Before you launch a business, a strong business plan may assist you in defining your strategy, seeing potential obstacles, choosing the resources you'll require, and assessing the sustainability of your concept or expansion plans.
Many entrepreneurs find benefit in taking the time to sit back, investigate their concept and the industry they're aiming to enter, and comprehend the scale and the strategy behind their methods, even if not every successful business debuts with a formal business plan. Writing a business strategy can help with that.
What is a business plan?
A business plan is a document that describes a business, its goods or services, how it makes money (or plans to make money), its management and staffing, funding, operational model, and much other crucial information.
We had a foundation in marketing but lacked the operations, financial, production, and technology skills necessary to manage a fashion ecommerce business. We were better able to see the “unknowns” and the areas where we would require assistance or, at the absolute least, to hone our skills after laying out a business strategy.Jordan Barnett, Kapow Meggings
Why write a business plan?
Business plans are frequently related to receiving a loan since lenders use them to assess a business's business before investing in it. But even if you don't require finance, there are still several compelling reasons to think about creating a business plan.
In addition to helping you comprehend the breadth of your business and the amount of time, money, and resources you'll need to get started, writing down your strategy is a very useful exercise for crystallizing your ideas.
If you have several ideas in mind, creating a rough business plan for each can assist you in concentrating your time and efforts on the projects that have the best chance of succeeding.
To construct a business plan, you must do market and competitive research—knowledge that will guide your strategic decision-making.
In particular, if you're in the early phases of expansion, your business plan is one of the simplest methods to explain your goal to possible new employees and may assist boost their confidence in the endeavor.
It will be much simpler for them to decide whether your business is a good fit for theirs if you plan to approach other businesses for collaboration if you have a clear understanding of your vision, your audience, and your business strategy—especially if they're further along in their growth trajectory than you are.
Numerous business plan contests provide rewards like mentorships, grants, or funding for investments. Try Googling “business plan competition + [your location]” and “business plan competition + [your industry]” to locate relevant contests in your field.
A business plan is a great place to start if you're searching for an organized strategy to organize your thoughts and ideas and communicate them with individuals who may have a significant effect on your success.
Free: Business Plan Template
Business planning is often used to secure funding, but plenty of business owners find writing a plan valuable, even if they never work with an investor. That’s why we put together a free business plan template to help you get started.
Our brick-and-store and online jewelry business switched from Magento to Shopify. Similar to how we did with our previous website and e-business venture, we developed a business strategy for the relocation. A summary of the reasons for the shift, problems with the existing business, advantages of switching platforms, anticipated problems encountered during the switch, the primary goal, additional costs, and a deadline were all included in our business plan. It truly covered everything we considered to be most significant. Everyone involved in the project, including the photographers, the marketing team, and the developers, received a copy of this business plan. We were all in agreement on this manner. The second time around, it worked even better than the first.Jeff Moriarty, Tanzanite Jewelry Designs
Business plan formats
Business plans might be one page long or several pages long, with intricate graphs and reports. A business strategy can be written in a variety of ways. The objective is to give readers the most crucial information about your business.
The following, among others, are examples of the typical business plans we encounter:
- Traditional. These are the most popular business plans. In the sections that follow, we'll go through the essential components of a business plan in more detail. Traditional business plans can be several pages long and take more time to write. Lenders and venture capital firms request this strategy.
- Lean. The standard business plan has been condensed into a lean business plan. The structure is the same, but it just contains the most crucial details. This strategy is used by businesses to adapt current plans for a particular target market or onboard new personnel.
- Nonprofit. Any organization that operates for the benefit of the public or society needs a nonprofit business strategy. It includes all the information included in a conventional business plan as well as a section outlining the effect the firm hopes to have. For instance, a speaker and headphone company that wants to assist those who have hearing impairments. Often, donors ask for this strategy.
How to write a business plan in 9 steps
Another option is, to begin with, a free business plan template and use it to guide the format of your document.
A blank page is one of the scariest things you may encounter. The ideal initial step you can do is to start your business plan with an organized overview and important components for what you'll cover in each section.
We've created a high-level overview you can copy into your blank document to help you start because creating an outline is such an essential stage in the process of producing a business plan (and avoid the terror of facing a blank page).
It's time to add details to your business plan outline now that it is in place. To assist you in creating your strategy step-by-step, we've divided it down into sections.
1. Draft an executive summary
One of your plan's most important elements is a strong executive summary, which you should create last.
The objective of the executive summary is to condense everything that follows and provide time-pressed reviewers (such as potential investors and lenders) with a high-level overview of your business that entices them to read more.
Again, since this is a summary, emphasize the important ideas you discovered when drafting your strategy. You may completely omit the summary if you're writing for your personal planning needs, but you might want to give it a shot simply for practice.
One page is the maximum length for an executive summary. The space restriction might indeed make fitting in all of the important information a little challenging, but it's not impossible. The executive summary of your business strategy has to include the following:
- Target market: Who do you sell to?
- The team: Who’s involved in the business?
- The ask: How much money are you asking for?
- Business concept: What does your business do?
- Current financial state: What do you currently earn in revenue?
- Business goals and vision: What does your business want to do?
- Projected financial state: What do you foresee earning in revenue?
- Marketing strategy: How do you plan on reaching your customers?
- Product Description and differentiation: What do you sell, and why is it different?
2. Describe your company
Who are you and what do you propose to do should be addressed in this area of your business strategy. By responding to these inquiries, you may introduce your business, your uniqueness, your advantages, and your suitability as an investment. As an illustration, the clean cosmetics brand Saie posts a letter from its creator outlining the goals and rationale behind the business.
Even if no one else will see these subtleties, clarifying them is still a good exercise. It's a chance to formalize some of your business's more abstract elements, such as your values, ideals, and cultural tenets.
You should include the following elements in your company overview:
- Your industry
- Your business model
- Your business’s vision, mission, and value proposition
- Background information on your business or its history
- Your team, including key personnel and their salaries
- Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or incorporated company?)
While some of these assertions are true, some will need a little more explanation, especially when it comes to your company's vision, goal, and values. Here, you may begin to explore the fundamental reasons behind your business's existence as well as your goals and key values.
Here, you may begin to explore the fundamental reasons behind your business's existence as well as your goals and key values.
Consider all the stakeholders your business is responsible to, such as owners, workers, suppliers, consumers, and investors, while defining your values. Now think about how you want to interact with each of them on business. Your key values ought to start to become clear as you construct a list.
Knowing your values will help you create a mission statement. Your statement should be no longer than one sentence and should convincingly explain why your business exists.
The purpose of Shopify, for instance, is to “Make commerce better for everyone.” Everything we do has a “why” and because it is so obvious, there is no need for additional explanation.
When you achieve your goals, what influence do you hope your business will have on the world?
Create your vision statement next. Once you've accomplished your goal, what influence do you see your business having on the world? If you open the statement with “We will,” you'll be off to a terrific start by framing this impact as an assertion. In contrast to your mission statement, your vision statement can contain more than one phrase, but try to limit it to three at most. The most effective vision statements are brief.
Finally, both short- and long-term goals should be included in your company overview. In general, short-term objectives should be accomplished within the next year, whereas long-term goals should be accomplished during the following one to five years. Make sure all of your objectives are SMART: time-bound, specified, measurable, achievable, and reasonable.
3. Perform a market analysis
Your market indeed has the power to build or ruin any sort of business you establish. You'll get a head start on success if you choose the correct market for your products—one where there are lots of clients who understand and need your product. You can find yourself fighting for every sale if you select the incorrect market or the appropriate market at the incorrect moment.
Whether or not you ever intend for anybody else to read it, the market study part of your business plan is crucial.
Because of this, whether or not you ever intend for anybody else to see it, a crucial portion of your business plan should include market research and analysis. An assessment of the size of the market for your products, a study of your company's position in the market, and an evaluation of the competitive environment should all be included. As you carry out your strategy, it's crucial to conduct thorough research to back your conclusions to convince investors and confirm your hypotheses.
How big is your potential market?
How many people need your product is an assessment of the prospective market. While imagining sky-high sales figures is fascinating, you should confirm your projected potential market using as much relevant, independent data as you can.
Here are some broad pointers to get you started on your study because this can be a challenging process:
- Understand your ideal customer profile. You might start by looking for official statistics regarding the size of the millennial market in the US. You could also consider future changes in the population of people in your target age group.
- Research relevant industry trends and trajectories. Find out how many individuals will be retiring in the next five years if your product caters to seniors, and also learn as much as you can about their consumption habits. If you're selling fitness equipment, you may investigate the prevalence of gym memberships as well as general health and fitness levels among your target market or the general populace. Find out, last but not least, if there are any predictions for future growth or decrease in your sector.
- Make informed guesses. It's impossible to have perfect, comprehensive knowledge about the size of your whole addressable market. To make a credible prediction, you want to base your estimations on as many independently verified data points as possible.
Government statistics departments, business associations, university studies, and reputable news organizations covering your industry are a few places to look for market information.
Your strengths, weaknesses, opportunities, and threats are examined in a SWOT analysis. What features of your business stand out as the best? What do you lack skill in? What changes in the market or business can you seize upon and transform into opportunities? Are there outside forces preventing you from succeeding?
You can generally omit writing lengthy paragraphs at this stage because these analyses are frequently presented as a grid with bullet points that break down the most important information in each part. The internal firm elements of strengths and weaknesses are stated first, followed by opportunities and threats in the subsequent row. Your reader will be able to rapidly understand the elements that might affect your business and identify your competitive edge in the market thanks to this graphic presentation.
Here’s an example:
Free: SWOT Analysis Template
Get your free SWOT Analysis Template now. By assessing your business's strengths, weaknesses, opportunities, and dangers, you can use this free PDF to future-proof it.
You may utilize the following three broad characteristics to set your business apart from the competition:
- Cost leadership. Offering cheaper pricing than the bulk of your rivals will allow you to maximize earnings. Businesses like Mejuri and Endy are examples.
- Differentiation. Your business depends on standing out from the competition due to how different it is from the present market leaders in your sector. Consider businesses like Qalo and Knix.
- Segmentation. You concentrate on a very particular, or niche, target market to gain success with a smaller audience before expanding to a larger one. Great examples of this method include businesses like TomboyX and Heyday Footwear.
You must comprehend your business as well as the marketplace's competitors to choose which is the ideal fit.
Even with a unique product, there will always be rivalry in the market, thus it's critical to include a competitive analysis in your business strategy. If you're breaking into an established market, select a few businesses you believe to be direct rivals and describe how you intend to set your goods and business apart from theirs.
Even if you have a cutting-edge product, there will always be competition in the market.
If you sell jewelry, for instance, your competitive advantage may be that, in contrast to many high-end rivals, you give a portion of your revenues to a reputable charity or pass discounts on to your consumers.
If you're entering a market where it's difficult to pinpoint your competitors, think about your indirect competitors—companies who provide products that can be used as a replacement for your own. For instance, it's too simple to claim that you have no competition if you're selling a cutting-edge new piece of kitchen equipment. Take into account what your target clients are doing to find solutions to the issues your product addresses.
4. Outline management and organization
Who is in charge of your firm should be disclosed to readers in the management and organization part of your business plan? Describe your business's legal structure in detail. Decide whether your business will be incorporated as an S corporation, a limited partnership, or a sole proprietorship.
If your business has a management team, utilize an organizational chart to demonstrate the roles, responsibilities, and connections among the individuals in your chart as well as your internal organizational structure. Share the specific ways that each employee will help your business succeed.
5. List your products and services
The majority of your business plan will focus on your products or services, but it's crucial to include a section that provides readers with pertinent information about them.
If you sell a lot of products, you may include more basic information about each of your product lines; if you only sell a small number, give more details about each. For instance, the bag store BAGGU offers a wide variety of bags in addition to home items and other accessories. The bags would be listed in its business strategy along with some critical information for each.
Describe any upcoming new products and any intellectual property you plan to release. Describe how they'll increase revenue.
It's also crucial to pay attention to the source of the products; for a dropshipping business, for example, handcrafted crafts are obtained differently from trendy products.
6. Perform customer segmentation
Your target market sometimes referred to as your ideal client, is the cornerstone of your marketing strategy, if not your whole business strategy. An overview of this individual is crucial to comprehend and incorporate into your strategy since you'll want to keep them in mind while you make strategic selections.
Describe several broad and detailed demographic traits to provide a comprehensive picture of your potential client. Typical customer segmentation includes:
- Where they live
- Their age range
- Where they work
- How much they earn
- Their level of education
- What technology do they use
- How they spend their free time
- Their values, beliefs, or opinions
- Some common behavior patterns
- Where they’re commonly employed
Depending on what you're offering, this information will change, but you should be detailed enough to make it crystal apparent who you're attempting to reach. More importantly, you should explain why you made the decisions you did in light of who your clients are and what they value.
A 50-year-old CEO at a Fortune 500 business, for instance, has different hobbies, buying preferences, and price sensitivity than a college student. Depending on which of them was your ideal customer, your business plan and actions would seem very different.
7. Define a marketing plan
Your ideal consumer immediately influences your marketing strategies. Your marketing strategy should describe your present choices and your anticipated course of action, with an emphasis on how well your concepts match the needs of your ideal client.
If you're going to spend a lot of money on Instagram marketing, for instance, you might want to consider if Instagram is the most popular platform for your target demographic. If it's not, you might want to reconsider your marketing strategy.
The majority of marketing strategies provide details on four important topics. Your business and the intended audience for your strategy will determine how much information you include on each.
- Product. What are you selling and how do you differentiate it in the market?
- Price. How much do your products cost, and why have you made that decision?
- Place. Where will you sell your products?
- Promotion. How will you get your products in front of your ideal customer?
The majority of your strategy may focus on promotions since you can more easily go into practical specifics, but each of the other three areas is a crucial strategic component of your marketing mix and should be discussed at least briefly.
8. Provide a logistics and operations plan
The routines you'll employ to make your ideas realities are logistics and operations. Even while you might not need to go into as much depth as if you were looking for investment, this is still a crucial element to take into account when developing a business plan for your personal planning needs.
Include anything related to your intended operations, such as:
- Suppliers. Where are your products made or do you obtain the raw materials required for production?
- Production. Will you create, produce, sell at a loss, or dropship your goods? How long does it take to manufacture your goods before shipping them to you? How will you respond to a busy time of year or an unanticipated increase in demand?
- Facilities. Where will you and the rest of the team be working? Do you intend to have a physical location for retail? Where, if so?
- Equipment. What equipment and technologies are needed for you to operate? From computers to lightbulbs and everything in between, this encompasses everything.
- Shipping and fulfillment. Will you utilize a third-party fulfillment partner or will you manage all the fulfillment responsibilities internally?
- Inventory. What would you store it in, and how much will you keep on hand? How will you handle inventory management and how will you transport it to partners if necessary?
This part should demonstrate to your reader that you have a firm grasp of your supply chain and effective backup procedures in place to deal with any possible uncertainties. If you are the reader, this information should help you decide how to price your products to meet your expected expenditures and when you will break even on your original investment.
9. Make a financial plan
No matter how brilliant your concept is or how much time, money, or effort you put into it, a business will either succeed or fail depending on its financial situation. People want to work with a business that they believe will be there for the foreseeable future.
Your audience and your objectives will determine the degree of information needed in your financial plan, but generally, you'll want to include an income statement, a balance sheet, and a cash-flow statement as the three main perspectives of your finances. The inclusion of financial information and estimates might also be relevant.
Here is a spreadsheet template with sample data that has everything you need to make an income statement, balance sheet, and cash-flow statement. If necessary, you can change it to incorporate projections.
Readers may view your sources of income and outlays on your income statement for a specific period. With those two pieces of information, they can determine your business's crucial bottom line, or the profit or loss it made during that period. If your business hasn't yet started, you may forecast future milestones using the same data.
The equity you have in your business is visible on your balance sheet. You put all of your business's assets (what you own) on one side and all of its liabilities on the other (what you owe). This gives a quick glimpse of the shareholder equity of your company, which is computed as:
Assets – Liabilities = Equity
Cash flow statement
The main distinction between your cash flow statement and your income statement is that the former considers when revenues are received and when costs are paid.
Your cash flow is positive when it exceeds the amount of money leaving your business. Your cash flow is negative if the reverse is true. Your cash flow statement should ideally show you when cash is low, when you could have a surplus, and when you might need a backup financing source to keep your business afloat.
Your cash-flow statement may be forecasted to assist you to spot gaps or negative cash flow and making necessary adjustments to operations. Here is a comprehensive approach to creating cash-flow estimates for your business.
Get copies of all 3 templates to use in creating these financial statements for your business plan by downloading them.
Tips for creating a small business plan
You should bear in mind a few essential points to design a successful business plan.
Know your audience
Knowing who will read your plan will help you adjust the language and degree of information, even if you're only creating it for yourself to organize your thoughts. This can also assist you in determining the most crucial material to include and when to delete less essential areas.
Have a clear goal
If your objective is to get money for your business rather than working through a strategy for yourself or your team, you'll need to put in more effort and present a more comprehensive plan.
Invest time in research
If your objective is to get money for your business rather than working through a strategy for yourself or your team, you'll need to put in more effort and present a more comprehensive plan.
Keep it short and to the point
Your business plan should be concise and easy to understand, often no more than 15 to 20 pages, regardless of who you create it for. Consider including them as appendices if you have any other materials that you believe might be helpful to your reader and your objectives.
Keep the tone, style, and voice consistent
The easiest way to handle this is to have one person develop the plan or give the plan enough time to be thoroughly updated before disseminating it.
Use a business plan software
For business owners, creating a business strategy is not the easiest process. However, it's crucial for everyone who is establishing or growing a business. Fortunately, there are tools available to assist with anything from planning and drawing to visual creation and data synchronization. You may complete a thorough strategy using business plan software's templates and training in hours rather than days.
A few curated picks include:
- Bizplan: tailored for startups seeking investment.
- LivePlan: the most affordable option with samples and templates.
- GoSmallBiz: budget-friendly option with industry-specific templates.
Common mistakes when writing a business plan
What we're going to tell you is something that other business plan publications would never tell you: your business plan might collapse. You don't want your time and work to be wasted. Avoid the following errors:
- Bad business idea. Not every suggestion will succeed. Your proposal can occasionally be deemed to be too hazardous to be funded. Other times, there is no market or the product is too expensive. Choose tiny business concepts that don't cost much money to set out and avoid the usual expenses.
- No exit strategy. When reviewing your business plan, potential investors have one question in mind: would they profit from your venture? You won't have much luck raising money if you don't present an exit strategy or a plan for them to depart the business with the greatest gains.
- Unbalanced teams. The cost of entry for establishing a business is a fantastic product. However, a fantastic team will lead it to success. Unfortunately, a balanced team is often neglected by business owners. They assume that readers want to see prospective earnings without considering how you'll make it happen. It makes sense to have at least one developer or IT professional on your team if you're presenting a brand-new software concept.
- Missing financial projections. The aspect of your stats that readers find most fascinating is. Don't forget to include your income statements, P&L statements, cash flow statements, and balance sheet. To write a good business plan, include your break-even analysis and return-on-investment projections.
- Spelling and grammar errors. Some companies believe that using a professional editor is excessive. The truth is that every top company has an editor go at its writing. How can someone read your business plan and think you'll manage a successful firm if they see typos?
Business planning gives you a solid foundation for growth
Even if you never intend to pitch to investors, a business plan may help you establish specific, intentional next steps for your business and can also show you any holes in your strategy before they become problems. You now have a thorough manual and the knowledge you need to start working on the next stage of your own business, regardless of whether you wrote a business plan for a new internet business concept, a retail shop, developing your present business, or buying an existing business.
Business plans FAQ
The 3 main purposes of a business plan are to:
1- Understand your financial needs
2- Clarify your plans for growth
3- Attract funding from investors, banks, and lenders
1- Market analysis
2- Marketing Plan
3- Financial plan
4- Executive summary
5- Company description
6- Management and organization
7- Products and services
8- Customer segmentation
9- Logistics and operations
Business plans fall into three broad categories:
1- lean startup
A solid executive summary is the foundation of a successful business strategy. It also provides appropriate explanations of the viability of the idea, target market insights, the competitive environment, and other firm information. A marketing plan concentrated on the target market, marketing mix, and campaigns.