How to Write a Business Plan


You have a great entrepreneurial idea and you want to turn it into a business.  You just simply want to get started.  Yet, there is a lot more to a good business than just having a good idea. You need to think through all the parts of your business, and plan how everything will work to maximise your chances of success.  Are you the right person to run the business? Will customers like the product or service you are offering?

When setting up a business, you must first consider writing a business plan.  This is one of the most important initial steps in the life of a new business owner.  A business plan, or strategic plan, makes your ideas actionable: it provides a roadmap to achieving your goals.  A business plan takes all of your multiple to-do lists, spreadsheets, mini-plans and other papers, and amalgamates your ideas into a concise and clear plan of action.  It is the bible that you will use to establish your company, measure your success and make your business grow.  The importance of this document will live well beyond the initial company setup or applying for finance.

Writing a business plan has a number of objectives.  It enables you to establish that your idea makes sense; it helps you to identify and overcome potential problems; it will clarify the company strategy to your employees; it will enable you to plan your sales, marketing and business operations, and establish what financial returns you can expect.  It will also help you to work out what financing you need and convince others to invest in your business venture.

Your business plan outlines what your business does and what you are trying to achieve. It explains what the market opportunity is, what makes your business special and unique from the competition, and how you will make it a success.  Marketing is not about what you want to sell, it is about what your customers want to buy.

A business plan, or strategic plan is an ongoing document.  It lets you know where you are and where you are going.  Update your business plan regularly, at least every year.

A business plan will help turn your idea into a viable business.  Ideally you want a good plan once you are finished, but a reasonable plan is better than none at all.  Some parts will be easier to complete than others.  To write it properly may take weeks but stick with it, because it is not the final document that is important, as much as the process.

As Thomas Boone Pickens Jr stated: ‘A fool with a plan is better off than a genius without a plan.’

There are a range of formats for writing a business plan, depending on your business idea and circumstances but generally, most of them include the same core sections:

  1. Executive Summary
  2. The Problem
  3. The Solution
  4. The Market
  5. Competitor Analysis
  6. SWOT Analysis
  7. The Execution
  8. The Team
  9. Financials
  10. Backup Plan
  11. Appendices

business planning

  1. Executive Summary

This is the most important part of your business plan.  People often make professional judgements based on this section alone.  It should grab your readers’ interest and entice them to read more, as this may be the only part of the document that they will read if they are busy.  It is the outline of your plan and should explain the key parts of your business in simple, direct language, so that the reader will understand what the business is and be keen to learn more.

This section should be no more than two pages.  Since this is the business plan summary, you should write it last.

  1. The Problem

Explain the need for your business and what problem you are solving, or explain the opportunity.  Why do people need or want what you are selling?  Make sure that the product or service that you are offering is not a solution looking for a problem.

  1. The Solution

How will you solve your customers’ problem outlined in the previous section?  What will your business do and how will it meet your customers’ needs?  Does your solution make sense?

  1. The Market

Describe the market in which you will sell.  This section outlines your understanding of your target market and your customers’ needs.  What are the key market segments for your business?  What is the size of each market segment and are they likely to contract or grow?  What are the main customer characteristics for each market segment?  How much can they afford and what influences their purchasing behaviour?  What are the existing market trends and how will these affect customers’ tastes and purchasing preferences?

Your research should involve desktop analysis as well as field analysis.  Are you selling to a global market or a local market?  If your market is global, your research will primarily be desktop analysis.  If you are selling locally, your research will considerably benefit from field-based research.  Do you have any confirmed customers?  Try to get letters of intent from them, and include these in your business plan.

Your research should also include quantitative as well as qualitative analysis: you cannot improve what you do not measure.

  1. Competitor Analysis

What is the extent of the competition and what are their strengths?  What are the weaknesses of your competitors and what can you improve upon?  What is your unique selling point (USP) that encourages customers to buy from you in preference to the competition?  How will your competitors react to losing business and how will your respond?  Never openly criticise nor underestimate your competition.

  1. SWOT Analysis

This is an important part of your business plan.  SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats.  A business SWOT analysis can help you to determine what strategies and direction your business will take, either at the initial setup or at a later date.

Try to involve a range of relevant people in the business SWOT analysis.  They will each have their own ideas, perspectives and concerns to contribute and discuss.

  1. Strengths

What assets do you already have?  These could include your own knowledge and skills, qualifications, brand name, quality of product, intellectual property such as patents, management experience, business contacts, and premises.  You might also have existing credit. In addition, you should also consider the benefits of the business idea itself.  What makes your product or service more attractive than others?

  1. Weaknesses

Every business opportunity has weaknesses, so be open and honest about them in your business plan and explain how you intend to overcome them.  This is an opportunity for you to improve your business.  Consider factors that are within your control.  What can you improve internally to make yourself more competitive?  Maybe you need to employ more highly skilled staff; maybe you need to invest in more modern machinery.  What can you improve externally to generate more customers or attract more funding?

  1. Opportunities

Consider what external factors make your business more attractive.  Is your chosen customer base growing? Has a major competitor of yours recently gone bust?  Are there opportunities, time-limited or ongoing, that your business can benefit from?

  1. Threats

Consider how you will address factors that you cannot control, such as a downturn in the market or a change in customers’ purchasing habits.  What will you do if a new competitor arrives in your area?

It is not enough for a SWOT analysis to identify weaknesses and threats to your business; you must also include strategies to overcome them that enable your business to prosper.

You may have noticed that the above four sections can be split up. Strengths and Weaknesses refer to factors internal to your business, whilst Opportunities and Threats are external. Similarly, Strengths and Opportunities are positives, while Weaknesses and Threats are negatives.

  1. The Execution

Having completed your analysis, you now need to explain how you are going to run your business and make it a profit-making enterprise.  This section will contain several subsections, including marketing and sales, operations, benchmarks and milestones.  How will you advertise your product or service to your target audience?  What channels will you use to reach your target customers?  How will you collect payments from your customers?

  1. The Team

Explain who is involved in your business, including outside experts and advisors such as accountants and lawyers.  Set out the structure and key skills of the management team and the staff.  You should also include each key team member’s relevant qualifications and experience and what they contribute to the business.  Include your own curriculum vitae and other experience, but only the details that are relevant.

  1. Financials

You need to explain clearly how your business is going to make a profit.  This is essential if you are seeking venture capital.  Your business cannot succeed without watertight financial forecasts.  The sophistication of your accounts should reflect the sophistication of your business.  Include in this section your sales forecasts and the cost of goods sold. You will also need to include a profit and loss forecast, cash flow statement, and a balance sheet. If available, include annual historical financial information for the last three to five years.  Provide annual financial forecasts for the next three to five years.  Make these the same format as the historical information to make comparison easier.  This information should be presented as raw numbers and charts and should be to-the-point.  Include detailed financial forecasts in the appendix.

Be realistic and consider all ‘what if’ scenarios that might detrimentally affect your business.  If you are seeking venture capital, include exit strategies that you would use to pay back your investors if your business fails.

If necessary, get help.  If you do not have an accountant, there are business support organisations, or banks with small business advisers that can help you create financial forecasts free of charge.

  1. Backup Plan

Although nobody plans to fail, a contingency plan, or backup plan, is essential in case your venture does not do well or does not turn out as planned.  Unexpected circumstances can arise such as changes in the market, or a change in family circumstances.

Make sure that you always have at least three exit strategies.  How will you pay back your investors if your business fails?  Explain your exit strategies and also include this in the ‘Financials’ section above.  Perhaps you can move to cheaper premises and pay lower rent, or maybe your qualifications will enable you to take a part-time job while running your business enterprise.  It is not sufficient to claim that you will fall back on your partner’s income if your business fails.

  1. Appendices

This section will contain features such as graphs, tables, and notes that are too long or complicated to include in the body of the plan itself.

Further Tips to Improving Your Business Plan

  • Make your business plan professional by putting it inside a cover.
  • Include a contents page, with page and section numbering clearly indexed.
  • Know your market and make sure that you understand your finances. It is very important that potential investors can understand at a glance what your business is and how it will make money from the outset.  Keep the business plan short and to-the-point, focusing on what is relevant and what the reader needs to know.  Be specific and concise, eliminating any waffle.  Use simple language and avoid technical jargon.
  • Use charts and diagrams where it will simplify the presentation.
  • Check your business plan for spelling mistakes.
  • Your plan should be easy and simple for anyone to understand. Ask your friends and relatives to read your business plan.  Rewrite and simplify those sections that confuse them or that they do not understand.

We hope you enjoyed the read and wish you all the success with your new business venture.

The FYR team.

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