Business plan

How to write a business plan

  • Test your idea on clients and partners.
  • Do your research.
  • Consider software or a template to help you write your plan.
  • Include a summary, company description, management breakdown, market analysis, and financial plan.

Preparing a business plan amounts to drawing an itinerary for a road trip. You want a clear map that you can follow step by step as you grow your business.

How to write a business plan

“A business plan is absolutely vital because it guides your business on the path to success,” said Joel Klein, founder and producer of BizTank and B-Tank platforms. “Only by putting together a plan that outlines where you want to go, along with an action plan for how you’re going to get there, will a business owner know if they’re headed in the right direction. correct direction and how far it is from its final destination. destination.”

Your business plan should guide you through the start-up process – it should serve as a helping resource for any issues that may arise. Based on advice from our expert sources, here are some dos and don’ts when formulating your plan.

Free download: Use our free business plan template to help you write a comprehensive plan for your business.

What are the three main goals of a business plan?

Before writing your business plan, it is important to understand the purpose of creating it first. There are three main reasons why you should have a business plan:

  1. Establish a business direction. The main objective of a business plan is to establish your plans for the future. These plans should include goals or milestones as well as detailed milestones on how the business will achieve each milestone. The process of creating a roadmap to achieving your goals will help you determine the direction of your business and continue to grow.
  2. Secure financing. One of the first things that private investors, banks, or other lenders look for before investing in your business is a well-researched business plan. Investors want to know how you operate your business, what your forecast for income and expenses are, and most importantly, how they will get a return on their investment. [Check out our recommendations for business loan options.]
  3. Attract executives. As your business grows, you will likely need to add executives to your team. A business plan helps you attract top executives and determine whether or not they are right for your business.

What’s in a business plan and how do you write one?

The specific details you include in your business plan depend a lot on your audience. If you are trying to secure outside financing, it is essential that you provide a complete and detailed overview of your cash flow, expenses and projections.

If your audience is for employees, create a shorter version with information relevant to them.

However, regardless of your audience, all business plans generally follow a similar format:

  1. Abstract. First and foremost, it should provide the overview to readers.
  2. Company Description. This section is especially important when securing funding as it provides a high level overview of your history, legal structure of your business, products / services, key partners and summaries of your financial goals and commercial.
  3. Products. Next, your business plan should include a detailed description of the products or services you provide. This section should illustrate how your product benefits your target customers.
  4. Market analysis. In this section, you really only need to explain two things: the market need and how your products and services meet that need. This includes targeted customer segments, industry statistics, relevant marketing data, and an in-depth look at the strengths and weaknesses of your competition.
  5. Management team. Before investing in your business, someone wants to know who is running the business. Include an organization chart with department descriptions and information regarding owners, key employees, management team, board members, advisors, etc.
  6. Financial plan. The last section of your business plan should be created with the help of a professional accountant. Include important financial statements, such as historical financial data for the past three to five years, realistic budget forecasts for the next five years, and analysis of all your financial data. [Need help organizing all of your business financials? Check out our accounting software recommendations.]

Test your idea – don’t go for it

It’s tempting to dive into your business after reading success stories from successful entrepreneurs. However, if you want to take a leap, test the water first.

“Don’t be hypnotized by the compelling macro data you can find on the web,” said John Mullins, Ph.D., associate professor at London Business School and author of The New Business Road Test: What Entrepreneurs and Investors Should Do Before Starting a Lean Start-up. “Before you start writing… talk to potential customers, suppliers and others in your industry. ”

Even after you get started with your business, you want to make sure you attract and retain customers before asking for capital, Mullins added.

“Raising money too early is a distraction and has big drawbacks… not least of which is losing control,” he said.

Study your market – don’t go blind

As with any business venture, research is essential to a solid business plan.

“Research is one of the great added values ​​of writing a business plan,” said Joseph Ferriolo, director of Wise Business Plans. “Research is forcing companies to know what they can hope to do and what the industry trends are.”

Mullins advises that you ask yourself how big and attractive your market is, how fast it is growing, and if there are any trends that will cause it to grow in the future. Pay close attention to the “five forces”: threat of entry, threat of substitutes, supplier power, purchasing power and competitive rivalry.

Additionally, look for Critical Success Factors (CSFs) or important areas that you need to focus on early on. Some examples are finding the right location, competing with similar companies, and keeping efficient employees. Discuss your CSFs with your team to ensure they are aligned with your goals, Mullins said.

Share your plan – don’t keep it to yourself

For your business to be successful, all employees must understand the dynamics of the business plan. This is not a document you should lock up.

“The business plan allows an organization to stay focused, [and] it needs to be shared, ”said Brian S. Cohen, operating partner at Altamont Capital Partners. “Too many companies treat it as a confidential document to be kept out of the ‘prying eyes’ of core employees. I think the business plan should be shared, discussed, and modified as appropriate, through an open loop of feedback and ideas. ”

The more people involved, the more ideas you can get around the business, Cohen said. It is important to consider the contribution of each worker to ensure that the result is enjoyable for all stakeholders. [ Check out our recommendations if you’re interested in investing in business plan software or services for your small business idea.]

Be clear and concise – don’t overdo it

You don’t need to have an over-the-top, elaborate document with fancy formatting or flashy decor. However, what is written should be specific enough to cover all areas of concern.

Cohen advised that you start your plan with a SWOT analysis, which represents strengths, weaknesses, opportunities, and threats. Create a summary outlining the industry you want to be successful in, and how and why you intend to do it. Next, list your business’s strengths and weaknesses, growth opportunities, and threats that could hinder achievement of those goals.

Klein said the document does not need pages and pages of text; rather, it can include images, infographics and details “so that it can be used as a point of reference at all times to ensure the business is on track and meeting its goals.”

Use it – don’t put it away

Your plan is there for a reason. Don’t be afraid to refer to it as much as possible – remember to check the map when you’ve made a wrong turn. There is nothing wrong with using your plan to get you back on track or to make sure you’re always on track.

“The biggest mistake people make is [that] they prepare the document then put it in a drawer and never look at it again. It’s doomed to fail, ”Cohen said.

Remember to revisit your business plan as your business grows.

Some source interviews were conducted for a previous version of this article.

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