Business planning is a vital step to consider whether you are setting up a new business or looking to focus on increasing revenue or expanding an existing business. A business plan should set out your strategy and action plan for a defined period, usually between 12 months and 5 years depending on the specific circumstances. This should include looking at business objectives, strategies, sales, marketing and financial forecasts.
Any plan that is in place should be regularly reviewed to ensure that the planning remains timely and continues to meet the business's objectives. This allows the plan to be used as means to judge various metrics and keep the business concentrating on its core aims and objectives. Business planning should also include both an external and internal SWOT analysis to assess the strengths, weaknesses, opportunities and threats to your business.
When looking at business planning, the following are some of the core areas that should be considered:
- Synopsis. A synopsis of your plans for the business and how you propose to put them into action. This should clarify your business concept in a clear and succinct manner and set out your goals for the future.
- Explanation. An explanation of the business, your objectives for it and how you plan to achieve them. This should also clarify your business idea and how you intend to move forward and drive growth. This could include a background to your business for example how long you have been developing the business idea and the work you have carried out to date.
- Employees and consultants. You should monitor all the key workforce members including you and any external consultants. It is important to identify any specific skills and expertise that these people have and outline how you intend to deal with any weaknesses.
- Product. Details of your product or service and your distinguishing feature. This is the business’ competitive advantage and should be different to what competitors offer. It is also important to consider how you price your product/service and how this compares to the competition.
- Marketing. Details of your target markets and your marketing plan. This could include an overview of your competitors and your likely market share together with details of the potential for growth. This is usually a very important part of business planning as proper marketing can help drive growth in the business.
- Running your business. This could include looking at areas such as the essentials of your business' operation, such as your physical location, facilities, and equipment. Depending on the kind of business this could also look at the manufacturing process and the supply chain.
- Financial forecasts. This is an essential part of any business planning. This should be used to estimate future revenue and expenditure and effectively translates business planning goals into hard numbers. Financial forecasting should be an ongoing element of good business practice that is regularly reviewed and updated.
- Financial requirements. After preparing financial forecasts, the business should have a better idea of how much finance the business needs. This is a very important part of growing a business and we have provided some further information on available options below.
Almost all small businesses require finance to get started or to drive growth in the initial phase of the business. Obtaining bank finance for a business can be very tough and sometimes borrowing money may not even be possible or only with security conditions such as a personal guarantee.
A well-prepared business plan can help attract funding and demonstrate how you plan to build and grow your business. This will help potential funders to understand more about your business, how much money you need, how you intend to use it and how they will be repaid for their investment.
We have listed below some of the most commonly used ways that startups can access funding in the UK. Many businesses will end up using a mix of these different financing options.
- Family and friends
One of the most common forms of funding for startup business ventures is via friends and family. This can typically be by way of either an investment or a loan. This can be easier and quicker than traditional methods. However, there are issues to be considered especially involving interpersonal relationships if things go wrong.
For many startups, it is important to look at what business grants are available. A business grant is essentially a sum of money awarded by Government or some other organisation to help fund a business. There can also be a lot of different businesses competing for the same grant funds. One of the main benefits of the grant is that the money is not usually repayable where the terms of the grant are met.
3. Debt funding
Debt funding is where a business borrows money but does not cede any control of the business. This is a loan that needs to be paid back and it can be difficult to access this type of funding for startups, especially from traditional banks.
One example of a Government-backed scheme is the Start-Up Loan scheme. This scheme offers personal loans to individuals looking to start or grow a business in the UK. Applicants that are accepted are also paired with a business mentor for 12 months. This loan is unsecured and all owners or partners in a business can individually apply for up to £25,000 each, with a maximum of £100,000 available per business. The average loan amount through the scheme is in the region of £7,000.
A bank overdraft (if available) can provide quick, flexible cashflow. The idea is simple: you dip into the overdraft in the leaner months and come back out when the business picks up.
4. Equity finance
There are many options available for equity finance. This is where business owners essentially sell part of their stake in the business to help raise much-needed funding. For example, through angel investors or venture capital.
5. Angel investors and angel networks
Angel investors are typically high net-worth individuals who choose to invest directly in startup companies. Angel investors provide not only financing but also usually offer their skills and experience to help grow a business in the early stages.
This could be the first source of serious investment a startup will secure before moving onto a venture capital round or other funding sources. Angel investors typically invest from £10,000 - £250,000 in return for equity in the business.
6. Venture capital
Venture capital is a type of financing that investors typically provide to early-stage, innovative small businesses that are believed to have excellent long-term growth potential. This can be an essential source of finance for both the business owners looking to raise funds and the investors they attract.
Page updated on 05/04/2022.