How to develop a plan for your small business

After making the exciting decision to start their very own business, prospective business owners often run into a problem - what's next?

If this situation sounds familiar, a business plan is an ideal place to start. A plan will help you craft a vision and direction for your business and help you secure funding from potential lenders or investors.

This guide is designed to give you head-start, and will cover what to consider when writing your plan, some tips to help write better plans, tips for securing finance and some common mistakes people make when writing business plans. 

1. Writing your business plan

Some imagine a business plan to be an intimidating, dense document that takes weeks to write and hours to read through. This might be the case for some businesses, but this circumstance will likely be unnecessary for yours.

A business plan should ideally be a one-page summary that easily demonstrates business goals. Think of it as a thoughtfully considered document designed to give you the best chance of success.

Business plans should be living documents, meaning they organically change as your business does. Because changes should be implemented regularly, your plan should be reviewed regularly to quickly understand how far the business has come, what goals are being accomplished and where growth can occur.


Dividing up the plan

There are five key areas your plan should cover: the need you’re fulfilling, potential customers, your competitors, a three-year financial plan and your distribution channels.


1. The need you’re addressing

Businesses exist to solve problems for people, so your first step should be to define the problem your business is solving.  Think about the specific need that you’re trying to fulfill - the simpler, the better.

When you figure out this need, you're then going to need to find the solution. What is the product or service you’re offering and how is it going to solve the problem?

2. Potential customers

Next you should consider the audience you're solving the problem for. You must determine who and where demand for your product or service will come from and what motivates the sale. Finding this last bit can be achieved with a bit of in depth market research.

3. Understanding competitors

There's a good chance that someone is already selling a product or service that’s similar to your own. If this is the case, it's a good idea to understand who they are and what they’re doing.

Doing this will help you find your competitive advantage – that is, why your customers will want to buy from you instead of your competitor. This information will then help you form your brand and market positioning.

4. Financial Plan

The idea of going into business is to make some money, right? That’s not going to happen if you’re spending more than you make. Before spending big, estimate how much it’s going to cost to get your business off the ground.

The best financial plans cover the following three areas, as well as how these projections change over the course of three years:

a. Costs to start

Setting up a business costs a lot - from costs of developing your product and buying the tools you’ll need to start servicing clients, to the initial outlays of licences, permits and insurances. Early on you’ll also need to figure out the cost per unit/service.

b. Costs to operate

Once you’re up and running, you’ll find that your business will keep steadily demanding money from you. From cost of staff to rent and equipment upkeep, consider what costs will stick around for the long run.

c. Revenue projections

Calculating how much money your business can make can help you understand how to prepare for potential business growth in the future. Consider your revenue per unit/service sold and how this will increase as your business scales and evolves over the years.

5. Distribution channels

Whether through a website, a digital marketplace like Etsy or eBay or a physical storefront, it's important to work out how your customer will find your product. No matter how you decide to sell your products or services, each option has pros, cons and different costs.

Tips to help write better business plans

Now that you know what to write in your business plan, below are four tips to help you make the most out of how you write your plan.

1. Preparation is key

Brainstorming has the potential to develop some interesting ideas, but without forethought these ideas can often end up unfocused, and potentially useless. Before your planning meeting, try to focus as much critical thought on a specific business process as possible.

Talking to existing businesses can help identify roadblocks, examine processes, and learn all they can from trade associations and competitors’ strengths. An experienced eye can better identify your business’s major strengths, weaknesses, opportunities and threats (SWOT) in advance.

2. Understand markets and cycles

Taking every day as it comes doesn't work in business. instead, you should make projections about future market conditions for your industry based on realistic market factors.

Don't be afraid to dive into comprehensive industry research - the more you know about each sector of your business, the more accurately you can make intelligent projections of sales and potential profits for the first few years and market cycles.

3. Budget for more than you expect

A budget should include a buffer for contingencies - even if you're positive of the outcome of your spend. Starting or improving a business will always require more funding than initially anticipated.

Whatever you plan on working on — whether it be new projects, expansions or retractions — have sufficient capital and backup resources on hand in the event your plans don't work out as they should.

4. Set your plan in motion

After sinking some time and energy into research and strategy, put your plan on paper. The document should answer the following questions:

  • What are your core beliefs regarding your business? Can you deliver better quality or value than others? What is your reason for being? Just because dad gave it to you is not enough.
  • Why does your business exist? Does it exist to improve life for you, your staff, your clients or the environment?
  • In the medium term where do you want to be? What is your vision? Do you want to be larger, better quality, or make a bigger profit? By when?
  • Where do you want to be in the short term? What are the small steps that can make a difference?
  • How can you meet your short-term goals? Break them down in to achievable tasks. Then assign them, set time targets and record them.

5. Monitor your industry

Once your plan is in place, there's unfortunately no time to rest. Your plan is a living document, so in order to succeed you must always monitor the market, your competition, new competition and the inevitable new processes welcomed by your industry. 

With these changes also comes weaknesses. so keep an eye out for opportunities in order to find new customers.

6. Keep your team on track

If your business planning is off to a rocky start, or is becoming increasingly inefficient, seeking out a business coach may help to keep you on track.

Understanding reports provided by your accounting software can also ensure your business isn't stumbling due to figures being months out of date. Instead, having real-time information can help you determine the impact of your current business plans and activities.

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Securing finance with your business plan

Preparing a business plan is crucial if you're considering applying for a business loan. Demonstrating that your business has the potential to generate revenue over an extended period of time helps financiers develop faith in your business.

Key Questions

There are a few key questions to consider before applying for a loan:

  • Why does your business need a loan?
  • How much does the loan need to be?
  • How soon can the loan be repaid?
  • What collateral can be offered to secure the loan?
  • What is the vision of your business?

Knowing in detail the answers to these questions will help significantly when making a formal application for your loan. There is also the added benefit of learning some new things about your financial needs you may not have previously considered!

Business plan template and guide

If you're stuck or overwhelmed trying to answer these questions, the Australian Government’s free, downloadable Business Plan Template and Guide is an excellent place to start. The guide provides a practical, four-part framework for your plan, together with a summary. The four parts are:

  • The Business
  • The Market
  • The Future
  • The Finances

The Business

This section will provide information about the:

  • business name
  • registration details
  • date established
  • structure of the business (company, sole trader, partnership, trust)
  • products and/or services
  • location or locations
  • ownership
  • management structure and organisational chart
  • key personnel with details of their experience and qualifications, risk management policies, and legal and regulatory consideration.

The Market

Here, explain your target market and lay out your researched business marketing strategy. It's important to feature things like customer demographics and a strengths, weaknesses, opportunities and threats (SWOT) analysis.

Your marketing strategy should include comprehensive general data collection and an in-depth assessment of potential competitors. In doing this you'll be able to determine the businesses that may be able to take away market share or even dominate your segment of a particular market.

All of this research is very much worth it - showing an awareness of where threats to the business exist or may come from can be seen by the bank as evidence of good business sense.

The Future

Here, share your vision for the future of the business and the key strategies you are looking to introduce to achieve that vision.

Include your vision statement and mission statement. The section will also include long term and short term goals.


Nailing the finances section is (obviously) crucial.

This section includes broad financial objectives in the form of sales or profit targets.

It should also include a detailed statement on the finance required from the bank (such as how much you need, for how long and by when it cam be repaid), a balance sheet forecast, profit and loss forecast, cash flow analysis and a break-even analysis.

Even if you're in a position to have an accountant do most, or all, of this planning, business owners who are not financial specialists should still have a good understanding of what is being included in this section.

At the very least, familiarise yourself with basic financial terms and concepts to prepare for the presentation of your business plan.

Common mistakes to avoid in your business plan

Now that you know all of the ingredients to create a great plan, it's time to familiarise yourself with what not to include. Below we mention three avoidable  mistakes that pop up time and time again on business plans.

Keeping these in mind while you're writing will ensure your business plan remains focused and reliable in the long-run, which in turn leads to better business decisions.


1. Assuming you don't need a written plan

Business owners or managers believing they don't need a written business plan — often because a "plan" exists in their head — tend to create plans riddled with assumptions.

Confidence in a business is great when starting out, but “gut feelings and “spur of the moment ideas” are full of assumptions that can lead to disaster. The strong belief that your business will succeed because you're ready to work hard is admirable, but ignoring potential pitfalls easily discovered through careful research and planning can quickly undo your hard work.

Even if you have what you believe is a bulletproof plan in your head, write it down. Then, come up with scenarios that have the potential to throw a spanner in the works and reference these in your plan. The best business plans highlight critical assumptions, test them and then rationalise them.

2. Identifying the right gaps

Although approaching your business on broad terms is a very useful exercise, a business plan should also examine all of the cogs in your business machine, no matter how small they may appear.

This involves identifying areas that have capacity and those that will inevitably require support, either in the present or the future. In doing this, you can deliver support and training before the bulk of the expected work.


For example: an industry with the capacity for high sales must also have the resources to appropriately invoice. Sales may indicate that money is coming in, but if an accounting department under stress has been unable to send out the relevant invoices, everything can grind to a halt.

In this situation money isn't available to support future sales and customers are (understandably) annoyed when followed up for payment when an invoice hasn't even been received. Eventually, credibility is damaged - sometimes irreparably. All of this can be avoided with a detailed business plan. 


With all this in mind, it pays to follow every aspect of your business to see if it can hold up in a high stress situation. If not, work out how you can support these elements.

3. Misusing finance facilities

Finance facilities, such as overdraft services, deferred payment plans and lines of credit, can be highly tempting means of injecting cashflow into a business quickly.

Even with the clearly stated high-repayment terms, many companies draw on these short-term facilities knowing the invoice recovery period will extend beyond the payback deadline. These short-term benefits eventually create damaged credit scores and ensure future financing is put at risk, or cut off completely.

To avoid this, make sure that staff know your plans and their finance limits. Senior staff and those with purchasing power should know financial avenues that are not to be abused, as just one poor purchasing decisions has the power to financially harm a company in the long-term.

Not sure how to get started?

Developing a business story, a unique selling proposition, and demonstrating groundwork can be difficult for a new business. If you're unsure where to start, there's plenty of help to be found around the internet.

As mentioned previously, the Australian Government’s business website is a great starting point, offering a number of useful business templates and guides you can use to start building your plan.

It's also important to not worry about getting a plan wrong. Instead, be concerned about not having a contingency plan in place if a business plan might go wrong. If you're putting it off, don't! Working through the process will identify weak areas or gaps and help you stay on course to making your business the best it can be.

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