Business plan

A business plan records a business idea, its aims and objectives, and the way the owner expects to reach them. It turns an idea into decisions the owner can check against later, instead of a vague hope that things will work out.

Produced before trading begins

A plan is written before a business starts up, or before it expands, so the owner plans activity in advance rather than reacting to events once money is already being spent. Someone setting up a mobile bike repair service, for example, would decide beforehand which areas to cover, what to charge per repair and how many jobs a week are needed, rather than working these out after the van is already on the road.

A working document

Planning does not stop once trading starts. The plan is a working document: the owner can review it, update it when circumstances change, and use it to monitor performance. If the bike repair owner expected ten jobs a week but is getting five, comparing actual figures with the plan highlights the problem early, while there is still time to change the prices, the area covered or the advertising.

How much detail?

The amount of detail varies with the size of the business and with whether the owner needs to raise finance. Someone funding a small venture from their own savings may write only a page or two, while a larger start-up asking a bank for a loan needs a much fuller document.

A business can be started without a plan, but the owner then works with greater uncertainty and finds it harder to raise finance. A plan reduces that uncertainty and supports an application for finance, but it cannot guarantee that the idea will succeed or that a loan will be approved.