s designed to clearly explain your business’ goals and purpose as clearly as possible. Keep your language clear and concise so stakeholders know exactly what you mean and resonate with your points.

Be passionate

Your business plan is your opportunity to showcase your commitment to your new venture and show others how much you care. The more passion you show for your new business, the more others are likely to understand your business’ purpose and mission.

Use data to back yourself up

The more evidence you have to back up your points, the more authoritative and well-researched your business plan will be. Data allows you to find benchmarks and set performance goals for your business, to outline exactly what success looks like.

Take time on the research

There’s no such thing as too much research! Get to know your competitors, the industry, and what you want your business to be. The longer you spend on research, the better you’ll know your company and the industry it sits in.

Be objective in your research

Make sure you include both the positives and negatives from your research. By covering the potential pitfalls you may face in your industry, you’ll show your stakeholders you’ve considered the obstacles you may face as a business.

Know your finances

The financial section of your business plan details your forecasted sales, expenses and cash-flows. If you’re looking to attract investors you’ll need to nail this section, as they’re likely to read it to decide whether their investment is safe. Looking to secure a bank loan? Banks will look at the finances section of your business plan to get a clear picture of your financial situation and plans, to ensure you’ll have means to pay back the money you’re looking to borrow.

Change your plan if needed

Remember you have the freedom to go back and change your business plan. Perhaps further down the road you realise your target market isn’t quite what you expected, or you’ve decided to tweak your service offering to appeal to a wider audience. You can go back and adjust your plan so it remains an accurate representation of your business’ goals and purpose.

How to write a business plan in 7 steps

While staring at a blank document can transport you back to late-night essay writing, try not to panic - you aren’t looking to meet a uni deadline! Instead, that blank page is the start of a new, exciting chapter.

We’ve broken down how to write a business plan into bite-size chunks, to make the process feel manageable and straightforward.

Step 1. Your executive summary

The executive summary is the introduction to your business plan. Its purpose is to summarise key information about your company and its goals, to encourage people to read the rest of your business plan.

In your executive summary you’ll cover what your business is and its opportunities for growth in your industry. Introduce yourself and other key stakeholders and their roles in your business. Explain how you plan to promote your business and your product or service, and how you’ll fund your business plans.

Keep in mind that your executive summary shouldn’t be more than a page long, but should still cover the important stuff - like who you are as a business and your plans. The stronger your executive summary, the more likely customers are to trust and connect with your brand.

Step 2. Company description

Here, you’ll include an in-depth description of exactly who your business is. It's your opportunity to explore your business’ values and what’s important to you as a business owner. You can tell your business’ story, such as what inspired you to start your business, and your goals for the future. It’s also important to clarify the legal structure of your business, such as whether you’re a limited company.

Step 3. Analyse the market

Next, you’ll explain the market research you conducted to identify your business’ target market, industry and competitors. You should cover how you expect your product or service to be received, your business’ position in your industry and how competitive the market is. This section of your business plan is your chance to show your awareness of the market, any obstacles you may face and how your business will stand out in a competitive landscape.

Step 4. Explain the structure of your business

Now you’ll need to explain the management structure of your business and who’s in charge of business operations. Explain the legal structure of your business - if you’ve formed a limited company for example, you may want to touch on the advantages of limited liability. You could include an organisational chart to explain your company’s management structure, including the roles and responsibilities of each member of your team. You can then explain how each individual will work towards meeting your business’ goals.

Step 5. Explain your products/services

This is your opportunity to dive into the benefits of your product or service and how you’ll meet the needs of your customers. Explain the unique selling points (USPs) of your product or service that differentiates you from your competitors and how you’ll fill any gaps in the market.

Step 6. Financial plan

The next section of your business plan is your financial plan. Even if you’re certain your business idea will transform the market, your business won’t survive without making a profit. Your financial plan should reassure investors that your business is viable and a safe investment for them.

You’ll typically look to include your income statement, balance sheet and cash flow statement. Your income statement will explore your revenue sources and business expenses over a set period of time. This allows investors to see your business’ profits and losses over time. Haven’t started your business yet? You can include predictions instead, such as how much money you expect to make and any losses you anticipate. Your balance sheet covers how much equity you have in your business. You can calculate your equity by noting your business’ assets (what you own) and your liabilities (the money you owe). You can then use the following calculation to work out your equity. Assets - liabilities = equity.

Finally, your cash flow statement details the money that is coming in and going out of your business. When the cash you have coming into your business is more than the cash you have going out, your cash flow is positive. Whereas, when you’re losing more money than you’re making, the cash flow is negative. Your cash flow statement can help you put together a plan should you have a negative cash flow, to keep your business afloat should you suffer financial loss.

Step 7. SWOT analysis

Including a SWOT analysis in your business plan shows self-awareness and your drive to succeed. SWOT analysis explores your strengths, weaknesses, opportunities and threats. Often, these four frameworks are presented as a grid, with bullet points that list the information, so you don’t need to worry about writing detailed paragraphs for each section. This section of your business plan allows you to reflect on your company’s strengths and weaknesses, and any factors that may limit your chances of success.

Step 8. Appendices

You made it to the end - congrats! Your final section, the appendices, should include any additional information or documents you think will be valuable to your reader. Perhaps you have market research data you’d like to include that is particularly significant to your business decisions. This section allows you to share any extra information that informed your business plans.

Business plan FAQs

What makes a good business plan?

A good business plan should be both concise and informative, to clearly explain your company’s plans and objectives.

A strong business plan is:

Clear and concise - avoid awkward phrasing and making things too wordy
Backed by data - make sure your statements or claims are supported by data
Realistic - your business’ goals should be attainable
Detailed - concise doesn’t mean you should skip the details. Explain your business’ goals clearly and how you plan to achieve them

Can you write a business plan yourself?

You can absolutely write a business plan yourself! You don’t need to be a literary genius to get your business’ goals and motivations onto the page. You may benefit from having someone else, like a friend or family member, read through your business plan to check for any errors and make sure it reads clearly. If you have any worries about how to approach or structure your business plan, you can reach out to our friendly team here at SUAZ. We’re always happy to help you achieve your business goals.

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