What is a business plan?
Imagine setting up your bespoke jewellery business without any thought for how much your competitors charge, how they sell, or even how you intend to make your business profitable.
Now that you’ve decided to freelance, it might be tempting to just get started; but without a plan, it’s difficult to know the best direction to take. Effectively, you'll be like a ship without a rudder.
A business plan can provide that direction. It’s a formal document that outlines the plans you have for your business. Think of it as a map, or pathway, that you’ll follow to launch, develop and grow your business.
It’s also a useful tool to help you identify what you’ll need in terms of equipment or tools; how you’ll sell your service or product, forecast your income and expenditure and show your knowledge of the market you plan to trade in.
But, as a freelancer, why do I need a business plan?
You may not think it, but as soon as you decide to go freelance, you’re running a business. And like any other business, creating a plan will help you map out exactly how you run it.
You’ll need one if you’re planning to apply for grants or loans, but it’s also essential to help you stay focused on, and fluid with, your goals as your business develops.
It’s an important document externally to prove you understand your business and what you’re letting yourself in for but also to show your professionalism. Internally it will help with decision-making.
It’s a common myth that business plans must always be long and detailed. It’s often, understandably, the case for large companies, but for freelancers, a 2-4 page well-written plan (excluding your financials) is just as effective.
What does it include?
A thorough business plan needs the following sections:
Executive summary
Company overview
Products and services
Marketing strategy
Financial projections
We’ll look at each of these sections, in turn, in the chapters that follow this one.
Although the executive summary is always the first section to appear in a business plan, it’s usually the one that’s written last. So we’ll instead begin with the company overview.
Prepare your company overview
This is the section that explains who and/or what your company is. It’s all the basic information about your history, structure and vision. It’s sometimes also called a company summary. It should contain the following elements:
A mission statement. This is a declaration of your aims and values.
Your company’s history. This is your backstory. It explains why you’re setting up, your background, your start date and what you plan to do.
Your legal status. What business structure have you opted for and who owns it.
Your location. Are you working from home or renting a workshop, studio or office space? You’ll also need to include your trading address.
You and your staff. Include your own short, relevant biography. Also, detail what kind of staff you might need in the future – whether it’s hiring other freelancers to take up the slack, an assistant to deal with your admin or an accountant to do your books.
A SWOT analysis. This is a tool that’s used to analyse a business and it’s activities in a much more thorough way.
Points 2-5 on this list can be pulled together fairly easily. But capturing the essence of your aims and values in a short statement and conducting a SWOT analysis can be more tricky, so let’s look at these two areas a little more closely.
Write a mission statement
Let’s look at a few great examples of mission statements:
Amazon's mission: To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices.
Uber's mission: Uber is evolving the way the world moves. By seamlessly connecting riders to drivers through our apps, we make cities more accessible, opening up more possibilities for riders and more business for drivers.
Ikea's mission: To create a better everyday life for many people. Our business idea supports this vision by offering a wide range of well-designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them.
The mission of Doctors Without Borders: To help people worldwide where the need is greatest, delivering emergency medical aid to people affected by conflict, epidemics, disasters or exclusion from health care.
All of these mission statements share one common feature: they all answer the basic question that should be at the heart of your mission statement:
What do you do?
But they also answer two other important questions:
How do you do it?
Who benefits?
They are all to the point, written in clear language and are succinct (under 50 words). This is the maximum number of words you should allow for your mission statement.
To write yours, follow this mission statement checklist:
Answer the three key questions
Decide how you want to be perceived (environmentally-friendly,
technologically advanced, socially responsible for example)Write up to, but no more than, 50 words
Keep the language simple and easy to understand
Carry out a SWOT analysis
A SWOT analysis is a useful tool for freelancers because it helps identify potential problems before you’re faced with them in reality.
When you’re first freelancing, it’s easy to stumble from one job to the next, just to keep the money coming in, without considering what you’re trying to achieve long term.
A SWOT analysis will get you thinking beyond the present and help with your business development. You’ll be able to pinpoint the areas where you might need training or expertise or find new ways to expand the services or products you offer.
To do this effectively, you need to identify the internal and external factors that affect your business. These are your Strengths, Weaknesses (internal), Opportunities and Threats (external).
Dionne Ible is a freelance artist and owner of Qemamu Mosaics. She has recently decided to give up her day job to turn her hobby into a career. Below is an example of a SWOT analysis sheet for her mosaic making business.
SWOT analysis for Dionne Ible, Qemamu Mosaics
Strengths
| Weaknesses
|
Opportunities
| Threats
|
'My SWOT analysis is helping me to pinpoint what's working in my business, where I can improve and what direction I should be going in.' Dionne Ible, Qemamu Mosaics
We get a clear idea of how to market her from her strengths – an environmentally-friendly artist producing one-off pieces for the collectors’ market. We have an idea of the problems that need to be solved – mainly the fact she has just one income stream in her weaknesses.
In her opportunities, we see a number of ways she can develop other income streams and raise her profile. In her threats, it’s clear she’ll need to think about other ways to promote her goods to appeal to a wider audience.
All of this will give her a clear roadmap to help her plan, develop and build her business.
Let's recap!
Identify the essential sections of a business plan.
Prepare your company overview.
Write a mission statement.
Carry out a SWOT analysis.
In the next chapter, we’ll look at the part of the business plan that outlines the product you plan to sell or service you want to offer.
