How to Write a Business Plan for Your Small Business
Many startups flop because they don’t plan properly up front. In fact, companies who write a business plan not only are more successful but also grow 30% faster than those who fail to plan.1 From creating budgets and setting sales goals to documenting marketing strategies and hiring employees, a thorough and well-researched business plan will help you achieve your goals and overcome possible road bumps.
Starting a business, even a home-based business, requires a never-ending to-do list that consists of mundane tasks, such as applying for business licenses, deciding on a business structure, choosing internet providers, and more. And let’s not forget constantly putting out fires during your day-to-day operations. However, many new entrepreneurs aren’t aware of the importance of crafting a business plan. There are several questions to ask before you map out your unique business plan, so let’s dive in with our step-by-step guide.
What is a business plan?
In the simplest form, a business plan is a blueprint of your business idea that outlines the long-term goals—both operational and financial, including a breakeven analysis—of your business and how you plan on achieving these goals. It also allows business owners to raise additional capital from investors and bankers and map out the marketing plan for how to grow. If you’re starting or expanding a business and expect to return a profit, taking the time to draft a business plan is crucial.
Why every business needs a business plan
Both startups and established companies should craft business plans, even if it’s only a one-page business plan. If you’re raising capital, investing your savings, or taking on a lot of risk, you’ll need to plan details out more thoroughly to avoid costly mistakes and show potential investors how your business will become profitable. Plus, a well-written business plan can attract new talent and improve your hiring practices. As another important component of business planning and employee hiring, consider offering employee benefits to increase your appeal, minimize your turnover rate, and improve morale and job performance.
The business plan template
A well-researched and well-thought-out business plan template should consist of the following elements. In addition to these sections, a business plan should have a cover, title page, and table of contents. Plus, the information and length of your business plan will differ depending on whether your business is a startup or an established company.
1. Executive summary
When writing up a business plan, the executive summary should provide a high-level look of the key points of the document. Think of it as a concise and quick summary of your business idea. It should capture the reader’s attention while convincing banks, venture capitalists, or angel investors to invest much-needed capital in your business. This section will also serve as your business story. It should cover basic topics, including these:
- Legal structure
- Business model
- Owners and staff
- Products and services
- Competitive advantages
- Financial projections
- Financial requirements
- Target market
2. Market analysis
A market analysis, oftentimes called a SWOT (strengths, weaknesses, opportunities, and threats) analysis, may sound daunting and meticulous, but it doesn’t have to be. As a key part of your written business plan, the market analysis section provides investors with a detailed overview of your industry, including the strengths and weaknesses your business has within the market. Your market analysis should dive deep into the following parts.
Make sure to add detailed statistics, including trends, growth rates, and the size of the industry. This will show potential investors that the target market is large enough to build a sustainable business.
After assessing the size and trends of your market, add information on your core target demographic, including gender, age, income level, and interests.
This part of the market analysis is dedicated to analyzing your current and potential competition. By documenting the strengths and weaknesses of your startup business and your competitors, your investors will determine whether or not your business will survive and flourish. While you don’t have to go undercover to assess and analyze your competitors, it’s important to develop a basic profile of your competition and their marketing strategies.
3. Operating plan
The expected day-to-day operations are the physical demands of your company. This ranges from office space, retail space, inventory, warehouse operations, equipment, labor, and more. If you’re a freelancer who works from home, this section will be short and sweet. On the other hand, larger companies should describe the physical location of their business, mortgage or rent costs, staffing information, overhead costs, and even the plan for comparing internet providers to find the one that will keep the business online.
4. Organization and management
This is your chance to boast about your organization and its members. Investors like to know how competent and experienced your team is. So highlight the members of your management team by showcasing their expertise and qualifications.
5. Sales strategies
This is where you outline how your business will raise money and become profitable. You also need to describe how you’ll attract customers, what your sales team looks like, what the average price is per sale, and what the estimated sales are. Keep in mind there’s more than one way to approach a sales strategy. However, it should evolve over time to fit your company’s unique needs.
6. Marketing plan
In the marketing strategy, it’s important to include in detail how you will gain and retain customers, whether it’s through social media, traditional advertising, or word of mouth. Take, for example, a food truck. To effectively let people know where it will be, the owner or another staff member could post the truck’s weekly schedule on Facebook and Twitter. A comprehensive marketing plan helps investors see the full picture of how your business will succeed.
7. Funding request
This section is where you’ll ask for the money you need to get up and running. Try to be as realistic and precise as possible. Specify if you’d like equity or debt and how you’ll use your funds. In addition, outline the specific terms and length of time your funding request will cover.
8. Financial plan
In a nutshell, the financial plan will contain all of the financial statements, including the startup costs, income statement, cash flow analysis, and balance sheet. A short analysis of these three statements should also be included. And be sure to outline the specifics of the legal structure of your small business so your investors are aware of how you’ll file taxes for your small business.
The appendix should provide supporting documents in a well-organized fashion. These documents can range from credit histories and bank statements to legal documents and patents.
Pros of using a business plan template
When writing a business plan from scratch, it’s normal to not know exactly what’s needed. When using a business template, you’ll be provided with step-by-step instructions to help you understand the general layout of the document—so you can easily get started and organize your thoughts.
5 business plan mistakes to avoid
When you submit your business plan to a bank or investor, you can be sure they are judging the quality of your work. Don’t let the following mistakes hurt your chances of success.
Spelling, punctuation, and grammar errors may leave investors wondering what else is wrong with your business. Luckily, you don’t need to be a professional writer to craft a well-written business plan. Simply run it through spell check or the popular writing app Grammarly. Along the same lines, use a confident, clean, and professional tone.
Sloppy presentation and style
Nothing bothers investors or bankers more than confusing formatting, poorly titled tables, missing page numbers, etc. Keep the presentation and style of your document consistent and professional.
Too much information
Try not to get bogged down on the technical details, as it may cause your audience to feel overwhelmed. Even a one-page business plan can effectively demonstrate the outline of your business idea and the depth of your knowledge while explaining fundamental components of your business. Additionally, make sure to speak their language and avoid jargon overload.
Too little information
Your business plan shouldn’t feel like a novel. However, it’s important that you cover the necessary elements that we listed above.
Insufficient research can really peeve a banker or investor. Although you shouldn’t bombard them with numbers, you should have some statistics and charts to back up financial projections or industry trends.
6 tips for writing the best business plan
In addition to following our business plan template, here are some tips for writing the best business plan:
- Write from the audience’s perspective
- Do your research
- Understand the potential customers and competition
- Maintain an attention to detail
- Focus on the opportunity
- Hire professional help or invest in a business plan software
Pros and cons of writing a business plan yourself
Writing your own business plan from scratch gives you the creative freedom to tell your brand’s story. Plus, if you are, say, a freelance copy writer, you get to show off your writing chops. But if you simply don’t have the time or knowledge, it may be best to hire outside help or take advantage of a business plan software. If you choose to write a business plan yourself, gain inspiration by viewing free sample business plans.
Pros and cons of using a business plan software
While writing a business plan yourself is completely doable, you can imagine how tedious and time-consuming it can be. So you may want to consider investing in a business plan software to take away some of the burdensome work. Most importantly, a business plan application can help you build confidence, organize your finances, and impress potential investors. While business plan software offers a slew of advantages, these programs can also be risky due to their inability to customize formatting and their lack of expert advice and input.
Navigating the waters of the business world can be tricky. That’s why it’s essential to carve out time to craft a thorough business plan. It will help you grow a successful business and survive the early stages of launching a company.
How will you write your business plan and achieve your entrepreneurial goals? Let us know in the comments below!
1. Bplans, “Business Planning Makes You More Successful, and We’ve Got the Science to Prove It”