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
How to Write a Business Plan in 10 StepsWhen 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 formatWhen 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
2. Write the executive summaryAn 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)
3. Outline the business descriptionThis 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
4. Identify ideal customersNow, 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 marketPart 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
6. Structure your teamPotential 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)
7. Project profit and lossThe 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
8. Detail investing needsThis 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 detailsHere 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 appendixFinally, 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 PlansThe 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 TemplateKnowing 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.
ConclusionA 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.