A well-written business plan is an essential tool for helping you start and manage your business. Think of it as a skeleton or flowchart for how to run, expand, and organize your operation. Read on to learn about how to write a business plan and what goes into a good one.
What is the Purpose of a Business Plan?
The main purpose of a business plan is to help you achieve your business goals. Essentially, it’s a management tool that empowers you to put your ideas into words, analyze key elements of your business, make important decisions, and show how your business will operate and expand. If written well, a business plan will boost your chances of success if you’re thinking of creating a new startup.
Business plans also have other purposes. By showing what your business is all about and how it will grow over the next few years, business plans can help you attract business partners and investors to your company. Additionally, a solid business plan can attract skilled employees who can help you achieve your business goals.
Writing Your Business Plan
Before you start writing your business plan, you need to decide what kind of business plan best fits your needs: traditional or lean startup.
Traditional business plans are:
- The most common type of business plan
- Usually around 30 to 40 pages long
- Lengthy, usually consisting of eight sections, which we will cover below
- Meant to cover a wide range of topics that will help you establish your reputation and obtain financing
- Best suited for seeking investments, loans, and business partners
In contrast, lean startup business plans are short flowcharts that outline your business goals and the steps you’ll take to reach them. Unlike traditional business plans, they are:
- Typically about a page long
- Meant to pinpoint a problem and your specific solution for it
- Brief outlines of what makes you stand out from your competitors and what unique value you’ll deliver to consumers
- Best suited for new businesses that just want to explain their business goals quickly
In this article, we will walk you through the process of writing a traditional business plan. However, you can use the information below to create a lean startup business plan. All you have to do is:
- Create a business plan outline based on the sections below
- Replace the executive summary with a short paragraph that pinpoints a problem that your company will solve
- Write two to five sentences for each section rather than five to ten pages
1. Executive Summary
This is the first section of a traditional business plan. Give a brief overview of your company’s:
- Mission statement
- Ownership structure
- Services or products
- Key C-class executives and employees
- Growth potential
- Viability and competitive advantage
- Funding requirements and financial information (if you’re planning to seek loans, business partners, or investments)
Remember to keep your executive summary short — it’s only an introduction, so it shouldn’t be more than one or two pages. Use it to highlight only the most important points and leave the details for later.
If you’re writing a lean startup business plan, you can skip this step. Instead, replace it with a few sentences that outline the problem that your startup aims to solve and the solution you will provide.
2. Management Team
Next, tell the reader about your company’s management team.
Describe your startup’s legal structure: is it a partnership, corporation, limited liability company (LLC), or sole proprietorship? After that, you can insert a chart to show the hierarchical structure of your company. Show and name your C-suite executives, management team, and key employees. To give the reader a full picture of your staff’s qualifications, include short bios and links to their resumes and LinkedIn profiles.
3. Products and Services
Describe the products and services you offer. Pinpoint the value they provide to current and future customers and share your plans for research and development. You should also discuss:
- Your company’s intellectual property, such as patent and copyright filings
- How your company’s services and products differ from what’s on the market
- What competitive advantages you have
- What competitive disadvantages you have and how you can overcome them, if possible
- How you will price your products and what the expected profit margin will be
- How you will source your products (i.e., whether you manufacture the products or purchase them from wholesalers and suppliers)
- Whether there will be a steady supply of products available once your business starts getting more customers
The main goal of this section is to convince the reader — as well as yourself — that your business is viable and that you have enough resources, time, and energy to achieve your goals. Keep the following in mind as you write this section:
- Avoid being overly technical and use simple, layman-friendly terms
- In general, you should be as detailed as possible when describing your services and products, particularly if your business is service- or product-focused. However, if your selling point is competitive pricing, focus on your pricing model instead of the products and services themselves.
4. Customers and Marketing
Your business plan also needs to provide a thorough analysis of your target market and customer base. The goal here is to show that you understand your market and target audience and that there is a viable market for your business.
To do this, you need to evaluate and analyze customers’:
- Demographic data, such as age, location, gender, and income
- Purchasing habits
- Buying cycles
- Willingness to buy new services and products
You should also answer the following questions:
- Which segment of the market do you plan to target? What age group, gender, or behaviors make up your key audience?
- What is the size of your target market? Is it expanding, stable, or declining?
- Will demand for your services and products change over the next few years? Will it fall or rise?
- Why are customers drawn to your services and products? What interests them the most about your offerings?
- What do customers generally expect to pay for the kinds of products and services you offer? Is your pricing fair?
- Will your market share increase over time? What will you do to achieve this?
5. SWOT Analysis
Organizations use SWOT analyses to determine how closely a business will adhere to its growth trajectories. A SWOT analysis involves looking at a company’s SWOTs, which are:
- Strengths: These are the things your project or company does well. Examples include having a unique selling proposition, standout branding, or human resources, like your employees and C-class executives.
- Weaknesses: These are the barriers preventing your project or company from reaching certain milestones. Examples include financial limitations, a shortage of skilled professionals, and unclear selling propositions.
- Opportunities: These are positive external factors that could give you a competitive edge. For instance, if you’re a manufacturer and the federal government cuts tariffs, you can export your products into a new market to boost market share and sales.
- Threats: These are events, competitors, and situations that pose a risk to your company and the goals you’ve set for it. Typical threats include negative media coverage, changing customer demands, emerging competitors, and new rules and regulations.
This is where you’ll include your company’s financial projections and estimates. Pay particular attention to this part of the business plan if you’re looking to secure a loan or investment. Your goal is to convince the lender or investor that your business is viable, stable, and will succeed.
Include the following reports and projections to give the reader a thorough picture of where your company’s headed:
- Balance Sheets: These indicate your business’s financial health. Be sure to list out your company’s liabilities, assets, shareholders, and earnings.
- Operating Budget: This is a breakdown of your startup’s expenses and income. Your operating budget will show the reader how your company will operate and how much money it will need to achieve certain goals and milestones.
- Income Statements: Also called profit-and-loss statements, income statements describe your company’s projected expenses and revenue and show whether your startup will earn a viable profit in the near future.
- Cash Flow Statements: These are projections of receipts and payments that show your business’s cash flow and will show the reader how payments (including salaries) are made.
- Asset List: List all of your company’s assets.
- Loan Collateral: List all of the collateral you have for loans. This will give lenders a more accurate understanding of the assets your company currently owns.
If your business is already established, you should include these documents for the last three to five years in addition to projections for the next three to five years. However, if you haven’t established your business yet, you would only need to include projections covering a three to five-year period.
Your business plan needs to include a thorough Operations Plan. This section reveals your strategies for manufacturing, fulfillment, managing, staffing, hiring, and all of the other processes you go through when running your business on a day-to-day basis.
Answer the following questions:
- What are your staffing needs? How do you source, hire, and onboard staff?
- What work models do you use? Do you use an in-person, hybrid, or remote work model?
- If you choose an in-person or hybrid work model, what type of building do you need? What kind of workstations will you provide?
- If you choose a remote work model, what kind of conferencing software will you use? What kind of computers or programs do you expect your employees to use?
- What is your organizational structure? What departments do you have?
- Does your company require a sustained research and development effort? If so, how will you sustain this aspect of your work?
- How will your startup establish business relationships with suppliers and vendors?
- How will your operations change as your startup expands and grows?
- What steps will you be taking if your company doesn’t perform according to expectations?
Attach supporting documentation and materials that were referenced in the other sections or requested by the reader. Most business plans provide the following:
- Product pictures or packaging samples
- Marketing materials
- Patents and trademarks
- Building permits
- Resumes of founders, C-suite executives, and key staff members
- Letters of reference
- Legal documents
Tips for Writing Your Business Plan
With so many sections to write and facets to cover, creating a business plan can be overwhelming. It can be challenging even if you know how to write a business plan step by step. Here are five tips that will help you avoid common business plan mistakes and streamline the process of writing your business plan:
1. Know Your Audience
Think of your business plan as a resume for your startup. Since you’re writing for different audiences and for different purposes, you should have several versions of your business plan — one for bankers, one for individual lenders or investors, one for potential partners, and one for employees.
2. Know Your Competition
Do thorough research on your competitors and detail what makes you stand out from each of them. However, do not be critical of your competitors. Approach this comparison from a neutral standpoint.
3. Be Objective
Although the purpose of your business plan is to sell your startup, avoid being overly salesy. Your goal is to present an objective and realistic picture of your company. A business plan is not a marketing ploy or project. Instead, think of it as a report that shows your startup’s stats and future goals.
4. Have a Strong Management Team
You need to have a strong management team to make a good impression on your audience. Your C-suite executives and key employees should have extensive experience, expertise, and credentials, and you should be sure to highlight how they can use their skills to make your business succeed.
5. Be Conservative with Your Financial Projections and Estimates
Finally, you need to be conservative when listing out your financial projections and estimates. Being too optimistic about your company’s growth and earnings will expose investors to undue risk.
Start Writing Your Business Plan
Now that you know how to make a business plan, start writing your business plan today with our free business plan template. Our template has all the sections and words you need to start creating your own business plan. Instead of writing everything from scratch, you only have to change and edit our text to suit your needs.
You can also discover how to write a business plan for your specific business type: