WHAT'S ON THIS PAGE?
Why Do You Need A Startup Business Plan?
The startup business plan you create will define what you want to achieve and what you intend to do to make it happen.
It is the roadmap for your new venture and will help you focus on what’s important.
A really good startup business plan will include:
- what you want to achieve for the 1, 2, and 3 years
- how you intend to make these target achievements happen
- what priorities you should set to get there
With these three areas addressed, you can then make sure what you’ve set out in your startup business plan happens and how you can go about measuring success.
You can also make adjustments to your startup business plan based on the what you find out along the way.
Most people will tell you that your startup business plan is only to secure external funding.
This is true!
Any investors will assess your viability on the strength of your startup business plan.
Many people may ask to see your startup business plan, including:
- external funders, be they your parents or seed funders
- grant providers
- potential investors interested in buying a part of the business
- potential business partners
Your startup business plan is a really good way to inform others of what your business is about and how it is performing, which is why it is a really important document.
Most businesses, let alone startups, only create a business plan when absolutely necessary.
Time is often cited as a factor as to why this doesn’t occur, but the busier you are, or are likely to become, the more likely you are to need a startup business plan.
Without a decent startup plan, you may end up over-concentrating on areas of the business that are not productive, financially or otherwise.
A startup business plan defines the route you should be taking.
What to Include in Your Startup Business Plan
All startup business plans will usually follow the same layout. Here’s a structure you might like to follow.
Part One: The Executive Summary
The executive summary provides an overview of your entire plan.
It will include the highlights from each section from the rest of the document, from a brief overview of the business opportunity through to an overview of the financial forecasts.
The purpose of The Executive Summary is to provide an explanation about your business in a way that informs the reader, as well as holding their interest.
If the reader understands what your new venture is about and wants to know more, then The Exexutive Summary has succeeded.
If it’s more than two pages long, it’s too long!
You should write The Executive Summary after the rest of the startup business plan has been completed.
Do not mistake The Executive Summary as simply a description of the business and its products. It is not. It is a synopsis of the entire plan.
Part Two: Introduction & Company Overview
So this section is about the business opportunity – who are you?
What do you plan to offer or sell?
Who or what is your target market?
An overview of the business should be your starting point:
- when do you intend to start trading, if you haven’t already
- what investment have you made to date
- what type of business is it
- what sector or sectors do you intend to operate within
- relevant history, e.g. you may have acquired the business, so who owned it previously and how successful was it operationally and financially
- the current legal structure
- where you want to take the business
You should then describe what services or products you intend to offer in as simple as format as possible:
- what makes your goods and services different
- what benefits do your goods and services offer
- why customers would buy from you instead of your competitors
- how you intend to develop your products or services
- whether you hold any patents, trademarks or design registration
- the key features and success factors of your industry or sector
Part Three: Market & Competitors
You need to define your market, how you wish to place yourself within it and outline who the competition is.
This section should refer to any market research you have undertaken and also demonstrate that you’re well aware of the marketplace you intend to be in.
You need to also show you understand the important trends and drivers of your sector and potential customers, as well as being able to show that your new venture will be able to attract new customers in a growing market regardless of the competition you might face.
You should include:
- market - its size, historical data about its development and key current issues
- target customer base - who they are and how you know they will be interested in your products or services
- competitors - who they are, how they work and the share of the market they hold
- future - anticipated changes in the market and how you expect your business and your competitors to react to them
In researching the other businesses in your market place, you need to identify their strengths and weaknesses individually.
The market is not static, the needs of your customers and your competitors can change. You should therefore also show that you have created contingency should the market place or competition be more fluid than anticipated.
Part Four: Sales & Marketing Strategy
You need to say why customers will buy what you sell, as well as how you plan to sell to them.
List and describe the key activities you will use to promote yor business and sell you goods and services.
This section is often the weakest part of the startup business plan, especially if you do not have a background in sales and marketing.
It really is worth investing time and effort to make sure what you say is achievable and realistic within your skillset or budget.
Consider these questions:
- how do you plan to position your product or service in the market place?
- who are your customers? Include details of customers who have shown an interest in your product or service and explain how you plan to go about attracting new customers.
- what is your pricing policy? How much will you charge for different customer segments, quantities, etc?
- how will you promote your product or service? Identify your sales process methods, eg direct marketing, advertising, PR, email, e-sales, social marketing.
- how will you reach your customers?
- what channels will you use?
- which partners will be needed in your distribution channels?
- how will you do your selling?
- do you have a sales plan?
- have you considered which sales method will be the most effective and most appropriate for your market, such as selling by phone, over the internet, face-to-face or through retail outlets?
- are your proposed sales methods consistent with your marketing plan?
- Do you have the right skills to secure the sales you need?
Part Five: Operations
This may sound obvious, but you need to include how you intend to operate.
This section should include information about your premises – whether home based or you rent space – you management information systems, your IT, your phones, your website, etc.
Consider these areas:
- where you are to be based?
- will you rent a unit or office space?
- what are the long-term obligations to such space?
- will you own or rent it?
- will you work from home?
- does your landlord or mortgage lender allow this?
- why did you choose this location?
How will you produce your goods and services?
- do you make physical things or buy them in wholesale?
- are your products electronic or knowledge based (e.g. consultancy)?
- will you need to have own a small factory unit?
- would it be cheaper to outsource any manufacturing processes?
- if you do have your own facilities, how modern are they?
- what is the capacity compared with existing and forecasted demand?
- will any investment be needed?
- who will be your suppliers?
How Will You Manage Information?
- have you got established procedures for stock control, management accounts and quality control?
- can they cope with any proposed expansion?
Part Six: Information Technology
IT, from your computer to your mobile phone to your website, are key factors in your business.
You should include your strength and weaknesses in this area, with an outline of what you intend to do should things go wrong or break.
Part Seven: Financial Information
This is where all your words are translated into numbers.
Careful consideration should be given to:
- how much capital you need if you are seeking external funding
- the security you can offer lenders
- how you plan to repay any borrowings
- sources of revenue and income
It is also a good idea to include your personal financial requirements in this part of the plan, from what you need to earn each month to how you intend to pay out any dividends.
Part Eight: Financial Planning
You should create monthly forecasts for 36 months at least.
How detailed these forecasts are depends on how complicated and cost-centric your business is to run, but the first 12 months’ forecast needs to be as detailed as possible.
They need to include all costs and potential revenues so investors can see your train of thought via the numbers.
What your forecasts should include
You cash balance and montly cashflow patterns are called your Cashflow Statements.
A good startup business splan will cover 12-18 months and demonstrate that your business will have enough working capital to survive.
Make sure you have considered everything, from timing of sales, peaks and troughs in your marketplace (e.g. is December a slow month?) and salaries.
You should also produce a statement of the trading position of the business called the Profit and Loss Forecast.
The startup business splan should demonstrate the level of profit your intend to make based on your projected sales and the costs of providing your good and services, including your overheads.
You really should cover a range of scenarios; very often you will over forecast sales so include worst, best and mid-based scenarios.
If you don’t make enough sales until three months after you initially thought, you will be able to demonstrate the impact on your business.
This demonstrates that to the reader you have a business-like approach to your business, as well as the enthusiasm that made you start the business in the first place.
What risks could you face in the business?
What contingency is in place (e.g. insurance)?
Risk can include:
- competitor action
- commercial issues - sales, prices, deliveries
- operations - IT, technology or production failure
- staff - skills, availability and costs
- acts of God - fire or flood
- holidays and illness – what impact would this have on the business
- being too successful – and being unable to deliver as a result
Part Nine: Appendices
You should present any research or information that backs-up your startup business plan in it's own Appendix.
Presenting Your Startup Business Plan
Now you’ve written your startup business plan and want it to have a positive impact with the reader, so what should you have done to maximise its effectiveness?
Keep it short and concise!
If you present a huge document, it’s less likely to be read.
Think about presentation and keep things professional – a really well laid out plan with correct spelling and grammar will demonstrate the type of business you are!
Here are some top tips for presenting your plan:
- keep the pages together, at least a staple but ideally a cover or binding
- make sure there is a contents page with page and section numbering
- start with the executive summary
- ensure everything is legible - make sure the type is 10 point or above
- if want to email your startup business plan ensure you use the best formatting on any type of device it may be viewed on, including smartphones
- even if it's for you own use only, write the plan as if it's intended for an external audience
- edit the plan carefully - get at least 2 people to read it and check that it makes sense
- show the plan to expert advisers - such as your accountant - and ask for feedback.
- redraft sections they say are difficult to understand
- avoid jargon and put detailed information - such as market research data or balance sheets - in an appendix at the back
- you may have detailed plans for specific areas of your business, such as a sales plan or a staff training plan, but it is best not to include these, though it is good practice to mention that they exist
You should always get advice, but make sure the plan is yours and you have written it!
Don’t be tempted to let someone else write it for you.
Oh and above all?
Make sure your startup business plan is realistic and that you actually use it.
It should be a living, breathing document that you may wish to update regularly to provide a framework for you to work within, as well as recording your business’ growth.