How to write a good business plan

Writing a business plan can seem intimidating. You know you need one, but how do you get it right? The last thing you want to do is make a fool of yourself, right?!

The first key is to understand that a business plan is not a single fixed idea. A business plan will look very different depending on the nature of the business, the stage of the business and, crucially, the intended audience of the business plan. So relax, take it easy, and follow this step by step guide to preparing a the best business plan for your circumstances.

Step 1 – decide what your business plan is for

Here are a few reasons you might create a business plan:

  • to help you think through your ideas and not make a stupid decision
  • to persuade a friend or acquaintance to get on board as a business partner
  • to persuade someone – a bank, your parents, etc – to lend you some money
  • to communicate vision to the team already working in your business

All of these reasons, and more, are totally legitimate reasons to write a business plan. However, each reason should lead to a different document because it will have a different audience and purpose. Decide the audience and write this down at the start of the plan.

Step 2 – decide the scope of your business plan

People often thing of the business plan as a document. I encourage you to scrap that idea and think instead of the business plan as a process.

Think of doing some planning that relates to the future of your business. The document is simply where you collect those ideas. The document is always a helpful focal point for the planning process but it is often the process that is of most value. After a thorough planning process you will almost always come out thinking differently about your business.

Here are some things you might want to cover:

  • what is going on in the sector – is it growing, shrinking, changing?
  • how will you actually make money – map out your potential income and expenses in detail (this should probably happen on a separate spreadsheet – see my post on how to set out helpful management accounts)?
  • what makes you different (not what makes you good, or cheap, but what makes you different)?
  • when you map out success, what are your assumptions? Often you will make major assumptions about the market for your product.
  • what have you done to demonstrate that your assumptions are reasonable?

Step 3  – choose a logical structure

Your structure should flow from your choices in the steps above, but here are some rough pointers:

  • Start with a summary that is very closely targeted at your audience. For example, if you are looking to borrow from a bank you should say how much you want, what you will buy, why it is a risk worth them taking and how quickly they will get their money back.
  • Zoom out and give the big picture. Your audience may not understand your sector so give them helpful context. Describe the characteristics of your market.
  • The people are important. If you are trying to get other people on board to offer either skills, time or money they will often be more bothered about the people involved in your business than the specific idea. You can change the idea easily but you can’t change the people.
  • Introduce the idea in the context of viability. You may find your idea unendingly interesting but resist the temptation to dive into the details. Give the minimal details necessary to demonstrate the financial viability of your idea. That is often the question the reader will be asking.
  • Draw clear actionable conclusions. If the process was mainly for your benefit this is where you draw together the strands and decide on next steps. Often the rest of the document becomes slightly redundant once you have these actions. This list should be your focus for the next few months.
  • Ask direct questions. Make it clear to your reader what, if anything, you want from them.

If you want more detailed guidance on business planning and especially if you are preparing a business plan to attract investors you may want to check out this book:

FT Essential Guide to Writing a Business Plan: How to Win Backing to Start Up or Grow Your Business (The FT Guides)