One of the most important things you should think about when starting a new business is an area that is just as crucial at the start of your business journey as it is at every point: the business plan.

I see value in the business plan as twofold. The most important part is the value for you, as the company’s founder and owner. You can use it to iron out every facet of your company. You then use your business plan to keep you in check – ensuring you are achieving what you set out to do. A long-term goal could be getting support from third parties for your business, whether that’s through investment, funding or gaining new customers.

So what does one look like? During my years in business I have written many business plans and I have seen many more. The one thing I can say with certainty is that there isn’t a golden formula. Your business plan is yours. It is personal to you, but there are certain things you should keep in mind when writing one.

First and foremost, your business plan will be written by you, but it will be read by others. So keep your audience in mind when pulling one together. A simple test is to try it out on friends who don’t know anything about your venture. Does it make sense to them or did you have to clarify areas?

When planning and writing keep the structure simple, I would suggest start with an executive summary. This needs to broadly cover the following five areas:
• What does your business do and what are the advantages?
• Where are your businesses opportunities?
• Do you or your team have a track record so far in the sector or in business?
• What are your financial projections?
• What are the costs of the venture and what funding is needed?

Your executive summary is your first impression and with a lot of potential supporters and investors, this really counts.

Next you will need to explain the background to your business in depth: what it is, what does it do, what is the advantage of it, how will it stand out, what will make people buy your product and where are you already with the business?

Now look towards your current or future market. Speak to potential customers about their wants and needs, whether they are being met and if not, why not. Clearly define the market analysis and research you have done. Knowing your market and having a strong understanding of the latest trends will not only help save time later on, but it will also help keep your business competitive.

Now you need to look towards your competitors. What do they do well and what do they do not so well? To get your business to succeed you are going to need to take customers away from them and offer something that your competitors do not. This could be about cost, customer service, advancement in the sector, any number of things. But make sure you know what your competitors do, both the good and the bad.

The next section is, in my view, one of the most important areas for any business. Sales. How will you market, how will you sell, how will you build sales volume and what will your profit margins be? You need to answer all of these points and, if you have already got customers or have customers lined up, mention them here.

You should also try and cover skills and skill sets, specifically your key skills and those of others in your team. If someone is investing in your business, they are investing in you and you need to be able to show that you have the right people and team around you that will reduce the risk and increase the chance of success.

Last but not least: the financials. You will need to include realistic forecasts regarding sales for your business. You will also need to include cashflow forecasts, profit-and-loss forecasts and if possible, projected balance sheets. The more you can include, and the more well thought out your projections are, the less financial risk you might face later.

I have by no means covered everything, but the above areas are the key points that I would expect and want to see in any business plan. If you spend time on it at the start, it can be worth its weight in gold in the medium to long term and it will help provide you and your team with a strong base from where the business can develop and grow.

Top tips:
• Keep structure simple
• Keep in mind who it is for
• Test it on friends and get them to quiz you
• Re-evaluate your plan as business develops

James Caan is chairman of the Start-Up Loans Company

Each fortnight James will be tackling a different business issue – keep up to date by visiting the network and signing up to our weekly newsletter. We’d welcome your suggestions for future topics and questions for James regarding your own business – please share them in the comments thread below

This content is brought to you by Guardian Professional. To receive more like this you can become a member of the Small Business Network here.