Diving headfirst into a new mobile app or online portal project is an exhilarating journey. But before you take that leap, it's essential to have a solid business plan in your arsenal. This blog post is designed to guide you through the process of crafting an effective business plan, specifically tailored to securing a bank loan.
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An effective business plan helps you to be effective, and convince others you will be effective too. So, it's as much a planning tool as a sales tool to convince lenders or investors. Your plan should have the following sections: Executive Summary; Background; Offering; IPR Rights (If Applicable); The Market Opportunity; Your Competition; Marketing Strategy; Your Team; Financials; Risks and Contingency Plans; Appendices; Plan Summary. I explain these in more detail below.
Get our free business plan template, which you can use to help you write a business plan.
Bear in mind, this guide is just that - a guide. While it offers helpful tips and advice to create an effective business plan, following it doesn't guarantee results. Securing a loan is dependent on numerous factors, including the lender's criteria and your business' financial health. Therefore, it's important to understand that you apply for loans at your own risk.
So, whether you're a seasoned entrepreneur or you're just dipping your toes into the world of business, this guide provides valuable insights to help you craft a compelling business plan, paving the way for your next app or online portal project. Dive in, and let's get planning!
Section 1: Executive Summary
First, the Executive Summary is your chance to hook your reader. Make it compelling, make it clear, and most importantly, make it reflect the potential of your business. Keep it short, ideally no more than one page, and make every word count. This is your chance to impress, so put your best foot forward. Think of it as the trailer of a film. It should be captivating enough to grab the attention of your readers, in this case, potential lenders, and give them a snapshot of what your business is all about.
Here are some examples of what to include:
Start by introducing your company. What do you do? Where are you based? How long have you been operating? Remember, this is a snapshot, so keep it concise and to the point.
Give a brief overview of your financial status. This could include your current assets or sales figures. However, avoid going into too much detail. You'll have a chance to elaborate in the 'Financials' section of your business plan.
Here's where you shine a light on your ambitions. What are your sales forecasts? What are your growth plans? Again, keep it brief yet informative.
If you're seeking funding, this is the time to make it known. How much do you need? What will it be used for? This will give lenders a clear idea of your financial requirements.
Use of Funds:
Briefly outline how you plan to use the funds. Are you planning to hire new staff, invest in marketing, or upgrade your website? This shows lenders that you have a clear plan for the money.
Finally, reassure your potential lenders by outlining your repayment plan. This demonstrates your commitment to repaying the loan and your confidence in your financial forecasts. If you can't demonstrate you can repay, your application is highly likely to be rejected!
Though the executive summary is the first thing in your business plan, it should the last section you write, and act to consolidate the key points from the test of your business plan.
Section 2: Background
Creating a compelling 'Background' section in your business plan allows you to tell your company's story. This section is where you provide context about your business, such as when it was established, who founded it, and what motivated them.
Start by stating when your business started trading, or plans to start trading. This gives a clear picture of your company's age and potentially the level of experience and stability within the company. If you're a new business, don't shy away from this fact; instead, view it as an opportunity to emphasise your fresh perspective and innovative approach.
Next, offer context about the founding team or management roles, including their relevant experience and qualifications. This can build credibility and demonstrate that your business is in capable hands. For instance, if they have a degree in a relevant field or have worked in a similar industry, this can be a major selling point. If you are the only director of the business, that explain what makes you special, and why you have the credibility to execute your plans!
It's also beneficial to discuss the evolution or planned evolution of your company if you aren't a startup. Have you pivoted or expanded your offerings over time? If so, provide a brief overview of this journey, highlighting the growth and progress your company has made. This can show adaptability and a willingness to evolve to meet market demands.
Don't forget to mention your target customer base. How many unique customers have you accumulated since you began trading? This can demonstrate your ability to attract and retain clients, which is crucial for potential lenders or investors to know.
Lastly, discuss any challenges your company currently faces, such as cash flow constraints or high demand. This shows transparency and can lead into discussions about your plans to overcome these obstacles. It's best to be honest about these and handle potential objections upfront rather than risk them becoming a reason for your application to be rejected.
Remember, the 'Background' section is not just about stating facts. It's about painting a picture of your company's journey, highlighting your achievements, and setting the stage for the rest of your business plan.
Section 3: Product/Service Offering
The Products and Services section is vital because it's where you detail what you're offering to customers. Lenders and investors pay close attention to this section because it shows them how you intend to generate revenue. They want to see that you have a clear, well-thought-out strategy for delivering valuable products or services that will attract and retain customers.
Start this section by defining your offerings. Are you selling physical products, digital goods, or providing a service? Maybe you're offering a combination of these. Be clear and concise in your descriptions. Avoid jargon and write in an easy-to-understand language that anyone can comprehend, regardless of familiarity with your industry.
Next, delve into the specifics of your products or services. What are their features, and how do they benefit the customer? If you're selling a product, you might mention its design, materials, or functionality. If you're providing a service, explain the processes and results customers can expect. Remember, you're not just listing facts but selling your offerings to potential investors or lenders. Highlight the unique aspects that make your product or service stand out from the competition. Remember, they need to buy in to your vision if you want to be successful!
Also, discuss how you plan to deliver those products or services. Will you have a brick-and-mortar shop, an online store, or both? Will you offer home delivery or only in-store pick-up? Detailing your distribution strategy helps investors understand how you plan to reach your customers. As you list your costs later in the document, this information will help them to reflect on whether your planned costs are accurate.
If applicable, talk about your product or service lifecycle. Do you have plans for updates, new versions, or additional features? Show that you're thinking ahead and planning for long-term customer engagement.
Finally, consider including information about your suppliers or third-party relationships crucial to your product or service delivery. This showcases your business's reliability and resilience to potential disruptions.
Remember, the Products and Services section of your business plan is your chance to showcase what your business does and how it will meet customer needs. Make it clear, engaging, and persuasive, and you'll be one step closer to securing that crucial support for your venture.
Section 4: Intellectual Property Rights
Drafting an effective "Intellectual Property Rights" section in your business plan is crucial to securing your business's unique assets and ideas. This section is not always appropriate for all business plans but is useful to include for technology projects such as apps. This part of your plan showcases the unique value proposition of your business, which can make a big difference in the eyes of potential investors or lenders as, generally, it's the value you bring which opens the door for monetisation strategies.
Start by clearly outlining your company's intellectual property (IP), including any patents, copyrights, trademarks, trade secrets, or any unique methods or processes that give your business a competitive edge. Remember that these assets are not just legal documents; they are the building blocks of your company's identity and play a critical role in its growth and success.
Next, detail the steps you've taken to protect your IP legally, if appropriate. This could include patent applications, trademark registrations, or confidentiality agreements. For example, if paying to build an app, they may want to know if you own the Copyright to your code.
Don't forget to discuss how your IP contributes to your business strategy. How does it differentiate your product or service from your competitors? How does it add value to your customers? By incorporating this information, you bring your IP to life, demonstrating its practical importance rather than just its legal status.
Lastly, address any potential IP risks. Are there any potential infringements you need to be aware of? Are there any disputes or challenges that could affect your IP? If so, what strategies do you have to mitigate these risks? This shows lenders that you're proactive in protecting your IP and prepared for any challenges that might arise. For example, given software projects are notoriously difficult to gain patents for, some choose to achieve an advantage through speed to market and brand values rather than other forms of protection.
In essence, your business plan's "Intellectual Property Rights" section is a crucial tool to demonstrate your business's unique value and competitive edge. It's about showcasing the ideas and innovations that set your business apart, and how you're protecting and leveraging them for success. So, invest the time and effort it deserves, and you'll create a compelling case for your business's potential.
Section 5: The Market
This Market part of your plan delves into the nature, size, and characteristics of your potential customer -ase. It provides insight into the market segments you aim to serve, helping lenders understand your business's potential for success and growth.
Firstly, you need to identify your market segments. These can be based on various factors such as age, location, income level, or specific needs and behaviours. For instance, a mobile app business might segment its market into smartphone users, tech enthusiasts, and businesses seeking productivity tools. If you don't have access to in-depth market research, you can estimate based on reasonable assumptions. For example, if your target audience is women in Birmingham, you may estimate that 50% of the 1.2 million population is a target, or 600k.
Next, describe the specific characteristics of your target market. This includes their purchasing power, preferences, needs, and behaviours. This information is vital as it helps lenders understand the potential demand for your product or service.
You should also outline your market size. This involves estimating the number of potential customers in your target market. You can use industry reports, government statistics or conduct your own primary research to gather this data. Demonstrating a sizeable market can be a powerful indicator of your business's growth potential.
It's also essential to discuss your market's trends and growth patterns. This allows you to showcase your understanding of the market dynamics and how they might evolve. Lenders will be interested in knowing whether your market is growing, stable, or declining, and how these trends might affect your business.
Finally, don't forget to touch on your market's key players. These could be your competitors or potential partners. Understanding who they are, their strengths and weaknesses can help you build a robust strategy to differentiate your offering and carve out your niche.
Remember, "The Market" section of your business plan is not just about providing data and statistics. It's about painting a clear picture of the environment in which your business operates. It's about demonstrating that you understand your customers, your competitors, and your market's opportunities and challenges.
In essence, this section should give lenders confidence that there is a viable market for your product or service, and that you have the necessary understanding of this market to make your business successful. By providing a comprehensive and well-researched market analysis, you can show potential lenders that you're prepared for the challenges ahead and ready to seize the opportunities that your market presents.
Section 6: Competition and Your Unique Selling Point
Creating a robust "Competition and Unique Selling Points (USPs)" section in your business plan is a fundamental step in showcasing your business's competitive edge. Lenders often scrutinise this part of your business plan to understand your market position and how you intend to outshine your rivals.
Firstly, it's crucial to identify your competition. This includes not just the businesses offering similar products or services, but also those that could be indirect competitors. For instance, if you're launching an app that offers online fitness coaching, you're not only competing with other fitness apps but also with traditional gyms and personal trainers.
Don't be overly concerned about competitors operating in your target market, as this demonstrates that the market exists. Instead, focus on how to compete in that market, and why you are different.
You'll also want to categorise your competitors. This might be based on their size (for example, independent versus multinational companies), their location (local, national or international), or their business model (freelance, outsourced, etc.). Include an analysis of each category, highlighting their strengths and weaknesses.
Next, articulate your USPs. These features or attributes set your business apart from the competition. Your USPs could be anything from an innovative product feature, exceptional customer service, or a unique business model, to a strong brand identity or a strategic partnership. Be specific about how these USPs give you a competitive advantage.
Don't forget to discuss local competition, if applicable. This is particularly important if your business operates within a specific geographical area. Understanding the local competitive landscape can provide insights into market saturation, consumer preferences, and opportunities for differentiation.
Finally, outline how your business differentiates itself from the competition. This could be through a unique business approach, superior product quality, or a more comprehensive service offering. Make sure to back up your claims with evidence, such as customer testimonials, awards, or certifications.
Remember, your business plan's "Competition and USPs" section isn't just about proving that your business can survive amidst competition. It's about demonstrating that you understand your market, are prepared to navigate challenges, and are poised to seize opportunities. So, be thorough, be honest, and most importantly, be confident in your business's competitive edge.
Section 7: Marketing Strategy
When crafting your business plan, the 'Marketing Strategy' section is undeniably one of the most pivotal parts. This section is not just a rundown of your marketing plans; it also provides potential lenders or investors with a snapshot of your strategic thinking, understanding of the market, and ability to connect with customers.
This section's main aim is to clearly articulate how you plan to attract and retain customers. It should demonstrate a clear understanding of your target market and how your product or service meets their needs better than your competitors.
Start by providing an overview of your existing marketing strategy, if you have one. This gives the reader a sense of where you are now in terms of marketing efforts. It could involve discussing your current marketing channels, campaigns, and their effectiveness. Lenders will want to see how you plan to acquire new customers and some evidence that this strategy has a chance of success.
Next, recap on your target market. Who are they? What are their needs and wants? How does your product or service meet these needs? You should be able to provide a clear profile of your ideal customer, including demographic details and behavioural characteristics.
The marketing channels you plan to use should also be clearly articulated. These could range from traditional methods like direct mail campaigns to digital strategies like content marketing or social media. Explain why you've chosen these channels, and how they will help you reach your target audience effectively. And if these channels carry a cost, then make sure that cost is also included in the finance section of your business plan.
Finally, your 'Marketing Strategy' section should outline your growth plans. This could include plans to target new markets, introduce new products, or expand your marketing efforts.
Remember, the 'Marketing Strategy' section of your business plan is crucial for giving potential lenders or investors confidence in your business. It shows that you understand your market, have a clear plan for reaching your customers, and are prepared for the competition. So, take the time to craft this section carefully, and ensure it aligns with the rest of your business plan.
Section 8: Management / Team
The Management part of your Business Plan plays a crucial role in providing potential lenders or investors insight into the team executing the business strategy. Here, you can highlight the skills, experience, and expertise that your management team brings to the table, demonstrating why they're the right people to lead the business towards success.
Firstly, start with an overview of your management team. Include the names of key individuals, their roles within the company, and a brief summary of their responsibilities. This gives a snapshot of who is in charge and their main tasks. If it is just you in the business, then write things to give confidence that you have what it takes to execute on the strategy outlined in your business plan.
Next, delve into the credentials of each team member. Highlight their relevant qualifications, past experiences, and achievements. Don't forget to mention any industry-specific expertise or unique skills they possess. This section is about more than just listing qualifications; it's about showing how each team member's background and abilities will contribute to the company's success.
For instance, if someone on your team has a proven track record in a related field or has successfully managed similar projects or businesses, these are details worth including. This demonstrates to lenders that your team has the necessary experience and skill set to execute the business plan effectively.
Remember, lenders are not just investing in a business idea, but also the people behind it. They want to see a competent and passionate team capable of overcoming challenges and driving the business forward.
Now, let's talk about the management structure. Outline how your team is organised, showing the hierarchy and reporting lines. This helps potential lenders understand how decisions are made and who holds ultimate responsibility.
Finally, you must be transparent about any gaps or weaknesses in your management team. If you're currently lacking in a certain area, acknowledge it and provide a plan for how you intend to address this issue. This could be through hiring new staff, seeking external advice, or providing further training for existing team members. Demonstrating that you have a proactive approach to improving your team's skills and capabilities can build trust with lenders.
A well-crafted "Management" section provides an opportunity to showcase the strength, experience, and skills of your team, reinforcing the confidence of potential lenders in your business's ability to succeed.
Section 9: Financials
When writing the 'Financials' section of your business plan, you're essentially telling a story about your business, but in numbers. This section is important because it shows whether your business is making money, spending too much, or just breaking even.
If your business has been around for a while, share a little about your financial past. This could be as simple as saying, "Last year, we sold £10,000 worth of subscriptions". If you're just starting out, you might say, "We need £5,000 to set up a subscription product offering".
Next, you'll want to talk about what you expect to happen financially in the future. This might sound complicated, but it's really just your best guess of what you think will happen based on what you know now. For example, "We expect to sell £15,000 worth of subcriptions next year because we're introducing three new product offerings".
Consider how much money you'll spend to make those soaps and run your business. This can be anything from app building services to paying for office space, to buying a new laptop for your admin work. Subtract these costs from your sales, and you'll know whether you'll make a profit or a loss.
To show that you've thought about your day-to-day finances, you might want to include a cash flow statement. This is a bit like your business's bank statement; it shows money coming in from sales and going out for expenses. For example, "We'll start the month with £1,000, earn £2,000 from subscriptions, but spend £1,500 on costs, leaving us with £1,500 at the end of the month".
If your business is already trading, then you should also include a balance sheet. This is a snapshot of what your business owns (like cash in the bank or soap-making equipment), what it owes (like a loan for that new laptop), and your investment in the business. Though this may not be possible or practical if you area a new startup.
If you're looking for a loan or investment, explain how much money you need, what you'll use it for, and how you plan to repay it. For example, "We're seeking a £5,000 loan to build a new feature into our app, which will add more value and increase sales. We plan to repay the loan in two years".
Finally, if you or others have invested your own money in the business, it's worth mentioning this. It shows you believe in your business and are willing to back it with your own money.
Remember, the 'Financials' section doesn't have to be intimidating. It's just a way to show that you understand your business's money story and have plans to make it a success.
Section 10: Risks and Contingency Plans
Drafting a robust Risks and Contingency Plans section is a crucial part of any effective business plan. This section is designed to demonstrate your understanding of potential challenges your business may face, and the proactive measures you've put in place to respond effectively. A well-drafted plan can impress lenders and investors, as it shows your preparedness to navigate uncertainties and your commitment to ensuring the business's sustainability and growth.
It's important to note that risks differ from business to business. However, some common risks many businesses face include financial underperformance, loss of staff, or unexpected legal challenges. It's your job to brainstorm and identify risks most relevant to your business and its specific context.
After identifying potential risks, the next step is to develop contingency plans. Should these risks occur, these are your strategies for mitigating or managing them. The goal is to reassure lenders that you've thought ahead and that the business can withstand setbacks.
For instance, if there's a risk of underperforming financially compared to your projections, consider what levers you can pull to adjust your outgoings. This could include delaying hiring, reducing operating hours, or renegotiating supplier contracts.
If you identify a risk of losing key staff members, think about how you'd ensure continuity of operations. This might involve cross-training current staff, establishing relationships with freelancers, or implementing succession planning for key roles.
For legal risks, such as potential lawsuits, it's wise to have insurance in place. Also, consider seeking professional legal advice to ensure your contracts and legal documents are robust.
Similarly, if you rely heavily on a few key clients or partners, you might identify a risk of losing one of these major revenue streams. To mitigate this risk, you could focus on diversifying your client base or expanding into new markets.
Remember, the key to a strong "Risks and Contingency Plans" section is not to present a business free of risks – that's unrealistic – but to demonstrate that you've thoughtfully considered potential challenges and have a plan to address them. This will give lenders confidence in your ability to steer the business through both calm and choppy waters.
Section 11: Appendices
The Appendices section of your business plan serves as a repository for any detailed, supplementary information that supports your main business plan but might disrupt the flow if included within the main body. It's essentially your 'evidence locker', housing all the data and additional documents that back up the claims you've made in your plan.
Remember, what you include in the Appendices can differ depending on your business type and the specific requirements of the lenders or investors you're pitching to. However, there are a few common elements that you might want to consider.
- Financial Information:
This is often the most substantial part of the Appendices. Here, you can provide detailed financial forecasts, such as profit and loss statements, cash flow forecasts, and balance sheets. You might also include past financial statements or tax returns, particularly if you're an established business seeking additional funding.
- Visual Data:
If you have any data that's best presented visually, the Appendices is a great place to include it. This could be charts showing sales trends, website analytics, or even screenshots of your product or website.
- Resumes or CVs:
If you've referenced your team's expertise within your business plan, you could include relevant CVs in the Appendices. This gives lenders a chance to review your team's qualifications and experience in detail.
- Market Research:
Any raw data from market research, such as survey results or interview transcripts, can be included here. This adds credibility to your market analysis and demonstrates that you've done your homework.
- Legal Documents:
If relevant, you might include copies of key legal documents. These could be patents, leases, contracts, licenses, or any other legal paperwork that's pertinent to your business.
- Competitive Analysis:
If you've conducted a detailed analysis of your competitors, you could include this in the Appendices. You might include competitors' annual accounts or other financial data, for example.
The Appendices should contain any information that supports your business plan, but which is too detailed or disruptive to include in the main body. It's an opportunity to provide lenders with a deeper understanding of your business, without overloading the main sections of your plan with excessive detail.
Section 12: Business Plan Summary
Your 'Business Plan Summary' or conclusion is a vital component, though positioned at the end of the business plan. It serves as an overview or distillation of your entire business plan. Why is it so important? Many lenders, investors, or stakeholders might read this section first to get a snapshot of your business plan. In essence, it's your opportunity to make a strong first impression.
Firstly, it should clearly state the funding amount you're seeking. This is a key piece of information that potential lenders or investors are looking for. Be clear and specific.
Next, elaborate on the sales or growth activity that this funding will support. This provides a clear idea of how you plan to grow your business and generate a return on investment.
Then, detail how the funding will be utilised. Will it be used to hire more staff, invest in new equipment, or perhaps develop a new product? This shows potential lenders or investors exactly where their money will go, and how it will contribute to the growth and success of your business.
Finally, affirm that your cash flow forecast supports the loan repayments. This is crucial as it provides reassurance to lenders or investors that your business has the financial capability to repay the loan.
Remember to keep this section concise and focused. Use bullet points for clarity and ease of reading. This summary should be a compelling snapshot of your business plan, enticing the reader to delve into the details of your plan and, ultimately, feel confident in investing in your business.
In conclusion, a well-crafted 'Business Plan Summary' is a powerful tool that can make your business plan stand out and increase your chances of securing the funding you need.
Where to Get a Loan (or Other Forms of Finance)
There are a variety of ways to finance your business ideas, including self-funding, attracting investment, or applying for a loan. If you're in the UK and have opted to explore the loan route, it might be worth looking into the Government-backed start-up loans provided by the British Business Bank. Currently, these loans offer comparatively low-interest rates of up to £25,000 at 6% annually for a maximum of five years, without charging fees for arranging the loan (figures based on 15th August 2023 website information, please check what they currently offer). However, this approach isn't suitable for everyone. Some may prefer different methods to finance their concepts, but as this option is backed by the government, it's certainly worth contemplating if you're in search of a loan.
Remember to tread cautiously when raising funds. Business investments inherently involve risk, meaning that any capital invested is also susceptible to risk. Therefore, if you decide to take out a loan, ensure you settle for an amount you're confident you can manage. Moreover, have a contingency plan if your business idea needs more time to take flight.
If your business requires additional funds or a prolonged runway with an unpredictable payment schedule, obtaining a loan might not be the most suitable option. You could instead contemplate self-funding, a grant, or procuring funds through an early-stage startup investor. However, remember that such a method of raising capital is highly competitive. Therefore, ensuring your business plan is robust and that your enterprise shines amidst other start-ups seeking investment is crucial! Quite often, grants or startup investors will want to see some evidence your idea has traction, which may require you to build something small with your own funds first to increase your chances of securing funds to build and grow the rest. So, plan for this expectation and set a sequence of activities that work best for you whilst increasing your chances of success!
Congratulations! You've journeyed through crafting a robust and effective business plan. This guide has illuminated the key sections of a business plan, offered practical advice, and, hopefully, empowered you with the confidence to articulate your business vision and strategy compellingly.
Why not also check our free business plan template, which you can use to help you with the process of writing a business plan?
Here's a quick reminder of the vital points:
- Always start with a compelling Executive Summary that encapsulates the essence of your business. Remember, it's your business's 'elevator pitch'.
- Present your business's background, including its journey, achievements, and future aspirations.
- Define your product or service offering clearly, highlighting its unique features and benefits.
- Showcase your intellectual property rights, delineating how they add value to your business.
- Conduct a thorough market analysis, demonstrating your understanding of the industry landscape and your customer base.
- Show your market position and unique selling points, indicating how you'll outshine your competition.
- Describe your marketing strategy, demonstrating how you'll attract and retain customers.
- Highlight your competent and passionate management team, emphasising their ability to steer your business to success.
- Present a clear and concise view of your financials, offering evidence of your business's financial health and growth potential.
- Showcase your understanding of potential risks and your proactive measures to mitigate them.
- Use the appendices section to include supplementary information that supports your business plan.
- Finally, conclude with a compelling business plan summary that provides a snapshot of your plan and entices readers to delve into the details.
A well-drafted business plan acts as a roadmap for your business' growth and plays a pivotal role in convincing potential lenders of your venture's viability. However, the structure of a plan for a bank loan differs from that for personal use or for investors, who often require a pitch deck (something I cover in a lot more detail in my book, Execute Your Tech Idea).
Remember, this guide serves as a roadmap, but the success of securing a loan hinges on factors beyond a stellar business plan. Here's to your business's journey to growth, success, and the realisation of your vision! Good luck, and happy planning!
Scorchsoft is here to help. For over a decade, we are a team of experienced developers passionate about creating apps and web apps that show off your brand and help achieve your vision. Whatever your ambitions, we can help you achieve them.
If you're ready to get started, get in touch with our team and let's start developing your app together.
Or, if you aren't ready to start your project yet and feel you have more to learn about apps and tech, please check out my book and audiobook: Execute Your Tech Idea - A Step-by-Step Guide for Non-Techies, Professionals, Managers, and Startups. Execute Your Tech Idea gives you everything you need to find, qualify, implement, and launch your tech idea. Discover your ‘aha!’ moment in this plain-speaking, easy-to-read guidebook suitable for non-technical readers.