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The importance of a business plan

By Maja Kiprovska

It’s important to know how to write a business plan, because it helps you answer questions about your business and recognise potential obstacles before you set it up properly.

While not all new businesses start out by writing a business plan, for many it’s an important step. It acts as your guiding document, helping you establish and grow your business, and it has a life well beyond just setting up or applying for finance. It doesn’t have to be detailed – and in fact being too long and descriptive can put your readers off. You should be able to explain your idea clearly, structuring your plan into sections including:

- the problem – what gap or need is your business answering? - the solution – how will your business meet those needs?

- competitor analysis – what other businesses are you up against? -SWOT analysis – SWOT stands for strengths, weaknesses, opportunities and threats – can you identify those for your business?

What is a business plan?

Starting a business is exciting. You’re bursting with so many ideas, you might be tempted to rush your plan to get to the fun stuff.

But a business plan isn’t something you write down when you’re setting up and never look at again. You’ll refer back to it often, making sure you’re hitting your goals and getting the best from the brilliant ideas you come up with at the beginning.

And if you’re looking for funding, your business plan needs to convince people to back your idea.

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So it’s not an overstatement to call your business plan the ‘bible’ you’ll use to help establish your company.

And while business plans come in different formats, most of them include the same core sections. Below, we explain how to write a simple business plan. How to write a business plan?

The executive summary goes at the beginning of your business plan. As it’s a snapshot of your plan, it’s often best to write it last.

This section is common in many business documents, from client reports to pitches for new projects.

It’s designed to hook readers with your idea, giving an overview of your plan – including what makes you different, how you’re going to market your ideas, and how much money you expect to make (and spend).

As the executive summary is at the beginning of the document, it’s important to make a good impression on your readers. We’ve got a guide on how to write an executive summary, with a quick six-paragraph plan you can use to structure yours effectively.

Your business

This is where you jump in and start talking about your idea. This section should include:

The problem – what’s the need for your business? What’s the problem you’re solving, or what’s the opportunity? Why would people want what you’re selling?

The solution – how are you solving the problem? What will your business do? How does it meet the needs you’ve identified? And importantly, how is it different?

Your history – how long has your business been established? If it’s new, what’s your experience in the sector or industry?

Business structure – who are its owners and what is its legal structure?

The market

Here you explain industry trends and the competitors you’re up against. It’s where you include the market research you’ve carried out. This research can be quantitative (based on measurable data and statistics), qualitative (based on gathering individual experiences and opinions), or ideally both. This section should answer: Where you’re selling (and who to) – who are your potential customers and what are their characteristics? How will you target them? How many customers are you targeting? Will that number grow? Where do those customers shop at the moment? Do you have any existing customers, or confirmed orders?

Market trends – how is the market changing? Is it growing? Are tastes changing? What are the reasons?

The competition – what businesses are you competing with? How will you attract customers from your competitors? What advantages and disadvantages do you have against them? How do you think your competitors will react when you start out? How will you respond?