Businesses and their employees need a strong foundation. When building an organization, everyone involved needs a guiding blueprint for success: a business plan. Writing down the business idea in the form of the company’s vision, direction, goals, and future plans educate the way the business operates. From employee roles to financial projections, a business plan covers the core factors required for a successful endeavor.
Business plans certainly help lead organizations to success during those first critical months. Research conducted by Palo Alto Software shows, “those who completed business plans were nearly twice as likely to successfully grow their businesses or obtain capital as those who didn’t write a plan.” Considering business plans have the potential to double the success of companies, creating one is a crucial step startup owners can’t afford to miss.
How to Write a Business Plan
Typically, this component of an organization consists of seven essential sections. This article provides a step-by-step guide on what should be included in each part of a professional business plan.
Part 1: Executive Summary
Like the first page of a book, executive summaries should grab the reader’s attention and keep them moving forward. In contrast, if you don’t write the introduction of your business plan well or correctly, you risk losing the interest of potential investors, lenders, and business partners.
Firstly, the introduction of a business plan should make goals and desires clear. In an article for Inc.com, startup reporter, Eric Markowitz describes that executive summaries “should include the major details of your report . . . Save the analysis, charts, numbers, and glowing reviews for the report itself.” Instead, he says, “let the person know what it is you do and why he or she should read the rest of your business plan or proposal.”
According to the Colorado State University style guide, an executive summary should be less than 10% of the completed plan. As a result, it should be less than 10 pages long. Above all, short paragraphs should concisely explain the main sections of the business outline in order.
Additionally, the U.S. Small Business Administration (SBA) suggests including brief statements or bulleted points for the:
- Mission statement
- Initial date of operation
- Names of company founder(s) and their roles
- Number of employees and any other locations of the business or its branches
- Description of facilities
- List of products or services
- Information on banking contacts and investors
- Discussion of growth and company highlights
- Briefing on business plan outlines for the future
Part 2: Business Description
First, reference the state of the market, industry trends, and possible opportunities. Correspondingly, researching and referencing sources in footnotes adds credibility and validity to any findings included within the document.
When outlining your business plan, cover the following:
- Type of operation
- Date of establishment
- Legal structure
- Key members
- Description of clients/customers
- Method for distribution of goods
- Support systems
- Products and services
- Unique selling proposition (USP)
- Factors of profitability
Try to keep each section listed as direct and concise as possible. For example, this portion of the business plan only requires a few paragraphs.
Part 3: Products and Services
Generally speaking, this part of a business plan outline describes the relationship between you, your customers, and your competitors. Due to this, provide details about how the product or service fulfills needs, creates value, and offers benefits to customers or clients.
Address these points in the products and services section:
- Description of product or service
- Comparison of competitors’ products or services
- Sales tactics (website, marketing materials, advertising)
- Order fulfillment
- Any needs for delivery (truck, new computer, software update, tracking system, etc.)
- Protection of intellectual property (registered trademarks and copyrights)
- Plans for expansion of future products or services
In this section, speak to the product or service’s target market. While demonstrating expertise and knowledge, keep the language simple and clear. In addition, focus formatting words around customer service, benefits, and the rewarding experience your company provides.
Part 4: Market Analysis
Altogether, this section should utilize research, data, and cited facts when communicating information to potential investors or those who can help grow the company. Avoid claims with no proven basis as much as possible. Instead, show those reading the business plan you understand the market and know how to position the company for success.
Answer the following questions when determining the content of this particular part:
- How do you describe the industry you’re in?
- What’s the temperature, trends, and signs of growth in your market?
- Who is your target market (developed client avatars)?
- What data do you have on them?
- What primary research did you conduct on your market?
- Where are the results of this research?
- What are the purchasing behaviors of your clients?
- Who are your competitors?
- What areas are they strong or weak in?
- How can you make a name for yourself in your market?
- When can a marketing plan be rolled out?
Always point your evidence, statistics, and research back to why your business idea should be in existence for those it serves.
Part 5: Strategy and Implementation
When writing a businesses plan, this section will summarizes your strategy for retaining and attracting customers while speaking to how the company functions. Moreover, getting into the specifics of day-to-day operations provides insight into how the company works and what framework is in place for serving clients.
NFIB proposes discussing:
- Your course of action for entering your market space
- A description of promotional tactics
- Company costs
- Plans for distribution
- Logistical information
- The journey from product development to product fulfillment
- Current employees and additional labor needed
- Details on the facility (locations, hours)
For a detailed example of a business plan’s strategy and implementation section, visit this link.
Part 6: Management Summary
In particular, the management summary describes the structure of your business, who’s behind it, and how key players help the company succeed. Therefore, highlight and demonstrate the value of those helping build the business. In addition, this part of a business plan also provides information on external professionals or companies needed for operation.
“When you write a management summary, it ultimately shows the strength of your company to readers of the business plan. Investors, financiers, and shareholders are most likely to scrutinize this section since it has the information that they need for decision making,” says Lori Wade in an article for Home Business Magazine.
For this reason, give detailed information on:
- The guiding leader
- Management team structure
- Experience, special skills, qualifications, and expertise of employees
- Places needing additional team members
- Business structure (LLC, partnership, corporation, etc.)
- Board members and their role
- Additional personnel who also help keep the company running (accountants, bookkeepers, lawyers, consultants)
- Data on salaries, any anticipated employee expenses, and discussion on growth (next hires and their cost)
In short, this section of the business plan outline proves your team is capable of success. More importantly, it helps your audience feel confident in the group’s ability to organize their efforts together and create an impact in the market and on your customers. With this in mind, ensure the information used is relevant and provides evidence on why the organization is beneficial to those involved. After finishing this section, take it to the team. They can help guide the direction of this section and elaborate on their function and purpose even further.
Part 7: Financial Strategy
Lastly, the financial strategy portion provides insight into the monetary aspects of the company. Additionally, if the business is already in operation, this section needs to cover the financial history of the organization, along with projections for the future (next three years). If creating a business plan before opening your company, the forecast included in your document needs citations on these figures.
It’s important to remember that the last portion of a business plan is one of the most vital parts for investors, bank loan officers, and business partners. For instance, sharing financial statements is a tangible resource providing evidence on the health and potential of your organization. Without sharing these specifics, those you’re interested in working with have nothing showing them their investment will be a profitable one.
In an article for Inc, Elizabeth Wasserman consults with Tim Berry, founder of business planning software, Palo Alto. He points out financial strategies aren’t written top to bottom. As a result, it’s a process that will skip around a bit since many of the numbers will inform the others.
What to Include:
- A spreadsheet providing realistic sales forecasts.
Include blocks determining unit sales, pricing, units multiplied by sales, unit costs, units multiplied by unit costs.
- A budget for expenses to determine fixed costs and variable costs.
Fixed costs include payroll, rent, utilities for the facility, etc.
Variable costs might be ads for promotional marketing and other unpredictable expenses.
Include an estimate of interest and taxes.
- A cash flow statement which shows how money moves in and out of your organization.
Use the rest of your financial strategy to determine this.
Consider existing profit and loss statements and balance sheets.
New businesses start with a 12-month projection (don’t count on all invoices being paid 100% on time).
- A profit and loss statement predicting the next three years.
Show assets (property, equipment).
Share liabilities (unpaid bills, debt from loans).
- Analysis on your break even point.
Provide numbers on how expenses line up with sales to “break even.”
Ultimately, this section provides clarity about whether or not the company is worth investing in. For this reason, the numbers included should provide educated predictions on what the next three years of your company look like. In the same way, investors want to see the business has the potential to grow quickly, while others looking to become involved want to make sure they’re joining a successful venture with a legitimate exit strategy.
How to Start Your Business Plan
This guide provides entrepreneurs and business owners with an outline for how to write a business plan. Each of the seven sections has multiple parts leaders must address. While this might be intimidating, start writing. Doing this allows time for you to work on the business, rather than in it. Additionally, it provides more perspective on the key facets of the organization. It also teaches you how to better prepare the company for success.
A business plan provides the directions necessary for getting everyone where they want to be, when they want to be there. For this reason, it’s an empowering tool that gives you and your team the guiding vision every company needs. Once you start, it’s easier to take a deep dive into your company and its future. Without a business plan, it’ll be difficult to be the strong leader your team and those who’ve invested in your company need you to be.
Still not sure where to start?
Want more information on the steps entrepreneurs need to take when opening a business? Check out these articles next:
Starting a Business: 10 Steps for New Entrepreneurs