Not every successful business starts with a formal business plan. Still, many founders value stepping back, researching their idea and the market they want to enter, and understanding the scope and strategy behind their tactics. Write a business plan.
How do you make a business plan?
A business plan describes a company, its products or services, how it makes money, its leadership, staffing, financing, operations model, and many other crucial details.
We had marketing experience but needed to improve in operations, finance, production, and tech.
Why do you need a business plan?
Business plans are linked to loans because investors use them to assess a company’s viability. Even without funding, a business plan has many advantages.
Strategic planning
Writing out your plan can help you clarify your ideas and understand the scope of your business and the time, money, and resources you need to start.
Evaluating ideas
A rough business plan can help you prioritize the best ideas.
Research your ideal customer and competitors to write a business plan.
Recruiting
The business plan you create is one of the easiest ways to explain your vision to potential new hires. It can also help build their confidence in the business, especially if you are starting to grow.
Partnerships
Suppose you want to ask other companies to work together. In that case, it will be much easier for them to determine if your business is a good fit for theirs if you have a clear picture of your business vision, audience, and strategy. This is especially true if they’re further along in their growth than you are. Business plan competitions: Many offer mentorships, grants, or investment capital.
Writhing A business plan is a great way to organize and share your thoughts with influential people.
Formats of business plans
Business plans can be one too many pages with graphs and reports. Every business plan is different. Readers should get the most important company information.
Typical business plans include:
Traditional. Most businesses use these plans. We’ll discuss business plan basics below. Traditional business plans are lengthy. Investors and lenders request this plan.
Lean. Lean business plans are shorter. This plan helps companies onboard new hires or adapt plans for a specific market.
Nonprofit. Any nonprofit needs a business plan. It includes everything in a business plan plus a section on the company’s impact. For instance, a hearing-aid speaker and headphone brand. Donors request it. Check out The Road to Success.
Business Plan Examples to Inspire Your Own for real-world examples of different business plans.
9-step business plan writing:
1. Executive summary
2. Company description
3. Market analysis
4. Manage and organize
5. Products and services
6. Segment customers
7. Plan your marketing
8. Plan logistics and operations.
9. Plan financially
Blank pages are scary. The best way to start a business plan is with an outline and key elements for each section.
Since outlining is an important part of writing a business plan, we’ve put together a high-level overview that you can copy into your document to get you started (and avoid the fear of staring at a blank page). Use a free business plan template to structure your plan.
Fill in your business plan outline. Sections help you build your plan.
1. Create an executive summary
Your plan’s executive summary should be written last.
The executive summary distills everything that follows and gives time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your business to entice them to read more.
As a summary, emphasize your plan’s main points. If you’re writing for your planning, you can skip the summary, but you should practice.
Executive summaries should be one page. Space constraints make it difficult to include all relevant information, but it’s not impossible. Business plan executive summaries should include the following:
Business idea. What’s your business?
Company objectives. What is your company’s goal?
Product description. Why is your product different?
Target market. Who buys?
Marketing plan. How will you reach customers?
Financial status. What’s your revenue?
Financial forecast. Revenue projections?
A request. Your price?
The team. Business participants?
2. Describe your business
Who are you, and what will you do? Answering these questions with a company description introduces, what makes you unique, why you’re in business, and why you’re a good investment. Saie, a clean makeup brand, shares its founder’s letter on its mission and purpose.
Even if only you see these details, clarifying them is useful. It’s a chance to document your company’s values, principles, and culture.
Include these in your company description:
- Your business structure (sole proprietorship, general partnership, limited partnership, or corporation)
- Your industry
- Your company’s mission, vision, and value
- Company History
- Short- and long-term business goals
- Your key staff and salaries
Some of these points are facts, but others, like your business’s vision, mission, and values, require more thought. You define your business’s purpose, goals, and values here.
You define your business’s purpose, goals, and values here.
Consider your company’s stakeholders—owners, employees, suppliers, customers, and investors—to define your values. Consider how you’d like to do business with each. List-making should reveal your core values.
Write a mission statement after identifying your values. Your one-sentence statement should convincingly explain why your business exists.
Next, write your vision statement: how will your business change the world? Start with “We will” to assert this impact. Unlike your mission statement, your vision statement should be at most three sentences. Concise vision statements work best.
Finally, include short- and long-term goals in your company description. Long-term goals should be achievable within five years, while short-term goals should be achievable within a year. Make your goals SMART—specific, measurable, attainable, realistic, and time-bound.
3. Check out the market
Markets can make or break any business. Choose a market with many customers who understand and need your product to get a head start. You may need to choose the right or the right market at the right time to sell.
No matter who reads your business plan, market analysis is essential.
Market research and analysis are essential regardless of who reads your business plan. It should cover your product’s market size, your company’s position in the market, and the competitive landscape. You must thoroughly research to convince investors and validate your plan’s assumptions.
How big is the market?
The potential market estimates how many people need your product. Even though it’s fun to imagine sky-high sales numbers, you should use as much relevant, independent data as possible to back up your market size estimate.
This can be overwhelming, so here are some general research tips:
- Know your ideal client. First, check government data on US millennials. You could also examine projected population changes in your purpose age range over the next few years.
- Track industry trends. If your product serves retirees, determine how many will retire in five years and their consumption patterns. If you sell fitness equipment, look at gym membership and health and fitness trends in your target audience or the general population. Finally, determine if your industry will grow or shrink in the coming years.
- Guess wisely. Your total addressable market size is never fully known. To estimate confidently, use as many verifiable data points as possible.
- Government statistics offices, academic research, industry associations, and respected industry news outlets can provide market data.
SWOT analysis
SWOT analyzes your strengths, weaknesses, opportunities, and threats. What are your company’s strengths? Your weaknesses? Can you capitalize on market or industry shifts? External factors threatening your success?
These breakdowns are usually presented as a grid with bullet points in each section highlighting the most important information, so you can probably skip writing paragraphs here. Opportunities and threats follow internal company strengths and weaknesses. This visual presentation lets your reader see factors that may affect your business and determine your market advantage.
An example:
Competitor analysis
Three main factors can set your business apart from competitors:
Cost leadership
By undercutting competitors, you can maximize profits. Mejuri, Endy, etc.
Differentiation
Your product or service stands out from industry cost leaders because of its uniqueness. Knix, Qalo, etc.
Segmentation
Before expanding to a larger market, you target a niche audience. TomboyX and Heyday Footwear use this approach.
Understanding your business and the competition will help you decide.
Your business plan should include a competitive overview, even with an innovative product. If you’re entering an established market, list your direct competitors and explain how you’ll differentiate your products and business.
Even with a new product, there will be competition.
If you sell jewelry, you could stand out by donating profits to a charity or offering discounts.
If you’re going into a market where it’s hard to find direct competitors, you should think about your indirect competitors, which are companies that sell similar products. If you’re selling a cutting-edge kitchen appliance, it’s too easy to say you have no competition. Consider how your potential customers are solving the same problems your product solves.
4. Explain management and organization
Your business plan should explain who runs it in the management and organization section. Business legal structure. Choose between an S corporation, limited partnership, or sole proprietorship.
An organizational chart can show your management team’s roles, responsibilities, and relationships. Explain how everyone will help your startup succeed.
5. Name your products and services
For interested readers, your business plan should include a section on your products or services.
If you sell many products, include general information on each line; if you sell few, provide more information. BAGGU sells a variety of bags, home goods, and accessories. Its business plan would detail each bag.
Describe your upcoming products and intellectual property. Demonstrate their profitability gains.
Handmade crafts and dropshipping products are sourced differently.
6. Using customer segmentation
Your marketing and business plans start with your target market or ideal customer. An overview of who this person is will help you make strategic decisions.
List general and specific demographics to describe your ideal customer. Typical customer segmentation:
- They live
- Age range
- Their education
- Some habits
- Leisure activities
- They work
- Their tech
- Their income
- Typical uses
- Their views
College students and 50-year-old Fortune 500 executives have different interests, shopping habits, and price sensitivity. Your ideal customer would affect your business plan and decisions.
7. Plan your marketing
Your ideal customer drives marketing. Your marketing plan should explain your current and future decisions and how they fit that ideal customer.
Most marketing plans cover four topics. Your business and plan audience will determine how much detail you provide.
Price. Why did you set your prices?
Product. How do you market your product?
Promotion. How will you market to your ideal customer?
Place. Where are you selling?
Promotion may take up most of your plan because getting into tactical details is easier. Still, the other three areas should be mentioned at least briefly because each is an important strategic lever in your marketing mix.
8. Plan logistics and operations
Your ideas will be realized through logistics and operations. This section is still important even if you’re writing a business plan for planning purposes.
Include all planned operations:
Suppliers. Where are your raw materials and products made?
Production. Do you manufacture, wholesale, or dropship? How long does it take to make and deliver your products? How will you handle peak demand?
Facilities. Where will your team work? Do you want a storefront? Yes, where?
Equipment. What equipment do you need to run? This includes computers, lightbulbs, and more.
Shipping and fulfillment. Will you outsource fulfillment or do it yourself?
Inventory. How much will you keep and where? How will you manage inventory and ship to partners if needed?
This section should show your reader that you understand your supply chain and have solid contingency plans for uncertainty. If your reader is you, it should help you decide how to price your products to cover estimated costs and when to break even on your initial investment.
9. Create a financial plan
A business’s financial health determines its success, regardless of its idea, effort, time, and money. People want to work with a sustainable company.
Your financial plan should include an income statement, balance sheet, and cash flow statement. The level of detail depends on your audience and goals. Include financial projections and data.
This spreadsheet includes sample income, balance, and cash flow statement numbers. Edit it to reflect projections.
Income statement
Your income statement shows your revenue and expenses over time. They can see your business’s bottom line with those two pieces of information. If you still need to start your business, project milestones of the same information.
Balance sheet
Your balance sheet shows business equity. You list your business assets and liabilities on opposite sides. Shareholder equity is calculated as follows:
Equity = Assets-Liabilities
Cashflow statement
Cash flow statements differ from income statements, accounting for revenue, expense collection, and payment.
Cash flow is positive when it exceeds outflow. Negative cash flow results from the opposite. Your cash flow statement should show you when cash is low when you have a surplus, and when you need a contingency plan to get funding to stay in business.
Forecasting your cash flow statement can help identify gaps. This guide covers business cash flow projections.
How to Write a Plan for a small business?
Your audience
Knowing who will read your plan—even if you’re writing it to clarify your ideas—allows you to tailor the language and level of detail. This can also help you include the most important information and decide when to cut sections.
Set goals
You’ll need to work harder and present a more detailed plan to get business funding.
Research it
Your ideas and vision will shape your business plan, but some of the most important information will come from independent research. You can learn about your target market, product demand, and competitors here.
Be concise
Your business plan should be 15–20 pages, regardless of the audience. Add appendices if you think they’ll help your audience and goals.
- Maintain tone, style, and voice.
- Having one person write or edit the plan before distribution is best.
- Use business plan software.
Business owners find writing a plan difficult. But it’s crucial for entrepreneurs. Tools are available for planning, drafting, creating graphics, syncing financial data, and more. Business plan software has templates and tutorials to help you complete a detailed plan in hours.
Some curated picks:
- LivePlan: cheapest with samples and templates
- Bizplan: startup investment plan
- GoSmallBiz: affordable and industry-specific.
Common mistakes made when writing a business plan
Other business plan articles would never tell you that your business plan can fail. Time and effort should be well-spent. Avoid these common mistakes:
Bad idea. Not all ideas win. Your idea may need to be more risky to fund. It may be too expensive or unprofitable. Try low-cost startup ideas.
No exit. Will your business make investors money? You will get funding with an exit strategy.
Uneven teams. Startups require a great product. But a great team will win. Many business owners need to pay more attention to team balance. They assume readers want to see profits, not how to make them. A developer or IT specialist should be on your team when pitching a new software idea.
Need to include projections. Readers like your numbers best. Include balance sheet, cash flow, P&L, and income statements. Successful business plans include break-even and return-on-investment calculations.
Misspellings and grammar. Some companies think professional editors are overkill. The best companies edit their documents. How can your business plan be successful if it has typos?
Read this sample business plan. Download a Microsoft Word or Google Docs copy to inspire your business planning.
Make a business plan right now!
Even if you don’t plan to pitch to investors, a business plan can help you figure out the next steps for your business clearly and deliberately. It can also help you spot holes in your plan before they become problems. Whether you wrote a business plan for a new online business idea, grew your existing business retail storefront, or bought an existing business, you now have a complete guide and all the information you need to move your business to the next stage.
