How to write a business plan and stay on track with your goals
A good business plan acts as a roadmap for growing your operation. It’s a comprehensive look at your company’s background, growth plan, and profit potential. Whether you’re starting a new business or trying to improve or expand your current one, learning how to write a business plan is an essential skill. Writing a business plan can help you:
- Refine your mission
- Develop a growth strategy
- Set smart goals
- Secure funding
Before you begin a first draft, though, it’s important to clarify your intentions for writing a business plan. Do you want to appeal to potential investors, apply for a business grant, or just outline your goals? What you choose to use your business plan for will dictate the way you write and organize it.
If you want to apply for funding, you may want to focus more on the success or market potential of your products and services. On the other hand, if you’re creating a business plan for internal purposes, you may want to emphasize your vision and long-term goals. The beauty of a business plan is that it’s malleable. Feel free to tweak your structure to suit your company’s needs.
Ready to get started? Here are eight crucial components to include when writing a business plan:
1. How to create an executive summary for a business plan
The executive summary provides a brief overview of your business plan, essentially serving as a highlights page. It’s your first opportunity to explain in broad terms what your business does and how you plan to grow. In addition to including general information about your business’ history, employees, and location, you should also describe the products and services you offer.
Next when writing a business plan, mention any important milestones you’ve reached, like hitting a specific financial target, acquiring a certain number of customers, or winning an award. If your business is new and you don’t yet have important numbers or details to share, you can touch briefly on your past experiences and any relevant business successes.
Lastly, make sure you mention your goals and what resources you need to reach them, whether it’s extra capital, a piece of equipment, or additional employees.
2. Company description
When creating a business plan, this section gives readers a deeper look into your company’s origins, history, and internal organization. Start by explaining how and when your company began, where you operate from, and whether or not you have multiple locations.
Next, talk about the people who make up your business — from founders and CEOs to managers and employees — and explain how your business is structured. Maybe you rely on a crew of independent contractors in addition to full-time employees, for example, or have a board of directors who dictate financial decisions each year.
When considering how to write a business plan that puts your organization in the best light, this section is also a good place to share your company culture and values, and highlight your strengths as an operation. Company values might include things like inclusivity, integrity, transparency, diligence, or accountability, while strengths could be team collaboration or productivity. Finally, mention any hiring needs or plans you have.
3. Writing a market analysis into your business plan
The purpose of a market analysis is to demonstrate the viability of your products or services. This should be a detailed, research-heavy section that gives information on your industry, target customer demographic, and competitors. You can create this as part of your business plan by incorporating graphs and charts for visual interest, or just stick to bullet points or brief paragraphs. Here are some details to include:
- Industry characteristics, patterns, and trends
- Target market characteristics, habits, and trends
- Target market size and growth potential
- Pricing of similar products or services
- Competitor characteristics and statistics
Ideally, this section should tell a reader how much market potential your industry has, as well as where your company falls within your industry.
4. Product and service positioning
In this section, you’ll share details on your products and services, explain why they’re valuable, then discuss how you plan to position them to appeal to your target market.
If you’ve been operating for a while, you can discuss how you developed and priced your products, what the production process entails, and how you choose which new items or services to create. If, however, you haven’t launched your business yet, focus on explains what stage of development your products or services are in and what you plan to do to bring them to fruition. If you need to outsource work or team up with certain vendors or suppliers for production, mention that when writing this section of your business plan.
After you’ve given enough background information, describe your company’s unique value propositions. For example, massage oils and body scrubs aren’t just skincare products — they’re also an opportunity for customers to engage in a form of self-care. Be sure to explain what gaps in the market your business addresses, as well as how you plan to tweak your brand or products and services to better serve your target customers.
5. Marketing and sales strategy
When creating the marketing and sales section of your business plan, you need to describe how you plan to promote your business and acquire customers. Start by outlining your sales process. Sometimes called a sales funnel, the sales process refers to the series of steps a business guides potential customers through before they make a purchase. There are usually four stages: awareness, interest, decision, and action. Go through each stage while writing your business plan and describe your goals, preferred marketing methods, and any challenges you face.
Include details on the different distribution channels you plan to use, and incorporate any numbers that help illuminate your choices. For example, when describing the awareness stage, you could talk about the success you’ve had with Google Analytics and online ad campaigns; for the decision stage, you might discuss different customer service approaches and why you want to invest in content marketing.
6. How to make a comprehensive finances section in your business plan
Strong finances are the foundation of any successful business, so it’s important to make this section as comprehensive as possible when writing a business plan. This is where you showcase your company’s profit potential and address any finance needs you have.
Along with discussing your business expenses and pricing strategy, you also need to include information on your revenue, cash flow situation, and COGS (cost of goods sold), or how much money it takes to create your products and services.
If your business is just getting started, you’ll have to rely on projections instead of hard data while creating your business plan, but if you’ve been operating for a year or more, you can pull numbers from your business’ past financial records. Try to include the following:
- Expenses analysis
- Income statement
- Balance sheet
- Break-even analysis
- Cash flow statement
Lastly, explain your funding needs. Do you need equipment, working capital, or a loan to buy a second location, for example? Make sure you clarify how much money you’re looking for, how the funds will help grow your business, and how you’ll manage your money to pay off what your borrow. Lenders and investors want to know you have a goal, plan, and history of responsible repayments.
You may have mentioned or alluded to your business goals in previous sections, but this is the place to explain them in detail. When considering how to write a business plan that covers your goals, include a mix of short- and long-term goals, like quarterly goals, annual goals, and five-year goals.
Make sure your goals follow the SMART method, meaning they should be specific, measurable, attainable, realistic, and time-sensitive. Some examples you can use when creating a business plan might include contacting 10% more leads each month by the end of the next quarter, or launching four new products in the next two years. Under each goal, include an explanation of how you plan to achieve the goal, who will be responsible for executing it, and how you’ll measure your progress.
8. How to create an appendix for your business plan
The appendix contains additional information. Think: supporting data, relevant news items, or resumes of key people on your team. It’s not necessary to add an appendix, but it can be helpful if you’re writing and sharing your business plan with potential investors or lenders.
Writing a business plan is an ongoing project. Your plan will change as your business grows — and that’s a good thing. Try to update your business plan at least once a year to stay on track with your goals and ensure your marketing and sales strategies are still effective.
If you need help figuring out how to make a business plan, check out LivePlan, a software program that helps you write the perfect business plan. Bplans is another helpful site that provides business plan templates and sample business plans, and SCORE is a great free resource for business advice and planning.