Starting a business requires a well written business plan in the first place. A business plan is a formal document which serves as a roadmap for a business. Having no business plan is like riding on a bus without knowing where it is going.
A business plan contains information such as what a business does, plans for how the business will grow, strategies and timeline to achieve those business goals. A business plan consists of sections like business goals, strategies, target market, competition, marketing and sales strategy, organizational structure and financial projections.
Business plans are crucial for any business to succeed as they provide you focus and direction. Business plan helps in decision making and most importantly when seeking funding from investors and banks.
The process of writing a business plan may seem challenging and complex at the beginning of a business. This process requires detailed market research and financial analysis, and requires clear, concise, and persuasive writing. It can be difficult to predict future trends and financial performance, and the plan needs to be flexible enough to adapt to changing circumstances.
However, our guide can simplify the process of writing a business plan. With that said, let’s begin.
Step 1: Executive Summary
Your executive summary is a brief overview of your business idea, and it’s the first thing anyone reading your business plan will see. It should succinctly explain what your business is, why it exists, and why it will be successful. This section should also detail your business’s goals and your plan to achieve them.
For instance, if you’re planning to open a bakery, you would outline your business concept (a bakery), your unique selling proposition (perhaps your bakery uses only locally sourced, organic ingredients), your target customers (health-conscious consumers and local businesses), and how you plan to make your business profitable (for example, through a combination of in-store sales, local deliveries, and catering services).
For a helpful template for writing an executive summary, check out SCORE’s guide.
Step 2: Business Description
Your business description provides more detail about your business, including its structure, the products or services it offers, and how it fits into the broader industry and market.
Using our bakery example, you’d describe the type of bakery you plan to start, the products you’ll offer, and how your bakery fits into the current market. This section should also explain the legal structure of your business – are you a sole proprietor, or have you formed a partnership, LLC, or corporation?
For more information on choosing the right business structure for your needs, check out this guide from the U.S. Small Business Administration (SBA).
Step 3: Market Analysis
This section provides an overview of your target market and competition. You’ll want to provide demographics about your target customers, the size of your target market, and data on its growth. You should also include an analysis of your competition, including their strengths and weaknesses and how you plan to differentiate your business.
Back to our bakery example, you’d want to know how many people in your area are interested in organic food, how much they spend on such products, and what other bakeries or stores they currently buy from. Tools like IBISWorld and Statista can be very useful for this kind of research.
Step 4: Business Organization
This section outlines your team and their roles. If you don’t have a team yet, describe the roles you intend to fill and the skills and experience you’ll be looking for. For instance, our bakery might need a head baker, a store manager, and several sales associates.
Consider including an organizational chart to visually represent your team structure. Canva offers a range of free templates for this purpose.
Step 5: Products and Services
Here, you’ll provide detailed descriptions of your products or services, explaining how they benefit your customers, and how they compare to those offered by competitors. In our bakery scenario, you’d explain the range of baked goods you plan to offer, their unique features (like being organic or locally-sourced), and how they meet the needs of your target customers.
Step 6: Marketing and Sales Strategy
In this section, you’ll outline your strategy for attracting and retaining customers. This might include your branding strategy, marketing initiatives, sales strategy, and customer service approach. For our bakery, this could involve a grand opening event, partnerships with local businesses, a loyalty program, and a social media marketing campaign.
For more on developing a marketing strategy, check out this guide from HubSpot.
Step 7: Funding Request
If you’re seeking external funding, this section is crucial. Here, you’ll need to explain exactly how much funding you need, how it will be used, and how investors will see a return on their investment. Remember, potential investors need to feel confident that they will see a return, so be as detailed and realistic as possible.
For our bakery, you might be seeking funds to cover startup costs, such as leasehold improvements, initial inventory, and equipment purchases. You might also include projected financials to show when the bakery is expected to break even and start making a profit.
The U.S. Small Business Administration (SBA) provides a great resource on how to estimate the cost of starting a business.
Step 8: Financial Projections
This section is all about the numbers. You’ll need to present your financial projections to give investors (and yourself) a clear idea of your business’s financial future.
Your financial projections should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, you should provide monthly or quarterly projections. Then annual projections for the next three to five years are typically sufficient.
It’s crucial to be realistic, and where possible, conservative with your projections. A tool like LivePlan can help you generate these financials if you’re unsure how to do it yourself.
Step 9: Appendix
The appendix is optional, but it’s a great place to include any additional information that doesn’t fit elsewhere, such as resumes of key team members, letters of support, permits, legal documents, or detailed market research data.
For our bakery, this could be a place to showcase images of your products, menu concepts, or letters of intent from potential suppliers or customers.
Step 10: Review and Edit
Finally, once you’ve put all this hard work into your business plan, take the time to review and edit it thoroughly. Your business plan is a reflection of you and your business, so you want it to be as professional and polished as possible. Consider enlisting a mentor, industry professional, or business advisor to review your plan and provide feedback.
The SCORE website has a network of volunteer mentors who can provide valuable advice and feedback on your business plan.
Remember, the process of creating a business plan is about much more than just having a document at the end. The process itself will help you refine your ideas, understand your market, and build a strategy for success. So, take your time and embrace the journey. Good luck!