Writing a business plan

It doesn’t matter whether you’re just starting up or you’ve been in business for ages – you should have a road map for your business in the form of a business plan.

On this page:

• Why business planning is important
• Preparing a business plan
• Getting started

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Why is business planning important?

Setting out to build your business without a business plan is like switching on the ignition and driving out of your driveway without knowing where you’re going or how you plan to get there.

Business planning helps define and guide:

• An agreed route for your business
• Your key objectives for the next three to five years and how they will be achieved
• Directions and timelines in which to achieve your goals
• Your day-to-day operations and decisions.

A business plan can also be used as a benchmark to measure your progress towards achieving your goals.

Who will read your business plan?

• Your staff: Because your business plan contains your strategy and action plan for your business, it will be referred to by staff to ensure the decisions they make match the overall plans and objectives of your business.
• Investors and lenders: Your business plan (or selected portions of it) is also likely to be shown to people outside your business when you look to raise finance or investment capital.
• Potential hires: Similarly, if you are looking to employ a new senior staff member, a professional business plan could help clinch the deal.
• Potential business partners: They’re likely to be impressed by a comprehensive business plan.
• Buyers: Your plan will play an important role in presenting your business to potential buyers when it comes time to sell your business.

Set your goals

Your business plan is likely to outline goals for some, or all, of the following.

• Financial objectives – for example, to increase turnover or reduce operating costs by 5% this year.
• Strategic objectives – for example, to increase the number of corporate clients by 20% within two years.
• Operational objectives – for example, to increase output by 10% within six months.
• Marketing objectives – for example, to increase total sales to existing customers by 10% next year.
• Social/Environmental objectives – for example, decreasing your carbon footprint by 5% each year for three years.

Holding a staff brainstorming session is a good way to benefit from their expert knowledge and gain their support for your business goals and objectives. Depending on the size of your business, you might hold only one brainstorming session, or several, to cover the objectives for various business units.

Keep your goals realistic and pertinent to current general economic conditions and your specific industry conditions. For example, in a period of global economic downturn, it’s more effective to look at ways to decrease costs than to increase sales.

 Download a goal setting template [PDF 66.7kb].

Identify your strategy

Use your business plan to outline the steps needed to achieve the goals and objectives you have identified. This in turn will direct the day-to-day operations of your business. Each of your business goals will need a plan of action that needs to be followed to achieve the objective.

As a rule of thumb, your strategy will outline the most practical and cost-effective way to achieve each objective. It will detail any extra equipment or personnel that might be required.

Forecast the financial implications

The financial implications of your goals and strategies will be reflected in the financial forecasts in your business plan. Your goals will identify the areas of improvement, like an increase in sales or a reduction in costs, and your strategy will identify any additional expenditure required to achieve these goals.

Most business plans will include a 12-month cash flow forecast, a profit and loss forecast, and a two- or three-year projection.

Review your business plan

Your business plan is a living document that grows and changes over your business’s lifespan.

The effectiveness of your business plan as a management tool depends on you referring back to it as a reminder of your plans and objectives, and updating your plans to keep them relevant.

Reviewing your progress against your business plan on an annual basis is a good way to measure actual performance, and will form the basis for revising and updating your plans.

Because the nature of your business and the market you operate in will change over time, it is a good idea to review and update your business plan once a year. The most efficient way to achieve this is to set aside a few days every year to do this.

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Preparing a business plan

There isn’t a one-size-fits-all business plan or a set formula you have to follow.

Structure

Identify the purposes you’d like your business plan to achieve because this could affect how you choose to structure and write your plan. For example, you’re likely to focus on different information depending on whether your plan is intended as an internal document for management to refer to, or to raise finances from an external source. Use the three business plan structures in the table below to find the best structure for your business.

If you’re writing your business plan as part of the process of applying for a loan, it is a good idea to include a one-page cover letter. The cover letter should include the following.

• The type of loan you are looking for
• The amount of the loan and period you wish to borrow the money
• What you need the money for
• A reference to the business plan attached

If you are applying for a loan, you will probably also need to include more detailed personal information, including your  IRD number, bank accounts, assets, liabilities and other business interests.

Writing the plan

Start by jotting down points and ideas under each of the headings you plan to include in your business plan. Then sort these ideas so there’s a logical flow. At the same time, look out for any gaps or weaknesses and fill them in with the necessary research.

• Keep your business plan as short and simple as possible. Use simple language and short sentences so it is easy to understand, and edit your draft to remove unnecessary words. Use bullet points or tables if this makes ideas easier to read or understand.
• Present your facts and information so they flow logically and make sure the information presented in different sections supports each other. You don’t want to present information that doesn’t add up or raises questions about the accuracy of your plan.
• Do not give in to the temptation to overstate the truth, and bear in mind the figures you present will need to back up the words in your business plan.
• Start writing your business plan as soon as possible and keep refining your work to keep it as short, simple and easy to understand as possible.

Writing your executive summary

Your executive summary is the first section people will read and provides a brief but complete overview of your entire business plan. Because it contains reference to the entire business plan, the executive summary is usually written towards the end of the business plan writing process.
Your executive summary should:

• • Be less than three pages
• • Be simply written and to the point
• • Place an emphasis on the key issues of your business plan
• • Focus on the areas that will make your business successful in a competitive market.

Use your plan’s table of contents to map out your summary, and elaborate on important areas. It’s a good idea to end your executive summary with a short statement of why your business is poised to be a success.

External reviews

It’s a good idea to let a few people read your draft business plan before you finalise it and print it out. Paying to have your business plan professionally proof read will ensure it is free of embarrassing spelling and grammatical errors. Ask your accountant and a few business acquaintances or mentors to read through your plan to help identify any inconsistencies or gaps in the information.

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Getting started

The best place to start is by accessing the free Online business plan training module to create a quick outline of your business idea. While you’re completing this, download the Planning for success [PDF, 3957kb] guide, which helps explain some of the detail you’ll need to consider.

The business plan template below can help you structure your business plan and give you some ideas about what to write in each section of the business plan.

 Download business plan template [DOC 42kb]

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