How to write a business plan: Tips to get started
There are lots of reasons to write a business plan. Like a roadmap, it can help you plot out your path through the early stages of your business. It’s a solid foundation to help you know where to start, and it can guide you as you begin to structure, operate, and grow your business.
Over 70% of seasoned small business owners recommended writing a business plan before you start your business. Planning for success is your first step toward succeeding. Companies with a business plan are twice as likely to grow, get investments, and secure loans.
It’s important to have a plan tailored to you, your business, and your industry. There are templates for business plans available from many sources. However, a generic document won’t be as effective as a plan created for your specific goals and research. Several components are included in a business plan. You should present information in the best way for your company.
A business plan must be more than an idea or a concept. You need a comprehensive document with details for growth and development. It should include a plan for your business, what it will do, and how it will do it. Set aside time to write a solid business plan following simple, practical steps.
Section #1 - The executive summary
An executive summary should be very brief. It functions like a mission statement and describes the products or services your business will offer. Don’t overpromise, but explain why your company will succeed. Information about the leadership team and the location of the business should be included. You can also have a broad summary of your high-level financial growth plans here if you plan to ask for financing.
One strategy is to write the executive summary last. The executive summary condenses much of the information that follows it. Many business owners find it easier to write later. Then they can highlight the information they’ve already written and identified in other sections instead of writing this section without that context.
Section #2 - The company description
This section is all about your company. It should include information like your business’s name, address, and business structure. You might also want to provide relevant information about key people in your company. This is a great idea if you can highlight any unique experience, expertise, or skills they have. A company description is also a great opportunity to summarize your business’s history.
Background information about your business gives a reader insight. It helps them understand what you do, who the management team is, and the customers you serve. It's another opportunity to make a great impression.
It’s a good idea to keep this section short as well. You want to make a good impression and highlight great aspects of your team and business. However, avoid rambling. Details about your team or business that aren’t relevant might need to be edited out. Even details like numbers aren’t necessarily required in this section. It’s okay to showcase your drive and enthusiasm. However, your passion will read stronger if it’s not overwhelmed by too much detail.
Section #3- The market analysis
The market analysis is an important component of your business plan. Here, you’ll demonstrate thorough research and understanding of your target market. Competitive research is a key step that shows you what other businesses are doing. It defines your direct competitors’ strengths and what trends and factors are affecting the market outlook. This research can give you insight that can help you leverage changes in the market in your favor. You can learn from what your competitors are doing successfully. Show that you'll adapt where you think there are opportunities to improve.
A market analysis section of a business plan can be made up of the following aspects:
- Objective - Simply put, this is a chance for you to define your purpose for the analysis. State if it’s meant to be shared with internal team members or external stakeholders.
- Outlook - This is a general overview of the broader industry, growing or in decline. Things like the market size, the projected market growth, and the product's life cycle may also be discussed here.
- Target market - This refers to the personas of the target customers. Here you should give information about who the ideal customer will be.
- Market value - If not already discussed in the market outlook, discuss market value here. This can be a tricky topic to navigate, and it isn’t always as simple as tallying your business’s inventory, equipment, and other assets and subtracting debts and liabilities. Often your business’s market value is also referring to the value it would pull in relation to shares or stocks. You might also consider it the amount your company would be worth if you sold it in the current market climate.
- Competitors - Provide information about your competition here. Depending upon your industry, these could be local or global and direct or indirect.
- Obstacles - Here, you should discuss the challenges you must overcome to enter the market. These could include limitations on your ability to keep up with the demand, funding limitations, location limitations, a saturated market, and a lack of brand identity.
- Regulations - Finally, you’ll need to show that you’ve done your homework regarding regulations. Many federal, state, and local laws could govern your industry. Be sure to include the requirements you would have to address. These could be labor laws, environmental regulations, or business licenses.
A piece of advice when approaching this section of your business plan is to break it down. This section is several smaller sections. It can take time to complete this research, so don’t rush. It also helps to understand your objective. A market analysis as part of a loan application differs from an internal analysis to see if there’s interest in the market for a new product.
| A business plan is a roadmap. Even if there are detours in the future, knowing the path you set for your business can help you find your way.
Section #4 - The products and services
Of course, at some point in your business plan, you should describe the products or services your business will offer. You’ll include an explanation about how they work and the benefits for your customers.
When considering what to include, think about how you might market your product. List what makes it unique or your strategy to bring it to market. As a basic rule, include the following elements:
- A general explanation of your product or service and how it works
- Features of the product or service
- Example of the pricing model
- Product stage of development
- Innovations/improvements over similar or existing products
- Lifecycle of the product and any relevant timelines
- Supply chain and fulfillment strategy
- Sales and distribution strategy
You’ll want to share information about intellectual property, such as copyright or patent filings. It would also be good to include relevant information about current research and development.
Many experts advise including a marketing and sales section in your plan. There’s no one way to approach your strategy for getting the word out about your product or service. However, lenders and investors want to know you’ve got a solid plan for spreading the word about your great idea. You don't have to share your business plan with external stakeholders. It still pays to take some time and consider how you’ll market to your customers. You should also revisit this section occasionally to evolve your approach. The methods you’ll use to attract and retain clients should change over time.
Section #5 - Financial analysis and projections
It’s time to get down to dollars and cents. If your business has been running for three to five years, you can include past financial documents. These can include income and profit-and-loss statements, balance sheets with assets and debts, and cash flow ledgers. Presenting previous metrics can demonstrate the financial health of your business. If you can, show your net profit margin, current ratio, and accounts receivable turnover ratio.
If your business is just starting out, you won’t have empirical data to show past success. You’ll have to show well-researched evidence that a company like yours can thrive in your industry and market. Business owners can put collateral up against a loan to increase their chances of receiving financing.
The best thing you can do in this section of your plan is provide as accurate of an outlook as you can. Try to forecast for the next five years of income and expenditures. Show your work. Explain how you came to the numbers in your projections, and align them to the numbers in your funding request.
Start your business off on the right foot
A business plan is a crucial step to help you make sense of your business. You can chart your goals for the future and create a comprehensive plan for how your business will operate and grow. Getting all this information sorted out early can help you request financing. It can also inform your decisions as you build your business.
Check out ComplYant’s other resources for more insights to help set your business up for success. The webinar, 9 Tax Things New Small Business Owners Need to Know, can help you break through the jargon of tax forms. If you sign up for a free account on ComplYant, you’ll never miss a deadline with customized calendars. Sign up today!