Crafting a Comprehensive Business Plan: Essentials and Common Mistakes

What is a business plan?

A business plan is a written document that describes a business. It typically outlines;

•  the main objectives;

• business strategy; 

• marketing;

• sales plans; 

• finance. 

Uses of a business plan

A business plan is useful for all stakeholders of a business such as investors, customers, employees and the government. The table below outlines some of the reasons for having a business plan.

Pros	Cons
Comprehensive overview - a business plan may provide a comprehensive overview of the main sectors of a business such as marketing, sales, strategies and finance. It is useful for possible investors that may become interested in a business.	Time-consuming - making a business plan, including reviews and corrections can be a time-consuming process. This may be discouraging for some businesses that operate in a fast-paced industry.
Action plan - a business plan clearly sets out the action plan of a business. It gathers objectives and expectations that can be referred to later in the operation of a business.	Must be tailored - business plans ought to be tailored to the target audience of the plan. They may need to emphasise different aspects of the business depending on whether the target audience are investors or internal management and employees.
Finance forecast - a business plan requires some finance forecasting. It will set some expectations regarding the financial situation and will allow planning of further operations of a business.	Inadequate expectations - the risk connected with using business plans is that they are partly based on speculations and forecasts which may set inadequate or unrealistic expectations regarding finance of the business or changes in the industry.
Identifies priorities - during the making of a business plan priorities of a business may be identified and so non-priorities are dropped. This allows the business to save time and focus on important matters.	May be inaccurate - if the business plan is done incorrectly, based on the speculations and forecasts, it will have to be redone. This will result in increased costs and time spent on creating the business plan.
Allows spotting gaps - once a business plan is written and reviewed gaps and shortfalls may be noticed and corrected. That may save time and help the business adopt a proactive approach rather than a reactive one. Additionally, it may help to generate new ideas based on any possible gaps in the business.	Tunnel-visioned - having a business plan may result in a ‘tunnel-vision’ of the founders and/or the management
Benchmark for the performance - a business plan may be a tool to check and control the performance of the business.

The business plan

A business plan should convey the main aims, targets and foreseeable operations of the business. 

It should include the following:

• Executive summary - especially crucial when writing a business plan for investors or external audiences. It should briefly describe the concept of the business, its mission and vision, the product and who it’s targeted at. It should also mention the main strategies, the business’ financial situation and the team involved in the business. 

• Introduction to your business - Here you will describe what it does, or wants to do, and why. Some context and history of setting up the company may be included. Then, the following should be explained. The business model and structure, the industry and competitors, mission and vision statements, long- and short-term objectives and the current team, including key employees and their salaries. 

• Market analysis - This should consider how big the market is, if it may grow in the future and strengths and weaknesses of the business relating to the market (that can be done using a SWOT analysis, an example may be found here). The analysis should also consider the competition and how your business stands out. It may differentiate itself from other businesses in three ways: cost leadership, differentiation and segmentation. Cost leadership means maximising profits by offering the lowest prices of the market. Differentiation means that a product offered by a business is simply different from any other products on the market. Segmentation means focusing on delivering a product to a very small, niche target audience before moving to a larger market. Identifying one of those three ways of standing out on the market will help reduce and control the competition and that must appear in the business plan. 

• Management and organisational structure - it should include a detailed description of the organisational structure and the type of business the company is (ie. limited company, sole proprietorship etc). 

• Concept of products or services - should provide detailed information about the product or service provided by the business. It would be helpful to include new products that are planned to be launched as well. The description of each should inform about souring of the products. For example handmade unique items will be sourced differently than trending, mass-produced ones. 

• Marketing strategies - this section should provide information about the target audience and how to respond to its needs. The ideal customer should be identified and treated as a reference point later in the operations of the business. The following characteristics of that customer should be determined: age range, level of education, location, behaviour patterns, cultural background, occupation. 

There are several key aspects of a marketing plan for products and services, so-called Marketing Mix. There are 4 Ps for products, and extended 7 Ps for services. The 4 Ps are: Price, Place, Product, Promotion. 

• Price relates to how much the product or service costs and why. 

• Place relates to where a product will be sold or where the service will be provided. 

• Product relates to the product and service and how it is different to competitors on the market. 

• Promotion relates to how the product or service will be presented to the customer. 

The additional 7 Ps for services are People, Process, and Physical evidence. 

• People relate to the employees of the business and provide the service. 

• Process relates to the way of delivering the services to customers and what processes need to take place to provide a positive experience for the customer. 

• Physical evidence relates to tangibles providing evidence of the (intangible) service. For example, for a restaurant tangible evidence would be menus, the building and its surroundings, and staff uniforms. 

Overall, marketing strategies are critical to including in a business plan because they determine who the product is targeted at and how it will be presented and delivered to the target audience. 

• Operations strategies - examples of what it should include are: suppliers, production, facilities and equipment; further, explain what will be used in the process of production or providing services and how. It should show that the business has undertaken steps towards realising the business idea. The operations strategies should also provide “back-up” plans to existing plans related to operations and logistics of the business.

• Finance - this section is especially important if the audience of the business plan are potential investors or the government. They must know what the financial situation and forecast of the business are in order to decide on the investment or a grant. It must be identified what kind and amount of support the business will need to succeed. The section should include an income statement, a cash flow analysis and a balance sheet. It has to be remembered that the financial statements are to some degree forecasts at the beginning of the business operations. But they should be kept realistic to avoid big differences between the statement and reality. Otherwise, investors may be discouraged to put money in that business in the future. 

Common mistakes to avoid

The most common mistake is having a bad, underdeveloped business idea. Sometimes it may be that the idea is too risky and too expensive and that discourages investors to invest in it. While writing a business plan it should be considered whether the idea will attract investors. It is also key to pick an idea that does not rely on excessive funding and does not exceed traditional costs of a start-up.
Another common mistake is not spending enough time on the research. A business plan is  to some degree based on forecasts and assumptions. Making predictions about the finances and the future of a market is not an easy task, therefore, the more time and resources are spent on research, the more reliable and convincing the business plan will be. 

Having no strategy is the next common mistake. Not only is it important for employees to know where the business is heading and what the next steps are, but also it is a crucial part of the plan for investors. They want to make sure a business will be successful and that their invested money will return to them. Otherwise, it is likely that they won’t invest at all.

The last mistake is very simple,  but critical - spelling and grammar mistakes. A business plan must not have any shortcomings. It is pivotal as the investors are less likely to invest in a business that missed a simple mistake in a business plan. It may be worth hiring an editor to go through the business plan to ensure it is flawless. 

Key takeaways

1. Be focused on your goal.

2. Keep it concise.

3. Invest time in creating the plan.

Author: Zofia Bonarowska -

Author: Zofia Bonarowska -

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DISCLAIMER

This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.

Sources

Cearns, K., Demystifying business plans for lawyers, Practical Law UK Practice Note 0-612-4565

U.S. Small Business Administration, Write your business plan, https://www.sba.gov/business-guide/plan-your-business/write-your-business-plan, last accessed 01/08/2023

Odjick, D., How to write a perfect business plan in 9 steps, 03/12/2022, https://www.shopify.com/uk/blog/business-plan, last accessed 01/08/2023

Start up Donut, Essential guide to writing a business plan,  https://www.startupdonut.co.uk/business-planning/write-a-business-plan/essential-guide-to-writing-a-business-plan, last accessed 01/08/2023

Write a business plan, https://www.gov.uk/write-business-plan, last accessed 01/08/2023

Foresey, C., SWOT Analysis:How To Do One, https://blog.hubspot.com/marketing/swot-analysis, last accessed 01/08/2023

Oxford College of Marketing, Understanding The 7 Ps of The Marketing Mix, https://blog.oxfordcollegeofmarketing.com/2020/10/08/understanding-the-7ps-of-the-marketing-mix/, last accessed 01/08/2023