Want to grow your trade business but don’t know where to start?
Whether you want to be self-employed or grow a team there comes a time where most tradesmen dream of working for themselves, but most don’t know where to start.
If you’re considering setting up your own trade company but need a nudge in the right direction, you’re in the right place.
In this article we tell you how to turn in your dreams into plans and trust us it pays to plan.
Those who write a business plan are 16% more likely to succeed than those who don’t!1
Why write a business plan?
Putting your ideas down on paper will guide you and help track your progress. We call that process writing a business plan. It doesn’t have to be a masterpiece, but it will help you turn your ideas into a business strategy! Plus, you’ll need one if you’re applying for finance!
If like most tradespeople you’re working a minimum of 40 hours a week on your tools, you’re probably thinking I don’t have time to write a business plan and why is it worth bothering with? You can trade without one, but it will limit your chance to grow…and we promise we’ll make it as easy as possible! See it like any job you do, spend the time to do it right and avoid the need to do it twice!
Writing a business plan will help you better understand who your competitors and customers are, document how much money you expect to make, see your ‘financial projections’ and set realistic targets, helping you see when you’re off track.
No time? No problem!
You don’t have to write a plan the minute you decide to go it alone. Research suggests that the sweet spot for writing a plan is when you’re talking to customers, getting the business ready to start trading and when you’re thinking about how you will advertise your services. If you get your plan down on paper when you’re doing all of these things, you’re increasing your chance of success by 27%2!
Even a one-page business plan to help you? It’s not going to help you get finance, but it will help gather your thoughts and stop your head from getting mashed!
How to write a business plan for tradespeople
Keep your business plan short and concise. Ensure details are specific, that you know your market and that all finance information is accurate.
Don’t worry if you get stuck there’s lots of help available and it’s the process of thinking of everything in the plan that’s most important.
What to include3:
- Executive summary (a summary of your business plan).
- Business Description.
- Market and Completion analysis.
- Sales and Marketing Plan.
- Operations and management plan.
- Financial factors.
- Supporting Evidence: include information such as your CV, accreditations, any permits and leases or licenses.
1. Executive summary
Write this section last. This part needs to grab the attention of the bank or the investor. It should be a summary of your business plan and why you’re going to be successful. It should include a summary of:
- What you do i.e. Your Service.
- What stage of development your business is currently at and why your business idea will be successful.
- Who your customers are.
- Summary of your plans for the future of the company.
- The strengths of your overall business plan including a summary of the financial information.
2. Business description
This bit covers things like your legal structure, history and start-up plans. You should include:
- The history of the business:
- Who owns the company.
- When you started trading and what progress the business has made to date. Include details of your personal background in the industry and what you have done so far towards launching the business.
- A description of your company:
- Details of all of your services.
- Who your customers are: list specific consumers or businesses you will serve.
- How your business will profit and what will make it be a success, such as its location, operation structure and industry expertise.
- Your mission statement or elevator pitch: A sentence explaining the business, it’s goals, how it will stand out from others and how will fit in the industry.
- Explain any key features of the industry including any special regulations or any major changes in technology.
3. Market and competition analysis4
Here’s your chance to show that you know your industry and where your business is in the market aka who your customers are.
Top Tip: do a good old Google search for “Home Improvement, Trends & Statistics” to help with your research, include the relevant stats in your plan and add the report data to your appendix. Cheers Google! Just make sure you use the most recent reports from a reliable source.
In this bit:
- Describe your industry, the size, trends and the future outlook.
- Explain who your customers will be, how many are available in the area you’re targeting, the number of customers you expect to gain and how much your customers spend on your services each year.
- Include the characteristics of your customers, things like their homeowner status; age bracket; their needs; where they are located; and any seasonal or buying trends that might affect your trade business.
Understanding your competition. You’ll need to assess the local competition, look for themes and figure out:
- Who your competitors are; list them, their strengths and weaknesses and what you can offer that they can’t?
- Tactics that will give you an advantage. Why will customers want to come to you and not other companies offering similar services? Do you offer competitive pricing, quality services, guarantees for your work, are you accredited, does your location give you an advantage? Do you have years of experience or are you a specialist in a particular service?
- Explain any barriers that you could face i.e. lack of staff, experience, no tools, no work and how you’ll overcome this.
4. Sales and marketing plan5
Things to include are:
- How customers find you and details of how you will advertise your services.
- What budget you will have to advertise, buy materials and for operational costs.
- How you will fund the business to the point where your business starts to experience a continuous income.
- Pricing structure and strategy: Profit margin and any discounts that you plan to use.
5. Operations and management plan
This is all about how your business will get things done, how it will function. It should include details like how your company will run and who will run it. Include:
- Services you offer: Explain the services you offer and how you’ll provide them to your customers. Include things like who carries out the work, is it you or your team – both? How do you get paid?
- Management Team: List your team and provide details of each person’s experience that will contribute to the success of the business. Include the management team’s responsibilities.
- Explain your operations structure. Include things like who is responsible for; taking customer calls, quoting jobs, buying materials, administration, labor, sales and marketing and what tasks each department has to handle. It may be that you handle everything – LUCKY YOU! That’s fine. Just write down when you intend to do each task i.e. if you’re out working all week, when will do your admin and how will you bring in more work etc.
- List any overheads and expenses related to your business operation, such as rent, salaries supplies, and equipment leases.
6. Financial factors
It’s all ‘bout the money! Let’s face it, all this plan needs to prove is that you’re going to make some CASH…so this is the important bit! To do this bit you’ll need details of your expenses; these come in two categories: your start-up expenses and your operating expenses.
This section includes 3 financial statements and a brief explanation / analysis of each. Those statements are:
- Profit and Loss statement which shows how your business will make money. It includes income (money) generated (or anticipated), cost of materials, gross profit margin, operating costs, net profit before and after taxes, and total expenses. It uses the formula. Income – Expenses = Profit/Loss.
- Cash flow forecast6: a statement of anticipated cash sales (i.e. money paid to you for work done), money owed to the business (receivables); total income, and costs for materials, overheads, and marketing and sales as well as salaries. It shows how much money will be needed to meet your business obligations, when it will be needed and where you will access it (i.e. if and when you’ll need funding). This statement is a great way to forecast and plan before plugging numbers into your income statement or balance sheet.
- Balance sheet7: provides a snapshot of what a company owns and owes at a specific date (rather than over a period of time like the other two reports). It provides a summary of all the financial information above. The balance sheet is made up of assets (what it owns), liabilities (what it owes) and equities (Capital). It uses the formula Assets = Liabilities + Equity.
Company accounts work like this…The company’s trading activity is recorded on the Profit and Loss statement. This records how much money has been made and how much has been spent running the company. This profit figure then gets adjusted to reflect the cash actually generated by the business through the Cash Flow statement. Once it emerges from the Cash Flow statement you can see how it turns up on the Balance Sheet.
How to forecast sales: Forecasting sales and creating cash flow projections is hard when you don’t have any operating history as a business. Investors/ banks will want to see that you’ve thoroughly thought of your numbers so here’s an example of a way to help you forecast8… Estimate how many households that need your services live within say, one mile? How much will they spend on the services you offer each year, and what percentage of their spending you will get, compared to your direct competitors? Do the same analysis for areas within five miles, using lower sales forecast figures, using distances that make sense for your location. For example:
| YOUR BUSINESS Sales Forecast9 | ||||
| Distance | #Households | Annual Spending | % of Spending | Forecasted Sales |
| 1 Mile | 20 | £5,000 | 5% (£250) | £5,000 |
| 5 Miles | 500 | £5,000 | 2% (£100) | £50,000 |
Once you’ve set your business up the easiest way to produce these reports is through accounting software such as Xero or QuickBooks. Your accountant will be able to format the correct accounts to be submitted to Companies House. See our Accounting article for more info.
7. Supporting evidence
This is where you provide evidence of any data, reports and statistics that you’ve used in your business plan. Include copies of any leases, licenses, accreditations, insurance documents, your C.V and the C.V of other key employees or owners. Add in anything else referred to in your business plan including your market research of the industry and your competitors.
Well folks that’s it! You have a detailed structure to help you write a business plan for your trade company. For more support be sure to sign up to our growth tips where we provide advice on growing a trade business and other specialist topics for tradesmen including sample business plans and cash flow statements to help you get started.
Questions
Do a great job, this will give you a good reputation building repeat custom and free word of mouth advertising. Treat it as a business, be organised, do things by the book and then – take the plunge.
Putting your ideas down on paper will guide you and help track your progress plus, you’ll need one if you’re applying for finance!
Executive summary
Business Description
Market and Competition analysis
Sales and Marketing Plan
Operations and management plan
Financial factors
Appendix: include information such as your CV, accreditations, any permits and leases or licenses.
A business plan is simply getting your ideas down on paper. So, whether you just want to do a one-page document to help gather your thoughts or a full financial plan this article will guide you through the process and our downloads will help you along the way.
It’s not essential unless you’re applying for funding, but it will help your trade business succeed by helping to get an idea of anticipated income, expenses and estimating contingency costs as well as acting as reference guide to keep you on track.
Get those ideas down on paper. It doesn’t have to be a work of art but it will help you get ideas into a step by step plan.
By getting your ideas down on paper. Make a to do list, use this article as guidance. Plus, we have loads more on how to start a trade company to help you at each stage of the journey.
Whether you want to be self-employed or grow a team there comes a time where most tradesmen dream of working for themselves, but most don’t know where to start. We say spend a few minutes planning to avoid mishaps further down the line.
Better understand who your competitors and customers are, document how much money you expect to make, see your ‘financial projections’ and set realistic targets, helping you see when you’re off track.
Basically, it’s a summary of your business plan – the best bits if you like. Its purpose is to make sure the lender wants to read more so it needs to say why your idea will be successful and back it up with stats from your financials.
The purpose of the balance sheet is to reveal the financial status of a business as of a specific point in time. The statement shows what an entity owns (assets) and how much it owes (liabilities), as well as the amount invested in the business (equity).
It measures a company’s sales and expenses during a specified period of time. The categories include net sales, costs of goods sold, gross margin, selling and administrative expense (or operating expense), and net profit.
P&L is short for profit and loss statement. A business profit and loss statement shows you how much money your business earned and lost within a period of time.
It’s a statement of anticipated cash sales (i.e. money paid to you for work done or services offered), money owed to the business (receivables); total income, and costs for materials, overheads, and marketing and sales as well as salaries.
It’s research and proof of research to show that you’ve considered who your direct competitors are and what would make your customers come to you and not them.
It shows how your trade business will make money, it includes income generated (or anticipated), cost of goods/materials, gross profit margin, operating costs, net profit before and after taxes, and total expenses.
Income – Expenses = Profit/Loss.
A balance sheet provides a snapshot of what a company owns and owes at a specific date (rather than over a period of time). It’s made up of assets (what it owns), liabilities (what it owes) and equities (Capital). It uses the formula Assets = Liabilities + Equity.
