How to Write a Business Plan

New business owners usually need to complete countless tasks before finally launching and doing business. One of the earliest and most important hurdles is writing a business plan. Many entrepreneurs who aren’t looking for funding think they can skip this step, but that’s never a good idea. 

A sharp and detailed business plan is essentially a business owner’s commitment to and preparation for the road ahead, detailing the operations, revenues, and potential growth. Lucky for you, this handy guide has all the info you need to write a fantastic business plan that’s sure to point you toward success.

A business plan is a detailed document laying out how the business will function and develop in its first few years. The key is the “plan” part of the name, which will specify how you will launch, gain customers, operate, make money, and, with any luck, expand. 

Yet what many first-time business owners seem to forget is that a business plan is not a static document. The initial version will be based largely on assumptions, supported by research. As you run your business you’ll constantly learn what works and what does not and make endless tweaks to your plan.

Thus, creating a business plan is not a one-time action – it’s a dynamic and continuous process of crafting and adapting your vision and strategy. 

1. Craft a Compelling Executive Summary

Launching into your business plan, you’ll first tackle the executive summary, albeit paradoxically, you’ll pen this section at the tail end of your process. This section isn’t mere fluff—it’s the encapsulating essence of your entire plan. With many investors and lenders skimming just this section to decide on their interest level, this summary has the power to enthrall or deter them.

To craft an engaging executive summary, ensure you incorporate the following critical elements:

1. Spotlight the Business Opportunity: Dive into the core problem plaguing the market. What gaps or unmet needs have you identified?
2. Introduce Your Innovative Solution: Describe the product or service you’re poised to offer. Emphasize its distinctiveness and its superiority in addressing the identified market problem.
3. Chronicle Your Business Journey: Chronicle the milestones and steps taken thus far. Even if you’re just starting out, from ideation to business naming and entity formation, lay it out.
4. Provide a Market Overview: Furnish insights into the industry, potential market size, your ideal customers, and existing competitors.
5. Detail Your Unique Selling Proposition (USP): Make a compelling case for how your business will distinguish itself amidst competition. What’s your secret sauce?
6. Set Out Immediate Goals: Highlight short-term objectives, whether it’s product development, launching an ad campaign, or onboarding a crucial team member.
7. Offer a Financial Snapshot: Summarize your financial strategy, shedding light on anticipated costs, sales forecasts, and the critical break-even analysis.
8. Introduce Your Stellar Team: Showcase the brains behind the business. Briefly detail their roles and underscore their pertinent experience.
9. Make Your Investment Appeal: If you’re courting capital, be direct. Specify the funds needed and its intended utilization, for instance: “Seeking $50,000 seed funding to refine our beta product.”

Given the often limited attention spans of potential investors or lenders, your executive summary should be a concise yet captivating read, ideally not surpassing two pages. Ensure it compellingly conveys your business’s uniqueness and potential for success.

2. Detail Your Company’s Foundation and Future

Stepping into the next section of your business plan, it’s time to unveil the story and aspirations of your enterprise. Here’s how you can systematically and compellingly walk the reader through your company’s backdrop, ethos, and road ahead:

Recount Your Company’s Odyssey

Origins: Elucidate how the eureka moment struck and the journey you embarked on to bring this business into existence. Was it a personal pain point or a market gap you identified?

Milestones: Share notable achievements and turning points that validate your company’s growth and direction.

Mission and Vision Statement

Mission Statement: Define the very core of why your business exists. For instance: “We’re committed to simplifying the lives of entrepreneurs with user-friendly payroll software.”

Vision Statement: Paint a picture of where you envisage your company in the long run. An example could be: “We aspire to be the world’s preferred end-to-end HR software solution, trusted by enterprises globally.”

Set Forth Your Goals

Objectives: List concrete, time-bound goals that guide your short-term actions. Examples to consider:

“Finalize the maiden version of our product by [specific date].”

“Onboard two seasoned sales professionals within the next quarter.”

“Debut our initial product iteration to the market by year-end.”

For ease of reading and to cater to different interest levels of your audience, it’s prudent to segment this section into discernible subcategories: ‘Company Backstory’, ‘Mission & Vision’, and ‘Immediate Goals’. This structure not only ensures clarity but also emphasizes the importance of each aspect of your company’s narrative and purpose.

3. Describe Your Products or Services

In this crucial segment, your objective is to meticulously detail what you bring to the table, why it matters, and the mechanics of turning it into a profitable endeavor. By diving deep into the specifics of your product or service, you can paint a vivid picture for potential investors or stakeholders. Here’s how to structure this segment:

Introduce Your Product/Service

Problem-Solution Fit: Begin by spotlighting the existing market gap or pain point. Subsequently, elucidate how your offering is poised to address it effectively.

Unique Selling Proposition (USP): Describe the distinctive features or attributes that make your product or service stand out in the market. Is it more efficient? More affordable? More innovative?

Detail the Development and Sourcing

Creation Process: Expound on how the product is crafted or the service is developed. Whether it’s manufactured, technically coded, or procured, be clear and specific.

Sourcing Strategy: If you’re not producing it in-house, clarify from where and how you’ll obtain the product or resource.

Outline Your Sales and Pricing Strategy

Monetization Model: Will customers be paying a one-time fee, or will you be adopting a subscription-based model? Clarify the pricing structure.

Target Pricing: Indicate the anticipated price point for your offering and the rationale behind it, factoring in costs, competitor pricing, and perceived value.

Distribution Channels: Describe the avenues through which customers can acquire your product or service. Are you targeting online sales via your website or third-party platforms? Or will there be a brick-and-mortar store? Perhaps both?

In essence, this section should give stakeholders a lucid understanding of not just what you’re offering, but also the underlying logic of its creation, its market positioning, and the strategy to turn it into a revenue stream. Remember, while transparency is key, always ensure any highly-sensitive proprietary information is shared with discretion, perhaps contingent on confidentiality agreements when appropriate.

4. Conduct a Thorough Market Analysis

In the market analysis, you’ll embark on a deep dive into the intricate landscape your business is poised to operate in. This analysis is both a reflection of your industry’s current scenario and a predictor of its future. Here’s how to systematically break down this segment:

Industry Analysis

Industry Overview: Provide insights into the current state of the industry—its growth trajectory, market size, and prevalent trends. Consider where the industry might stand a decade from now.

Your Positioning: Carve out where your business fits within this industry. Is there a niche segment you’re targeting? Maybe a specific sub-sector? Delve into how you plan to evolve with the industry’s shifts and nuances. Remember to cite your data sources for authenticity.

Competitor Analysis

Scouting the Competition: Identify primary competitors and dissect their market stance. What makes them tick? Is it convenience, quality, or something else?

Your Differentiation: Highlight how you’ll distinguish your brand from the pack. Detail the competitive edge you have and the strategy to maintain it. This part is paramount for potential investors and stakeholders.

Target Market Analysis

Customer Profile: Illustrate your ideal customer. Are they distinct from your competitors’ clientele? Perhaps a younger audience or a different socio-economic class?

Deep Dive into Customer Psyche: Go beyond just demographics. Understand their pain points, aspirations, and how your offerings align with them. Clarify why they’d choose you over others.

Engagement Strategy: Identify the best channels to reach, engage, and convert these potential customers. Be it online advertising, offline events, or in-store promotions, draft a plan. Continuously recalibrate based on real-world feedback.

SWOT Analysis

Strengths: Enumerate the elements that set you up for success, be it a stellar team, proprietary tech, or unmatched service quality.

Weaknesses: Recognize potential pitfalls or areas of improvement. No startup is flawless, but having a mitigation plan is key.

Opportunities: Spotlight potential avenues for growth or market capture, whether it’s targeting a novel segment or leveraging an emerging tech trend.

Threats: Identify possible external challenges, be it competitors, tech disruptions, or regulatory shifts. Detail your strategy to navigate or counter them.

In essence, this section should serve as a comprehensive guide to the market landscape, not only for stakeholders but also as a strategic compass for your enterprise. Investing time and effort here will provide clarity and direction for both immediate and long-term actions.

5. Outline Your Marketing and Sales Strategies

Marketing and sales are the engines driving your business growth. It’s about creating visibility for your offerings and then converting interested individuals into loyal customers. Here’s a structured approach:

Marketing and Advertising Plan

Channel Selection: Based on your target market analysis, pinpoint where your potential customers spend their time. Whether it’s TikTok, Instagram, or newer platforms, allocate your marketing budget wisely. Describe each channel’s potential and your rationale behind choosing it.

Messaging: Craft a compelling narrative around the benefits of your product or service. Start with a strong value proposition—a succinct statement encapsulating:

• What you offer.
• Whom it’s for.
• The problem it addresses.
• The unique benefits it brings.
• How it stands out from the competition.

For instance: “Intuitive payroll software tailored for small business owners, simplifying complex processes at an unbeatable value.”Ensure your value proposition remains central to all your marketing initiatives.

Sales Strategy and Tactics

Sales Vision: Define how and where you’ll interact with potential buyers. This might be through an e-commerce platform, physical storefronts, or direct outreach, especially in a B2B setting.

Conversion Tactics: Once prospects interact with your sales channels, how do you convert them? Whether it’s persuasive web design, engaging product demos, or a compelling pitch by your sales team, the focus should be on addressing customer pain points and showcasing your unique value.

Pricing Strategy

Market Positioning: Understand how you want to be perceived in the marketplace. Are you a cost-effective solution akin to Walmart, or do you aspire to be seen as a premium offering like Mercedes? This perception will guide your pricing.

Factors to Consider: While perception drives pricing, ground it in realities:

• Cost Structure: Ensure prices cover operational costs and yield a healthy profit margin.

• Competitive Landscape: Assess what competitors are charging. Are you providing more value, or are you aiming for cost leadership?

• Customer Willingness: Gauge what customers are willing to pay, especially if you’re introducing a novel solution.

Substantiate your chosen pricing model by addressing these factors and explaining the rationale behind it.

In sum, this section should paint a comprehensive picture of how you’ll attract and retain customers. This isn’t just a guide for potential investors; it’s also a roadmap for your teams, ensuring everyone is aligned towards a common goal: sustainable business growth.

6. Outline Operations and Management Plan

This section is the real nuts and bolts of your business – how it operates on a day-to-day basis and who is operating it. Again, this section should be divided into subsections.

Operational Plan

Daily Operations: Break down the everyday tasks and responsibilities. Who’s in charge of sales, customer service, quality assurance, or procurement? Highlight routine activities.

Supplier Management: Outline your vendor relationships. How will procurement be managed? When and how frequently will raw materials or inventory be replenished? Establish an understanding of your supply chain.

Quality Control: Discuss measures ensuring product or service quality. This could range from QA testing for products to training protocols for service providers.

Critical Functions: Highlight essential roles and processes that ensure your business remains operational. This could include inventory management, customer relations, or financial management.

Technology Plan

Technical Development: If your business is tech-based, provide a roadmap of product development. Identify stages, milestones, and timelines.

Tech Infrastructure: For non-tech businesses, explain the technological tools and platforms that will support your operations. Whether it’s CRM systems, accounting software, or collaboration tools, detail how technology enhances efficiency and effectiveness.

Management and Organizational Structure

Leadership Profiles: Begin with an overview of the top brass. Highlight their roles, qualifications, and past experiences that make them apt for their positions. This might include resumes or CV summaries, demonstrating their ability to drive success.

Organizational Design: Visualize the hierarchical structure. Use an org chart to show lines of authority, roles, and departments. Discuss the rationale behind this structure and how it aids in decision-making and operational efficiency.

Personnel Plan

Current Personnel: List existing employees, their roles, and their key responsibilities. Also, outline their qualifications and the value they bring to the business.

Future Hiring: Identify gaps in your current team and forecast future hiring needs. Detail job roles, expected qualifications, and when these positions will be filled. Consider also discussing training, onboarding, and retention strategies.

In summary, this section provides a clear picture of the “how” behind your business. It offers investors, partners, and even employees a look into the inner workings of your company and the human capital driving it. By detailing each aspect meticulously, you’re not just showing a well-thought-out plan but also building credibility and trust.

7. Make a Financial Plan 

Now, you’ll enter the dreaded world of finance. Many entrepreneurs struggle with this part, so you might want to engage a financial professional. A financial plan has five key elements.

Startup Costs

Detail in a spreadsheet every cost you’ll incur before you open your doors. This should determine how much capital you’ll need to launch your business. 

Financial Projections 

Creating financial projections, like many facets of business, is not an exact science. If your company has no history, financial projections can only be an educated guess. 

First, come up with realistic sales projections. How much do you expect to sell each month? Lay out at least three years of sales projections, detailing monthly sales growth for the first year, then annually thereafter. 

Calculate your monthly costs, keeping in mind that some costs will grow along with sales. 

Once you have your numbers projected and calculated, use them to create these three key financial statements: 

• Profit and Loss Statement, also known as an income statement. This shows projected revenue and lists all costs, which are then deducted to show net profit or loss. 
• Cash Flow Statement. This shows how much cash you have on hand at any given time. It will have a starting balance, projections of cash coming in, and cash going out, which will be used to calculate cash on hand at the end of the reporting period.
• Balance Sheet. This shows the net worth of the business, which is the assets of the business minus debts. Assets include equipment, cash, accounts receivables, inventory, and more. Debts include outstanding loan balances and accounts payable.

You’ll need monthly projected versions of each statement for the first year, then annual projections for the following two years.

Break-even Analysis

The break-even point for your business is when costs and revenue are equal. Most startups operate at a loss for a period of time before they break even and start to make a profit. Your break-even analysis will project when your break-even point will occur, and will be informed by your profit and loss statement. 

Funding Requirements and Sources 

Lay out the funding you’ll need, when, and where you’ll get it. You’ll also explain what those funds will be used for at various points. If you’re in a high growth industry that can attract investors, you’ll likely need various rounds of funding to launch and grow. 

Key Performance Indicators (KPIs)

KPIs measure your company’s performance and can determine success. Many entrepreneurs only focus on the bottom line, but measuring specific KPIs helps find areas of improvement. Every business has certain crucial metrics. 

If you sell only online, one of your key metrics might be your visitor conversion rate. You might do an analysis to learn why just one out of ten site visitors makes a purchase. 

Perhaps the purchase process is too complicated or your product descriptions are vague. The point is, learning why your conversion rate is low gives you the chance to improve it and boost sales. 

8. Add Additional Information to an Appendix

In the appendices, attach any relevant reports and documents, such as manager resumes or financial breakdowns. 

Purpose of a Business Plan

If you need funding for your business, whether you go to investors or a lender, they will want to see your business plan, particularly when you’re very early in the startup process. With no history, a business is just an idea, so they’ll want assurances that you have a sound concept and strong vision. 

A business plan is also just what the name says – it’s your plan for your business. It should guide you as you move forward so that you’re not just figuring out what to do as you go. 

Importance of a Business Plan 

Clearly, if you’re seeking capital for your business, a business plan is a must. But even if you’re not, as stated, a business plan will be your guide as you launch your new company. 

Creating a business plan early in the startup process also helps you to think through every aspect of your business. You’ll learn a great deal as you research and write your business plan, and that invaluable knowledge could be the difference between success and failure. 

Writing a business plan takes much research and a considerable amount of time, but it’s well worth the effort. It will be your roadmap as you work your way through the startup process. 

Conclusion 

Crafting a business plan is one of the more complex and involving elements of starting a business, but it is absolutely crucial. And you’ll want to do it well, so be willing to take your time and be open to help from a financial professional if you need it. 

Keep in mind that writing a business plan is an important learning process, and that once you complete it you’ll know how to run your business and be fully prepared for whatever comes your way. Once you’ve completed your plan, have someone review it before you send it out to investors and loan officers. 

If you’re applying for a bank loan, just contact the bank and follow their application process. If you’re seeking investors, you’ll likely need a pitch deck, and your best bet is to go to your local business incubator. They’ll have professionals who’ll walk you through the pitching process.  

Don’t forget to pat yourself on the back! Completing a robust and detailed business plan is a massive step on the road to launching your business and making your dream a reality.