How to Write and Structure a Business Plan

Last night I watched an episode of The Apprentice, during which an otherwise brilliant candidate got fired for not having prepared a suitable business plan to communicate the essence of his big idea. At 23 years of age, he claimed to have been naive about what was expected of him in this respect. This reminded me of a 'how to' document that I put together to help a team of students during my role as a Young Enterprise Mentor. It is based on authoritative research, common sense, and discussions with venture capitalists. I offer it here in the hope that it might be of benefit to other aspiring entrepreneurs who need backing for a big idea…

1 Executive Summary

Write this section last. Use plain-English and avoid jargon.
Maximum length: one page. Summarise the following:
1.1 - Your product or service and its advantages.
1.2 - Your gap or opportunity in the market.
1.3 - Key members of the management team.
1.4 - Your track record (business and/or personal).
1.5 - Your financial projections (key figures only).
1.6 - Funding requirements and expected returns.

2 Background

Explain how the business idea has come about. For example:
2.1 - What inspired the idea and how long has it been in development?
2.2 - Do you or your team have any related previous skills or experience?
2.3 - Achievements and/or development work carried out to date.
2.4 - Proposed ownership and structure of the business (an overview).

3 The Product or Service

Explain the following in concise, plain English:
3.1 - What the product or service is.
3.2 - Its USP (Unique Selling Proposition) or differentiation.
3.3 - What customers will gain through buying the product or service.
3.4 - Disadvantages or weak points (being frank inspires confidence).
3.5 - Relevant regulations, cartels or recent changes in technology.

4 Market Research

Outline the current state of the market and its key players. Focus on:
4.1 - Size of each market segment and whether it is growing or declining.
4.2 - Relevant or important market trends and the reasons behind them.
4.3 - Key characteristics of buyers in each segment (e.g. age, sex, income).
4.4 - Sales already achieved and customers already lined up, if any.
4.5 - Competing products or services and who supplies them.
4.6 - Advantages and disadvantages of competitors and their products.
4.7 - Reasons people will or might switch from established competitors.
4.8 - Competitors' likely reaction to losing business and planned responses.

5 Sales and Marketing

How do you intend to bring your product or service to market? Explain:
5.1 - How your product or service will be positioned within the current market.
5.2 - How you will demonstrate that your product/service will meet customers' needs.
5.3 - How price, quality and after-sales service will compare with your competitors.
5.4 - How the product or service will be promoted e.g. advertising, PR, social media etc.
5.5 - How it will actually be sold e.g. phone, website, face-to-face or through an agent.
5.6 - How long each sale is likely to take (contacts, failed attempts, repeat business).
5.7 - Who has already expressed an interest and the level of sales they represent.
5.8 - How further potential customers will be identified and targeted.

6 Business Management

Outline the proposed management structure and team, and its suitability.
6.1 - Provide an overview of the main management structure applicable to the business.
6.2 - Define each key management role, who will fill it, and their skills and experience.
6.3 - Show how committed you and/or the team is to achieving business success.
6.4 - Show management strengths and outline how any weaknesses will be overcome.
6.5 - Briefly describe key management systems, procedures or software to be utilised.
6.6 - Describe any mentors and/or other support mechanisms that can be called upon.

7 Operations

Explain the business's facilities and mechanisms for product or service delivery.
7.1 - Show the advantages and disadvantages of the business's location.
7.2 - List the facilities owned/needed to start trading e.g. equipment and machinery.
7.3 - List employees required by role or skill-set and address likely availability.
7.4 - Explain key steps/timing required from start-up to product or service delivery.
7.5 - Highlight any potential limits to production capacity or service delivery.
7.6 - Explain how raw materials or completed stock will be stored and for how long.
7.7 - Show availability of suppliers and/or distributors, and how they were selected.

8 Financial Forecasts

Translate your business performance expectations into 'realistic' numbers and charts.
For each forecast, list all your key assumptions e.g. prices, sales volume, timing etc.
8.1 - Summarise what contribution to profit each part of the business will make.
8.2 - Illustrate your sales forecasts broken down by product, service or buyer type.
8.3 - Show a cash-flow forecast allowing for realistic scenarios and contingencies.
8.4 - Demonstrate an understanding of key factors and timings affecting cash-flow.
8.5 - Show when money coming in will exceed money going out i.e. cash-positive.
8.6 - Summarise the annual P&L forecast for each of the first few years of trading.
8.7 - For larger start-ups, projected balance sheets will also show competency.

9 Financial Requirements

Your financial requirements should follow on from the above forecasts.
9.1 - Specify how much financial support is required, when and in what forms.
9.2 - State what this finance will be used for e.g. stock, working capital, wages etc.
9.3 - Show that the business will be able to meet its repayment obligations.

10 Assessment of Risks

Demonstrate that you have allowed for risks e.g. your main supplier closes down.
10.1 - Consider and address a range of potentially damaging what-if scenarios.
10.2 - For more serious risks, show that contingency funding can be obtained.
10.3 - For potentially critical risks, show that you have an affordable exit strategy.

11 Appendices

Whilst the main Business Plan should be concise, add the necessary detail here.
11.1 - Show detailed financial forecasts (monthly sales, monthly cash-flow, P&L etc.).
11.2 - Include detailed CVs of key personnel (essential if seeking outside funding).
11.3 - Include the market research data that backs up your sales assertions.
11.4 - Include any relevant product literature or technical specifications.
11.5 - Include names or profiles of specific target customers if applicable.
11.6 - Add credibility by listing all external data sources used in your research.