Creating a business plan for the first time

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You’ve had an idea burning away at you for years and you’re finally taking the big step to start a business. Before anything else, you need to write a business plan. 

There are lots of questions you might be thinking about:

  • How is your business going to succeed?

  • How is your business going to operate and flourish?

  • What are your strengths and weaknesses?

  • What are your competitors up to? 

  • How much profit can you make?

A business plan is technically defined as “a document setting out a business's future objectives and strategies for achieving them”, but they can be a bit daunting to create. 

What is a business plan for

A structured plan helps you set out the goals and benchmarks for your business. It also gives you a way of explaining your business to other people you want to bring on board or potential investors. 

Why you need a business plan

Writing a business plan sets out what your business should aim to achieve from the start and it can help keep you honest to your goals.

Some other benefits are:

  • Putting pen to paper on your business idea can help you find gaps or blindspots you hadn’t previously considered

  • You can prioritise ideas and tasks necessary to getting your business off the ground

  • With these ideas you can set achievable, ambitious goals and objectives

  • Writing a plan gives you a clear idea of your business’ journey over the next three months, three years and beyond! 🚀

When you might start thinking about a business plan

Research has shown businesses who create a plan are more likely to succeed than those who don’t. 

The same researchers also found the most successful start-ups created their business plan a year to six months before starting their business. According to them, “writing a plan in this timeframe increased the probability of venture viability success by 8%.” 

They also said devoting time to writing a plan led to greater success, with the optimal time spent being three months. Your business plan will probably change as you get going and your business progresses, so keep that in mind too!

What things should you consider before writing a business plan

Your target audience and market

Who is your business plan for? Is it for you to set clear objectives and hit benchmarks? Or is it for investors? Keep your audience and their reason for reading your business plan in mind 

Make sure you’ve done your research

It sounds obvious, but delving into the market landscape and doing some competitive analysis will help you see where your company will succeed and your potential market share.

Consider how the businesses in your space are performing and the competitive advantage you could have over them. As with any plan, the research behind it is almost more important and almost definitely more time consuming than putting the plan together.

Look at reliable and relevant data

You’ll probably have lots of data in your business plan showing how your business will work, the target market you’re breaking into and how your competitors are performing. It’s helpful to make sure that all the data you’ve used is reliable and from a verified source. Also that it adds to a point you’re making in your plan. Including irrelevant information may just give someone reading your plan the idea that you don’t know what you’re doing.

How to write a business plan

Try to keep it concise. Focus on the bits that  give the clearest picture of what your business is, the problem it addresses and how it’s going to work. Give your plan a defined structure. Tell the reader what they need to know.

Stick to facts. Avoid over exaggerating things that are hard to prove, like financial information on the profit you think you’ll make. It might bring up some difficult questions from potential investors.

Ask for help. Whether it’s from experts in your industry, people who have had similar experiences or just someone to proofread your plan, you should always welcome advice. If you’ve got no idea about what key financial details to include, ask someone who knows. It’s worth having a mentor, or your business plan may fall short of an investor’s expectations or give you unachievable targets. Reaching out to people directly on LinkedIn can be a good way to go about this and asking friends and family to introduce you to anyone they know who might be useful.

Why do business plans fail?

There are hundreds of reasons why business plans fail. 

From not conducting research, failing to understand your competitors and your customers, to simply getting the maths wrong in your financial projections. The key is to stay focussed on your objective and keep things clear and short.

What should your perfect business plan include

An executive summary

Your executive summary should give your reader the clearest picture possible of your business. What problem does your firm solve for its customers? What’s your main business objective? This section should pull the most important facts, figures or statements from the other sections in your plan.

You should consider writing this last, once you’ve been through each element of your business and ironed out all the potential problems..

A company profile

This bit usually comes after your executive summary and is more factual. Keep this section brief so you aren’t repeating the previous section too much. You could include things like:

  • An outline of your basic info like location and the type of business you are (for example a sole trader or limited company)

  • All the people behind the company and their backgrounds 

  • A short mission statement

  • Your products and services

  • Your target market and audience

  • Your business objectives: outline what you want to achieve in the short-term (and what the rest of your plan will show)

Strengths and expertise

You want to show why you’ve got what’s needed for this business to succeed. Don’t be afraid to show your strengths or that of your management team. It’s also worth considering talking about the mistakes you’ve made and the lessons you’ve learned up to this point. It’s a great opportunity to show you and your team’s passion and experience, and also show you’re aware of the areas you need support in that an investor could help with.

Market analysis

Based on your extensive research, be honest about the challenges and opportunities within your target market. Demonstrating how much knowledge you have shows your reader and a potential investor that you know what you’re talking about and that you care deeply about your business. Even if they’re an expert in the field, show that you share their interest. Explain why your business will succeed in this market and what makes it different from your competitors.

Competitor analysis

If your market analysis section shows the opportunities, this section shows you’ve thought about the competition and how you’re going to succeed despite them. You may want to consider not only your current competition, but any future competition that might enter your market too – this shows you’ve thought about how the market is growing. When doing your research on competitors, consider these points:

  • What are their strengths and weaknesses?

  • What are their business objectives and strategy?

  • How are they executing these strategies? (e.g. marketing, sales functions, etc)

  • What might your competitors do when you enter the market?

  • What gaps have they left that your company will fill?

How operations will work

You’ve researched the market and realised the opportunity, but there are many questions to ask yourself. How are you capitalising on your idea? You’ll need an outline of your marketing and sales function. How are you using social media? What process do you need to manufacture a product or provide a particular service? How are you organised internally, either to deal with the information you’ll gather or even with client accounts and invoicing? 

Monzo’s Business Account connects with Xero and FreeAgent platforms, so you can decide if you want to use them.

No need to switch between platforms, or manually upload statements. You can keep on top of your accounts with everything in one place, and see where you’re at with a glance. We’ll never share your data with anyone else unless you agree to it, or ask us to.

What everyone will be responsible for

It’s important to mention who is responsible for each bit of the business. If you’re missing someone to lead a team, how are you going to find one? If you plan to bring people on board in certain areas, how are you going to train them and manage them once they’re on board? If you lose an employee, how are you going to handle them leaving?

Any financial projections you might have

It’s good practice to include five years of financial projections. All these figures will vary according to the success of your business. But don’t go overboard – show your reader the basics first.

If you’re an established company, use your previous data to form these projections.

A Monzo Business Account can help you categorise your spending and set aside money for taxes to HMRC, making these financial predictions a lot easier. Read more about using Monzo for your business account here💰

These projections should include:

  • Sales forecasts

  • Budget for expenses

  • Cash flow statement (your sales vs your expenses)

  • Profit and loss statement (often called P&L)

  • Balance sheet, showing everything you own (e.g. kitchen equipment) vs everything you owe (what’s left to repay on a bank loan)

  • Break-even projection: using all the above, it gives you and any investor a idea of when you’ll begin to turn a profit

What templates and examples can you use

There are loads of free business plan templates out there, including financial tables and breaking down your idea into elevator pitches and more. There are also some great examples too. Here are a few we found:

Which is better, a business plan or a pitch deck

Pitch decks are usually made up of highly designed slides and contain certain bits of information you’ve picked from your business plan. It’s a short version of what your business does and usually the aim is to get potential clients or investors into a longer conversation. 

Pitch decks focus on who you are, what your company offers, the state of the market and why you’ll succeed. 

A business plan is a much deeper look into your business as a whole and why it might succeed. 

How long should a business plan be

Have you ever read a 100-page document? Ok, how about 50? If the answer is probably no to both, we’re with you on that one.

You’ll see recommendations for anywhere between 15 and 30 pages. What’s important is not to waffle, keep it structured and clear, and include the information that’s going to explain why your business will be a success. 

Good luck! 💪

Monzo is covered by the Financial Services Compensation Scheme (FSCS). Eligible deposits in Monzo are protected by FSCS up to a value of £85,000 per person 💰. Read more about eligible deposits here.