How to Write a Business Plan
Writing a business plan illustrates how you’ll turn an idea into a profitable venture, breaking down each step along the way. A business plan provides a detailed description of each facet and process within your business, from financing to marketing — and you’ll revisit it as you develop and grow your company.
How to write a business plan: Step by step
Your basic business plan should include the following sections:
To begin your business plan, describe your company, including your product or service, mission statement and basic information about your leadership team, location and employees. Also provide an overview of financial information and growth plans, which you’ll describe in detail in later sections.
Provide details about your business, such as the problems you expect to solve with the company and the specific types of customers you plan to serve. The company description is the place to highlight strengths and advantages like a desirable location.
Showcase your market research, including industry outlook and what your competitors are doing. Describe any trends or themes in the marketplace and how you plan to outperform the competition .
Organization and management
Identify your business entity and who will run, or is currently running, the company. You should include the job descriptions and resumes of anyone who is already on the team. The more team experience you can show, the better your business will look to investors. This is also where you could discuss sourcing and distribution of your product. You could illustrate your strategy for fulfilling orders and delivering products to customers.
Service or product line
Describe in greater detail the product or service you sell, how it will benefit customers and the product life cycle. Include any plans to file for a patent or copyright, as well as any research and development you’re conducting. In this section, you would also include pricing information and metrics for measuring performance like profit margin.
Marketing and sales
Your marketing strategy should be thorough, outlining your branding, sales and promotion strategy. Clearly define your target market and where those customers are located. Marketing also extends to digital marketing like social media accounts. Set up a website and official advertisements beyond social media campaigns, such as print or television ads.
If you expect to distribute your business plan to investors or business lenders, explain the kind of funding you’re looking for. This is your opportunity to specify how much money you need, the length of time the money will cover and how you will use the funding. State the terms you would like applied to your financing as well, such as the length of time you’d like to have to repay your debt.
Provide a financial outlook for the company for up to five years. Include projected income statements, balance sheets, cash flow statements and budgets. If you’re in your first year, you can make projections on a monthly or quarterly basis, since you wouldn’t yet have a full year’s worth of data. Established business owners should include past annual income statements, balance sheets and cash flow statements to give a sense of the business’s financial health.
Womack says business owners should be conservative in their financial projections. Financial experts reading the document will know if you’ve embellished anything or if you’ve set unattainable goals.
Include any additional documents you did not find a place for in other sections, such as credit histories, letters of reference, permits or legal documents.
Developing a business plan
New entrepreneurs should write their business plans before making any official moves, such as setting up a legal entity, to make sure they have a feasible idea. After finalizing your business idea, conduct extensive research to see how your concept would fare in the market. Then, compile all of that research into your business plan.
Here are four ways to prepare before sitting down to write your plan:
Step 1: Research the market
Analyzing your competition helps you make business decisions like determining your price point and product line. It also helps you shape your business model so you stand out from others.
Step 2: Decide on a legal structure
The legal structure of your business determines your personal liability, how much you pay in taxes and what paperwork you’ll need to complete.
Step 3: Run the numbers
New business owners often don’t estimate the amount of funding they’ll need to get started if considering a startup business loan. Carefully evaluate all areas of your business to make sure you’re asking for enough financing in your business plan.
Step 4: Conduct at SWOT analysis
SWOT stands for strengths, weaknesses, opportunities and threats. Identifying these in your business helps organize the information that you need in your plan.
Tips for writing a business plan
When it’s time to put together a business plan, there are a few steps you could follow to make sure the process goes smoothly.
Decide whether to use a business plan template.
Using a template ensures you won’t run the risk of leaving out crucial material. If you’re not sure what needs to be in a business plan, a detailed template will help you gather the right information. From there, you just need to fill in the blanks under each section heading, which makes the process easier.
A business plan can be from 10 to 30 pages, depending on the level of detail. If you’re making one for your own use or to apply for financing, nine to 12 pages should suffice, with a focus on financial information.
You may need to tailor your business plan to fit certain audiences or purposes. For instance, a lean business plan is a condensed version of a traditional business plan. A lean business plan includes small, actionable steps to reach a series of goals. This kind of planning may be most useful for startups or businesses with limited resources.
Clean up your credit while working on your business plan.
When you start a business, all of your financing is based on your personal credit before you build up business credit. Business owners may not realize how big a role their own financial history will play in securing funds for the company.
Before handing your business plan to potential investors or lenders, make sure your credit is in good shape. You could make improvements by paying down existing debts and ensuring you pay your bills on time.
Give yourself time.
Writing a business plan might take a couple of weeks, and questions can arise as you go through the process. Surprises aside, it’s important to take the time to craft a quality business plan that will benefit you as you grow your company.
After you make your initial projections in your business plan and open your operation, periodically adjust for changes in the business to see if you need more capital than you originally thought.