Entrepreneurship

Business Plans: A Step-by-Step Guide

This guide to writing a business plan will outline the most important parts and what should be included in an effective

A business plan is a written description of your business’s future, a document that tells what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of one.

Business plans are inherently strategic. You start here, today, with certain resources and abilities. And you want to get to there, a point in the future (usually three to five years out), at which time your business will have a different set of resources and abilities as well as greater profitability and increased assets. Your plan shows how you will get from here to there.

Related: 7 Steps to a Perfectly Written Business Plan

You can visit our small business encyclopedia to learn more about business plans or our FormNet area to get the necessary forms to get started.

Before writing your plan

Writing your business plan

Business Plan Tools

Business Planning Videos

Video: What Investors Really Think About Your Business Plan. At our Entrepreneur magazine Roundtable, financial pros offer tough talk about the business plans of first-time entrepreneurs:

Related: What Investors Really Think About Your Business Plan

Video: How Can I Hire Someone to Help Write My Business Plan? In the video belowTim Berry, founder and president of Palo Alto Software Inc., responds to a reader seeking advice on finding a low-cost writer to help with a business plan:

Related: 25 Business Plan Tips From Professionals

BUSINESS PLANS

7 Steps to a Perfectly Written Business Plan

Every business needs to have a written business plan. Whether it’s to provide direction or attract investors, a business plan is vital for the success for your organization. But, how do you write a business plan?

We recommend a business plan include:

  1. Executive summary — a snapshot of your business
  2. Company description — describes what you do
  3. Market analysis – research on your industry, market and competitors
  4. Organization and management — your business and management structure
  5. Service or product — the products or services you’re offering
  6. Marketing and sales — how you’ll market your business and your sales strategy
  7. Funding request — how much money you’ll need for next 3 to 5 years
  8. Financial projections — supply information like balance sheets
  9. Appendix — an optional section that includes résumés and permits

However, getting started may be difficult to do. So, here are seven steps for writing a perfect business plan.

1. Research, research, research.

“Research and analyze your product, your market and your objective expertise,” William Pirraglia, a now-retired senior financial and management executive, has written. “Consider spending twice as much time researching, evaluating and thinking as you spend actually writing the business plan.

“To write the perfect plan, you must know your company, your product, your competition and the market intimately.”

In other words, it’s your responsibility to know everything you can about your business and the industry that you’re entering. Read everything you can about your industry and talk to your audience.

Related: Do You Really Need a Business Plan?

2. Determine the purpose of your plan.

A business plan, as defined by Entrepreneuris a “written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement.” However, your business plan can serve several different purposes.

As Entrepreneur notes, it’s “also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road.” That’s important to keep in mind if you’re self-funding or bootstrapping your business. But, if you want to attract investors, your plan will have a different purpose and you’ll have to write a plan that targets them so it will have to be as clear and concise as possible. When you define your plan, make sure you have defined these goals personally as well.

Related: 3 Apps to Help You Write a Business Plan

3. Create a company profile.

Your company profile includes the history of your organization, what products or services you offer, your target market and audience, your resources, how you’re going to solve a problem and what makes your business unique. When I crafted my company profile, I put this on our About page.

Company profiles are often found on the company’s official website and are used to attract possible customers and talent. However, your profile can be used to describe your company in your business plan. It’s not only an essential component of your business plan; it’s also one of the first written parts of the plan.

Having your profile in place makes this step a whole lot easier to compose.

Related: Conducting a Market Analysis for Your Business Plan

4. Document all aspects of your business.

Investors want to make sure that your business is going to make them money. Because of this expectation, investors want to know everything about your business. To help with this process, document everything from your expenses, cash flow and industry projections. Also, don’t forget seemingly minor details like your location strategy and licensing agreements.

Related: How Do I Build a Business Plan? (Infographic)

5. Have a strategic marketing plan in place.

A great business plan will always include a strategic and aggressive marketing plan. This typically includes achieving marketing objectives such as:

  • Introducing new products
  • Extending or regaining market for existing products
  • Entering new territories for the company
  • Boosting sales in a particular product, market or price range. Where will this business come from? Be specific.
  • Cross-selling (or bundling) one product with another
  • Entering into long-term contracts with desirable clients
  • Raising prices without cutting into sales figures
  • Refining a product
  • Having a content marketing strategy
  • Enhancing manufacturing/product delivery

“Each marketing objective should have several goals (subsets of objectives) and tactics for achieving those goals,” states Entrepreneur.

In the objectives section of your marketing plan, you focus on the ‘what’ and the ‘why’ of the marketing tasks for the year ahead. In the implementation section, you focus on the practical, sweat-and-calluses areas of who, where, when and how. This is life in the marketing trenches.”

Of course, achieving marketing objectives will have costs. “Your marketing plan needs to have a section in which you allocate budgets for each activity planned,” Entrepreneur says. It would be beneficial for you to create separate budgets for for internal hours (staff time) and external costs (out-of-pocket expenses).

Related: Why You Must Have a Business Plan

6. Make it adaptable based on your audience.

“The potential readers of a business plan are a varied bunch, ranging from bankers and venture capitalists to employees,” states Entrepreneur. “Although this is a diverse group, it is a finite one. And each type of reader does have certain typical interests. If you know these interests up-front, you can be sure to take them into account when preparing a plan for that particular audience.”

For example, bankers will be more interested in balance sheets and cash-flow statements, while venture capitalists will be looking at the basic business concept and your management team. The manager on your team, however, will be using the plan to “remind themselves of objectives.”

Because of this, make sure that your plan can be modified depending on the audience reading your plan. However, keep these alterations limited from one plan to another. This means that when sharing financial projections, you should keep that data the same across the board.

Related: 7 Steps To A Winning Business Proposal

7. Explain why you care.

Whether you’re sharing your plan with an investor, customer or team member, your plan needs to show that you’re passionate and dedicated, and you actually care about your business and the plan. You could discuss the mistakes that you’ve learned, list the problems that you’re hoping to solve, describe your values, and establish what makes you stand out from the competition.

When I started my payments company, I set out to conquer the world. I wanted to change the way payments were made and make it easier for anyone, anywhere in the world to pay anyone with few to no fees. I explained why I wanted to build this. My passion shows through everything I do.

By explaining why you care about your business you create an emotional connection with others so that they’ll support your organization going forward.

STARTING A BUSINESS

5 Things Most Startup Plans are Missing

Those who stick too rigidly to the business plan die by the business plan.

Each day brings new surprises when you’re running a startup. For entrepreneurs, that insecurity can make goal-setting feel futile. It’s hard to make a plan when there is so little predictability about what the year will bring. But creating goals that actually account for the flexibility and spontaneity required when running a company not only helps future-proof your business plan, it can also be empowering. All entrepreneurs have a grand vision for what their business is capable of, and often we get caught up in focusing only on the most obvious goals: revenue targets, product launches, partnerships and team growth.

As you plan to tackle 2020, create goals that keep you anchored by allowing for the intangibles of running a business. Start by following these five steps.

1. Examine your intentions.

In today’s hyper-competitive world, it’s easy to set our eyes on accomplishments that look like success on the outside, but may not actually benefit our business as much as we think. It might be a press feature, an uptick in Instagram followers, a fancy award or attendance at a high-profile conference. 

None of those aspirations are inherently problematic, but as you set your goals, consider what will actually be most impactful in the year ahead. Most importantly, ask yourself if it’s something you actually want to work toward, or if it’s just something that looks nice on paper.

Time is limited, and the more selective and purposeful we can be about our goals, the more likely they’ll be to actually contribute to our success and happiness. 

2. Learn something new. 

When setting your goals, identify objectives that demand you learn a new skill. Give yourself permission — and, indeed, a mandate — to thrive outside your comfort zone. Sign up for coursework and accreditations, immerse yourself in new design software, learn to do ad buying or plan on attending at least one networking event a month. The idea is to stay plugged in by expanding your thinking and skillsets, inspiring yourself in ways you might have otherwise missed out on.

There were several years in my own entrepreneurial journey when I was so caught up in the day to day that I rarely prioritized opportunities outside of the business. Looking back, it’s easy to see how that contributed to feeling isolated or burnt out. As business leaders, it’s important we embrace the rewards of investing both in ourselves and in each other. Community engagement and skill development are circular processes and provide the fuel to keep going.

3. Ask yourself who your goals will impact. 

Our businesses don’t exist in a bubble. The goals we set will impact our personal lives, our community and the team members who work alongside us. For example, if you’ll be working toward an ambitious operations expansion this year, make sure you account for the effects it will have on the people around you. Talk with colleagues and partners about what to expect and how you can support one another. Evaluate how your growth might impact your community economically and socially, inform your workplace culture and influence customer perception.

Plan for more time than you might expect to suss out these important issues. Ambition is necessary for growing your business, but what good is it if, on balance, it’s resulted in insecurity for those who have made sacrifices to help you achieve success? 

In other words: Don’t climb a mountain only to find yourself alone when you reach the top. Make sure your goals and plans account for those around you. 

4. Leave room for spontaneity. 

Once the planning-ahead gears are turning, it can be tempting to over-predict where you might land. Having a watertight plan makes us feel like the business is secure and stable, almost like we’ve accomplished what’s on our list before we’ve even begun. 

But being too rigid or specific can lead us to miss out on unexpected opportunities. As you set your goals, it’s okay if they include broad placeholders. Gray areas aren’t necessarily a bad thing. Communicating the importance of flexibility to your team, too, will help ensure emerging opportunities are considered and encourage different ways of thinking. It’s the difference between having the freedom to pursue a crucial new partnership or sending that email to spam because it doesn’t immediately contribute to the quarter’s revenue goals. This effectively gives your employees permission to pursue de-risking the business, rather than encouraging the pursuit of growth at all costs.

What matters most isn’t sticking to a particular goal or plan but making measurable progress towards your greater vision. Stay true to your intentions, flexible in your approach. And remember to check in with yourself seasonally to make adjustments as you go.

5. Plan to celebrate along the way. 

If you’re anything like most entrepreneurs (myself included), you probably have a tendency to cross one accomplishment off the list, then immediately move onto the next without significant reflection. Let’s change that in 2020. Plan to reflect on what you’ve learned, and recognize unexpected wins along the way, too. Build in rewards for yourself ahead of time and account for them in your budget now, like celebratory dinners and offsite gatherings with your team. Take the time at the end of a particularly busy month to journal on your reflections and accomplishments. And schedule a damn vacation for yourself.

Acknowledge those who contributed to your success, too. It’s easy to get so caught up in our work that we forget the importance of a simple, sincere acknowledgment. Don’t assume the people around you already know how grateful you are.

Too often, we miss out on business-defining opportunities and embrace the false sense of security that comes with over planning. In 2020, by making room for the unexpected, we can change that.