Start-up Briefing

Writing a
business plan

Many potential start-up businesses are 1.2 When deciding whether to back a start-up,
daunted by the prospect of compiling a bank managers and investors often make
business plan. But it is not an intimidating provisional judgements based on the
process — and a good business plan executive summary.
focuses the mind as well as helping to
secure finance and support. • The main body of the business plan (see
2–9) is then read to confirm the initial
The business plan will clarify your main decision. The appendices at the back of
business idea and define your long-term the plan (see 10) carry detailed information
objectives. It provides a blueprint for running to support the main text.
the business and a series of benchmarks to
check your progress against. It is also vital
for convincing your bank — and possibly key 2 The business
customers and suppliers — to support you.
2.1 Explain the background to your business
This briefing explains: idea, including:

• What information to include. • The length of time you have been

• How to present your financial forecasts. developing the business idea in its present
form.
• Work carried out to date.
1 Executive summary • Any related experience you have.
• The proposed ownership structure of the
The executive summary outlines your whole business.
business proposal. Although it is the last
section to be written, it goes on the first 2.2 Explain, in plain English, what your product
page of the business plan. It will be read by or service is. Make it clear how:
people unfamiliar with your business, so avoid
technical jargon. • It will stand out as different from other
products or services.
1.1 The executive summary highlights the most • Your customers will gain through buying
important points and should sum up six your product or service.
areas. • The business can be developed to meet
customers’ changing needs in the future.
• Your product or service and its advantages. It is important to cover any disadvantages
• Your opportunity in the market. or weak points you feel the business may
• Your management team. have. Be frank about these — it actually
• Your track record to date. inspires confidence.
• Financial projections.
• Funding requirements and expected 2.3 Explain any key features of the industry
returns. (eg special regulations, effective cartels or
major changes in technology).

England Reviewed 01/05/07

Start-up Briefing 2

3 Markets and competitors You must show you have done the market
research needed to justify what you say in the
3.1 Focus on the segments of the market plan (see Researching your market).

“
you plan to target — for example, local
customers or a particular age group. Show your
4 Sales and marketing business plan
• Indicate how large each market segment is to experienced
and whether it is growing or declining. This section is crucial. It often gives a good business people.
• Illustrate the important trends — and the indication of the business’ chances of success. Ask if they
reasons behind them. agree with your
• Outline the key characteristics of buyers in 4.1 How will your product or service meet your assumptions, and
each segment (eg age, sex or income). customers’ specific needs? your forecasts for
• Mention customers you have already sales and costs.
lined up and any sales you have already 4.2 How will you position your product? If you are being
achieved. unrealistic, it’s best
• This is the place to show how your price, to find this out
3.2 What are the competing products and quality, response time and after-sales before you invest
who supplies them? service will compare with competitors. all your time and

• List the advantages and disadvantages of

all your competitors and their products.
• Explain why people will desert established
• Quote minimum order figures, if
appropriate.

4.3 How will you sell to customers?

money.

”
Mike Ewart-
Smith,
Whitegrove Group
competitors and buy from you instead. For example, by phone, through your
• Show you understand your competitors’ website, face-to-face or through an agent.
reaction to losing business and
demonstrate how you will respond to it. • The key sales points for your product or
service (see Marketing your business).
Unless there is a viable market and you know • Show how long you predict each sale will
how you are going to beat the competition, take. Many new businesses underestimate
your business will be vulnerable. the time involved in winning each order. In
year one you may spend up to 80 per cent
Keep it real of your time making contacts and selling.
• Will you be able to make repeat sales? If
Sales forecasts produced for start-up not, it will be hard to build up volume.
businesses are often wildly over-optimistic.
Here are some important reality checks. 4.4 Who will your first customers be?

A How soon can you start selling? • Show which customers have expressed an
interest or promised to buy from you and
• Will potential customers hold off for a the sales they represent.
year before they take you seriously and • How will you identify potential customers?

“
place an order? Unless you can demonstrate that you
have a clearly defined pool of potential Good business
B How often will you be able to sell? customers, starting your business is likely to plans are not
be a struggle. just written once
• How many days can you spend selling? — they are written
• How long will each lead take to line up? 4.5 How will you promote your product? For and rewritten many
• What percentage of leads will turn into example, using advertising, PR, direct mail times. Review and
sales? or via email and a website. reappraise your

C How much will you be able to sell?

• What will the average sale value be?

4.6 What contribution to profit will each part of
your business make?
plan regularly.
Frank Thaxton,
Thames Valley
”
Partners business
• Will most people give repeat orders, or • Most businesses need more than one advisers
must you find new customers each time? product, more than one type of customer
and more than one distribution channel.
D How long after a sale will it be before • Look at each in turn. Examine your likely
you can collect payment? sales, gross profit margins and costs.
• Identify where you expect to make your
How much income can you realistically profits and where there may be scope to
expect each month? increase either margins or sales.
Start-up Briefing 3

Services and intangible products (eg computer 6.4 Show how you selected your suppliers.
software) are more difficult to market. Start-ups
in these areas must pay special attention to
marketing in their business plans. 7 Financial forecasts
Your financial forecasts translate what you have
5 Management already said about your business into numbers.

People reading the business plan need to be 7.1 A realistic sales forecast forms the basis
given an idea of why they should have faith in for all your other figures.
the management of your start-up operation.

“
• Break the total sales figure down into its
5.1 Outline the management skills within your components (eg different types of products There is no
team. or sales to different types of buyer). point in spending
hours producing
• Define each management role and who will 7.2 Your cashflow forecast shows how much detailed financial
fill it. money you expect to be flowing into and forecasts if you are
• Show your strengths and outline how you out of your bank account and when. You not going to use
will cope with any weaknesses. must show that your business will have them to control the
• Describe the background and experience of
each team member.
• Clarify how you intend to cover the key
areas of production, sales, marketing,
access to enough money to survive.

• Demonstrate that you have considered the

key factors affecting cashflow — eg level
business.

”
Steve Richards,
Interflora

finance and administration. and timing of sales revenue, wages.

• Management information systems and • Show when there will be more money
procedures should be outlined. For coming in than going out (‘cash-positive’).
example, management accounts, sales,
stock control and quality control. 7.3 Your profit and loss (P&L) forecast gives
• Show how many ‘mentors’ and other a clear indication of how the business will
supporters you will have access to. move forward. Summarise the annual P&L
forecast for each of the two or three years
5.2 How committed are you? of trading.

• Banks and any other potential investors • Calculate the turnover you need to break
will want to be sure you are committed to even:
the business. Show how much time and
money each of the management team will £ fixed costs
£ breakeven = £ % gross margin x 100
contribute, and what your salaries and
benefits will be.
If your gross margin is 25 per cent, your
sales must be four times as large as fixed
6 Operations costs to break even.
• Compare the breakeven level of sales with
Explain what facilities the business will have the sales you are forecasting.
and how it will deliver the product or service to
the customer. 7.4 If you are launching a larger start-up, you
will also need projected balance sheets.
6.1 Show the pros and cons of the location. These will show you the financial state of
your business on day one and at year end,
6.2 Indicate the facilities you will need to start perhaps for the first two or three years.
(eg equipment and machinery). Some start-
up businesses only need a desk and a 7.5 Do not get too protective about your
phone. forecasts. You may need to revise them.

• Consider any potential limits to production For every forecast, list all your key assumptions
capacity. (eg prices, sales volume, timing). Small
If you are going to manufacture or distribute business advisers at banks, Business Link and
products, show how and where you are Enterprise Agencies will often help you put
going to warehouse them and for how long. together your forecasts free of charge.

6.3 Provide a list of employee roles you need

to fill and the skills required to fill them.
Start-up Briefing 4

8 Financial requirements • Product literature or technical specs. Expert

• Names of target customers. Contributors
The cashflow forecast will show how much • A list of external data sources used in
finance the business needs. Your assessment your research will add credibility to the Thanks to Mike
of the risks will determine whether or not you information. Johnston (Chartered
need to arrange contingency financing. Institute of Marketing,
01628 427306);
8.1 Say how much finance you will want, 11 Presenting the plan Charles Cooke-
when and in what forms. Hurle (management
For example, you might want a fixed-interest The more solid information you can gather for consultant, 01590
loan and an overdraft facility. your own use, the better the business plan will 611044); John
be. But a banker or other outsider will not have O’Reilly (North
8.2 State what the finance will be used for. time to read through all the details. Derbyshire Chamber
of Commerce, 01246
• Show how much will be for buying 11.1 Keep your business plan short. 207207); Frank
equipment and how much for working Thaxton (Thames
capital (financing stock and debtors). • Most business plans are too long. Focus on Valley Partners
what the reader needs to know. business advisers,
8.3 Confirm that you will be able to afford it. 020 7637 1727).
11.2 Make it professional.

9 Assessing the risks • Put a cover on the business plan and give Further help
it a title.
9.1 Look at the business plan and isolate • Include a contents page. There are other Start-
areas where something could go wrong (eg up Briefing titles
if your main supplier closes down). 11.3 Test it. that can help you.
These briefings are
• What you would do if it actually happens? • Re-read it yourself. Would reading your referred to in the text
plan give an outsider a good feel for your by name, such as
9.2 Consider a range of what-if scenarios (eg business and a grasp of the key issues? Researching your
what happens to your cashflow if sales are • Show the plan to friends and expert market.
20 per cent lower or 15 per cent higher advisers and ask them for comments.
than forecast?) If there are serious risks:

• You can arrange contingency funding to

cover the finance you may need.
• You may decide that the business is too
risky and abandon the whole project.

Assessing risk will help you minimise problems

and help build up your credibility with any
investor or bank.

10 Appendices

10.1 Detailed financial forecasts (monthly

sales, monthly cashflow, P&L) should
usually be put in an appendix. © BHP Information
Solutions Ltd 2007.
• Include a detailed list of assumptions. ISSN 1469-0470. All
rights reserved. No
For example, the profit margin on each part of this publication
product, debtor collection period, creditor may be reproduced or
payment period, stock turn, interest and transmitted without the
written permission of the
exchange rates, equipment purchases. publisher. This publication
is for general guidance
10.2 You may want to give other relevant only. The publisher, expert
contributors and distributor
information. disclaim all liability for
any errors or omissions.
• Detailed CVs of key personnel (essential if Consult your local business
support organisation or your
you are seeking outside funding). professional adviser for help
• Market research data. and advice.

Published by BHP Information Solutions Ltd, Althorp House, 4-6 Althorp Road, London SW17 7ED
Tel: 020 8672 6844, www.bhpinfosolutions.co.uk