As a business owner, one of the best tools you can have is a business plan. Business plans are essential to starting your business, expanding, and pivoting your operations. Need help writing your first business plan or updating an old one? We’ve got you covered. Below, we explain why you need a business plan, who’ll be reading it, and what to include.
What is a business plan?
A business plan is a document that sheds light on your company’s history, business model, market potential, goals, and funding needs. There are a few different types of business plans:
- Traditional business plan: A traditional business plan offers a comprehensive look into your business’s structure, products and services, market potential, sales strategy, and growth plan. Traditional business plans are great for businesses that are just getting started, as well as more established businesses trying to expand or secure financing. A traditional plan typically ranges from 20 to 50 pages.
- One-page business plan: A one-page plan is a condensed version of a traditional business plan. In addition to being a helpful cheat sheet for potential investors and small business lenders, a one-page plan is also an easy way for you to update your board members or executive team on recent business changes.
- Startup business plan: A startup business plan is a roadmap for new companies that need a lot of funding. Instead of highlighting your company’s short and long-term growth strategies, a startup plan usually focuses specifically on how you’ll launch and get capital.
- Strategic business plan: A strategic business plan provides a high-level overview of your business’s goals. Instead of including sections describing your business’s market potential or unique offerings, you’ll use a strategic business plan to outline your goals, then detail the specific strategies and timeline for achieving them.
Why do you need a business plan?
Business plans are critical no matter what stage your business is in. The very process of writing a business plan forces you to consider the viability of your idea, then develop a strategy for success.
If you haven’t started your business yet, writing a business plan is a great way to refine your company’s mission and business model. On the other hand, if you’ve already been operating for a while, writing a business plan gives you an opportunity to evaluate your progress and set goals for improvement.
The bottom line: business plans are flexible and serve a variety of purposes. Depending on your needs, you can use a business plan to:
- Solidify your business model
- Analyze your market and customer demographic
- Develop a specific growth strategy
- Figure out how to expand operations
- Outline a crisis recovery plan
- Set more realistic goals
- Plan for financing
Who is going to read your business plan (besides you)?
A business plan is a great check-in tool for you as a business owner, but it’s also a helpful reference point for other people. Here are the people most likely to read your business plan:
- Potential business partners
- Senior staff or employees
- Company board members
- Small business lenders
- Business accountants and attorneys
The reason why you’re writing a business plan influences how you structure it. If you’re applying for a business loan with a bank, for example, you’ll want to beef up the market and finance sections of your plan. However, if you’re sharing your business plan internally with senior staff, you might want to go into more detail when talking about your company goals.
You can always tailor your plan to the person or entity reading it, but it should still be accessible to a variety of different groups.
How to write a business plan (and whom to ask for help)
You can format your business plan however you like, but most standard plans include the following sections:
- Executive summary
- Company description
- Market analysis
- Services and products
- Marketing and sales strategy
Let’s dive into each section one by one.
1. Executive summary
The executive summary is an introduction to your business. If someone were to only read this section, they should walk away knowing what your business does, what makes it unique, and what’s in store for the future.
In addition to sharing your business’s mission statement or tagline, briefly describe your services and products, highlight any notable or recent company accomplishments, and share your company’s broad growth goals, like opening a second store within three years or launching a new product next quarter.
2. Company description
The company description is where you can go into more detail about your business’s set-up and history. Consider including information on the following:
- Your legal structure
- Your management or ownership team
- Your company’s origin
- Your size and location
- Your company culture
- Your current employees and hiring needs
- Your company’s history, including any significant changes throughout the years
3. Market analysis
The market analysis section is one of the most important components of a strong business plan. Using quantitative data and research, you need to be able to prove that your business idea is both viable and profitable. Aim to cover these three areas:
- Industry: What industry does your business fall into? Provide details on the size and characteristics of the market you’re in, as well as how your business fits into it.
- Target demographic: Who are your ideal customers? Paint a picture of their needs, values, and purchasing habits.
- Competition: Who are your competitors? Explain what’s notable about them and how you plan to differentiate yourself.
Consider using bullet points and visuals to illustrate your points. You may also want to turn to your marketing team—or hire an external marketing consultant—for help structuring and completing this section.
4. Services and products
The purpose of the services and products section of your business plan is to highlight your offerings and demonstrate their value. Start by describing what your product or service does, whom it’s for, and how it differs from similar offerings on the market.
Next, state your company’s value proposition, which is the unique value your product or service provides. If your business creates custom travel itineraries for career-driven people, for example, your value proposition could be “Where convenience and luxury meet” or “Helping ambitious adventure seekers maximize their two weeks of vacation time.”
Finally, explain your pricing structure and production process, giving details on the different vendors and materials you rely on to create your services or products. If you haven’t opened yet, describe the steps you need to take in order to develop and launch your service or product.
As a business owner, you know your products and services best, but you might want to lean on your business accountant and operations director (if you have one) for help filling out the pricing and production sections, respectively.
5. Marketing and sales strategy
Now that you’ve described your business’s offerings and market potential in detail, the next step is to explain how you plan to build a customer base and promote your business. If you’ve been in business for a while, you can draw on your past experiences and strategies, detailing what worked well and what didn’t.
There are a few different ways to structure this section of the business plan. You can dive into marketing methods and sales tactics individually, or break down both your marketing and sales strategies by problem, goal, or customer. Another option is to list your strategies according to the four stages of the sales funnel: awareness, interest, decision, and action.
No matter which route you choose, work on answering the following for each marketing and sales strategy:
- What the strategy is
- Why it’s effective
- How you plan to execute it
- The various challenges you might encounter when implementing it
As with the market analysis section, you may want to solicit feedback on this section from an in-house marketing expert, salesperson, or external marketing or sales consultant.
The financial section of your business plan is critical, especially if you want to circulate the plan to investors or lenders. The purpose of this section is threefold: to 1) outline your business’s financial plan, 2) demonstrate your profit potential, and 3) share your financing needs.
If you don’t have any financial documents yet, you can use this section to list your startup expenses, explain your cash flow needs, and do a revenue or sales forecast for the first year of operations.
If you do have financial data to draw from, work on including the following components:
- Income statement: A breakdown of your business’s profits and losses
- Balance sheet: A document that lists your business’s assets (what you own) and liabilities (what you owe)
- Cash flow statement: An assessment of how much money comes into and out of your business during a given period of time
- Expenses analysis: A detailed look at how much it costs to operate your business each month
- Funding needs: An explanation of how much money you need and what you’re looking for, whether it’s a loan, line of credit, or equity investment. It’s also a good idea to explain how exactly you’ll use the money to improve or grow your business, and how you plan to pay off what you borrow.
Take the time to review this section with your business accountant for accuracy.
The goals portion of your business plan gives readers a better idea of where your business is headed. Try to include a mix of quarterly goals, annual goals, and goals that span five or 10 years.
For each goal you share, include a few bullet points explaining:
- Your timeline for reaching the goal
- The benchmarks you have to hit to reach the goal
- How you plan to assess your progress along the way
Make sure your goals align with the SMART format, which stands for specific, measurable, attainable, timely, and realistic.
Tips for writing a strong business plan
The best business plans are informative and accessible. Here are a few tips to help your business plan stand out, no matter which structure you choose:
- Be clear and concise: Use straightforward language and cut anything that doesn’t help tell your business’s story.
- Use data and research: Back up all your claims with relevant research and statistics.
- Embrace visuals and graphics: Use charts, graphs, and images to help illustrate complex concepts in an interesting way.
- Double-check your financials section: Make sure your business’s numbers are accurate.
- Take advantage of helpful resources: Check out the free business plan templates on Bplans and SCORE. Or use a business plan software like LivePlan.