How to write a business plan for a communication agency?

Putting together a business plan for a communication agency can be daunting - especially if you're creating a business for the first time - but with this comprehensive guide, you'll have the necessary tools to do it confidently.

We will explore why writing one is so important in both starting up and growing an existing communication agency, as well as what should go into making an effective plan - from its structure to content - and what tools can be used to streamline the process and avoid errors.

Without further ado, let us begin!

Why write a business plan for a communication agency?

Being clear on the scope and goals of the document will make it easier to understand its structure and content. So before diving into the actual content of the plan, let's have a quick look at the main reasons why you would want to write a communication agency business plan in the first place.

To have a clear roadmap to grow the business

It's rarely business as usual for small businesses. The economy follows cycles where years of growth are followed by recessions, and the business environment is always changing with new technologies, new regulations, new competitors, and new consumer behaviours appearing all the time...

In this context, running a business without a clear roadmap is like driving blindfolded: it's dangerous at best. That's why writing a business plan for a communication agency is essential to create successful and sustainable businesses.

To write an effective business plan, you will need to take stock of where you are (if you are already in business) and where you want the business to go in the next three to five years.

Once you know where you want your communication agency to be, you'll have to identify:

• what resources (human, equipment, and capital) are needed to get there,
• at what pace the business needs to progress to get there in time,
• and what risks you'll face along the way.

Going through this process regularly is beneficial, both for startups and existing companies, as it helps make informed decisions about how best to allocate resources to ensure the long-term success of the business.

To get visibility on future cash flows

If your small communication agency runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your communication agency's future cash flows.

So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.

The good news is that your communication agency business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.

To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.

By diligently monitoring your communication agency's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.

To secure financing

Whether you are a startup or an existing business, writing a detailed communication agency business plan is essential when seeking financing from banks or investors.

This makes sense given what we've just seen: financiers want to ensure you have a clear roadmap and visibility on your future cash flows.

Banks will use the information included in the plan to assess your borrowing capacity (how much debt your business can support) and your ability to repay the loan before deciding whether they will extend credit to your business and on what terms.

Similarly, investors will review your plan carefully to assess if their investment can generate an attractive return on investment.

To do so, they will be looking for evidence that your communication agency has the potential for healthy growth, profitability, and cash flow generation over time.

Now that you understand why it is important to create a business plan for a communication agency, let's take a look at what information is needed to create one.

What information is needed to create a business plan for a communication agency?

Writing a communication agency business plan requires research so that you can project sales, investments and cost accurately in your financial forecast.

In this section, we cover three key pieces of information you should gather before drafting your business plan!

Carrying out market research for a communication agency

Carrying out market research before writing a business plan for a communication agency is essential to ensure that the financial projections are accurate and realistic.

Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.

In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.

Your market research could reveal that there may be an increasing demand for social media marketing services among small businesses, as they look to reach more potential customers online. It could also show that there might be a growing interest in video content, as companies look to engage customers with more dynamic visuals.

This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your communication agency.

Developing the sales and marketing plan for a communication agency

Budgeting sales and marketing expenses is essential before creating a communication agency business plan.

A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.

This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.

The staffing and equipment needs of a communication agency

As you embark on starting or expanding your communication agency, having a clear plan for recruitment and capital expenditures (investment in equipment and real estate) is essential for ensuring your business's success.

Both the recruitment and investment plans must align with the timing and level of growth projected in your forecast, and they require appropriate funding.

Staffing costs for a communication agency might include salaries for full-time employees, such as graphic designers, writers, and account managers, as well as freelance fees for additional specialists, such as photographers and videographers. Equipment costs might include the purchase of computers, software, and other technologies necessary to complete projects, as well as the costs associated with maintaining or replacing these items.

To create a realistic financial forecast, you also need to consider other operating expenses associated with the day-to-day running of your business, such as insurance and bookkeeping.

With all the necessary information at hand, you are ready to begin crafting your business plan and developing your financial forecast.

What goes into your communication agency's financial forecast?

The financial forecast of your communication agency's business plan will enable you to assess the growth, profitability, funding requirements, and cash generation potential of your business in the coming years.

The four key outputs of a financial forecast for a communication agency are:

• The profit and loss (P&L) statement,
• The projected balance sheet,
• The cash flow forecast,
• And the sources and uses table.

Let's look at each of these in a bit more detail.

The projected P&L statement

The projected P&L statement for a communication agency shows how much revenue and profit your business is expected to make in the future.

A healthy communication agency's P&L statement should show:

• Sales growing at (minimum) or above (better) inflation
• Stable (minimum) or expanding (better) profit margins
• A healthy level of net profitability

This will of course depend on the stage of your business: numbers for a startup will look different than for an established communication agency.

The projected balance sheet of your communication agency

Your communication agency's forecasted balance sheet enables the reader of your plan to assess your financial structure, working capital, and investment policy.

It is composed of three types of elements: assets, liabilities and equity:

• Assets: represent what the business owns and uses to produce cash flows. It includes resources such as cash, equipment, and accounts receivable (money owed by clients).
• Liabilities: represent funds advanced to the business by lenders and other creditors. It includes items such as accounts payable (money owed to suppliers), taxes due and loans.
• Equity: is the combination of what has been invested by the business owners and the cumulative profits and losses generated by the business to date (which are called retained earnings). Equity is a proxy for the value of the owner's stake in the business.

Your communication agency's balance sheet will usually be analyzed in conjunction with the other financial statements included in your forecast.

Two key points of focus will be:

• Your communication agency's liquidity: does your business have sufficient cash and short-term assets to pay what it owes over the next 12 months?
• And its solvency: does your business have the capacity to repay its debt over the medium-term?

The cash flow forecast

As we've seen earlier in this guide, monitoring future cash flows is the key to success and the only way of ensuring that your communication agency has enough cash to operate.

As you can expect showing future cash flows is the main role of the cash flow forecast in your communication agency business plan.

It is best practice to organise the cash flow statement by nature in order to show the cash impact of the following areas:

• Cash flow generated from operations: the operating cash flow shows how much cash is generated or consumed by the business's commercial activities
• Cash flow from investing activities: the investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.) either to maintain the business's equipment or to expand its capabilities
• Cash flow from financing activities: the financing cash flow shows how much cash is raised or distributed to financiers

Looking at the cash flow forecast helps you to make sure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.

Your communication agency business plan will normally include both yearly and monthly cash flow forecasts so that the readers can view the impact of seasonality on your business cash position and generation.

The initial financing plan

The initial financing plan - also called a sources and uses table - is an important tool when starting a communication agency.

It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).

Having this table helps understand what costs are involved in setting up the communication agency, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).

Now that the financial forecast of a communication agency business plan is understood, let's focus on what goes into the written part of the plan.

The written part of a communication agency business plan

The written part of a communication agency business plan plays a key role: it lays out the plan of action you intend to execute to seize the commercial opportunity you've identified on the market and provides the context needed for the reader to decide if they believe your plan to be achievable and your financial forecast to be realistic.

The written part of a communication agency business plan is composed of 7 main sections:

1. The executive summary
2. The presentation of the company
3. The products and services
4. The market analysis
5. The strategy
6. The operations
7. The financial plan

Let's go through the content of each section in more detail!

1. The executive summary

The executive summary, the first section of your communication agency's business plan, serves as an inviting snapshot of your entire plan, leaving readers eager to know more about your business.

To compose an effective executive summary, start with a concise introduction of your business, covering its name, concept, location, history, and unique aspects. Share insights about the services or products you intend to offer and your target customer base.

Subsequently, provide an overview of your communication agency's addressable market, highlighting current trends and potential growth opportunities.

Then, present a summary of critical financial figures, such as projected revenues, profits, and cash flows.

You should then include a summary of your key financial figures such as projected revenues, profits, and cash flows.

Lastly, address any funding needs in the "ask" section of your executive summary.

2. The presentation of the company

The second section in your communication agency's business plan should focus on the structure and ownership, location, and management team of the company.

The structure and ownership part provides an overview of the legal structure of the business, who the owners are and how much each has invested and owns. If you are seeking financing it is important that the reader gets a clear picture of which legal entity is receiving the funds, and who controls the business.

The location part should give an overview of the premises from which the company is operating, and why that location is of particular interest (catchment area, accessibility, amenities nearby, etc.).

When describing the location of your communication agency, you could emphasize its access to a diverse range of customers. It may be situated in a vibrant metropolitan area with many potential customers, or it could be located in a smaller city in close proximity to major markets. Additionally, the location may have good public transportation options or access to major highways, making it easier for customers to get to the agency. You could also point out that the agency is positioned in an area with a strong business infrastructure, offering a range of resources to support your operations.

Finally, you should introduce the management team. Explain each member's role, background, and experience.

It is also important to emphasize any past successes that the members of the management team have achieved, and how long they've been working together, as this will help potential lenders or investors understand why they should trust in their leadership.

3. The products and services section

The products and services section of your communication agency business plan should include a detailed description of what your company sells to its customers. 

For example, your communication agency might offer content writing, website design and development, and social media marketing services to its customers. Content writing can help customers reach a larger audience and effectively convey their message to their audience. Website design and development can help customers create an interactive website that is both visually appealing and easy to navigate. Finally, social media marketing can help customers engage with their customers on popular platforms, and increase their reach and visibility.

The reader will want to understand what makes your communication agency unique from other businesses in this competitive market.

When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through. 

4. The market analysis

When you present your market analysis in your communication agency business plan, it's crucial to include detailed information about customers' demographics and segmentation, target market, competition, barriers to entry, and any relevant regulations.

The main objective of this section is to help the reader understand the size and attractiveness of the market while demonstrating your solid understanding of the industry.

Begin with the demographics and segmentation subsection, providing an overview of the addressable market for your communication agency, the key trends in the marketplace, and introducing different customer segments along with their preferences in terms of purchasing habits and budgets.

Next, focus on your target market, zooming in on the specific customer segments your communication agency aims to serve and explaining how your products and services fulfil their distinct needs.

For example, your target market might include small business owners. These are people who own a business with a limited budget and need help with communication and marketing strategies. They may benefit from the agency's services in creating content, running campaigns, or providing guidance on upcoming projects.

Then proceed to the competition subsection, where you introduce your main competitors and highlight what sets you apart from them.

Finally, conclude your market analysis with an overview of the key regulations applicable to your communication agency.

5. The strategy section

When crafting the strategy section of your business plan for your communication agency, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.

The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.

For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.

In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.

Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.

Your communication agency could face the risk of losing clients due to a lack of fresh ideas or not delivering on promises. This could lead to a decrease in revenue, which could have a negative impact on your agency. Another risk your agency may face is the potential for a data breach. With the growing prevalence of cyber-attacks, your agency could be at risk of a malicious attack that could compromise client data or cause harm to the agency's reputation.

6. The operations section

The operations of your communication agency must be presented in detail in your business plan.

Begin by addressing your staff, specifying the main roles and your recruitment plan to support the anticipated growth. Outline the qualifications and experience needed for each role and discuss your recruitment strategies, which may involve using job boards, referrals, or headhunters.

Next, clearly state your communication agency's operating hours, allowing the reader to gauge the adequacy of your staffing levels. Additionally, mention any considerations for varying opening times during peak seasons and your approach to handling customer queries outside regular operating hours.

The key assets and intellectual property (IP) required to run your business should also be highlighted. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, ensure they are well-documented in this section.

You might have key assets such as a portfolio of successful campaigns you have worked on for previous clients, or a list of contacts you can call upon to help you with certain projects. Your IP could include any proprietary software, processes or systems you use to help you deliver effective campaigns quickly and efficiently. You may also have a database of contacts, or a library of creative work that you have developed over time.

Finally, provide a comprehensive list of suppliers you intend to collaborate with, along with a breakdown of their services and main commercial terms, such as price, payment terms, break clauses and contract duration. Investors often seek insight into the reasons behind your supplier choices, which may include a preference for higher-quality products or established relationships from past ventures.

7. The presentation of the financial plan

The financial plan section is where we will include the financial forecast we talked about earlier in this guide.

Now that you have a clear idea of the content of a communication agency business plan, let's look at some of the tools you can use to create yours.

What tool should I use to write my communication agency's business plan?

There are two main ways of creating your communication agency business plan:

• Using specialized business planning software,
• Hiring a business plan writer.

Using an online business plan software for your communication agency's business plan

Using online business planning software is the most efficient and modern way to write a communication agency business plan.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

Hiring a business plan writer to write your communication agency's business plan

Outsourcing your communication agency business plan to a business plan writer can also be a viable option.

Business plan writers are experienced in writing business plans and adept at creating financial forecasts without errors. Furthermore, hiring a consultant can save you time and allow you to focus on the day-to-day operations of your business.

However, hiring business plan writers is expensive as you are paying for the software used by the consultant, plus their time, and their profit margin of course.

From experience, you need to budget at least £1.5k ($2.0k) excluding tax for a complete business plan, more if you need to make changes after the initial version (which happens frequently after the initial meetings with lenders or investors).

You also need to be careful when seeking investment. Investors want their money to be used to grow the business, not spent on consulting fees. Therefore, the amount you spend on business plan writing services (and other consulting services such as legal services) needs to be negligible relative to the amount raised.

The other drawback is that you usually don't own the business plan itself: you just get the output, while the actual document is saved in the consultant's business plan software - which makes it difficult to maintain the document up to date without hiring the consultant on a retainer.

For these reasons, outsourcing the communication agency business plan to a business plan writer should be considered carefully, weighing both the advantages and disadvantages of hiring outside help.

Ultimately, it may be the right decision for some businesses, while others may find it beneficial to write their business plan using online software.

Why not create your communication agency's business plan using Word or Excel?

I must advise against using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write your communication agency business plan. Let me explain why.

Firstly, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is highly technical and requires a strong grasp of accounting principles and financial modelling skills. It is, therefore, unlikely that anyone will fully trust your numbers unless you have both a degree in finance and accounting and significant financial modelling experience, like us at The Business Plan Shop.

Secondly, relying on spreadsheets is inefficient. While it may have been the only option in the past, technology has advanced significantly, and software can now perform these tasks much faster and with greater accuracy. With the rise of AI, software can even help us detect mistakes in forecasts and analyze the numbers for better decision-making.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Moreover, software makes it easier to compare actuals versus forecasts and maintain up-to-date forecasts to keep visibility on future cash flows, as we discussed earlier in this guide. This task is cumbersome when using spreadsheets.

Now, let's talk about the written part of your communication agency business plan. While it may be less error-prone, using software can bring tremendous gains in productivity. Word processors, for example, lack instructions and examples for each part of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they don't handle formatting for you.

Overall, while Word or Excel may seem viable for some entrepreneurs to create a business plan, it's by far becoming an antiquated way of doing things.

Takeaways

1. A business plan has 2 complementary parts: a financial forecast showcasing the expected growth, profits and cash flows of the business; and a written part which provides the context needed to judge if the forecast is realistic and relevant.
2. Having an up-to-date business plan is the only way to keep visibility on your communication agency's future cash flows.
3. Using business plan software is the modern way of writing and maintaining business plans.

We hope that this practical guide gave you insights on how to write the business plan for your communication agency. Do not hesitate to get in touch with our team if you still have questions.

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• Free business plan template

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