March 15


Business Planning for Small and Medium Business

By Patrick Millerd

March 15, 2020

business planning, business planning definition, business planning format, business planning outline, how to do business planning, small business planning, what is business planning

Business planning is essential for all businesses but for most small business owners, the thought of producing a business plan brings as much enthusiasm as having a root canal treatment.

Something they don’t really need or have time for. 

Be assured ... every business needs one and although it looks like an impossibly tedious exercise, it's not! 


“In preparing for battle I have always found that plans are useless, but planning is indispensable.” – Dwight D Eisenhower

The business planning exercise moves the information from inside heads, scattered around on scrappy pieces of paper, or with staff or advisors into a written summary that can be discussed and evaluated.

It unmasks false beliefs and provides a basis for assessing risks and fleshing out and testing any half-baked assumptions.

At the beginning there will be missing information, but this is no big deal ... with a planning format this can  be completed over time.

If you don't know the answer start with a best guess until the facts have been collected.

"The value of planning is that it makes you think logically about what you want to do. It forces you to list specific actions that you want to take. It helps you to identify and test the assumptions. It can cause you to consider factors that you might otherwise neglect." ~ David Wittenberg

What is business planning and why is it needed?

"Out of every 100 ideas there is probably only 2 great business ideas!". 

The business planning exercise is designed to find the two great ones!

It is the output of a complete process designed to test an existing or proposed business idea.

In addition, every business owner looking for finance will require a business plan to present to prospective financiers that will: 

  • confirm that it has a good business case,
  • provide the way that the owner sells its business or business idea to potential investors, i.e. venture capitalists and banks,
  • be used by the potential financial backers to value the business,
  • set out an insight into the company`s future strategy,
  • form the basis upon which financial backers will assess the business performance once the deal has been done,
  • give a thorough description of the company's activities, the markets in which it operates, its strengths, weaknesses and critical success factors,
  • provide an explanation of where the business is going and how it is going to get there and
  • detail a description of the team who will achieve it.

Who prepares the business plan?

There is often confusion in the mind of an owner about who should prepare the business plan.

The golden rule is that it should be an autobiography, not a biography.  This means that the owner and management team should prepare the plan with advice from advisors.

This is an owner or management responsibility ... not a financial advisor. 

The financiers will be backing the owner and members of the management team so they must "own" the document and the strategies and plans in it. 

Venture capitalists are suspicious of business plans which appear too biographical, so the plan should to reflect the company’s style and character. 

The role of the financial advisor is to guide the management on the preparation of their business plan. As professionals seeing business plans every day, they can advise on the length, content and style of the plan, and on the likely reactions and expectations. 

In addition, during the preparation of the plan, the advisor should play the devil's advocate role, challenging the statements made, ensuring that all the relevant points are covered and that all the arguments put forward are supportable, reasonable and consistent. 

Style and length of the business plan

The document is often a selling document. Therefore the style should be positive and compelling. It needs to capture and keep the reader`s attention! 

No waffle!

The business plan should contain enough information to support the points made while at the same time not be boring. Technical elements should be explained in simple layman's terms. 

It should make all the positive points about the business. With this in mind make sure the positive points are easy to find and don’t assume that the reader knows them or will work them out for themselves.

When making the points above, bear in mind that the planned strategy and projections will be used as a performance measure after the deal has been completed. 

Don't be too optimistic or over ambitious... it's a plan not a dream!

The business plan is usually the first contact a financier has with a company which looking for finance. Unfortunately, in many cases it is also the last, as only a small percentage of businesses actually receive funding. 

Given the high failure rate of business plans it is vital that time and care is taken in the preparation of the business plan.

Style and presentation  

The contents of the plan should be easy to read, clear, concise and accurate. Text should be neatly typed and a legible size. Double spacing, wide margins, headings and sub-headings, lists and bullet points help the reader. 

Wherever possible, use graphs to illustrate numeric trends. Finally, use appendices for detailed information. 

Those interested in the business will want to be sure that you understand its critical success factors. 

Unless in a revolutionary market the plan should show consistency between the past and the future. It must draw together the different elements of the business in a logical way to present them as a whole. 

Forecasts must be realistic, and assumptions stated and tested. 

On Completion of the Business Planning

After completing an initial detailed draft, the management team and the financial advisor should work together to complete a final version. 

Once completed, the financial advisor will schedule meetings with the short-listed financiers. 

Helpful Hints

  • To hold the reader's attention it must be engaging and interesting. 
  • Be concise but at the same time cover all the significant points. 
  • Although the business plan is often a selling document it must remain credible. 
  • Write positively showing commitment to the business and a thorough understanding of the market. 
  • Don`t be over-optimistic 
  • Avoid jargon and flowery language 
  • Don`t underestimate the time required to prepare a business plan. It's an important document, and it's quite normal for the process to take two to four weeks. 

Business Plan Content

The following is a business planning outline. A template that any small business owner can use for the step by step planning of their business. 

Remember ... this is a guide and not the 10 Commandments! Business plans come in many forms depending on their objectives. So the format and content should be crafted to fit these specific objectives. 

However, there is some critical information and that is the market and customers and the financials ... especially the cash flow.

Title Page

  • Company name, 
  • Address, 
  • Website address and telephone number, 
  • Plan date, 
  • Name and contact details of the company representative to contact for questions.

Table of Contents

The contents should be clearly laid out with each topic and page numbered. This will make it easier for the reader to locate the information required. Use internal links to the various sections.

Executive Summary

A one, or maximum two, page Executive Summary is the most important part of the document. It must be focussed, brief and compelling and will include:

  • a description of the business e.g. products/services and the target market, 
  • current situation of the business, including key financial data and factors driving success, 
  • aims and objectives in a stated time period. Include growth plans with assumptions, 
  • finance required and a summary of how these funds will be used in the business,
  • benefits likely to accrue to an external investor (if relevant) and the company's exit strategy for the investors. 

The executive summary should be done after the plan is completed

The summary should be powerful and engaging and summarise all the key positive points about the business. 

Hint: Less is more ... but it must be complete. A comprehensive summary in not more than two pages. 

Business Overview

This is an introduction to briefly describe the background to the business and how it got to where it is now. 

It should explain the “what”: what the company actually does, the products it makes or sells or the services it provides and who are the customers. 

It should not be more than two pages and include the following topics:

  • When was the business first established? How did the idea for the business first develop and how was it launched? 
  • What is the current position of the company and how did it get there? When describing the history concentrate on the last two or three years. 
  • Where is it based and how does it operate? Describe the sites that the company owns and/or where it operates. 
  • Achievements and major events in the business to date: highlight any major events in the history of the business which display unique business skills or positioning. 
  • How the business trades: as a sole trader, a partnership or limited liability company. 
  • Main products/services: a description of products/services currently provided and details of those proposed. Highlight the particular advantages of the range of products/services have over others in the marketplace (the USP). This could, for example, include patented technology, the specialist in-house skills to manufacture product, together with any guarantees and services intended to offer with the products. 
  • If possible, cross-refer descriptions of the company's products to corporate literature in the appendices.
  • A short description of how the products have developed, which products have been introduced, which have been dropped and why. 
  • Target market: who buys the products/services?  Where are they located, how are services and products delivered to them? 
  • What is the nature of the contractual relationships with customers?  Details of any long-term contracts, one-off projects, etc.) 
  • What is the nature of the company’s relationship with suppliers? 
  • A summary of financial results giving a true and accurate picture of the growth and development of the business.

Industry and Market Analysis

The Industry

  • What industry is the business in? 
  • Is the industry expanding or contracting?
  • Is the industry stable (few changes in technology) or unstable (short life cycle and changing technologies)?

The Market

  • What size is the market in volume and value terms, and what are its prospects for future expansion? 
  • What is the market share and how dispersed is the competition? 
  • Are there any barriers to entry? How is the business exposed to major new competitors coming into the market? 
  • What other factors affect the market, for example changes in economic climate, trade barriers and government? How will these factors affect it? 
  • Are there any gaps in the market which offer opportunities? 
  • Overview of major customers, strengths, weaknesses, opportunities and threats

Situational Analysis and Business Strategy

Situational Analysis

Revenue analysis and trends (breakdown of market segments, product types, seasonal fluctuations and regions).

Business Mission and Vision Statement

This is a whole subject on its own but this article has a few ideas. Like everything in planning a business it is useful to have a guiding star and importantly to be clear what the business does not do. 

It is easy to be lured into chasing "shiny objects" without having a clear ultimate goal.

SWOT Analysis

Identify and list the Strengths and Weaknesses of the business and the Opportunities and Threats facing the business. Then what needs to be done to pursue those Opportunities and how to protect the business from the Threats. 

Apply the "so what" test when drafting this section. 

  • Does that Strength really make a difference?
  • What impact does that Weakness actually have? 
  • What plans will be applied to defend the Threats or Weaknesses and take advantage of the Strengths or Opportunities? 

No business has the resources to pursue every Opportunity or change every Weakness.                         

Focus efforts to identify:

  • short term tactical objectives 
  • long term strategic objectives

Objectives should include qualitative and quantitative measures of performance,  such as:

  • opportunities to exploit, 
  • threats to defend against, 
  • sales volume and value, 
  • market share, 
  • profit before tax,  
  • return on capital employed. 

Explain the key success factors on which the achievement of the objectives depends - for example, that the target market segment continues to expand at a rate of 10% by volume and value each year or that interest rates will be unchanged. 

State the assumptions in respect of these key success factors. A prospective investor will then be able to evaluate whether these assumptions are reasonable. 

The major assumptions should be included in the body of the text, but detailed analyses included in an appendix. Whenever possible all assumptions should be supported by market research or historical results and industry benchmarks. 


This section should explain where the growth in the business is going to come from and how it is going to be achieved. It should therefore address the following issues:

  • What is the strategy for achieving growth? 
  • What are the targets and objectives for the company in terms of market share, pricing and promotional policy, distribution channels etc.?
  • In which new markets will the company operate and/or what new products will the company develop? 
  • What are the plans for acquisition and expansion? 
  • How will existing key accounts be retained?
  • How will new customers be attracted? 

The main focus should be on the first year (important) and then the next two to three years (less important). 

Unless the business has long term projects (like contracts for building power plants!) any plans beyond three years are just dreams.  

Marketing Plan

The Marketing Plan is critical as it will drive many of the company’s programs and should include.

  • Sales and marketing objectives 
  • Market positioning
  • Product strategy (including product line, branding packaging and new product development
  • Proprietary issues
  • Communications strategy (including advertising, sales promotion, public relations, personal selling, social media)
  • Distribution strategy
  • Warranty policies
  • Service quality strategy
  • Pricing strategy
  • Distribution strategy


  • What is the customer base and how dependent is the business on particular customers? 
  • How loyal are the customers? What factors affect their future loyalty? 
  • Is trade fairly constant or subject to seasonal fluctuations? Does this present any particular difficulties in estimating demand for the products/services? 
  • Why should the business appeal to new customers and how will you go about converting that appeal into new business? What are their key buying criteria? 


  • Are developments presently taking place in the market and what will be their effects? 
  • What is/will be the current market share of the company?
  • Who are the major competitors, what are their market shares and what are their strengths and weaknesses? 
  • What are their marketing strategies and how do they compare with these? 
  • What are the likely future developments in competition, for example new competitors and trends? 
  • How vulnerable is the business to any particular competitor?
  • What is the process for getting new business?
  • How will the business achieve the sales and marketing objectives through verifying the mix of:

           - products/services

           - pricing policy

          - promotional support, and

          - distribution?

  • How will potential customers be identified and reached? 
  • Is there ways customers can be attracted away from competitors? 
  • How will the key accounts be protected ? 

Production and Operations

Production process

  • How will the product be manufactured, is there a patented technology, and what are the problems anticipated in the production process? 
  • What is the actual and potential capacity of the business and how sensitive is it to breakdowns unanticipated short-term demand increases, collective labour practices etc? 
  • How secure is the source of supply for essential raw materials? Are there alternative sources of supply? 

Premises and Facilities

  • How suitable are the premises for the business
  • Are there current and future needs in terms of location, size and type? 
  • Are the premises owned or is the business exposed to increases in rents or termination of the lease? 
  • What is the present state of the machinery, when will it need replacing and what will be the cost?
  • Is the present equipment sufficient to manufacture at the forecast levels and how much spare capacity exists? 

Production and operations strategy

Again, outline the plans to overcome Weaknesses, to protect against Threats and to enable the business to pursue its growth plans.

People (HR)  

Having explained what the company does and what it plans to do, this section needs to explain who is going to deliver the strategy. It should include:


  • Who are they and what have they achieved to date? 
  • What are their motivations and aspirations and what are their ambitions for the business? 
  • Why them? How do their skills contribute to the whole? 
  • To what extent are they committed to the success of the business, including financial commitments? What plans do you have for aiding their retention, for example share option schemes etc?
  • A description of the roles and responsibilities of the management team. 
  • Consideration of succession issues and recruitment. 
  • Human resource policy and strategy. 

Organisation Structure

  • Show the existing organisation structure and how this is likely to change, if at all, to meet the requirements of the business plan. 
  • How are responsibilities distributed? Are there any gaps? 
  • To what extent will the business be relying on outsiders, for example bankers, lawyers, accountants and non-executive directors? 
  • Looking to the future, how will anticipated growth affect the structure and the skills required? 

Personnel requirements

  • What are the present and future employee requirements and are the relevant skills available in the business? 
  • Is productivity satisfactory and how much scope is there for improvement, bearing in mind the industrial relations environment? 
  • What are the current labour costs and how are they likely to change? 
  • How will effective succession be ensured by the structure?  

People strategy

  • What is the strategy for overcoming any weaknesses identified, for protecting against threats and for enabling the growth plans to flourish? 
  • Are there any likely changes to the organisational structure needed to realise the strategic objectives? 
  • What will be the strategy for attracting and retaining staff with appropriate skills and of sufficient motivation to grow with the company? 

Financial Information

The financial information should comprise both an analysis of historical performance and an explanation of how this relates to the financial projections. Projections should cover at least the next two years and include: 

  • Monthly cash flow forecasts for the first year and annually thereafter
  • Profit and loss account 
  • Balance sheets at the end of each year
  • Returns (e.g  ROI, IRR, payback period, months to positive cash flow, breakeven point). 
  • A summary of the financial statements should be inserted in the main body of the text and details contained in an appendix. 
  • Include sensitivity analysis showing how the results would be affected by changes in major risk variables, for example demand, gross margin and any limiting factors. 
  • Financials should be prepared for three years and should be summarised here, and cross-referred to the detailed documents, assumptions and sensitivities in the appendices. .
  • When preparing financial projections, avoid trying to invent deal structures with interest and dividends etc. and instead to assume that the whole funding requirement is met by overdraft. This way the actual cash requirements of the business are more apparent. In addition, it is also easier for advisors and venture capitalists to model various deal structures. Once a financing structure has been agreed it can easily be included in the projections.

Proposed Company Offering

  • Desired financing
  • Offering
  • Capitalisation
  • Use of funds
  • Investor's return

Implementation Plan

  • Timetable and implementation milestones
  • Action plans


All supporting information that is required for the assumptions should be attached as appendices to the business plan including:

  • Strengths, weaknesses, opportunities and threats (SWOT) and strategies to utilize (strengths and opportunities) or defend (threats and weaknesses)
  • Corporate literature. Remember that sometimes a picture is worth a thousand words. Include here any useful 'coffee table', glossy, promotional literature 
  • Any relevant extracts or press cuttings on the market in general, the company or its products from relevant press articles on the market or recent press cuttings
  • Floor plans
  • Copyright/patent information 
  • Maps
  • Leases and contracts
  • Technical data
  • Any analyses required to support point made in the text, e.g. analysis of customers or suppliers
  • Most recent audited accounts 
  • Detailed financial projections (3 years) 
  • Assumptions underlying the financial projections. (Include here macro-economic assumptions, e.g. interest rates, VAT etc., and specific business assumptions) 
  • Sensitised financial projections. (Although the financial projections contained in the business plan are the central base projections, it is helpful if a downside/pessimistic case is also prepared. 
  • If, under this scenario, it can be shown that the business is profitable and investors can still make a good return, this is another plus point about the business and should be referred to in the main text of the document) 
Human Resources
  • Corporate organogram
  • Job descriptions of staff
  • Full curricula vitae of the management team
  • CV's of principals
  • Employment policy details
  • Market research data 
  • Suppliers price lists or quotations 
  • Relevant letters (e.g. advance orders) 
  • Market or customer satisfaction research summaries
  • Published market information
  • List of major clients

Patrick Millerd

About the author

I support small and medium-sized business (SMB) owners to drive profitability and cash flow, managing the financial health of their business through understanding and using their numbers.
Helping them build a complete management system that puts them in control.

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