Latest posts by Meredith Wood
- 8 Ways to Avoid Burnout When Starting a New Business - May 23, 2021
- A Step-By-Step Guide to Writing a Killer Business Plan - December 30, 2020
- 7 Reasons Every Startup Needs a Business Credit Card - December 16, 2020
A business plan is as important to a new business as a map is to a ship, or blueprints are to an architect. A written business plan will guide your actions and keep you focused on your short- and long-term goals.
Your business plan puts your aspirations into words (and charts), demonstrating to partners, investors and lenders why your venture can and will be a success. It details the path from your business today to your business three to five years down the road.
Whether it’s a traditional plan or a lean startup document, your business plan should cover everything someone would want to know about your business. What is your value proposition? Why is now a good time for a business like yours? And how much will you and your potential investors or lenders stand to gain if everything goes to plan?
Now that we’ve established how important a business plan is, how do you write one? The idea of writing a blueprint that carries your business five years down the road can sound intimidating to some, but a business plan is only as complicated as you make it.
Let’s discuss what information your plan needs, what format it should have, and what additional steps you need to take to write an expert-level business plan.
What’s in a business plan?
There isn’t an exact formula for what a business plan should look like. You can and should give the concept your personal spin.
That said, there are areas that most business plans cover, in varying amounts of detail. According to the Small Business Administration, they are as follows:
1. Executive summary
This general overview tells readers what your company is and why they should expect it to succeed. This piece of the puzzle is arguably the most important part of the plan—if someone reads this and doesn’t want to keep going, you’ve lost them.
Typically, an executive summary is about a page and contains these six things:
- Mission statement: What is your company and what are your goals?
- General company information: Include the state your company was incorporated in, the names of its founders and employees, and any physical locations.
- Highlights: Even if your business is brand new, you should have some highlights to discuss. What kind of early traction do you see? What opportunities are on the horizon?
- Products and services: What do you actually sell or do?
- Financial goals: Do you have aspirations of obtaining a business loan, a grant or other additional funding? Include those goals here.
- Future plans: You’ll get into this more later, but give a synopsis of where you see the business headed.
Though your executive is the first page of the business plan, you may find it easier to write after you finish everything else.
2. Company description
Now that you’ve set the scene, go in-depth into the details of your company. Answer questions like:
- What does your company do, and how does it do that differently than its competitors?
- What market or kind of customer will you cater to?
- What is your strength as a business?
Be specific in this elevator pitch of your business.
3. Market analysis
Your business doesn’t exist in a bubble—it needs to thrive within its industry, alongside (and in spite of) its competitors. Your market analysis will be an examination of the market you’re entering, demonstrating your mastery of the details, emerging trends and themes.
A good market analysis includes:
- Industry description: The history, size and largest players of your industry.
- Target market overview and characteristics: Who are you specifically targeting, and what do you know about them as customers?
- Target market size and growth potential: Is this target market big enough for sustained business? Is there potential for further growth?
- Your market share potential: How much of this market do you think you can corner?
- Market pricing and promotional strategies: Research should tell you how much you can reasonably expect to charge for your goods or services.
- Potential barriers to entry: Discuss potential issues such as changing technology or lack of available talent in certain areas. Don’t be afraid to voice your concerns—it will make them easier to address.
- Research on competitors: What strengths and weaknesses does your competition possess, and how can you join them at the top of your field?
4. Business organization
In this section, describe how your company will be structured from a logistical and legal standpoint.
Logistics-wise, you should have an organizational chart that describes who is in charge of what in your company. Even if it’s just you or you and a few employees, lay out each person’s responsibilities as well as backgrounds and experience. You can also describe any pressing hiring needs.
In addition, include information about your company’s legal structure here. Are you a sole proprietorship, LLC, or S Corp? This helps investors or lenders understand what legal protections you may or may not have in place.
5. Product development plan
Describe your products or services here. What need do they fulfill and why will customers want to buy or obtain them, particularly over the products or services of competitors?
Of course, your product isn’t just an item on a shelf. This section is also for detailing sourcing and fulfillment, intellectual property rights, the current status of your products (are they still in development or ready to ship?), and your future plans for growth and improvement.
6. Marketing and sales plan
The best business idea in the world won’t succeed if no one knows about it or can’t get their hands on it. That’s where marketing and sales come into play.
When discussing marketing, you need to focus on two key points: positioning and promotion. Positioning includes your branding, which is more than just your logo and name; it also includes your company culture and reputation. Promotion is your plan for making people aware of your business, from where you’ll advertise to potential content marketing practices.
For sales, describe how a sale will actually happen. Who will make sales, what tools will they use, and what is the overarching strategy for obtaining, converting and maintaining leads?
7. Financial plan and projections
Here, you’ll discuss both your current and future financial situation. For brand new businesses, you won’t have data or income statements to demonstrate, but you will be expected to make projections and forecasts of your future success.
Make projections for your business for a minimum of 12 months into the future, but preferably for three to five years down the line, as well. Don’t worry: You can (and should!) make adjustments to this document as variables change; the goal is to create a baseline that you can then exceed—or, conversely, fail to exceed, and understand why.
8. Funding request
Financing is a common need for new businesses, as the startup costs for new ventures can be much higher than inexperienced entrepreneurs understand. Even small, home-based businesses can often require thousands in startup capital. If you need funding, say so in your plan.
Now that you’ve shown your financial expectations, explain how an infusion of funds (whether via investment or a loan) will help put you on the path to success. How much funding will you need over the next five years, and why? Where in the business will you invest these funds? This way, investors and lenders will know what you expect from them.
A good business plan will include an appendix that provides supporting documents, materials, contracts, permits, licenses, resumes, credit histories and any other important information. This is also a good place for charts, graphs and other points of reference.
How should you format your business plan?
There are two ways that businesses choose to format their business plan. You may choose to have two versions, or just one.
Traditional business plans have a standard structure and typically span a dozen or more pages due to their detailed analyses, as described above. Though they require more work upfront, you can rest assured once the plan is completed that you’ve got a thorough outline.
Lean startup business plans are usually one or two-pages that summarize the most important elements of your business plan. They may have many of the same sections that a traditional plan has, but they’re truncated to give readers a brief overview rather than a deep dive into your business. Other topics that a lean startup plan might cover include key business partnerships, key resources and customer relationships.
Lenders and investors typically ask for a traditional business plan, but a lean startup plan may be a good place to begin if you expect major aspects of your business to change, or just want to create a quick document that explains the fundamentals.
How do you write the best possible plan?
Let’s say you’ve written what you consider to be a strong business plan for your new business. You’ve covered all the topics above, formatted everything nicely, and want to present it to potential investors. What else can you do to make sure it makes an impact?
Here are a few additional tips on writing an excellent business plan:
You should know everything you possibly can about your business and the industry you want to impact. As much time as you spend actually writing, you should spend even more on research, planning and interviewing.
Make it adaptable
A good business plan will be accessible to anyone, from investors to family members. But that doesn’t mean it needs to stay the same for every audience: If you’re presenting your business plan to a lender, give more emphasis to your financial projections; for investors, play up the value of your team.
A business plan isn’t carved in stone: It can be altered at any time. Just don’t present alternate financial projections—you should have solid math and theory behind your numbers.
Make it personal
Business plan writing doesn’t have to be staid and boring. Use your business plan as a vehicle for expressing your passion for your new business. If you are able to explain why you care, others will care as well.
Whether your business plan is traditional or lean, whether it’s for your own reference or to woo investors, and whether it’s one page or 50 pages, just know that you need one. Your new venture likely won’t survive without a plan in place for its present and future, so get writing before you get down to business.