A business plan is essentially a roadmap that clearly indicates your company’s financial and developmental goals and the steps you’ll take to achieve them over the next several years. Business plans typically include the different phases of your business’s development, from the initial structuring to long-term growth. They can also help you define your brand, assess risk, and forecast expansion opportunities.
A good business plan can show potential partners, investors, and lenders that you’re dedicated to the business’s success. This could help you find better funding opportunities, keep your venture on track, and solidify your company’s position in the market.
As a new business owner, having a business plan is essential to minimizing risk and increasing your venture’s chances of succeeding. But if you’ve never created one before, it can feel like a daunting task. Fortunately, it doesn’t have to be that complicated. Here’s how to write a business plan step by step.
What Is a Business Plan?
A business plan is a plan that contains the key milestones, short- and long-term financial goals, and other details regarding your business and how you plan to make it succeed. The exact details can vary, depending on the size and scope of the business.
In general, a thorough business plan will try to accomplish the following:
- Detail your product or service and what you can offer to your customer segment
- Identify the company’s core values
- Consider the competition and where your company fits in the current market
- Provide details about your cash runway (time you have until you run out of money) and outline how you plan to spend money for marketing, development, business loan, etc.
- Identify opportunities for new partners, employees, etc.
- Show potential investors that yours is a venture worth funding and help them feel confident they’ll see a return on investment.
- Detail the business’ overall budget and cash flow
- Help you uncover new opportunities for growth and profitability
Writing a business plan can also help reduce risks and inspire you to make savvy business decisions in the future. It could also help you brainstorm new ideas and find ways to innovate your existing business.
How to Write a Business Plan in 10 Steps
When it comes to writing a business plan, there are a series of basic steps to help your company succeed. With that in mind, here’s how to write a business plan step by step.
1. Pick the right format
When writing a business plan, consider the format and how you want the details about your venture laid out. Many options exist, but the two main ones are the traditional and lean startup formats.
The traditional format goes into a lot of detail about the various aspects of a business. This plan is separated into easy-to-read sections for partners or potential investors to review. Common sections include:
- Executive summary
- Business description
- Industry Outlook
- Target audience or market
- Business structure, organization, and management
- Marketing and sales strategy
- Financial projections
Opposite the traditional format is the lean startup format. This format can still include many of the above details but in a simpler way. These business plans usually contain precise, high-level information that’s easier for potential partners or investors to consume.
A traditional format may be better for businesses with more predictable growth and long-term development. A lean startup plan may be better for ventures with rapid development or changes over a shorter period.
2. Write the executive summary
An executive summary is a business plan’s introductory section to get others on board with your venture. It typically includes:
- Mission statement
- Product or service
- Employee and leadership team information
- Financial details (for businesses seeking funding)
An executive summary can be a standalone document or attached to the rest of a business plan.
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3. Outline the business description
This section details what the business does, the problems it solves, and the needs it meets. It indicates the following:
- Type of product or service you’re offering
- Ways to innovate or refine the product or service
- The business’ viability in the current market
- What is the competition like, and the advantages your business has over them
- How the business innovates on similar, competing services and products
Writing this part of the business plan helps you think about your business from the consumer side. Describe what you’re offering in a way that shows your audience segment that they need what your business offers.
4. Identify ideal customers
Now, it’s time to describe your customer segment. Do this through a combination of market research and analysis. Focus on the current market and how it’s expanding or changing so, you can better understand how your business can take advantage of these changes and grow.
This section is broken down into two parts:
- Ideal Customer Profile (ICP): This can help you see what the ideal customer looks like for your business. Consider your customer’s problems and how your product/service can solve them. Also, think about how much your customer would be willing to spend and any limitations your product or service has.
- Buyer Persona: This is focused on the customer demographics – where they live, their interests, pain points, habits, behaviors, etc.
5. Reach your target market
Part of making a business plan is creating a viable marketing plan. Define how you plan to reach your target audience. Options include:
- Paid promotions
- Marketing a product at specific stores your audience frequents
- Creating partnerships that can improve your reach
Break down the cost of getting your product or service on the market.
6. Structure your team
Potential partners and investors want to know how your company is organized. When writing a business plan, outline the following:
- Who owns the business
- Whether the company is divided among several people or has a single owner
- Who’s on the team (including leaders, experts, and employees)
- Each employee’s expertise
- How the business is legally structured (ex., LLC or an S or C Corporation)
If you’re looking to expand, go into detail about who you need to bring onto the team to do this.
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7. Project profit and loss
The profit and loss section can be robust since it outlines things like:
- Forecasted gains and losses for 1 to 5 years
- Projected cash runway (number of months you have until the cash runs out)
- Other financial details
Many resources exist to help organize your business finances. For example, cash flow statements can keep track of expenses, while a balance sheet details your company’s financial health.
Go into as much detail as possible, especially for the first year or so. Doing this will help convince potential investors and partners that your business is stable. It will also show them the potential rewards of getting on board.
8. Detail investing needs
This section is an extension of the previous one. It’s necessary if you’re looking for investors since it can show them that your business is worth investing in and is financially stable.
In this section, write the amount of funding you need over the next several years and precisely describe where the money is going. This could be anything from paying employees, purchasing business equipment, and covering operating costs.
Also, write the business’ long-term financial goals. Clarify whether you plan to sell the company (if so, include an exit strategy), or plan to continue operating it indefinitely.
9. Include other details
Here is where you can include any other pertinent information about the business. This may include:
- Key resources or partnerships you’ll need to run the business
- Whether you have specific shippers, you need to work with
- Preferred channels of communication with customers
- Different ways the business will profit through diverse revenue streams
- Other logistics of operating the business (ex., type of equipment or facilities needed, production, storage or transportation, etc.)
10. Write an appendix
Finally, include an appendix. This section will include any tables, charts, illustrations, pictures, or other details (including legal information) that didn’t fit into the rest of the business plan.
The 4 Types of Plans
The four main types of business plans are:
- Operational Planning: This business plan goes into detail about how the business will operate every day. These plans can either be ongoing (perpetual) or used once for a specific event.
- Strategic Planning: This type of plan provides details about the overall company and outlines a long-term solution to any problems that might arise as the business grows.
- Tactical Planning: This business plan breaks down the details found in the strategic plan. Its main purpose is to illustrate the specific actions needed to run the business and simplify them for those involved.
- Contingency Planning: A contingency plan comes into play when something unforeseen occurs suddenly or if a previous plan needs to be changed.
Why Do You Need a Business Plan?
A comprehensive business plan can keep you on track and boost your odds of success. It can also keep potential partners on track and minimize unnecessary confusion or conflict within the team.
Plus, a business plan shows potential investors that you’re serious about the business and have a step-by-step plan for making it succeed. This can make them more confident about investing in your company’s growth and development.
Finally, making a business plan can reduce risk since it covers the different aspects of the company, including its greatest strengths and weaknesses. This can also help you avoid future problems.
Simple Business Plan Template
Knowing how to make a business plan is a key to your company’s success, but it can also be time-consuming. Here’s how to make a business plan that’s simple and effective:
- Executive summary. This includes the product or service description, target audience, and long-term goals for the company.
- Business or company description. This includes the mission statement, principal team members (including the owner and other leaders or experts), and business structure (ex. sole proprietorship).
- Market research and analysis. This involves specifying your industry, the ICP or buyer persona, and any advantages your company has over the competition. It can also detail any state or federal regulations and how your company complies with them.
- Product or service details. Describe what your business offers, the product or service’s lifecycle, and the pricing structure. Also, indicate the research and development involved. Finally, indicate the product or service's intellectual property rights (legal ownership).
- Sales and marketing. Write about your company’s growth strategy, channels of communication with the customer, where and how you’ll sell, and the different marketing tactics you’ll use.
A business plan is fundamental to your company’s success, as is knowing how to write one. Making a business plan takes time, careful planning, and research. But once you have one in place, you can use it as a step-by-step guide for how to best operate your business for several years to come.
Remember, having a business plan isn’t just for you – it’s for potential investors, partners, and employees, too. They can also refer to it when deciding whether to get on board and help your company throughout each stage of growth.
There’s no one correct way to write a business plan. However, every good business plan should include specific things, such as the executive summary, business description, ideal customer segment, and marketing plan.
Once you’ve outlined everything, you’ll better understand your business goals, the challenges you’ll face, and how to overcome them.
What are the benefits of a business plan?
A business plan serves as a foundation for your business. It can clarify your business’ purpose, identify key milestones, set goals, and help with the decision-making process as the venture grows. The plan can also help you identify your target audience and the best ways of reaching them. Plus, it can be used to attract talented partners and employees as your company continues to develop. Finally, if you’re looking for funding from investors (or lenders), a business plan can help with that.
Can I write a business plan by myself?
You can write a business plan by yourself, especially if you have persuasive writing skills. There are also software programs and templates that can help. Alternatively, you could take a workshop or class about how to write a business plan step by step.