How to write a business plan for a web agency?
Creating a business plan for a web agency is an essential process for any entrepreneur. It serves as a roadmap that outlines the necessary steps to be taken to start or grow the business, the resources required, and the anticipated financial outcomes. It should be crafted with method and confidence.
This guide is designed to provide you with the tools and knowledge necessary for creating a web agency business plan, covering why it is so important both when starting up and running an established business, what should be included in your plan, how it should be structured, what tools should be used to save time and avoid errors, and other helpful tips.
We have a lot to cover, so let's get to it!
Why write a business plan for a web 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 web agency business plan in the first place.
To have a clear roadmap to grow the business
Running a small business is tough! Economic cycles bring growth and recessions, while the business landscape is ever-changing with new technologies, regulations, competitors, and consumer behaviours emerging constantly.
In such a dynamic context, operating a business without a clear roadmap is akin to driving blindfolded: it's risky, to say the least. That's why crafting a business plan for your web agency is vital to establish a successful and sustainable venture.
To create an effective business plan, you'll need to assess your current position (if you're already in business) and define where you want the business to be in the next three to five years.
Once you have a clear destination for your web agency, you'll have to:
- Identify the necessary resources (human, equipment, and capital) needed to reach your goals,
- Determine the pace at which the business needs to progress to meet its objectives as scheduled,
- Recognize and address the potential risks you may encounter along the way.
Engaging in this process regularly proves advantageous for both startups and established companies. It empowers you to make informed decisions about resource allocation, ensuring the long-term success of your business.
To get visibility on future cash flows
If your small web 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 web 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 web 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 web 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 web 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 web 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 web agency, let's take a look at what information is needed to create one.
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Information needed to create a business plan for a web agency
You need the right data in order to project sales, investments and costs accurately in the financial forecast of your web agency business plan.
Below, we'll cover three key pieces of information you should gather before drafting your business plan.
Carrying out market research for a web agency
Before you begin writing your business plan for a web agency, conducting market research is a critical step in ensuring precise and realistic financial projections.
Market research grants you valuable insights into your target customer base, competitors, pricing strategies, and other crucial factors that can impact the success of your business.
In the course of this research, you may stumble upon trends that could impact your web agency.
You may discover that clients are increasingly looking for web agencies that specialize in responsive web design, as many are recognizing the importance of having a website that looks great on any device. Additionally, you could find that clients are beginning to prioritize agencies that offer comprehensive digital marketing solutions, as this allows them to have a single point of contact for all of their online presence needs.
Such market trends play a pivotal role in revenue forecasting, as they provide essential data regarding potential customers' spending habits and preferences.
By integrating these findings into your financial projections, you can provide investors with more accurate information, enabling them to make well-informed decisions about investing in your web agency.
Developing the marketing plan for a web agency
Before delving into your web agency business plan, it's imperative to budget for sales and marketing expenses.
To achieve this, a comprehensive sales and marketing plan is essential. This plan should provide an accurate projection of the necessary actions to acquire and retain customers.
Additionally, it will outline the required workforce to carry out these initiatives and the corresponding budget for promotions, advertising, and other marketing endeavours.
By budgeting accordingly, you can ensure that the right resources are allocated to these vital activities, aligning them with the sales and growth objectives outlined in your business plan.
The staffing and equipment needs of a web agency
As you embark on starting or expanding your web 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.
A web agency might incur costs for staffing, such as hiring website designers, web developers, quality assurance engineers, and content writers. They might also need to invest in equipment, such as computers, software, web hosting services, and other tools necessary to develop and maintain websites.
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 web agency's financial forecast?
The objective of the financial forecast of your web agency's business plan is to show the growth, profitability, funding requirements, and cash generation potential of your business over the next 3 to 5 years.
The four key outputs of a financial forecast for a web 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 web agency shows how much revenue and profits your business is expected to generate in the future.
Ideally, your web agency's P&L statement should show:
- Healthy growth - above inflation level
- Improving or stable profit margins
- Positive net profit
Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established web agency. And similarly, an established company should showcase a higher level of profitability than a new venture.
The projected balance sheet of your web agency
Your web 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 web 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 web 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 projected cash flow statement
A cash flow forecast for a web agency shows how much cash the business is projected to generate or consume.
The cash flow statement is divided into 3 main areas:
- The operating cash flow shows how much cash is generated or consumed by the operations (running the business)
- The investing cash flow shows how much cash is being invested in capital expenditure (equipment, real estate, etc.)
- The financing cash flow shows how much cash is raised or distributed to investors and lenders
Looking at the cash flow forecast helps you to ensure that your business has enough cash to keep running, and can help you anticipate potential cash shortfalls.
It is also a best practice to include a monthly cash flow statement in the appendices of your web agency business plan 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 web 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 web 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 web agency business plan is understood, let's focus on what goes into the written part of the plan.
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The written part of a web agency business plan
The written part of a web agency business plan is composed of 7 main sections:
- The executive summary
- The presentation of the company
- The products and services
- The market analysis
- The strategy
- The operations
- The financial plan
Throughout these sections, you will seek to provide the reader with the details and context needed for them to form a view on whether or not your business plan is achievable and your forecast a realistic possibility.
Let's go through the content of each section in more detail!
1. The executive summary
In your web agency's business plan, the first section is the executive summary — a captivating overview of your plan that aims to pique the reader's interest and leave them eager to learn more about your business.
When crafting the executive summary, start with an introduction to your business, including its name, concept, location, how long it has been running, and what sets it apart. Briefly mention the products and services you plan to offer and your target customer profile.
Following that, provide an overview of the addressable market for your web agency, current trends, and potential growth opportunities.
Next, include a summary of key financial figures like projected revenues, profits, and cash flows.
Finally, in the "ask" section, detail any funding requirements you may have.
2. The presentation of the company
The second section in your web 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 web agency, you could emphasize its potential for success due to the area's access to major markets. You might point out that the area provides access to a large customer base and potential partners, as well as talented and experienced personnel. Additionally, you could mention the area's relatively low cost of doing business, its diverse and growing population, and its access to necessary resources. Furthermore, you could emphasize the area's economic stability and its potential for long-term growth.
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 web agency business plan should include a detailed description of what your company sells to its customers.
For example, your web agency could offer website design, web hosting, and search engine optimization services to its customers. Website design helps customers create a visually appealing website that reflects their brand and services. Web hosting allows customers to store their site's data and make it available for users to access. Search engine optimization helps customers increase their visibility and rank higher in search engine results, allowing their business to reach a larger audience.
The reader will want to understand what makes your web 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 web 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 web 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 web 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 who are in need of a website. They may not have the technical skills to build a website themselves, or the time to do the research to find a reliable web agency. These business owners are looking for an agency to provide a professional website that will help grow their business.
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 web agency.
5. The strategy section
When you write the strategy section of your web agency business plan, remember to cover key elements such as your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.
In the competitive edge subsection, elaborate on what makes your company stand out from competitors. This becomes especially important if you're a startup, aiming to carve a place for yourself amidst established players in the marketplace.
The pricing strategy subsection should demonstrate how you plan to maintain profitability while offering competitive prices to attract customers.
Outline your sales & marketing plan, detailing how you'll reach out to new customers and retain existing ones through loyalty programs or special offers.
For the milestones subsection, outline your company's achievements to date and your main objectives for the future, complete with specific dates to set clear expectations for progress.
Lastly, the risks and mitigants subsection should address the main risks that could affect your plan's execution. Explain the measures you've put in place to minimize these risks, assuring potential investors or lenders.
Your web agency could face financial risks if clients fail to pay for services rendered. Clients might not pay due to dissatisfaction with the services provided or if they experience a financial crisis. Additionally, your web agency could face legal risks if clients or third-parties contend that your services infringed upon their intellectual property or violated laws. Such claims could result in costly litigation costs.
6. The operations section
The operations of your web 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 web 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 could have a valuable brand identity that sets you apart from competitors. This could include a logo, website design, and a color palette that may be recognizable to your customers. Additionally, you might have a portfolio of web development and design projects that showcase your capabilities. This could be a great asset to demonstrate your abilities to potential clients.
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 web 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 web agency's business plan?
There are two main ways of creating your web agency business plan:
- Using specialized business planning software,
- Hiring a business plan writer.
Using an online business plan software for your web agency's business plan
Using online business planning software is the most efficient and modern way to write a web 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.
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Hiring a business plan writer to write your web agency's business plan
Outsourcing your web agency business plan to a business plan writer can also be a viable option.
Business plan writers are skilled in creating error-free business plans and accurate financial forecasts. Moreover, hiring a consultant can save you valuable time, allowing you to focus on day-to-day business operations.
However, it's essential to be aware that hiring business plan writers will be expensive, as you're not only paying for their time but also the software they use and their profit margin.
Based on experience, you should budget at least £1.5k ($2.0k) excluding tax for a comprehensive business plan, and more if you require changes after initial discussions with lenders or investors.
Also, exercise caution when seeking investment. Investors prefer their funds to be directed towards business growth rather than spent on consulting fees. Therefore, the amount you spend on business plan writing services and other consulting services should be insignificant compared to the amount raised.
Keep in mind that one drawback is that you usually don't own the business plan itself; you only receive the output, while the actual document is saved in the consultant's business planning software. This can make it challenging to update the document without retaining the consultant's services.
For these reasons, carefully consider outsourcing your web agency business plan to a business plan writer, weighing the advantages and disadvantages of seeking outside assistance.
Why not create your web agency's business plan using Word or Excel?
Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a web agency business plan is a terrible idea.
Why?
For starters, creating an accurate and error-free financial forecast on Excel (or any spreadsheet) is very technical and requires both a strong grasp of accounting principles and solid skills in financial modelling.
As a result, it is unlikely anyone will trust your numbers unless - like us at The Business Plan Shop - you hold a degree in finance and accounting and have significant financial modelling experience in your past.
The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the 1990s and early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.
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.
Also, using software makes it easy to compare actuals vs. forecasts and maintain our forecasts up to date to maintain visibility on future cash flows - as we discussed earlier in this guide - whereas this is a pain to do with a spreadsheet.
That's for the forecast, but what about the written part of my web agency business plan?
This part is less error-prone, but here also software brings tremendous gains in productivity:
- Word processors don't include instructions and examples for each part of your business plan
- Word processors don't update your numbers automatically when they change in your forecast
- Word processors don't handle the formatting for you
- ...
Overall, while Word or Excel may be viable options for creating a web agency business plan for some entrepreneurs, it is by far not the best or most efficient solution.
Takeaways
- 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.
- Having an up-to-date business plan is the only way to keep visibility on your web agency's future cash flows.
- 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 web agency. Do not hesitate to get in touch with our team if you still have questions.
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Founder & CEO at The Business Plan Shop Ltd
