It is crucial to have a realistic, working business plan when you’re setting up a business. It has many functions, from securing external funding to measuring growth within your business.

Many people see the business plan as a document used to secure external funding. This is essential because potential investors, including banks, may invest in your idea, work with you or lend you money as a result of the strength of your plan. There are many other benefits to creating and managing a realistic business plan - even if you just use it in-house. It can:

• help you spot possible pitfalls before they happen
• form the financial side of your business efficiently
• focus any of your development efforts
• work as a measure of your growth

The following people or institutions may request to see your business plan at some stage:

• external investors - whether this is a friend, a venture capitalist firm or a business angel
• banks
• grant providers
• anyone interested in buying your business
• potential partners

You should also keep in mind that a business plan is a living document that will need updating and changing as your business develops. Regardless of whether you intend to use your plan internally, or as a document for external people, it should still be capable of taking an objective and honest look at your business. Failing to do this could suggest that you and others have unrealistic expectations of what can be achieved and when.

Your business plan is a statement of intent. It should offer you details of how you are going to develop your business, when and who’s going to play a part and how you will manage the money. Clarity on these issues is on the whole important if you’re looking for finance or investment. The process of building your plan will also focus your mind on how your new business will need to operate to give it the best chance of growth.

Your plan should include:

• An executive summary - this is a general idea of the business you want to set up. It’s crucial. Many lenders and investors make judgments about your enterprise based on this section of the plan alone.
• A short description of the business opportunity - who you are and what you plan to sell or offer, why and to whom.
• Your marketing and sales strategy - why you believe people will buy what you want to sell and how you plan to sell it to them.
• Your management team and personnel - your credentials and the people you plan to recruit who will work with or for you.
• Your operations - your premises, production facilities, your management information systems and IT.
• Financial forecasts - this section translates everything you have said in the previous sections into numbers.

The executive summary:

The executive summary is often the most key part of your business plan. Positioned at the front of the document, it is the first part to be read. Nevertheless, as a summary it makes sense to write it last. It may be the only part that will be read. Faced with a large pile of funding requests, venture capitalists and banks have been known to separate business plans into “worth considering” and “discard” piles based on this section alone.

The executive summary is a synopsis of the key points of your full plan. It should include highlights from each section of the rest of the document - from the key features of the business opportunity through to the elements of the financial forecasts. Its idea is to explain the basics of your business in a way that both informs and interests the reader. If, after reading the executive summary, an investor or manager understands what the business is about and is keen to know more, it has done its job.

It should be brief - no longer than two pages at most - and interesting. It’s advisable to write this section of your plan after you’ve completed the rest:

• A brief description of the business and its supplies. It’s a synopsis of the entire plan.
• An extended table of contents. This makes for very dull reading. You should ensure it shows the highlights of the plan, rather than restating the details the plan contains.
• Hype. While the executive summary should excite the reader enough to read the entire plan, an experienced businessperson will distinguish hype and this will undermine the plan’s credibility.

A short description of the business opportunity:

This part of the plan sets out your vision for your new business and includes who you are, what you do, what you have to offer and the market you want to address.

Start with a summary of your business:

• when you started or intend to start trading and the progress you have made to date
• the type of business and the sector it is in
• any related history - for example, if you acquired the business, who owned it originally and what they achieved with it
• the current legal structure
• your vision for the future

Then describe your commodities or services as simply as possible, defining:

• what makes it different
• what benefits it offers
• why customers would buy it
• how you plan to develop your products or services
• whether you hold any patents, trademarks or design rights
• the key features of your industry or sector

Bear in mind that the person reading the plan may not fully understand your business and its products, services or processes as well as you do, so try to avoid jargon. It’s a better idea to get someone who isn’t involved in the business - a friend or family member perhaps - to read this section of your plan and make sure they can fully understand it.

Your marketing and sales strategy:

In this section you should identify your market, your position in it and highlight who your competitors are. In order to do this you should refer to any market research you have previously carried out. You need to show that you’re fully aware of the marketplace you’re planning to operate in and that you know any important trends and drivers.

You should also be able to explain that your business will be able to attract customers in a growing market despite the competition. Key areas to cover include:

• your market - its size, historical data about its development and key current issues
• your target customer base - who they are and how you know they will be interested in your products or services
• your competitors - who they are, how they work and the share of the market they hold
• the future - anticipated changes in the market and how you expect your business and your competitors to react to them

You also require knowing how your competitors’ advantages and disadvantages relate to your own. Portray any competitive analysis you have carried out and include some what-if scenarios that show how your business would deal with customers’ changing needs or any other market changes. 

Marketing and sales:

This section should illustrate the specific activities you intend to use to promote and sell your products and services. It’s often the weak link in business plans so it’s worth spending time on it to make sure it’s both realistic and achievable.

A strong sales and marketing section means you have a clear idea of how you will get your products and services to market.

Your plan will need to provide answers to these questions:

• How do you plan to position your product or service in the market place?
• Who are your customers? Include details of customers who have shown an interest in your product or service and explain how you plan to go about attracting new customers.
• What is your pricing policy? How much will you charge for different customer segments, quantities, etc?
• How will you promote your product or service? Identify your sales methods, eg direct marketing, advertising, PR, email, e-sales.
• How will you reach your customers? What channels will you use? Which partners will be needed in your distribution channels?
• How will you do your selling? Do you have a sales plan? For example, will you sell by phone, via a website, face-to-face or through retail outlets?

Your management team and personnel:

Your business plan required to set out the structure and key know-how of both your management team and your staff. It should categorize the strengths in your team and your plans to deal with any obvious weaknesses.

The management team: If you’re looking for external funding, your management team can be a decisive factor. Give details of who is involved, their role and how it fits into the organisation. Include a paragraph on each of the individuals, outlining their background, relevant experience and qualifications. Include any advisors you might have such as accountants or lawyers. If you’re aiming to satisfy your bank manager or other investors, you need to show that your management team has the right balance of know-how, drive and experience to enable your business to succeed. Key know-how include sales, marketing and financial management as well as production, operational and market experience. Your investors will also want to be convinced that you and your team are fully committed. For that reason it’s a good idea to set out how much time and money each person will contribute to the business and the salaries and benefits you plan to draw.

Your people: Give details of your workforce in terms of total numbers and by department. Spell out what work you plan to do internally and if you plan to outsource any work. Other helpful figures might be sales or profit per employee, average salaries, employee retention rates and productivity. Your plan should also outline any recruitment or training plans, including timescales and costs. It’s vital to be realistic about the commitment and motivation of your people and spell out any plans to improve or maintain staff morale.

Your operations:

Your business plan also required you to outline your operational capabilities and any planned improvements. There are certain areas you should focus on.

Location:

• Do you have any business property?
• What are your long-term commitments to the property?
• Do you own or rent it?
• What are the advantages and disadvantages of your existing location?

Production facilities:

• Do you need your own production facilities or would it be cheaper to outsource any manufacturing processes?
• If you do have your own facilities, how modern are they?
• What is the capacity compared with existing and forecasted demand?
• Will any investment be needed?

Management-information systems:

• Have you got established procedures for stock control, management accounts and quality control?
• Can they cope with any proposed expansion?

Information technology (IT):

• IT is a key factor in most businesses, so include your strengths and weaknesses in this area.
• Outline the reliability and the planned development of your systems.

Financial forecasts:

As part of your plan you will need to provide a set of financial projections which translate what you’ve said about your business into numbers. You will need to look carefully at:

• how much capital you need if you are seeking external funding
• the security you can provide lenders
• how you plan to repay any borrowings
• sources of revenue and income

You may also want to take account of your personal finances as part of the plan at this stage.

Your forecasts should run for the next three (or even five) years and their level of sophistication should reflect the sophistication of your business. Nonetheless, the first 12 months’ forecasts should have the most detail associated with them.

Your forecasts should include:

• Cashflow statements - your cash balance and monthly cashflow patterns for at least the first 12 to 18 months. The aim is to explain that your business will have enough working capital to survive so make sure you have considered the key factors such as the timing of sales and salaries.
• Profit and loss forecast - a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads. 
• Sales forecast - the amount of money you expect to raise from sales.

Presenting your business plan:

To make sure your business plan has maximum impact, there are a number of points to examine.

Keep the plan short - it’s more likely to be read if it’s a manageable length. Think about the presentation and keep it professional - even if you only aim to use the plan in-house. Remember, a well presented plan will reinforce the positive impression you want to create of your business. Make sure your plan is realistic. Once you’ve prepared your plan, use it. If you update it regularly, it will help you keep track of your business’ development.

• Include a cover or binding and a contents page with page and section numbering.
• Start with the executive summary.
• Ensure it’s legible - make sure the type is ten point or above.
• You may want to email it, so ensure you use email-friendly formatting.
• Even if it’s for internal use only, write the plan as if it’s intended for an external audience.
• Edit the plan carefully - get at least two people to read it and check that it makes sense.
• Show the plan to expert advisers - such as your accountant - and ask for feedback. Redraft sections they say are difficult to understand.
• Avoid jargon and put detailed information - such as market research data or balance sheets - in an appendix at the back.

Tags: business plan

 This document sets out:

1. the company’s name,
2. where the registered office of the company is situated (in England, Wales or Scotland); and
3. what it will do (its objects). The object of a company may simply be to carry on business as a general commercial company.

Other clauses to be included in the memorandum depend on the type of company being incorporated. The form of memorandum for each type of company is set out in a set of tables called The Companies (Tables A to F) Regulations, 1985. (In this booklet we have called them “the Tables”.) These tables do not apply to RTM companies or commonhold associations. The memorandum and articles for these types of companies are set out in:

1. For RTM companies: “The RTM Companies (Memorandum and Articles of Association (England) Regulations 2003″ or “The RTM Companies (Memorandum and Articles of Association (Wales) Regulations 2004″
2. For commonhold associations: “The Commonhold Regulations 2004″.

The company’s memorandum delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature.

Tables The Companies (Tables A to F) Regulations 1985, SI 1985/805, (ISBN 0110568052), and the Companies (Tables A to F) (Amendment) Regulations 1985, SI 1985/1052 (ISBN 0110570529) are available to buy from “The Stationery Office Limited” at www.tso.co.uk/bookshop . Table A was further amended by the Companies Act 1985 (Electronic Communication) Order 2000, SI 2000/3373. This is available, free of charge, at www.legislation.hmso.gov.uk/si/si2000/20003373.html . Likewise, “The RTM Companies (Memorandum and Articles of Association (England) Regulations 2003″ SI 2003/2120, “The RTM Companies (Memorandum and Articles of Association (Wales) Regulations 2004″ and “The Commonhold Regulations 2004″, SI 2004/1829 are also available from www.hmso.gov.uk .

As you see in the previous paragraph, special rules apply for companies created online by the responsible agents. FID Trust will create for you a Memorandum of Association by the rules of Table A and this document will be accepted internationally.

In this section we publish ALL SAMPLES of the memorandum of association for the types of companies which we serve and which can be incorporated online.

This document sets out the rules for the running of the company’s internal affairs. Model articles are provided in the Tables mentioned above.

A company may adopt the whole of Table A as its articles or any part of it.

A company limited by shares which has adopted the whole of Table A without modification does not need to deliver a copy for registration. However, you must attach a letter to your application saying this. CICs cannot take advantage of Table A to avoid registering articles.

NOTE: If you adopt Table A without modification then you will need to appoint at least two directors. However, a private company can have just one director, if it’s articles allow. So if your company will have only one director, you need to adopt a modified version of Table A. If Table A is adopted with modifications, you must deliver the articles for registration.

All companies whether limited by shares or by guarantee must register articles. These should be in accordance with, or as near to that form as circumstances permit, the following tables:

* Table C does not apply to RTM Companies or Commonhold Associations.

In addition, the articles for community interest companies must comply with the requirements of the Community Interest Company Regulations 2005. Sample CIC memoranda and articles can be found on the CICs website at www.cicregulator.gov.uk .

The company’s articles delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature.

In this section we publish ALL SAMPLES of the articles of association for the types of companies which we serve and which can be incorporated online.

Small Business Summary

The purpose of company law and corporate governance is to promote enterprise and stimulate investment. The government is determined to ensure that their system makes it easy to set up and grow a business.  A thorough overhaul of the law is needed to make it more suited to the needs of small business. This summary sets out the main elements of the Company Law Reform Bill affecting small business.  The Bill was introduced into Parliament on the 1st of November.

Clearer law

Current company law was written mainly with the large company in mind.  The provisions that apply to private companies are often expressed as an exception to the provisions applying to public companies, making them hard to understand. The government has turned this approach on its head.  Those parts of the law most relevant to small companies (such as the model articles of association and the requirements on accounts and reports) came first so that the provisions that apply to them are easier to find.  The Bill also uses simpler and clearer language.

Better guidance

Government cannot eliminate the complexity in company law, (as this would reduce flexibility for companies).  So, making it easier to understand for both companies and their advisors involves supplementing it with clearer and comprehensive guidance.  Small companies will easily be able to identify the basic day-to-day requirements that apply to them.  Government will increase the coverage of Companies House plain English guidance and ensure that it follows the principles of “Think Small First.”  DTI (Department of Trade and Industry) benefited from the advice of small companies in preparing draft model articles of association for private companies and intends to seek their help again in developing the guidance most frequently used by small companies.  This will include a new small company checklist of the basic company law requirements.

Improved website

Increasingly, small companies are using the Companies House website.  Companies House will continue to improve their website for their customers, including a wider range of web-based guidance, better links to related websites and on-line access to up to date companies legislation.  During 2007, Companies House will be offering web incorporation and this will be supported by easier access to relevant material, for example a company will be able to access its own details through the “my Companies House” portal.

Specific legislative changes

The main changes to company law affecting small companies are as follows:

Forming a company

1. The company memorandum will become a formal document recording the position at the point of registration with just the articles being the continuing constitutional document.
2. There will be separate model articles of association for private companies.  These will contain the minimum key rules on the internal workings of the company and will be shorter and clearer.
3. There will be improved rules for company names.
4. Companies will no longer be required to specify their objects.

No requirement for a company secretary

DTI are abolishing the requirement for private companies to have a company secretary.

Directors

The general duties that a director owes to the company are currently established in case law rather than statute making it hard for them to be widely understood.  The Bill includes a statutory statement of directors’ general duties both to make the law in this area more accessible and to change the law where it no longer corresponds to modern business practice.  DTI will provide a clear guidance for new directors on what these duties mean.

Directors’ addresses on the public record

Directors will automatically have the option of filing a service address on the public record (rather than their private home address).

Resolutions and meetings

Private companies will not need to hold an annual general meeting unless they positively opt to do so.  It will be easier for companies to take decisions by written resolution rather than holding a meeting, as such resolutions may in future be carried with a simple or 75% majority of eligible votes rather than requiring unanimity as at present.  Companies will be able to make greater use of electronic communications for communications with shareholders.

Accounts and Reports

The provisions on accounts and reports have been restated to make them much easier to understand for small companies and their advisors.  DTI are retaining the option for small and medium sized companies to file abbreviated accounts with Companies House.  The deadline for private companies to file their annual reporting documents will reduce from ten months after the year-end to nine, reflecting both improvements in technology and the increased rate at which information becomes out of date.

Shareholders will be able to agree limitations on the liability of auditors.

Financial assistance and capital maintenance

The rules on providing financial assistance to potential or actual shareholders, which limit the circumstances in which companies can provide assistance for the acquisition or purchase of their own shares, are highly complex and largely irrelevant to the majority of private companies and DTI are abolishing them.  DTI are also making it easier for private companies to make capital reductions.

Keeping the law up to date

In order to keep the law up to date and ensure it meets the users’ needs, the Bill includes a power to allow the reform or restatement of company law to be made in future by a special form of secondary legislation, subject to strong requirements on public consultation and Parliamentary scrutiny.

Costs and benefits

The Government estimates that total net savings to companies of company law reform could be around £250 million annually.

Implementations

20th January 2007:

1. EU Directive enabling Companies to make greater use of electronic communications. Full details are available on the DTI website (www.dti.gov.uk/bbf/co-act-2006/)

6th April 2007:

1. Removal of the maximum age limit (currently 70) for directors of PLC’s
2. Directors will no longer need to provide details of their interests in shares or debentures of the company or its group. The result is that Companies House will no longer accept Form 325 (Location of Register of director’s interests in shares), or Form 325a (Notice for inspection of a register of directors interests in shares kept in a non-legible format).
3. There will no longer be a statutory annual report by the Secretary of State to Parliament (the ‘Companies In’ report) but DTI will continue to produce the information.
4. Directors will not be required to disclose their interests in shares in the Directors report of the Annual Accounts for reports signed after 6 April.
5. Takeover forms will be replaced with forms that align with the clauses of the new Act: 429(4) Notice of non-assenting shareholders will become Form 980(1); 429dec Statutory Declaration relating to a Notice to non-assenting shares will become Form 980(dec); 430A Notice to non-assenting shareholders will become Form 984

More information

Click to download whole:

1. Companies Act 2006 (PDF format - 2.8MB) or
2. Explanatory Notes on the Companies Act 2006 (PDF format - 1.57MB).

The Company Law Reform Bill will take several months to complete its passage through Parliament and is not expected to come into force before 2007. All parts of the Act will come into force by October 2008, but there will be early commencement of some of the provisions. Refer to the DTI website for latest developments which will be updated when there are any new announcements. The full text of the Bill with explanatory notes is also available through the DTI website: [ www.dti.gov.uk/cld/review.htm ] and through the Companies House website ( www.companieshouse.gov.uk  ). You can also follow the progress of the Bill directly on the United Kingdom Parliament webpage http://www.parliament.uk/

If you have any queries or comments about the legislation, please contact DTI in one of the following ways:

Email us at companylawreform@dti.gsi.gov.uk, or

Write to Patrick Barry, Company Law Reform Bill,

5th Floor, 1 Victoria Street, London SW1H 0ET.

Tags: Companies Act 2006

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