How to Write a Business Plan in 8 Steps
A business plan is your blueprint for financial success, outlining every aspect of your business model and providing a detailed account of your business goals and strategies. Writing one can seem intimidating at first, but with the right tools and some practice, it’s an easy process that will help you move confidently into the future of your small business or startup. In this article, we’ll walk you through how to write a business plan step by step, including what to include and where to start.
What is a business plan? A business plan is essentially a road map that details the route you will take to achieve your long-term goals in running your business. Although it’s never too late to write one, it’s always best to sit down and write your business plan as soon as possible, especially if you’re just starting out with your small business. Follow these 8 steps to help you write your own small business plan and reap its many benefits!
Step 1: Research
You probably already know that writing a business plan is an exercise in planning and research, but it’s also important to take time to learn about what’s already out there. For example, if you have an idea for dog walking service, it might make sense to do some research on other successful dog-walking services before spending time writing your own business plan. Do your homework first. Research your competitors, their weaknesses and strengths. What can you do better? What are they doing right? What are they doing wrong? Where are they falling short? These questions should help shape your plan going forward. Make sure you’re confident with your answers because people will ask them of you—especially investors! When researching potential competition, look at who else is providing similar products or services. Try to find common themes between them. Are all of these businesses profitable? If so, how much profit are they making? How long have they been around? Is there anything special about any of them that sets them apart from others like them? Use these answers as jumping-off points for further investigation.
Step 2: Start with the Executive Summary
The executive summary, found at the beginning of most business plans, is intended to give an executive-level overview of your business. Instead of focusing on operational or financial details, you’ll want to focus on the most important factors that explain why your company is worth investing in. Start with the what first and then go into the why later on. You’ll need about two pages for your executive summary. This will be used as a pitch document if you decide to seek funding from investors so it needs to be concise and compelling. A good way to do so is by thinking about how someone would describe your business idea over coffee—what would they say? How would they describe it? What key points would they hit? Don’t write down every detail but highlight only those things that are truly critical for someone else to understand. This should make up no more than 2% of your entire plan, however, which means you can skip all those nice-to-have ideas you had before.
Step 3: The Introduction
The introduction of your business plan sets up why your company is necessary, and provides an overview of your industry, explaining what problem you are solving or the opportunity you are taking advantage of. Essentially, it’s a summary of your entire plan that also leads into Step 4. Introductions can be brief (1–2 paragraphs) or elaborate (several pages), but they should be written so that even people unfamiliar with your industry would be able to understand them. If you were planning on introducing a new car-sharing service for students at your university, for example, your introduction might look something like this: There has been little innovation in transportation options for college students since campus shuttles were introduced almost 50 years ago. With their small capacity and inability to travel off-campus, shuttles cannot adequately meet the current demand from students who wish to explore both their academic and personal interests beyond campus borders.
Step 4: Market Analysis
An effective market analysis lays out your business’s value proposition, explains why customers will care, and maps out where they are (eg. competitors) along with their product and pricing strategies. Your plan should specify key metrics like price point and sales target by month. This information gives you benchmarks so you can assess your business against your competitors and make adjustments if necessary. If possible, benchmark against big-box stores or companies that are similar to yours that have been running for several years. The market analysis is essential to determine whether there is any need for a particular product or service before moving on to the actual implementation of your business idea. You may not realize it but one of the most important things when starting up a new business is having an accurate picture of what exactly you want to sell and who will buy it. With online shopping becoming more popular than ever before, knowing what products people are looking for online is imperative if you want them to come back again and again.
Step 5: Product and Service Offerings
Now, it’s time to add your product and service offerings. Think of everything you want your business to offer and list it all out here. This includes services and products you may be offering—or plan on offering. Make sure each entry has a corresponding short description. All of these details will be used later when we work on completing your market research, cash flow projections, sales and marketing plan, and more! Now that you have identified your target customers, what do they need? What are their pain points? Explain how you would solve them using your product or service. Do some brainstorming here: You can write down anything you think of; don’t edit yourself at all! The only rule is that whatever idea or concept comes into your head needs to be written down somewhere.
Step 6: Financial Projections
You don’t have to be an accounting wizard or CPA, but every business plan should include financial projections. Your projections may not be 100% accurate (or they may be overly optimistic!), but they help you think through and set reasonable goals for your business, which is why we recommend creating them even if you’re still early on in your start-up process. Financial projections are one of those yuck tasks that most entrepreneurs hate doing, so take advantage of online tools that can help simplify things. A good place to start is with free tools like QuickBooks Online—they allow you to create basic charts and graphs that illustrate how much money you anticipate making at various points throughout your first year of operation. If you want more advanced features like building cash flow scenarios or calculating tax implications, consider using Xero as it also offers a free trial period!
Step 7: Organizational Charts
If you’re going with employees, you may want to include an organizational chart or diagram of your hierarchy. Organizational charts are especially important for larger organizations, where it’s critical for employees to understand how their role fits into bigger operations. Organizational charts can also be helpful if you’re planning on bringing consultants and freelancers into your business; it will show them how they fit into your organization’s structure. In general, make sure that all titles used in your organizational chart match up with job descriptions outlined in your Job Descriptions section.
Step 8: Writing Style and Formatting
The formatting and style of your business plan depend on what kind of plan you are writing, and to who you are presenting it. Some people prefer that you use tabular data, while others prefer graphs and charts. Every financial statement should be clear and organized so that people can understand exactly how much money was made or lost over each month period. The most important thing is to keep your business plan consistent with whatever style of presentation it needs to be convincing. The last step before you present your plan to investors is proofreading. When looking at a page full of text, there are bound to be some mistakes—either grammatical errors or typos.
Writing a business plan is one of those things that you do in order to get your thoughts about a new business organized. After all, it’s often difficult to write down exactly what your goals are when you first begin working on starting your own business, and actually sitting down and making that happen can be even more confusing. But remember: just because someone else might have figured out how to make money from their great idea doesn’t mean you can do it too. in conclusion, it’s important to note that writing a business plan isn’t as scary as it seems; there’s no right or wrong way to go about doing so.