How to Create a Business Plan

by/19th January 2026/inBusiness, Running a business, Starting A Business
Formations Wise - how to create a business plan

What Is a Business Plan and Why It Matters

A business plan is your clear, practical explanation of how your business will work in the real world.

It is not a fluffy document written for show. It is a working blueprint that proves your idea is viable, your market exists, and your numbers make sense.

Whether you are writing it for yourself, a bank, an investor, or a grant provider, a solid business plan demonstrates three key things:

  • You understand what problem your business solves
  • You know who your customers are and how to reach them
  • You can show how the business will make money sustainably

For UK startups in particular, a business plan needs to reflect how things actually work here. That means aligning with UK tax rules, regulatory requirements, and funding realities rather than generic advice copied from overseas guides.

Why a Business Plan Is Especially Important in the UK

In the UK, your business plan often plays a role beyond internal planning.
It may be used when applying for:

  • Startup loans or finance from UK lenders
  • Government-backed funding and grants
  • Angel investment or seed funding
  • Business bank accounts with enhanced due diligence

Lenders and investors will expect your plan to show awareness of:

  • Corporation Tax or Income Tax obligations
  • VAT registration thresholds and cash flow impact
  • Payroll responsibilities if you plan to hire staff
  • UK-specific compliance through Companies House and HMRC

A business plan that ignores these realities can quickly fall apart under scrutiny. A good one shows that you have thought beyond the idea and into execution.

Quick Tip Before You Go Any Further

Write your business plan as if someone sceptical is reading it. If you can clearly explain your idea, your costs, and your risks in plain English, you are already ahead of most new businesses.

As you work through the rest of this guide, remember that your business plan does not need to be perfect. It does need to be honest, realistic, and grounded in how UK businesses actually operate.

What a Business Plan Should Achieve

A strong business plan is not about length or fancy formatting. Its job is to answer the most important questions anyone will ask about your business. If it does that clearly and credibly, it is doing its job.

At a minimum, a solid business plan should achieve three things.

1. Explain Your Offer Clearly

First and foremost, your plan must explain what you sell, who buys it, and why they will choose you. This sounds obvious, but many plans fall down here by being vague or overly technical.

A good explanation of your offer should make it easy for a reader to understand:

  • What product or service you provide
  • Who your ideal customer is
  • What problem you solve for them
  • Why your solution is better or different from alternatives

If someone unfamiliar with your industry cannot grasp this within a couple of minutes,
the rest of the plan will struggle to land.

2. Prove There Is Real Demand

Ideas are cheap. Evidence is what matters. Your business plan should show that people actually want what you are offering and are willing to pay for it.

This usually includes:

  • Basic market research showing customer need
  • An overview of your main competitors and alternatives
  • Realistic pricing based on what the market supports
  • Any early traction, even if it is small or informal

Traction does not have to mean large sales. Early enquiries, pilot customers, pre-orders, or even strong waitlist numbers all help demonstrate demand.

3. Show the Numbers Stack Up

This is where many business plans live or die.
You need to show that the maths works and that you understand how money moves through your business.

A credible financial section should cover:

  • Your main costs and how they scale
  • Your sales assumptions and pricing logic
  • Expected cash flow, not just profit
  • How you will stay solvent during quieter periods

In the UK, this is especially important for showing awareness of VAT,
tax liabilities, and timing differences between invoicing and getting paid.

Government-Backed Guidance and Templates

If you want a reliable, UK-focused benchmark for what a business plan should include, the guidance from Gov.UK is an excellent starting point.

Their official resources outline what lenders and funders expect to see and include practical templates you can adapt:

Tip: Use government templates as a structure, not a script. The strongest plans customise the content to reflect the reality of the business, rather than filling in boxes for the sake of it.

Choose the Right Business Plan Format First

Before you start writing, decide who the business plan is for.
Different audiences want different levels of detail, and choosing the wrong format
is one of the most common mistakes founders make.

A clear, focused plan that fits its purpose will always outperform a long document
written for the wrong reader.

Common Business Plan Formats Explained

One-Page Plan (Lean Canvas Style)

A one-page plan is ideal when you need clarity and speed. It strips your idea down to its essentials and helps you quickly test whether it makes sense.

  • Best for early-stage ideas and founders
  • Useful for internal clarity and quick discussions
  • Not usually sufficient for banks or formal funding

Many UK startups use a Lean Canvas approach as a thinking tool before expanding into a full plan.
You can explore the original framework here: Lean Canvas overview

Funding-Ready Business Plan

A funding-ready business plan is the most detailed format.
This is what lenders, investors, and grant providers typically expect.

  • Usually 10 to 20 pages plus financial forecasts
  • Includes market research, strategy, and risk analysis
  • Backed up by realistic cash flow and assumptions

This format is essential if you are applying for:

  • Bank loans or overdrafts
  • Angel or seed investment
  • Government-backed funding schemes

Operational Plan (Internal Use)

An operational plan is designed for you and your team. It focuses less on selling the idea and more on how the business will actually run.

  • Delivery timelines and milestones
  • Hiring plans and roles
  • Systems, tools, and processes
  • Short and medium-term priorities

Many successful UK businesses maintain both a funding plan and an operational plan,
using each for its intended purpose.

Special Requirements for Start Up Loan Applications

If you are applying for funding through the Start Up Loans scheme, your business plan must meet specific criteria.

Your plan will need to include clearly defined sections and supporting evidence, such as:

  • Detailed personal and business financial forecasts
  • Market research tailored to your target customer
  • Clear explanation of how the loan will be used
  • Evidence that you understand costs, risks, and cash flow

You can review the official guidance and expectations directly from the scheme here: Start Up Loans business plan guidance

Tip: Write your plan to the highest standard you need, then simplify it for other audiences. It is far easier to cut content than to add credibility later.

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Step-by-Step: The Core Sections of a Strong Business Plan

Most effective business plans follow a clear structure. You do not need to reinvent the wheel, but you do need to be specific, realistic, and relevant to how UK businesses actually operate.

Below is a proven step-by-step breakdown of the core sections, with guidance on what to write in each one.

1) Executive Summary (Write This Last)

The executive summary is the most important page of your business plan. It should stand on its own and make sense even if the reader goes no further.

Keep it to one page maximum and cover:

  • What the business is and what it does
  • Who it serves
  • Why now is the right time
  • What you are asking for, if funding is involved
  • High-level numbers such as expected revenue, margin, and break-even month

Tip: If this page does not make sense on its own, the rest of the plan will not save it.

2) The Business and the Problem You Solve

This section sets the foundation for everything that follows. It explains what your business is and why it needs to exist.

Cover the following:

  • Business name and core concept
  • Your mission written in plain English
  • The customer problem or pain point
  • Your product or service as the solution
  • What genuinely makes you different

Be specific. Claims like “better service” only work if you clearly explain how it is better and why competitors cannot easily copy it.

3) Market Research and Customers

This section proves that demand exists and that you understand your audience.

Include:

  • Your target customer segments, two to four is usually enough
  • Market size using top-down and bottom-up estimates if possible
  • Customer behaviour, including how they buy and what they care about
  • Evidence such as interviews, surveys, waitlists, pilot clients, search demand, or competitor pricing

Stuck? Start with the question: “What would someone Google right before buying this?” Then build your research around that behaviour.

4) Competitor Analysis (and Your Advantage)

Every business has competition, even if it looks indirect. Showing that you understand the landscape builds credibility.

List both direct and indirect competitors and outline:

  • Their pricing, positioning, and target customers
  • Key strengths and weaknesses
  • What you will do differently and why that difference is believable

A simple comparison table works well here and keeps this section easy to scan.

5) Your Product or Service (What You Actually Deliver)

This section explains what the customer receives and how delivery works in practice.

  • What is included and what is not
  • Your pricing model, such as hourly, fixed fee, subscription, or tiered
  • The delivery process from enquiry to follow-up
  • Suppliers or partners, if relevant
  • Quality control and consistency standards

6) Marketing and Sales Plan (How You Win Customers)

This is where you show how customers will actually find you and convert.

Break it down into:

  • Channels such as SEO, paid ads, partnerships, referrals, marketplaces, social, or direct outreach
  • The funnel, how leads find you, convert, and repeat
  • Your sales process, who sells, how long it takes, common objections, and close rate assumptions
  • Metrics including CAC, conversion rate, average order value, and retention

Reality check: “A bit of social media” is not a sales strategy. Build at least one channel you can measure properly.

7) Operations Plan (How It Runs Day-to-Day)

This section reassures readers that the business can function smoothly.

  • Location, home-based, office, remote, or hybrid
  • Tools and systems such as CRM, accounting, booking, and support
  • Key processes and responsibilities
  • Milestones for the first 90 days and the first year

8) Team and Experience (Why You Can Pull It Off)

This is where you build trust in the people behind the plan.

  • Your background and relevant skills
  • Advisors or mentors, if any
  • Gaps in experience and how you will fill them through hiring, outsourcing, or training

9) UK Set-Up and Compliance

Investors and lenders like to see that you have thought about the practical and legal basics.

  • Business structure, sole trader, partnership, or limited company
  • Registrations with Companies House and HMRC
  • VAT registration if relevant
  • Insurance such as public liability, professional indemnity, and employers’ liability
  • Data protection and ICO registration where applicable
  • Contracts, terms, and general legal hygiene

For a government-backed starting point, the Business Growth Service hub provides practical guidance across setup and compliance.

10) Financial Plan (The Section That Makes It Real)

This is where your assumptions meet reality. Even a great idea will fail scrutiny if the numbers do not make sense.

A) Start-Up Costs – Include equipment, software, deposits, initial stock, branding, legal and accounting fees, and working capital.

B) Sales Forecast – Show monthly customers or units multiplied by price, with clear explanations of your assumptions.

C) Costs Forecast – Separate fixed and variable costs, including suppliers, staffing, marketing, and overheads.

D) Cash Flow Forecast – Cash flow matters more than profit in the early stages. A profitable business can still fail if it runs out of cash.

The Start Up Loan Scheme provides free financial templates built around what lenders typically expect: Start Up Loans business plan templates

For additional insight into how banks assess business plans, mainstream lenders also publish practical guides.  The resources from Barclays Business are particularly useful for structure and financial presentation: Barclays business plan guide

The Fastest Way to Produce a Strong First Draft (In One Afternoon)

One of the biggest blockers when writing a business plan is overthinking it. You do not need perfection on day one. You need a clear, credible first draft that you can improve.

If you want momentum, this is a practical process that works for most UK startups and can be completed in a single afternoon.

1) Start With a Template, Not a Blank Page

Blank pages kill progress. Use a proven template so you are reacting and filling in gaps rather than inventing structure.

Reliable UK-focused starting points include:

2) Write Rough, Honest Assumptions

At this stage, accuracy matters less than honesty. Write down what you actually believe will happen, not what sounds impressive.

Be clear about:

  • How many customers you think you can realistically win each month
  • What you believe they will pay
  • Which costs will arrive before revenue does

You will refine these later once you have more evidence.

3) Check Competitor Pricing and Update Your Numbers

Before locking in your forecasts, sanity-check them against the market. Look at real competitor pricing rather than relying on instinct.

  • Review competitor websites and pricing pages
  • Check marketplaces and directories where your customers already buy
  • Note whether competitors sell on price, service, speed, or specialism

This step alone often forces useful changes to revenue and margin assumptions.

4) Build a Simple 12-Month Cash Flow

You do not need a complex financial model to start. A basic monthly cash flow for the first 12 months is enough to highlight risks.

Focus on:

  • When money comes in, not just how much
  • Fixed costs that arrive every month
  • One-off costs that can cause cash dips

Many founders discover potential cash flow gaps at this stage, which is exactly why this step matters.

5) Tidy the Wording Last

Only once the structure, assumptions, and numbers are in place should you polish the language and presentation.

This is where you:

  • Simplify explanations
  • Remove jargon and vague claims
  • Check that each section supports the executive summary

Tip: A clear, imperfect plan beats a perfect plan that never gets written. Get it down, then improve it.

Common Business Plan Mistakes (and Easy Fixes)

Most weak business plans do not fail because the idea is bad. They fail because the thinking is unclear or important details are missing. The good news is that these issues are usually easy to fix once you know what to look for.

Vague Target Market

Saying your customer is “small businesses” or “everyone” tells the reader nothing. It suggests the business has not yet found a clear focus.

Easy fix: Clearly define:

  • The type of customer
  • The situation they are in
  • The trigger that makes them ready to buy

For example, “UK freelancers registering as a limited company after hitting the VAT threshold” is far stronger than “small business owners”.

Unrealistic Sales Projections

Forecasts that jump straight to high monthly revenue with no explanation immediately raise red flags for lenders and investors.

Easy fix: Tie sales directly to:

  • A specific acquisition channel
  • A realistic conversion rate
  • The capacity of the business to deliver

Showing how 2 percent of 1,000 monthly visitors becomes 20 customers is far more credible than a single headline revenue number.

No Cash Flow Forecast

This is one of the most common and most damaging omissions. A business can be profitable on paper and still fail due to poor cash timing.

Easy fix: Add a simple monthly cash flow forecast, even if it is basic. Focus on when money enters and leaves the business.

Claiming You Have No Competition

Saying “we have no competitors” undermines trust instantly. Every business competes with alternatives, including customers choosing to do nothing.

Easy fix: Identify:

  • Direct competitors offering similar solutions
  • Indirect competitors solving the problem differently
  • The status quo or “do nothing” option

Then explain why customers would realistically choose you instead.

Walls of Text

Dense paragraphs make even good ideas hard to follow. Most readers scan business plans before they read them.

Easy fix: Improve readability by using:

  • Clear headings
  • Bullet points
  • Short paragraphs and white space

Remember: A business plan is a communication tool. If it is easy to read, it is easier to believe.

UK-Friendly Business Plan Templates and Resources

There is no shortage of business plan templates online, but many are US-focused or disconnected from how UK businesses are actually assessed. The resources below are genuinely useful, credible, and aligned with what UK lenders, investors, and government-backed schemes expect to see.

GOV.UK Business Plan Guidance

The guidance from Gov.uk is one of the best neutral starting points for UK founders. It focuses on clarity, realism, and structure rather than buzzwords.

GOV.UK provides:

  • Clear explanations of what each section of a business plan should cover
  • Links to trusted templates and learning resources
  • Practical advice designed for UK businesses, not generic startups

You can access the main guidance here: How to write a business plan (GOV.UK)

Start Up Loans Templates and Planning Tools

If you are applying for funding or want a plan that meets lender expectations, the resources from Start Up Loans are particularly strong.

Their materials include:

  • A structured business plan template
  • Cash flow, sales, and cost forecasting spreadsheets
  • Guidance tailored to how applications are assessed

These templates are widely accepted by UK lenders and advisors: Start Up Loans business plan and financial templates

British Business Bank Guidance

The British Business Bank offers high-quality guidance on reviewing, improving, and stress-testing your business plan. This is especially useful once you have a draft and want to sense-check it from a lender or investor perspective.

Their resources help you:

  • Understand how funders assess risk
  • Identify weaknesses in assumptions and forecasts
  • Strengthen your plan before submitting it externally

You can explore their planning guidance here: British Business Bank business guidance

Tip: Use one primary template and one secondary resource for cross-checking. Mixing too many formats often creates confusion rather than clarity.

Mini Checklist Before You Share Your Business Plan

Before you send your business plan to a bank, investor, advisor, or partner,  it is worth doing one final sense-check. This quick checklist helps catch the issues that most often weaken otherwise solid plans.

Executive Summary Clarity

Ask yourself:

  • Does the executive summary clearly explain what the business does?
  • Is it obvious who the business is for?
  • Would someone understand the core idea without reading the rest?

Consistency of the Numbers

Inconsistent figures are one of the fastest ways to lose credibility.

  • Does pricing match what is used in the sales forecast?
  • Do margins align with your cost assumptions?
  • Does the cash flow reflect realistic payment timings?

Evidence Over Opinion

Strong plans show their working. Weak plans rely on belief alone.

  • Have you included real market or customer evidence?
  • Are claims backed by research, testing, or examples?
  • Could a sceptical reader follow your logic?

Clear Go-To-Market Plan

Readers want to see how customers will actually be won.

  • Is there a defined acquisition channel or channels?
  • Are the steps measurable and realistic?
  • Can progress be tracked against clear metrics?

UK Registrations and Compliance Covered

For UK businesses, overlooking compliance is a common red flag.

  • Have you chosen and explained the business structure?
  • Are registrations with Companies House and HMRC addressed?
  • Have VAT, insurance, and data protection been considered where relevant?

Final check: If a third party can read your plan and explain your business back to you accurately,
you are ready to share it.

Final Thoughts and Next Steps

A well-written business plan is more than a document. It is a thinking tool that helps you pressure-test your idea, spot risks early, and move forward with confidence.

Whether you are starting from scratch, applying for funding, or tightening up an existing plan, taking the time to get this right puts you in a far stronger position than most new businesses.

Need Help Turning Your Plan Into a Properly Set-Up UK Business?

Writing a business plan is only one part of the journey. Choosing the right structure, registering correctly, and setting things up compliantly in the UK are just as important.

That is where Formations Wise can help.

We support UK founders with:

If you are ready to move from planning to action, or you want reassurance that everything is set up properly from day one, our team is here to help.

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Formations Wise is a trading style of Accounting Wise Ltd, a limited company registered in England under company number 09365202. Our registered office is: The Carriages, Station Road, Ware, SG12 9PL UK.

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