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How to Create a Business Plan

Creating a business plan is one of the first hurdles for any aspiring business person and a useful exercise for existing businesses wishing to develop and grow with additional funding. By creating a plan you will be able to save and make money as you use your resources more effectively.

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Creating a business plan is one of the first hurdles for any aspiring business person and a useful exercise for existing businesses wishing to develop and grow with additional funding. By creating a plan you will be able to save and make money as you use your resources more effectively.

Business plans – why bother? A business plan will often form the basis on which banks, venture capitalists and business angels will invest. By having a compelling business plan your investors will be easier to attract and will have a greater respect for your business acumen. Even a very small sole trader should have some form of business plan as it acts as a focal point for building a business. Whether you are a new or established business, you will need to sit down and plan precisely what you want to achieve from your business. By doing this you get a chance to explore some of the more difficult issues such as finance which often stall a business, even before it has had a chance to take off. 

What's in a business plan? It is important to understand the basics of a business plan before rushing out and buying something to help you create one. A typical business plan has the following breakdown:

Business description: What is the business called and what is it actually going to sell? Avoid specialist language and put down in simple, straightforward terms what the business is about. Think long and hard about the business name – you could be stuck with it for a long time.

The market: What other companies are there in a market and why are you different? How big is the market and what % of the market are you going after. Is there a market in existence for your product? Is it local or overseas?

What's the competition like?: You may want to do a strengths/weaknesses/opportunities and threats analysis, commonly called a SWOT analysis, of the competition. A couple of free SWOT software tools can be found at New Mexico State University and MyStrategicPlan.com.

Products: What are you actually selling and why? Why is your product better than anyone else's? How are you going to produce your products?

Pricing: How much will you be selling the product for? Is the market price sensitive?

Promotion: What marketing activities do you need in support of your business objectives? You need to think about advertising, websites, mail shots, targeted email, leaflet drops and word of mouth to start with.

Profit and finances: What are your profit margins and how will you be funding the business? What cash flow projections do you have and how will you collect payments? Is factoring a possibility? How are you going to raise finance?

People: Who is involved in the business and what is their background and history? You may need to demonstrate a track record of success to attract external finance.

Infrastructure: How many employees do you need? Do you need premises or can you start the business from home? Do you need any expensive machinery or other equipment to produce your goods?

Unfortunately, we cannot give specific guidance for your business, but these points have covered most of the key issues financiers like to see.

Business planning software: There are a range of tools available to help you with business planning. There are some software products that you can install which then take you through the business planning process. Some of these come with pre-built templates and industry sector data that can help with your market research. They may also have some financial planning software to help you create a balance sheet and set financial milestones. Don't cut corners! Remember that you are creating your business plan, copying someone else's is not going to do you any favours with potential financiers that see many business plans each day.

Business planning tools from banks: A lot of the banks give away business planning templates as part of their marketing to attract new business clients. These tools are also useful as they can help you format data in the correct way for the appropriate bank you are dealing with.

About the author: This article was first published in Creating a business plan on Business IT Guide, part of e-skills, the Sector Skills Council for IT and telecoms. The Business IT Guide has been developed in collaboration with industry experts to help small businesses find the right IT solutions for the issues that affect them.

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