Launching a business without a business plan is a little like embarking on a hike through a pathless forest: Exhilarating at first, but ultimately a really, really bad idea. In this metaphor, obviously, your business plan acts as your much-needed map: It’s a detailed guide demonstrating what your business is, what it offers, and how it’ll operate. Beyond that, business plans are crucial if you’re approaching investors or other lenders (meaning, banks) for funding, as it demonstrates why your business is worth investing in. Clearly, understanding how to write a business plan is crucial to your business’ success.
While every business plan differs depending on the type of business, its stage of growth, and why you’re writing it in the first place, all well-rounded plans have some things in common—namely, these eight, key sections:
- Executive summary
- Company description
- Market analysis
- Organizational structure and management
- Product or service explanation
- Marketing and sales strategy
- Financial plan and projections
Ahead, we’ll explain each of these sections in greater detail. Consider this step-by-step guide on how to write a business plan a “map” for your “map.”
Step 1: Executive summary
An executive summary is exactly what it sounds like: A summary of your business. If you’re writing a business plan for funding, investors will occasionally ask for only this document as an evaluation tool before requesting further information, so it should be precise, but brief—two pages, tops.
Here, you’ll touch on some of the topics you’ll delve deeper into in later sections of your business plan, like the following:
- What product or service does your company offer, and what is your value proposition?
- What is your target market?
- Who is your competition, and how does your business set itself apart?
- How do you plan on evolving your business in the future?
- What is your financial plan?
- If you’re seeking funding, how much funding do you need, and how do you plan on using it?
- Who are your business’s principal members, what is your legal structure, and where are you located?
Although your executive summary comprises the first part of your plan, many business experts and advisors actually recommend writing it last. That way, you’ll have a deeper understanding of the ins and outs of your plan, so it’ll be much easier to sum them up concisely here.
Step 2: Company description
Your company description is an expanded version of that first bullet point: What does your business actually do? Explain what your product or service is in general, and then how it fits into the larger marketplace. What gap in the market does your business fill, and how is it different from what your competitors are offering?
If you have a mission statement (which you should!), this is where you’ll put it. Also mention your business’s legal structure, where you’re located (especially if you have physical storefronts), and maybe even a short history of your business.
Essentially, this section drives home to investors why your product or service is necessary right now, and why your organization is best equipped to offer it.
Step 3: Market analysis
The market analysis section explains how your business slots into your industry.
First, provide a detailed portrait of your industry. What are some key trends and characteristics of your field right now? How do you (or experts) predict it will change and evolve over the next few years, and how will your business change and evolve with it? You should also identify potential problems or barriers to entry that may arise over the course of your operations, and how you plan to overcome them.
Next, define your target audience. What is the problem your prospective customers are trying to solve, and why will they choose you to offer the solution? What are your clients’ key demographics?
It’s useful to include competitor research here, as well. Identify your main competitors, and how they’re succeeding or failing in catering to your shared audience. Crucially, explain how you’ll emulate and personalize their strengths to suit your business, and how you’ll fill a gap they’re leaving in the marketplace.
Step 4: Organizational structure & management
Next, describe how your business is organized. Start by listing your business’s principal members, their roles in your business’s operations, and perhaps a sentence or two of relevant background information—if they’ve earned higher degrees, for instance, or their experience in your industry. Business plans for funding often include each principal member’s CV. For investors, this is a little like putting a face to the name, and help them understand why they can trust you with their investment.
If it’s applicable, you’ll also note how many employees you have here, and provide an organizational chart. If you don’t have employees now but plan to in the future, you may want to include a hiring plan.
Step 5: Explain your product or service
Here, you’ll describe exactly what products or services you’re offering. If you’re creating a product, note whether it’s ready to put on the market ASAP, or if you’re still in the ideation, creation, or beta stages. Also if you’re a product-based business, provide details about your vendors, how you’re sourcing your materials, how and where your product is created, and your distribution plan.
Regardless of whether you’re a service- or product-based business, provide a pricing structure and how it reflects your market analysis. And if it’s applicable, also include intellectual property rights, and any research and development your business plans to conduct.
Step 6: Marketing & sales strategy
Your marketing plan is one of the most important aspects of your business plan (and your business, period). So in this section, you’ll lay out the basics on how you’ll design a marketing strategy to best target your highest-intent customers. Will you lean heavily on organic digital marketing, for instance, or will you use a combination of organic and paid digital advertising? Alternatively, you may choose to work with a PR or social media firm to run your marketing efforts; if that’s the case, include information about their services here.
Step 7: Financial plan & projections
Another important, albeit slightly drier, aspect of your business plan: Your business’s financial outlook. Here’s where you’ll demonstrate your business’s financial stability with materials like balance sheets, cash flow statements, income statements, and financial projections. If you’re in the very beginning stages of your business, take stock of how much cash you have on hand, how much you need to launch, and how much you’ll need to operate over the next three to five years. You should also use this opportunity to create a business budget.
This step may be the trickiest, especially for the right-brained among us. Work with a business accountant if you need hands-on help.
Step 8: Appendix
The appendix is the “odds and ends” section of your business plan, where you’ll attach any supporting documents or reference material your readers need in order to fully evaluate your business. Think: CVs, charts, data points, legal documents, pictures of your products and packaging design, and examples of your marketing materials (like social media posts).
Top tips on writing a business plan
If you’re feeling overwhelmed by everything we just told you, here’s a hot tip: Don’t write it all in one sitting! Rather, break it up section by section, and take as much time as you need to tackle each one. But remember, too, that your business plan should be relatively concise. If you feel like you’re getting too deep into the weeds, then you probably are. Keep it simple.
Also, know that your initial business plan isn’t set in stone, especially if you don’t plan on submitting it to investors anytime soon. Rather, your plan is a living document that’ll shift and change alongside your business.
Finally, know that you don’t have to go it alone. If you need more guidance, consider enlisting a business advisor. Start by contacting your local SBA or SCORE office, as they can offer one-on-one business advising services for free.