How to Write a Business Plan: A Step-by-Step Guide
- By Andrew Jacobs
- Aug 21, 2014
How to Write a Business Plan: A Step-by-Step Guide
Business plans are essential to successful companies. These plans help analyze strengths, weaknesses, and new opportunities your company may partake in. Before you get started with the components of the business plan, here are some tips everyone writing a business plan should know:
Draft, draft, draft!
You learned this in high school write your first draft then edit, edit, edit. Your final draft should look nothing like your first. Read it out loud, get peer revisions, hire qualified help to check for grammatical errors, run-on sentences, punctuation, missing titles, and page numbers. Remember, once you submit it to investors there is no turning back.
Be clear and concise
Yes, you want your reader to understand exactly what your plan is and love it as much as you do. And yes, you also want to prove how your research positively correlates to your strategy, but writing flowery and drowning your reader with unnecessary information will make them turn the other way. An ideal business plan should not exceed 30 pages. If you truly believe you can’t cut down, you can add extra information in the Appendix.
Be honest
Investors don’t like being tricked. Don’t tell them your company doesn't have any competition and there aren't any risks. Don't skimp on any information. There is always someone competing with you and every action has a reaction that can be a negative one. Investors WILL know if you are withholding or exaggerating the truth.
Now that we've covered the basics, let’s write your business plan. Each plan should have the following categories, though they vary depending on what you are asking of investors:
Executive Summary
Your executive summary is a brief synopsis of your overall business plan. This should include a description of your business, its goals, and what you are asking of investors. Like the first line in a book, this is your moment to captivate your reader. Most investors will decide if this is a path they’d like to go down after reading this section. Executive summaries are only about 1-3 pages.
Company Description
Tell investors who you are, what makes you different from competitors, and who your target audience is. Describe your corporate culture and management style. What problems does your company solve for consumers and other businesses? Sell your company and explain what makes it unique.
Marketing Analysis
What do you know about your business and market? Provide research and draw conclusions to help investors understand who you plan to target and how you intend to get your product known.
Competitive Analysis
Shine light on your competition and point out their strengths and most importantly their weaknesses. What are you doing that surpasses their strategies? Why will customers choose your product over theirs? What are your advantages?
Product Development
Give investors a visual on all aspects of your product. Include the design, how it will be manufactured, a marketing plan, and last but not least the budget your company will need to fulfill these goals.
Risk Analysis
Don't pull the wool over investors' eyes, indicate potential risks and how you intend to diminish them.
Financial Performance
Include a profit & loss (P&L) and cash flows, be sure to justify your assumptions and mention what you plan to do with your earnings.
Appendix
This section is optional but you may include any extra information you see fit including credit reports, resumes, legal documents, permits, contracts, product images, and more.
Overall, you want to be transparent and disclose meaningful information to potential investors. Did I miss anything? What would you add to your business plan?
What is a Business Plan?
A business plan is a comprehensive document that outlines the goals, objectives, and strategies of a business. It serves as a roadmap for the company's future, detailing how it will achieve its objectives and overcome potential challenges. A well-written business plan not only helps entrepreneurs secure funding and attract investors, but also provides a clear direction for the business and its stakeholders. It typically includes sections on the company's mission and vision, market analysis, competitive analysis, marketing and sales strategies, operations and management, and financial projections.
The Benefits of Writing a Business Plan
Writing a business plan offers numerous benefits for entrepreneurs. It forces them to thoroughly evaluate their business idea, market, and competition, helping them identify potential pitfalls and opportunities. A well-crafted business plan can also increase the likelihood of securing funding from investors or financial institutions, as it demonstrates a clear understanding of the business and its potential for success. Additionally, it provides a roadmap for the business, helping to set goals, track progress, and make informed decisions.
Use Cases for a Business Plan
A business plan is essential for entrepreneurs looking to start a new business, as it helps them articulate their vision, set goals, and develop a strategy for success. It is also valuable for existing businesses seeking to expand, as it provides a framework for growth and helps secure funding for new initiatives. Furthermore, a business plan can be used to attract potential partners or key employees, as it demonstrates the company's potential and long-term vision.
Alternatives to Traditional Business Plans
While traditional business plans are comprehensive and detailed, some entrepreneurs may opt for alternative approaches, such as lean canvas or one-page business plans. These condensed formats focus on the most critical aspects of the business, making them ideal for startups or small businesses with limited resources. Additionally, some businesses may choose to create pitch decks or executive summaries to present their ideas to potential investors or partners, providing a concise overview of the business and its potential.
Tips for Writing an Effective Business Plan
When writing a business plan, it's essential to conduct thorough research and analysis to ensure the document is accurate and realistic. Entrepreneurs should clearly define their target market, competitive advantage, and unique selling proposition, and develop a detailed financial plan with realistic projections. It's also important to keep the plan concise and focused, avoiding unnecessary details that may distract from the core message. Finally, seeking feedback from mentors, advisors, or industry experts can provide valuable insights and help refine the business plan.
Additional Resources for Business Planning
In addition to the step-by-step guide provided in this article, there are numerous resources available to help entrepreneurs with business planning. Online templates, software tools, and books on business planning can provide valuable frameworks and insights for creating a comprehensive business plan. Additionally, seeking guidance from local small business development centers, industry associations, or professional consultants can offer personalized support and expertise to ensure the business plan is well-crafted and effective.