Strategy and Business Planning
Formulating a business plan or strategy is one of the most important tasks when
starting up a new business and running a profitable business. It will help you
set targets, collate all your ideas, plan for the future of your enterprise and
see if your idea for a business is realistic and workable. The business plan is
an essential tool in attracting funding to get started.
Services
Gateway for Business employs specialist advisers trained in business planning that can help your company develop a strategy for success. This can involve helping you from scratch with templates and action plans or simply a critical friend to help you shape your plan into the most effective plan possible.
The following describes what a business plan should include, how you should go about writing one and what you will achieve by doing so. It includes hints and tips as well as sources of further information.
Information
Why have a business plan?
Your personal objectives
Business description and purpose
Business vision and long term objectives
Current market situation
Target customers
Competitor analysis
Marketing strategy
Marketing plan
Sales targets and objectives
Operational requirements
Current financial requirements and financial forecasts
Management processes
Business risks
Why have a business plan?
Many new business owners write business plans with the sole purpose of
convincing a bank or investor to lend them money for starting up. However, a
good business plan can be useful for other reasons. It can help you to:
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Bring together your ideas and research into a structured format.
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Clarify your business purpose to yourself and communicate it to any partners or
staff.
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Predict future scenarios and address them before they threaten the success of
your business.
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Set out the strategy for your business and particularly your marketing
strategy.
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Set targets and objectives, including sales and financial targets, so that you
can monitor your business' performance.
Your plan should be a coherent description of how your business will move from
where it is now to where you want it to be. Every business will be different,
but the headings below are useful 'stepping stones' to include in your business
plan and will ensure that you cover the most important issues.
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Your personal objectives
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Why are you in business and what do you want out of it?
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Will the business supplement your main income or replace it?
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Are you starting it as an investment, to sell as soon as you can?
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Will your business provide jobs for family members?
The answers to questions like these will have an impact on your business' aims,
development and strategy. For example, if you are starting a business as an
investment opportunity, the focus of your planning will be leading up to your
exit - the sale of your business. Your strategy must therefore focus on
building your business quickly and maximising its value to get the best selling
price possible.
On the other hand, if you are building up a business for a less experienced
family member to take over, your plan will focus on a succession strategy. This
might mean keeping the business small and easily manageable.
For most people, though, the aim of starting in business is to provide a degree
of independence, the ability to have some fun and the opportunity to generate a
reasonable income.
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Business description and purpose
What exactly will your business do?
Be as specific as possible about the kind of business that you are starting. If
you are going to open a restaurant, for example, will it be a family restaurant
serving good quality, local food at competitive prices in a family friendly
environment? Or will it be more upmarket, serving gourmet dishes to discerning
customers in an intimate setting?
When describing your business, think of it in terms of writing a mission
statement. This statement should clearly summarise the purpose of your
business, and should be easily understood by you, your staff, your customers
and your potential investors.
If you cannot describe your business in these specific terms, then you should
rethink your business idea, focusing on your business' core purpose, target
audience and mission.
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Business vision and long term objectives
Where do you want your business to be in five years?
Try to envisage this so that you can start to move your business towards that
point. For instance, you might work towards becoming a market leader, an
innovator, a specialist, a good employer, a large, national or international
enterprise, or a supplier of superior quality.
Defining your business vision will help you to identify clear and challenging
objectives and determine how you will go about achieving these goals.
When defining this vision, be ambitious but realistic.
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Current market situation
Where is your market now?
To earn enough revenue, your business must be able to achieve a share of the
markets available to it. You will need to have a thorough understanding of your
target market to do this, including its size and the share that you can
realistically achieve. The size of your share will depend on:
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The overall size of the market.
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Market trends - find out what influences your target market now and how you can
take advantage of this.
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Target customers - describe who your target customers are and how many of them
there are; justify your estimate of the market share you aim to get (see below
for more about this).
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Competition - list your competitors and describe their products or services;
describe how your product will be different (more about this below).
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Target customers
Who will your target customers be now and in the next 12 months?
Define the characteristics of the target groups of customers that could buy from
your business. To do this, think about the type of people or businesses that
are likely to benefit from using your products or services and why they would
use them.
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Think about the benefits that your customers are looking for and then think
about the features that your product or service offers - do your features
provide the desired benefits?
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Build up a picture of your target customers. For individuals, describe them in
terms of characteristics like age, gender, income, location, lifestyle and
marital status. For businesses, use indices like location, numbers of
employees, public or private sector, industry type and turnover.
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Research how many customers there are in your target group, how much they spend
and how often they buy.
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Identify trends that tell you whether this group is growing or shrinking.
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Competitor analysis
Who are your competitors?
Competitors may be in the same (direct competition) or similar (indirect
competition) business as you. The level and strength of competition in a market
indicates how difficult it will be to gain enough share of that market.
However, it is not simply the number of competitors that you should be
concerned about; analyse the following aspects of each competitor's business:
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Their products: Are their products and services the same as yours? Do your
competitors provide something that you don't?
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Their customers: Are your competitors targeting the same customer segments as
your business?
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Their share of the market: How large is it, and could you take some of it?
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Their strategies for growing, marketing themselves and pricing their products:
Can you learn from how they conduct their businesses, or can you do it better?
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Their operations and facilities: How much stock do your competitors hold? Do
they offer additional benefits such as free delivery? What after-sales service
do they provide?
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Their future plans: Are they planning to move to new premises? What direction
is their product development heading in?
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Marketing strategy
How many customers do you want, and by when?
Once you have developed a clear understanding of your market in terms of size,
location, groups of potential customers, competitors, trends and influencing
factors, it's easier to define clearly your overall marketing strategy. Break
this down into objectives and targets relating to the volume and share of the
market (or market segments) you hope to achieve and when you intend to achieve
them by.
For example:
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Who are your initial marketing targets (specific groups or market segments)?
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What products, services or particular deals will you be offering to them?
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What is your Unique Selling Proposition (USP) and how does this differentiate
you from your competitors?
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Is there a specific volume, value or share of these markets that you hope to
achieve?
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When do you hope to achieve these targets by?
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Why are you choosing these markets first?
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Who will you target next, i.e. in 6 months or 12 months time?
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If it helps, think about the seven 'P's of marketing (see marketing section).
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Marketing plan
How will you do your marketing?
Once you have a clear marketing strategy, you need to be clear about how you are
going to make it happen. A detailed marketing plan should explain how you will
go about achieving each of your marketing targets and objectives (as defined in
your marketing strategy above) either by particular target segment, by type of
marketing activity, or both.
Such a plan will include some or all of the following:
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The marketing methods you will use for each segment of the target market.
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The specific action you are going to undertake to reach each segment.
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A time scale or timetable for each marketing activity.
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The people or organisations who are going to carry it out.
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The estimated costs to undertake particular marketing activities (your
marketing budget).
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How you will monitor and review progress.
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How you will handle the response to your marketing.
It will also be important to identify how you will manage the overall marketing
plan, including aspects such as ensuring that the entire budget is not spent in
the first couple of months, monitoring results, adjusting the plan and
introducing new tactics as you go along.
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Sales targets and objectives
What are your sales targets and how will you achieve them?
Your marketing plan, when implemented, needs to be converted into perhaps the
most important business goal of all: your sales revenues.
Set out your sales forecasts in terms of:
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Sales of different product types by volume and value.
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Sales from different customer groups.
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Sales from different distribution channels.
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Operational requirements
What do you need to turn your operational plans into action? In other words, how
will you make everything happen?
Details about your operational requirements will be essential when preparing
your financial forecasts, while other information will be needed for basic
operational planning. Outline your plans for the following aspects of your
business and estimate the respective costs involved:
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Premises
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Equipment
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Staff
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Suppliers
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Compliance
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Licensing
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Current financial requirements and financial forecasts
How much money do you need now and for what purpose?
Your business plan should include a breakdown of your financial requirements,
the sources of finance you have available to you and any additional finance
that you may need. This should include:
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The cost of starting your business.
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Your personal budget.
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Details about your own finance that you intend to invest.
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Details about additional finance that you have secured.
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A break-even analysis to help you understand how much of your product or
service you need to sell at a given price to cover all your costs and
contribute towards your profit.
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A detailed cash-flow forecast that will help you to estimate how much available
cash you will have in any particular month.
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A profit-and-loss forecast to help you estimate when your business will start
to make a profit, which will be essential to your longer-term success.
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A balance sheet forecast to provide you with a snapshot of the trading position
of your business, to identify what your business will owe, what it will own and
how financially strong it will be at a particular point in the future.
Gateway for Business advisers can show you how to write the above
documents. Please contact us on the below form for further details.
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Management processes
How will you manage your business?
Getting organised will make your business more efficient and ultimately
enjoyable. Even if you are the only person involved in your business, it is
still worth looking at your key skills, responsibilities and management
processes at this stage:
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Your management team - outline their existing skills and experience (potential
investors are particularly keen to see strong skills here). Consider any
additional skills you will need to bring in.
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Your key staff and their responsibilities - summarise their roles and
contribution to your business (this will also show up any weaknesses for you to
address or over-reliance on certain people). Be sure to cover these tasks:
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Marketing and sales.
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Finance.
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Recruitment.
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Product development.
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General management.
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Administration.
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Monitoring and co-ordination - set out how you plan to monitor your business'
performance (against objectives and targets), and to co-ordinate the roles of
key staff (see Human Resources section).
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Business risks
What could go wrong and what will you do if the worst starts to happen?
Your plan should include an honest assessment of the risks involved in your
business, as well as how you will minimise them. Consider which of the
following risks are relevant to your business:
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Lack of management experience (address this risk by getting advice or mentoring
from your business adviser, accountant or solicitor).
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Little trading history (this will make it difficult to borrow money, so you
might need to make other plans to finance the business initially).
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Economic uncertainties (if you are borrowing money and paying interest, for
instance, make contingencies for interest rate increases).
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Over-reliance on key staff.
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Over-reliance on a few suppliers.
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Over-reliance on a small customer base.
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Customer bad debts leading to cash-flow problems.
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Partnership difficulties.
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A sudden increase in competition.
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Security issues.
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Failure to meet your sales targets.
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