How to Write a Small Business Plan

It can not be underestimated how important it is for your small business to have a clear and concise business plan. A sad statistic is that the large majority of small businesses fail in the first few years, usually due to insufficient capital or poor planning. Having a business plan isn’t the magic bullet for small business success but it greatly increases your likelihood and more importantly allows you to be better prepared for dealing with any headwinds that your business may face.

So understanding the importance of a business plan is one thing but how do we actually write a business plan? What information needs to go in it?

The following is a list of some of the common elements that should form part of your business plan:

Executive Summary

The Executive summary is a brief overview of the business, effectively summarising the detail of what you will be discussing in the following sections. In a nutshell it outlines what the business is, what it plans to do and how it plans to do it.

It can often make sense to write this part of your business plan last once you have fine-tuned the details of the other sections, picking out the most important and relevant parts to highlight in your Executive Summary.

Introduction

The introduction usually starts with a brief history of how the business came about ie what was the inspiration for founding it? Who are the people behind it? You would then go on to describe what the business does, how the business aims to derive its revenue and what particular gap in the marketplace it is aiming to exploit.

The key point to identify here is what is it about your business that is so special? You need to go deeper than it just being “great customer service” or “competitive pricing”. What is the reason customers come to you over your competitors?

 

Market Analysis

A market analysis is your observation of your competitors and the size of your market. It also discusses the growth rates of your particular industry. For example if you run a cafe and their are 5 other cafes in your neighbourhood that is where you need to focus your market analysis. In this example you may spend some time at each of the cafes and get a feel of how many daily customers they are getting, what the average spend is, what products are being sold etc. Of course every business is different but it is important to be aware of your competitors and what they are doing well and also where their weaknesses are.

A couple of great websites to check out for market analysis are:

* IBIS World – IBIS World has industry reports across a wide range of sectors for countries including USA, UK, China, Australia and a whole host of globall industry reports
* Forrester Research – Forrester Research surveys over 250000 consumers a year across 15 countries, identifying purchasing & spending habits

Marketing Plan

Before outlining what should go in a marketing plan it is important to differentiate between marketing and advertising as many people consider them to be the same beast.

Laura Lake of About.com describes advertising as “The paid, public, non-personal announcement of a persuasive message by an identified sponsor; the non-personal presentation or promotion by a firm of its products to its existing and potential customers.”

She then goes on to describe marketing as “The systematic planning, implementation and control of a mix of business activities intended to bring together buyers and sellers for the mutually advantageous exchange or transfer of products.”

In a sense advertising forms part of your marketing strategy but in a way you are always marketing, every time you shake hands with somebody and discuss each other’s business you are marketing.

Now your marketing plan needs to describe how it is you are going to go about attracting customers, some examples being:

  • attending networking events
  • establishing a website to promote your products and/or services
  • writing informative articles on your niche in a blog that links to your products and/or services
  • promoting referral through word of mouth
  • email/fax/mail advertising
  • pay per click advertising

There are literally thousands of ways you can market your business. The key here is to identify a select few that suit your niche well, help leverage what is unique about your product/service and is manageable within your time and budget.

Operations Plan

The operations describes the day to day activities of the business. If there are multiple people involved it outlines who they are and what their key responsibilities are.

The operations plan also identifies the key government regulations and industry specific licensing or codes of conduct your business operates under and how your business is compliant with them.

SWOT Analysis

SWOT stands for strengths, weaknesses, opportunities and threats. These are fairly self-explanatory but briefly the key points for each are:

Strengths – What is is that you do better than your competitors or what is it that is unique about your business that no other business has? It could be a great location, an exclusive license for an in demand product etc, etc.

Weaknesses – What are the areas of your business that aren’t so great? Could it be low barriers to entry? Reliance upon a key customer/s? It is important when identifying weaknesses that you outline steps to manage or eliminate them.

Opportunities – This section may be the key reason for setting up the business as it could be an area of the market that is not being serviced or it could be something you do or your product does that currently is not being offered/serviced. It could be that there a some large contracts in your industry coming up for tender or a great location that has come on to the market.

Threats – Threats are factors that whilst aren’t affecting your business at the moment, could potentially do so down the track. Perhaps a competitor is set to release a new product that steals market share from you or a change in government legislation that affects the viability and/or revenue potential of the business. As with weaknesses it is important to address each threat and what plans you have to counter them or limit their impact.

Cashflow Analysis

Finally and most importantly a cashflow analysis is a projection of the revenue and expenditure you expect to occur over the next week/month/years depending on what is relevant for your business plan. You want to have this part of your business plan constantly up to date as you move forward with your business so you are always fully aware of where you are at financially in comparison with your projections so if you are ahead of projections you can potentially increase your marketing spend and vice versa if you are behind.

One common aspect to many starting out in business is their ability to identify a raft of revenue opportunities but not have a full appreciation of the potential costs involved in running your business. With that in mind, and this may seem harsh, whatever you project, to err on the side of conservatism you should halve your expectation of revenue. If you can still operate under that scenario then you have a much more robust business plan.

Hopefully that gives you a good overview of what is involved in writing a business plan and if you have any questions please feel free to contact us.