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A strong business plan can help you succeed at any stage in your company’s growth. When you initially launch, it helps to prioritize your focus areas and manage your funds. As you continue to evolve and expand, writing a business plan gives you a roadmap to execute new opportunities. And at any point in time, it could be used to apply for loans and grants or set up a crowdfunding campaign.Find out how to write a business plan for a small business that is designed to help you achieve your company’s unique goals.
The Importance of a Business PlanCreating a business plan allows you to map out every crucial detail in launching and managing your company. Walking through each step helps you define your business goals, financial strategies, and both legal and organizational structures. The document helps ensure that you focus on your core areas without getting distracted by opportunities that don’t support the plan. Externally, the business planning process helps identify funding needs and serves as support for financing applications, investor pitches, and even crowdfunding for small businesses.When deciding how to make a business plan, first identify which type is better suited for your company. There are two primary categories: a traditional business plan and a lean startup plan.
Traditional Business Plan
A traditional business plan is the more in-depth option, discussing the company’s past, present, and future. The goal of writing a business plan is to provide a roadmap for the company. As such it often includes:
- A discussion of the broader market to identify both upcoming challenges and opportunities the business may face.
- Any relevant expansion plans. The business plan generally outlines where the funding will come from and what hiring needs to be done.
- An explanation of duties for current employees
- A strategy in case certain setbacks occur.
- A five-year forecast of company financials.
Lean Startup PlanFor a more basic business plan, you could opt for a lean startup model. Writing a lean startup model business plan requires less detail than a traditional plan and takes a more general approach to outlining the company’s information. A lean startup business plan typically doesn’t have enough information to satisfy a lender or investor. But it can be a useful internal tool when you’re just starting out. It also provides the flexibility to experiment with business models and other details. In other words, it gives you more room to pivot as you gain experience with managing the company. According to the Small Business Administration, elements of the lean startup plan include:
There are a variety of templates, examples, and online resources that can help business owners navigate how to write a lean startup business plan.
When you’re ready, here’s how to write a business plan step by step that can help you create a solid strategy for both the near-term and long-term. The following steps are for a traditional business plan. Business owners may decide to pick and choose the sections that are most relevant for their company’s goals.
- Partnerships. Highlight the strategic partnerships that will help your business operation. This may include suppliers or manufacturers.
- Activities. In what ways will the company have a competitive advantage in the existing market? Things to consider here may be technology that could set you apart.
- Resources. What resources will allow you to create value for customers? This may be staff, intellectual property.
- Value proposition. What unique value does your company bring to the existing market?
- Customer relations. How will consumers interact with your company? Will their experience be in-person vs online?
- Customer segments. Identify your target market. Defining and understanding who your target market is can help inform overall business and marketing strategies.
- Cost structure. This section should explore the costs your business will face - such as labor or supplies. In this section, it can also be helpful to define whether your company will work on a cost-driven model or a value-driven model. Cost-driven models focus on lowering costs while value-driven models focus on creating premium value for customers.
- Revenue streams. How is the company going to make money?
1. Executive SummaryThe executive summary provides a brief overview of your company as well as your goals. This section is particularly important if you’re applying for a small business loan or pitching new investors. Be direct with your funding goals, whether it’s receiving a certain loan amount or raising a specific amount of money. Within no more than a few pages, the executive summary should outline what you’ll discuss in greater detail throughout the rest of the business plan. You may even opt to write this section last so you know exactly what you’re summarizing.
2: Business Overview and StructureThis section goes into more detail on the business, including the products or services you offer. Include information on why your company is (or will be) successful, such as a specific competitive advantage, unique expertise on your team, and intellectual property.
Also talk about your mission and vision statements to clearly communicate your goals and values. These can be updated over time as your company evolves. Finally, describe your target customer, location, and other structural details that are central to your business.
3: Market Analysis and StructureHere’s where you show an assessment of your market. Discuss metrics and trends of the entire industry in which your company operates. This should largely discuss the competition and the demand for your product or service. Is your industry focusing major growth in one area, or price increases because of a general trend?Also describe your various customer segments, including their general location and demographics. By the time a lender or investor finishes reading this section they should understand how your industry works and where your company fits in among the competition.
4. Management and TeamThe strength of a company’s management team can be an important part of any business plan. Here’s where you get to brag a little about the people working for you and their expertise. Even if there are only a couple of co-founders at the moment, present their full bios and how each individual contributes to the company’s success. Larger businesses could include an organizational chart to illustrate the reporting structure of the team.Another important aspect to consider when writing a business plan, regardless of a company’s size, is the legal structure and ownership of the company. You can also introduce any advisory board members who lend their expertise to the business.
5. Marketing PlanTee up your funding request by explaining how you plan to get sales or how your current sales come in. Whether you’re selling a product or a service, go in-depth about where you connect with customers, such as in-store or online. Also outline your pricing strategy and how that stacks up to the competition. Next describe your advertising strategy and any results that you’ve experienced so far. Are you advertising online or through traditional media channels? For more established companies, discuss any new, upcoming campaigns. You can also mention budget plans for your sales and marketing plans.
6. Operations PlansThis section may make sense if you want to give more detail on how your company operates, especially if you have multiple divisions rather than just a few team members. It can build off of information you included in the management section. Rather than focusing on each member’s expertise, here you would discuss the different responsibilities throughout the company. Also provide details on operating expenses and overall budgets. You don’t need to go into revenue numbers yet, but instead talk about the capital and cash flow needed to run the business on a day to day basis. You may need to update your business plan if your company pivots to a new product or service.
7. Financial ProjectionsYour financial section includes a lot of crucial information. This includes both a historical account of your business finances (if you’re already established), as well as a forward-looking estimate, usually projecting the next three to five years. Data should include profit and loss statements, balance sheets, and cash flow statements. Include projections for each of these documents and get as specific as possible if you’re a new enterprise. Graphic visuals can also help your numbers pack more of a punch, especially when showing trends over a period of time.
8. Funding RequestWhen writing a business plan to attract investors or apply for a small business loan, you’ll want to outline your exact financing need and what you plan to accomplish with the funds. Describe how much you’ll need to launch if you’re a startup. Existing businesses can describe expansion plans, such as salaries for new positions, research and development for a new product, or a brand new location. For a loan application, you may give details about your preferred repayment plan. For an investor pitch, address your valuation and how much equity you’re willing to give up for a specific investment. Some small business grant applications will like to see a business plan too. Tie all of this information back to your projections and how much revenue growth you expect from this potential funding.
9. Appendix and Supporting DocumentationThe final component of creating a business plan is your supporting documentation in the appendix. This could include requested materials, like resumes or a business credit report (although lenders will frequently do their own credit check). You may also include letters of recommendation, customer testimonials, and product pictures. Consider adding your incorporation documents and any legal contracts or licensing information that impacts your business.
Final thoughtsUnderstanding how to write a business plan can help business owners be better prepared for both requesting funding, like a small business loan, and actually running your business. Writing a business plan requires quite a bit of research to make sure you can clearly communicate about your company and your industry as a whole. You may not need to follow all of these business plan steps, especially if you’re a new company. But you can still provide a well-informed analysis of your market, your company’s competitive advantage, and your future plans. As your business grows and evolves, it can be helpful to regularly update your business plan in the appropriate areas. This could give you the agility to jump on opportunities as they arise when you already have a well-prepared plan that only needs minor changes. Writing a business plan is a particularly wise investment of your time regardless of your company’s current stage.SOLC20025
About the Author
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.