1. Explain your business

1.1. Explain the background to your business idea.

Explain how long you have been developing the business idea in its present form.

Outline any work you have carried out to date.

Highlight the relevant experience you have.

Explain the proposed ownership of the business.

1.2. Give details about your product or service.

Explain what will make it stand out from other products or services, and what benefits customers will gain from buying it.

Outline how you will be able to develop the business to meet customers' changing needs in the future.

Include any weak points or disadvantages the business might have. Being frank about these will help to inspire confidence.

1.3. Explain any key features of the industry.

For example, any special regulations, whether the industry is dominated by a few large companies or any major changes in technology.

2. Describe your market and competitors

2.1. Highlight the market segments you plan to target.

For example, you might aim for local customers, customers of a particular age group or business customers of a particular kind.

Outline the key characteristics of buyers in each segment. For example, age, gender and income (for consumers) or industry and turnover (for business customers).

Indicate how large each segment is and whether it is growing or declining. Illustrate important trends and the reasons behind them.

Mention customers you have already lined up and any sales you have already achieved.

2.2. Explain what competition you face.

List the advantages and disadvantages of all your competitors and their products (or services).

Explain why you expect customers to desert established suppliers and buy from you instead.

Show that you understand your competitors' reaction to losing business, and demonstrate how you will respond.

3. Explain your marketing plan

3.1. Describe how your product or service will meet your customers' specific needs.

Don't focus on features, explain what benefits your product or service offers to customers.

3.2. Explain how you will position your product.

Highlight how your price, quality, design features, response time and after-sales service will compare with competitors.

Quote minimum order figures, if appropriate.

3.3. Outline how you plan to sell to customers.

Make clear what sales methods you will use. For example, you might sell by phone, through your website, face-to-face or using an agent.

Highlight the key selling points for your product.

3.4. Explain how long it will take to make sales.

Explain how soon you expect to be able to start selling. For some businesses, potential customers might hold off for a year before taking you seriously or placing an order.

State how much time you will devote to selling. Explain how long it will take to line up each lead and what percentage you expect to turn into sales. In your first year, you might need to spend up to 80 per cent of your time making contacts and selling.

Work out how much you will be able to sell, what the average sale value will be and whether customers will give repeat orders. If you cannot make repeat sales it will be hard to build up your sales volume.

Give a realistic assessment of how long after a sale you will get paid.

3.5. State who your first customers will be.

Give details of any potential customers who have expressed an interest or promised to buy from you, and the value of the sales they represent.

Explain how you will identify potential customers.

3.6. Explain how you will promote your product.

For example, using advertising, PR, direct mail, email or websites.

3.7. Set out what contribution to profit each part of your business will make.

Most businesses need more than one product, more than one type of customer and more than one distribution channel. Look at each in turn and examine your likely sales and costs.

Work out your gross profit margin for each part of the business, as well as what percentage of the sale contributes to profits after deducting direct costs (eg raw material, rent, rates etc).

Identify where you expect to make your profits and where there might be scope to increase either sales or margins.

4. Describe your management

4.1. Outline the management skills within your team.

Define each management role and explain who will fill it. Clarify how you intend to cover the key areas of production, sales, marketing, finance and administration.

Show your strengths and outline how you will cope with any weaknesses. Show how many 'mentors' and other supporters you will have access to.

Describe the background and experience of each team member.

Outline the management information systems you will have, for example, management accounts, sales, stock control and quality control.

4.2. Show how committed you are to the business.

State how much time and money each of the management team will contribute and what your salaries and benefits will be.

Banks and potential investors will want to be sure you are committed to the business.

5. Explain your business operations

5.1. Show the pros and cons of the location.

Explain how these are likely to affect your business.

5.2. Indicate what equipment and other facilities you will need.

Some start-ups only need a desk and a phone.

Consider any potential limits to production capacity.

If you are going to manufacture or distribute products, explain how and where you will warehouse them, and for how long.

5.3. Provide a list of the employee roles you need to fill.

You also need to detail the skills employees will need.

5.4. Show how you have selected your suppliers.

6. Provide financial forecasts

6.1. If necessary, get an adviser to help you.

Small business advisers at banks, Business Link and Enterprise Agencies will often help you put together your financial forecasts free of charge.

6.2. Set down a list of key assumptions.

For example, the prices you will charge, forecast sales volumes, the timing of sales and when you expect payment.

6.3. Prepare a realistic sales forecast.

Break the total sales figure down into its components, for example, sales of different products, different types of customer etc.

6.4. Prepare a cashflow forecast.

The cashflow forecast summarises how much money you expect to be flowing into and out of your bank account each month. You must show that your business will have access to enough money to survive (see section 8).

Demonstrate you have considered the key factors affecting cashflow, for example, the level and timing of sales revenues, wages and costs.

Show when you expect the business to be 'cash positive' (more money coming in than going out).

6.5. Prepare a profit and loss forecast.

Summarise the profit and loss forecast for each of the next two or three years of trading.

Calculate the turnover you need to break even (for example, if your gross margin is 25 per cent, your sales must be four times as large as fixed costs to break even).

Compare the breakeven level of sales with the sales you are forecasting.

6.6. Consider preparing projected balance sheets.

If you are launching a larger start-up, you will need these. They show the financial state of your business on day one and at each year end for the first two or three years.

7. Assess the risks

7.1. Look at your plan and isolate areas where something could go wrong.

For example, your main supplier might close down, or a customer you are relying on might decide not to buy from you after all.

Plan what you will do if something actually does go wrong.

7.2. Consider a range of 'what-if' scenarios.

For example, consider what will happen to your cashflow if sales are 20 per cent lower than forecast (or 15 per cent higher).

Depending on the risks, you might need to arrange contingency financing (see section 8). You may even decide that the business is simply too risky and abandon the whole project.

8. Establish your financial requirements

8.1. Use your cashflow forecast to determine how much finance the business needs.

Depending on the risks, you will usually need to arrange some additional contingency financing as well. This gives you a safety cushion if your business does not perform as well as you had hoped.

8.2. Say how much finance you want, when and in what forms.

For example, you might want a fixed-interest loan and an overdraft facility.

8.3. State what the finance will be used for.

Show how much will be used for buying equipment and how much for working capital (financing stock and debtors who have bought from you on credit).

8.4. Confirm that you will be able to afford the financing.

For example, if you want a loan, your business must generate enough cashflow to cover the interest payments and repayments of capital.

9. Complete the document

9.1. Prepare the main text, keeping it as short as possible.

Most business plans are too long. Focus on what the reader needs to know.

9.2. Add an executive summary at the beginning.

The executive summary highlights the most important points. It should sum up: your product or service and its advantages; your opportunity in the market; your management team; your track record to date; your financial projections; and the funding requirements and expected returns.

9.3. Put detailed financial forecasts in an appendix at the end.

The appendix should include the full forecasts.

The appendix should also include a detailed list of assumptions: the profit margin on each product; how long it takes to collect payment from debtors; what credit suppliers will offer you; what financing you are expecting to get and the interest rate you will pay etc.

The main text of the document should just highlight the key parts of your financial forecasts.

9.4. You may want to put other detailed information in an appendix as well.

For example, you might include detailed CVs of key people, product literature or technical specifications, names of target customers etc.

Market research data and a list of external data sources used will add credibility to your plan.

9.5. Make the document professional.

Put a cover on it and give it a title.

Include a contents page.

10. Review the plan

10.1. Read through the plan from your target reader's point of view.

For example, try to imagine the impression the plan will make on your bank manager. Ask yourself whether reading the plan would give an outsider a good feel for your business and a grasp of the key issues.

Ask friends and business advisers to read the plan and give you their impressions. Ask if they agree with your assumptions and your forecasts for sales and costs.

10.2. Concentrate first on the executive summary.

Bank managers and investors often make provisional judgements based on the executive summary. Only then do they read the rest of the plan to confirm their decision.

10.3. Check that the plan shows you have a viable market.

You must be able to get a large enough share of a large enough market to make your business financially viable.

The plan must show that you know how you will beat the competition.

You must show that you have done the market research needed to justify what you say.

10.4. Check that your sales forecast is realistic.

Unless you can demonstrate that you have a clearly defined pool of potential customers, starting your business is likely to be a struggle.

Don't underestimate the time it will take to win new customers and to get paid for the sales you make.

Services and intangible products (eg computer software) are more difficult to market. Start-ups in these areas must pay special attention to marketing in their business plans.

10.5. Be prepared to make changes.

Do not get too protective about your forecasts. Be prepared to revise them if necessary.

The time you spend rewriting and polishing the plan now will save you time later, when you are arranging finance and launching your business.