Writing a business plan is most likely the first step in turning your business from an idea into reality. In any case, the formal document can provide the vision needed to motivate your team, impress investors, or plan future decisions.
No matter the industry you’re in, the task of writing a business plan can feel almost overwhelming. Fear not, below we broke everything down for you to start feeling confident in writing your very own business plan.
What is a business plan and why do you need it?
A business plan is a formal document outlining the goals, direction, finances, team, and future planning of your business. It can be geared toward investors, in an effort to raise capital, or used as an internal document to align teams and provide direction. It typically includes extensive market research, competitor analysis, financial documentation, and an overview of your business and marketing strategy. When written effectively, a business plan can help prescribe action and keep business owners on track to meeting business goals.
Who needs a business plan?
A business plan can be useful during a company’s beginning stage and serve as a guide through the unknown and with distractions that may come up. For enterprise companies, a business plan should be a mandatory staple that guides every decision.
“You should have a game plan for every major commitment you’ll have, from early-stage founder agreements to onboarding legal professionals,” says Colin Keogh, CEO of the Rapid Foundation— “You can’t go out on funding rounds or take part in accelerators without any planning.”
Seven parts that every business plan needs
While there are no set rules for writing a business plan, there are several parts that are usually included.
1. Executive summary
This shouldn’t be longer than half a page, the executive summary should briefly introduce your business and describe the purpose of the business plan. Are you writing the plan to gain capital? If so, specify how much money you wish to raise and how you’re going to pay it back. If you’re writing the plan to keep your team in line, explain at a high level what you hope to achieve with this, as well as the size and state of your existing team.
The executive summary should explain what your business does and provide an overview of your financial health and major achievements to date.
2. Company description
To introduce your company the right way, it’s important to also describe the bigger picture of your industry. What is the financial worth of your market? Are there market trends that will affect the success of your company? What is the current state of the industry and its future potential? Use data to support your statements and be sure to include the full scope of information, both positive and negative, to give investors and your employees a complete outlook of your company’s background.
From there, describe your company and what it gives your customers. Are you a sole proprietor, LLC, partnership, or corporation? Are you an established company or a new startup? What does your leadership team look like and how many employees do you have? This part should provide both past and future information about your business, including its founding story, mission statement, and vision for the future of your company.
3. Market analysis and opportunity
Research is key in completing a business plan and, ideally, more time should be spent on research and analysis than writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent to the bigger market is crucial for the success of your business, and these considerations should be written here.
In addition, it’s important to include research into the target demographic of your product or service. This might be in the form of fictional customer personas, or a broader overview of the income, location, age, gender, and buying habits of your existing and potential customers.
Though the research should be unbiased, the analysis in this section is a good place to reiterate your point of difference and the ways you plan to claim the market and do better than your competition.
4. Competitive analysis
Beyond explaining the parts that separate you from your competitors, it’s important to give an in-depth analysis of your competitors themselves.
This research should go into the operations, financials, history, leadership, and distribution channels of your direct and indirect competitors. It should explain the ways you can compete with, or exploit their strengths and weaknesses.
5. Execution plan: operations, development, management
This part of the business plan provides details around how you’re going to do the work to meet this plan. It should include information about your structure and the everyday operations of your team, contractors, and physical/digital assets.
Consider putting your company’s organizational chart, as well as more detailed information on the leadership team: Who are they? What are their backgrounds? What do they bring to the company? Try to include the résumés of key people on your team.
For startups, your plan should include how long it will take to begin operating and then how much time it will take to be profitable. For established companies, it’s a good idea to outline how long it will take to execute your plan and how you will change the existing operations.
If you plan to, it’s also smart to include your plan for hiring employees and moving into different markets.
6. Marketing plan
It’s crucial to have an in-depth marketing plan in place as you scale or start a new strategy. This should be shared with your stakeholders and employees. This part of your business plan should have everything from promoting your business, attracting customers, and retaining existing clients.
This should include brand messaging (who you are), what avenues you’re going to use, and the timeline and budget for engaging consumers across different channels. Also, you should have laid out how your competition is marketing and what messages they are sending.
7. Financial history and projections
It’s important to disclose all of your finances in your business plan. This is so your shareholders properly understand how you’re expected to perform going forward, and the progress you’ve made so far.
You should include your income statement, which outlines annual net profits or losses; a cash flow statement, which shows how much money you need to start or scale operations, and a balance sheet that shows financial liabilities and assets.
“An income statement is the measure of your financial results for a certain period and the most accurate report of business activities during that time, [whereas a balance sheet] presents your assets, liabilities, and equity.” “It’s crucial to understand the terms correctly so you know how to present your finances when you’re speaking to investors.”
- Amit Perry
In addition, if you’re asking for an investment, you will need to outline exactly how much money you need as well as where this money is going and how you plan to pay it back.
Some Quick Tips for Writing A Business Plan
Now that you learned all of the necessities, it’s time to learn how you’ll actually create the document.
1. Don’t make it too long
Use clear, concise language and avoid rambling. When business plans are too long, they’re more likely to be forgotten or skimmed over by stakeholders.
2. Show why you care
Let love for your business come through; show employees and investors why they should care too.
3. Provide supporting documents
Don’t be afraid to have a detailed list of documents, including the CVs of team members, built-out customer personas, product demonstrations, and examples of internal or external messaging.
4. Reference data
All information mentioning the market, your competition, and your customers should have real references.
5. Do your research!
The research that goes into your business plan should take you longer than writing the document itself.
6. Clearly demonstrate how you differ from your competitors
It’s important to show the way your product or service differentiates you from your competition and helps solve a problem for your target audience. Don’t be afraid to reiterating these differences throughout the plan.
7. Don’t be afraid to change it
Your business plan should change with your company’s growth, which means your business plan document should as well.
Don’t forget to use your business plan!
Whether you’re just starting out or running an existing business, writing an effective business plan can bring future success. It can be a constant reminder to employees and clients about what you stand for and the direction in which you’re going. Just remember to use it!