Learn how to write a sound business plan that will help set up your business for success.
Learning how to write a sound business plan is an essential first step toward creating a successful business. Simply put, a business plan explains exactly what your product or service is and why people want to purchase it, as well as how you will tackle any environmental and market risks. It can also help you clarify what you want to achieve and plan exactly how you will reach those goals. This, in turn, can help you motivate your team, promote your business, and make key decisions.
A strong business plan also serves as an important communication tool for potential investors and lenders. It will allow you to articulate your current financial status, any sources of revenue, and how you plan to meet revenue projections. Although a business plan isn’t required for all types of credit, it often plays a significant role in SBA loan applications. While no two business plans are alike, every plan should cover the following elements.
Executive summary: Define your business
Your plan’s executive summary is your chance to introduce the business — so it needs to be concise and compelling. The summary should give a brief recap of the history and background of your business in a manner that will make the reader want to learn more about your plan. Sometimes it’s helpful to write this last — after you’ve spent some time contemplating and articulating all the details of your business.
Company summary: Delve into the details
Your business plan should explain what your product or service is and why people and businesses will want to purchase it. Be sure to highlight areas where your product or service has a clear advantage over the competition. Also, include details about pending or established copyrights or trademarks, and present or future plans for research and development (R&D).
Market analysis: Outline your strategy
A market analysis centers on the marketability of your business, who your competitors are and how you fit into the competitive landscape. In the analysis, give detailed information about your business’s industry, including the size of the market, your target market, the market need, and barriers to entry such as supply issues and regulation. Also, include information on any market tests you have conducted and identify your direct and indirect competition.
Marketing plan: Identify your niche
Here, you’ll highlight how you plan to promote your business and generate revenue. Describe in detail what your product or service does and how it will help consumers. Explain how your product is unique from others on the market, and how you will promote your business and generate revenue. Also, provide details about the product life cycle and any intellectual property issues. (Note: Some of this may reiterate or expand upon information elsewhere in your business plan.) You can protect your intellectual property, which can include names, designs and automated process, through trademarks, copyrights, non-disclosure agreements and more.
Management overview: Introduce your leaders
To highlight your human capital, describe how your business will be organized in terms of structure and leadership. Let your reader know who does what and what qualifications they have. Summarize this in your writeup, but consider providing relevant resumes, too.
Financial summary: Develop your financial plan
The financial summary, which includes details about your company’s funding sources, existing debt, any grants, as well as financial analysis, are crucial areas to lay out in detail. Explain the amount of funding your business needs and provide supporting financial data as well as financial projections. Include documents that communicate your business’s current financial status, such as income statements, balance sheets, and cash flow statements. List your expectations for revenues as well as the cost of your goods, rent, fuel, utilities, salaries, and other expenses.
The final step: Organize it logically
There are many ways you can organize the information mentioned above so you can share it with potential investors and lenders, current and prospective team members and managers, and anyone else who needs to understand your vision.
Do your research and find a business plan format that works for your business. There can be different types of plans for different types of readers, i.e. investors vs. employees, so you can modify your plan depending on your audience.
A few things to keep in mind:
- Make it easy to find key info. Create a cover page and table of contents, so information is easy to find. Also consider using dividers with tabs if you’re printing it out and putting it in a binder.
- Add more details as they emerge. Depending on what you do or sell, you may also want to add a section on Action Plans, which includes information on regulations, legal and compliance issues, safety processes, operational and management plans, an employee handbook, delineations of job descriptions of your staff, and anything else you’ve put on paper (or into a digital document).
- Consider using an Appendix. This is where you can store any supporting documents, including financial and market analyses, logo and branding examples, team resumes, and so on.
Your business plan should reflect changes in your business, the industry or the market. Make changes as necessary to incorporate the changing needs of customers or changing economic conditions in order to keep your plan current. Treating your business plan as a living document — and revising it regularly — can help you stay ahead of the competition and exceed your dreams.
There are several resources available to get you started with your business and business plan. Here are a few: