Step-by-step guide to planning your new business

A business plan does not have to be a long document. For most small businesses, a few clear pages are enough. The point is to think things through before you spend money. Here is a step-by-step approach.

Step 1: Describe your idea in one sentence

Write down what you sell, who it is for, and why they should choose you. For example: "We fit wooden floors for homeowners in Edinburgh who want quality work done on time." If you cannot say it simply, keep refining it.

Step 2: Know your customers

• Who are they? Age, location, type of business.
• What problem do they have?
• How do they solve it today?
• Where do they look for help – online, word of mouth, trade shows?

Talk to real people. Ten honest conversations are worth more than guesses.

Step 3: Study the competition

List three to five competitors. Note their prices, strengths and weaknesses. Look at their reviews to see what customers like and dislike. Find the gap you can fill.

Step 4: Set your prices

Work out your full cost for each product or service, including your own time. Then check what the market will pay. Price too low and you may never make a profit; too high and you may not win customers. You can change prices later, but start with a clear reason.

Step 5: Estimate your start-up costs

Typical costs include:

• company formation or registration
• equipment and stock
• website and branding
• insurance and any licences
• marketing to win your first customers
• money to live on until the business pays you

Step 6: Plan your cash flow

Cash flow is the timing of money in and out. Many profitable businesses fail because they run out of cash. Make a simple 12-month table showing expected sales, costs and the bank balance at the end of each month. Be cautious with sales and generous with costs.

Step 7: Choose a legal structure

• Sole trader – simplest, but you are personally liable for debts.
• Limited company – separate legal person, with limited liability and more admin.
• Partnership or LLP – for two or more owners.

An accountant can explain the tax differences for your expected profits.

Step 8: Register and set up

1. Register with HMRC (sole trader) or Companies House (company). The Companies House online fee to form a company is £100.
2. For a company, register for Corporation Tax within three months of starting to trade.
3. Open a business bank account.
4. Check licences and insurance for your trade.
5. Register for VAT if your turnover will go over £90,000 in 12 months.

Step 9: Plan how you will find customers

Choose two or three ways to reach customers and do them well. Examples: a simple website, local networking, social media, partnerships with other businesses, or online marketplaces. Track where each customer comes from.

Step 10: Set goals and review

Set simple targets for 3, 6 and 12 months, such as number of customers, monthly sales or a break-even date. Review your plan every quarter and update it as you learn.

When you need a formal plan

If you are applying for a bank loan, a grant or investment, you will usually need a more detailed written plan with financial forecasts. Many banks and business support organisations offer free templates.

How Form My Company can help

When your plan is ready, we can form your company – most companies are registered within 24 hours. Check your name is free with our name check, then compare our packages. The Digital Package costs £290, including the £100 Companies House fee and VAT.

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