If you want to know how to write a business plan, you’ve landed on the right article.
While the term sometimes sounds dull and bureaucratic, it’s something even the smallest businesses should do. Every company needs a strategy. We will tell you why and how to start planning by yourself.
What Is a Business Plan, and Why Do You Need One
A business plan outlines your business’s goals and how you’ll achieve them. In addition, it provides an overall snapshot of your business, including its market position and how it works.
Typically, business plans are roadmaps for your business according to different operational goals like:
- Daily Operations
There are different types of business plans, but virtually all of them contain the same elements.
Business plans are essential. They’re an effective way to transcribe your vision into a written document that you can share with others.
Sharing your business plan is good for attracting partners and employees, but it’s also required to apply for a business loan.
For example, if you want to attract investment from a bank, you’ll have to show them your business plan. Many companies write them just for acquiring loans and a cash flow statement.
Your business plan doesn’t have to be permanent. The most successful businesses routinely change and update theirs. You can also start with a business plan template to make this process easier.
Benefits of Having a Business Plan
Before learning about writing a business, knowing all the benefits of having would be helpful, creating it has numerous benefits, ranging from clarifying your business goals to providing valuable management guidance.
Validate Your Business Idea
This document will improve your understanding of your business.
While developing a business plan, you’ll need to ask yourself difficult questions about your business.
For example, if you’re writing a restaurant business plan, you’ll have to ask yourself why consumers will choose your restaurant over others. You’ll also confront why your restaurant has a chance to succeed when most others fail.
While preparing it, you might even discover that your business model was unsustainable. Don’t you think it’s much better to learn that your business model is unsustainable before investing time and money in an unprofitable business model?
Writing a business plan helps convert your vision into a reality.
A business plan outlines what your business needs to do to be successful. A good business plan even outlines the high-impact everyday activities your business needs to perform.
Having access to that information is vital.
By writing your goals, you know the next step in your entrepreneurial journey. A clear goal and plan are essential because proper planning converts abstract goals into concrete reality.
A proper business plan is like a map of the wilderness—it keeps you from getting lost in the woods.
Business plans improve resource management by providing insight into the resources needed for each business activity. They’ll help you structure your daily operations and allocate resources according to their strategic impact.
For example, your business plan could highlight how your company will answer these questions:
- Assets: Which assets will your company acquire and when?
- Human Resources: How many employees do you need? What will your hiring policies be? And how will they contribute to your business?
- Business Space: What buildings do you need to rent for your business?
- Cash Flow: How will your business remain solvent? And what will you do during financial emergencies?
- Revenues and Expenses: What are your revenue forecasts? And What are your estimated monthly expenses?
Strategic business planning helps both startups and large corporations.
The business plan provides guidance on what your business needs to do in different situations. Just the process of writing alone will improve your business decision-making abilities.
When you’re researching your business plan, you consider every aspect of your business. Doing so provides you with knowledge about different business aspects and improves your overall understanding of your business.
This improved understanding of your business translates to making more informed and strategic decisions.
Planning and making strategic business decisions is vital for your company.
You won’t be overwhelmed when making important decisions by planning everything in advance.
Your business plan will provide you with all the guidance you need to make the right decision.
Risk and uncertainty threaten every business. You have to reduce both to maximize your chances of success.
Outlining your goals in advance is one of the best ways to minimize risk and uncertainty. Likewise, a business plan highlights your weaknesses so that you can correct them.
When writing your plan, you’ll develop a realistic perspective of your business and objectively identify :
- The biggest challenges your company will likely face
- The most compromising weaknesses in your business model and strategy
- Potential critical mistakes that could cripple your firm
Recognizing your weaknesses is the first step to solving them.
A successful business requires talented employees and partners. A good business plan is among the best communication tools for attracting talented individuals.
The business plan gives potential talent a snapshot perspective of your business.
It’ll outline your firm’s guiding principles and direction of growth.
When presented appropriately, potential talent will understand why working with your company makes the most sense. By fully understanding your business, they’ll also have increased confidence in your company’s chance of success.
Having an overall perspective is vital for motivating potential employees to work with you because it convinces them that your business will grow.
A good business plan makes it easier to communicate with outside actors like:
- Allies and partners: Providing your business plan, in whole or part, to potential allies and partners will make it easier for them to form alliances with you.
- Suppliers: Allow you to attract reliable suppliers and accelerate your business’s approval for credit. Naturally, suppliers are most confident when they have solid reasons to believe your business will succeed. The plan provides them with those reasons.
- Professional Services: Sharing relevant sections of your business plan with professionals you hire makes their work for you better. For example, you could share your financial section with an accounting firm you’ve hired.
- Customers: Business plans are prospectuses for potential customers. Reading your plan could convince them of your business’s value to consumers.
How to Use Your Business Plan to Achieve Success
The three primary benefits of business plans are that they help you get credit, adapt to growth, and track performance.
Whether you want a microloan or require capital financing from investors.
Lenders care the most about the risk of defaulting from borrowers. As such, the most effective way to increase your chances of receiving credit is to reduce the perceived risk of your business.
Providing them with a comprehensive business plan that outlines your strategy and growth potential is the best way to reduce your business’s perceived risk.
In fact, lenders’ confidence is highest when they receive a detailed business plan that objectively proves why your business model is too good to fail.
At Camino Financial, though, you don’t need to present this document because we want to make the application process as smooth and fast as possible.
Grow and Change
Like we said before, business plans aren’t static–they constantly change with your business. As your company evolves, so does your business strategy.
Having an adaptable business plan helps you contextualize changes to your company and formalizes your acceptance of the change.
A constantly updated business plan increases investors’ and consumers’ confidence in your business. They can all see things changing for your company, but you must recognize that too.
Set and Track Goals
Business plans outline your company’s goals and how to achieve them. They help you objectively track your business’s current performance and figure out what you’re doing wrong.
Specifically, designing a business plan helps you with:
- Setting priorities: Your plan identifies crucial high-impact activities and goals.
- Accountability: Comparing progress to your business plan measures your company’s performance.
- Course-Correction: A business plan helps you change your business’s direction when the market and other factors change.
- Mission: Refer to the plan to see a clear set of your values.
The Components of a Business Plan
Here are some of the most common parts of a business plan:
An executive summary gives an overview of the plan’s content, including:
- guiding principles
- basic values
- marketing strategy
- competitive advantage(s)
Sometimes, executive summaries also contain a table of contents.
Understandably, executive summaries are usually the shortest section in a business plan and only contain essential information.
Business Description and Structure
In this section, you explain what your business does.
If you sell products, explain the manufacturing process, including what materials you need and how you manage your inventory.
If you provide services, explain your value proposition to customers.
Also, briefly include information about your company’s strategic relationships and administrative and legal structure.
Market Research and Strategies
Explain your market research and analysis conclusion, and discuss your marketing strategies.
You should include sales forecasts, a public relations report, and a marketing competitor analysis to give more context.
The more objective marketing data you provide, the better.
Management and Personnel
Include bios of your company’s executives and managers. Explain their contributions to the company and include how they’ve helped business goals.
Having a highly experienced group of managers and executives helps reduce your business’s perceived risk.
Arguably the most critical section, financial documentation provides investors with the numbers they need to know your business model works.
Include detailed financial information, including:
- Profit and loss projections
- Your balance sheet
- Cash flow statements
How to Write a Business Plan: Step by Step
Here’s some actionable advice on writing the different elements of a business plan.
You’ll create an excellent business plan if you follow our 8-step approach.
How to Write a Traditional Business Plan
A traditional business plan contains seven sections, each covering a different business aspect.
Your plan’s length depends on your audience and your businesses’ maturity.
The executive summary is the hook that draws readers in. This tells readers why they should take an interest in your business.
Use it to sell your business and establish why it matters.
Also, briefly summarize the rest of your plan in the executive summary. Again, don’t include extensive details, but provide enough information for the reader to expect what comes next.
Make sure your executive summary is no more than 2 pages long.
Provide a detailed and impactful description of your business. Explain what market opportunity you intend to capitalize on.
Include details of your target market and competitive advantage.
The most important part of writing a business description is to show how you’re doing things differently.
Market and Competitive Analysis
Provide details on your market and industry. Highlight the overall trends of your industry and inform your audience about the competition.
Don’t restrict your competitor analysis to large organizations; expand it to include smaller and similarly-sized companies too.
Your goal should be to provide in-depth market information for an audience completely unfamiliar with your industry. As such, the most important aspect is to highlight your industry’s competitive landscape and highlight your company’s place in the industry.
This section covers your business’s daily operations. So, you need to provide tangible details about your business and explain everything about how your company operates.
For example, is your business a sole proprietorship, or is it a partnership?
This section needs to provide all details regarding your business’s structure. We’d even recommend including an organizational chart to showcase how everything looks.
It’s finally time to discuss what you’ll be selling. This section is usually longer than the others because of its importance.
You need to define your product or service, explain how it’s different from the competition, and explain how it compares with the competition. Also, it describes how your product will appeal to consumers.
It’d be a good idea to attach a marketing or promotions plan in this section.
Include this section if you intend to use your business plan to attract investors or apply for a loan.
Specify the exact amount you want in your funding request and clarify why you need it. You need to clearly explain why you need this investment and the positive outcomes you expect from it.
Include a return on investment (ROI).
Financial Analysis and Projections
A detailed financial analysis is one of the most important business plan sections.
Your financial analysis should have two goals:
- Showcase impressive past financial performance
- Predict future financial performance based on past performance
You want to paint an overall picture of your business as financially successful and likely to grow more over time.
Including charts and images are one of the best ways to improve this section’s impact.
If your business has been operational for a few years, use past performance data to highlight financial stability. If your business is newer, use realistic projections instead.
For example, if your sales increased 5% in the previous quarter, don’t claim they’ll randomly grow to 50% in the next quarter.
Financially compare your firm with competitors to give a detailed financial outlook. You can use income statements, cash flow statements, and balance sheets to make the comparison.
Your financial outlook section should cover at least five years. Also, clearly state the reasons for your projections to add weight to them.
Insert any other relevant information in the Appendix that doesn’t neatly fit anywhere else in the plan.
Don’t dump excess information, though. Instead, only include meaningful information that supports the overall narrative of your business plan.
There’s no one-size-fits-all answer for writing business plans. For example, writing a business plan for a construction company will likely be different from writing a business plan for a food truck.
7 Parts of a Business Plan
- Executive summary
- Company description
- Products and services
- Market analysis
- Strategy and implementation
- Organization and management team
- Financial plan and projections
How to Write a Lean Startup Business Plan
The idea behind lean startup plans is to condense all businesses into 9 segments. You then explain each of those segments with minimal details.
Usually, it uses only a single page per segment.
Lean startup business plans are more flexible than traditional ones. This flexibility makes them great for businesses that expect to change drastically.
While there are many business plan templates for lean plans, these are the most common segments of a lean startup business plan:
Explicitly identify your target audience(s). Having multiple target audiences is fine, but make sure you define them properly.
This section will explain how your business appeals to its target audience. If you have multiple target audiences, explain your value proposition for each of them.
You need to provide clear and concrete value propositions, so readers take you seriously.
In this segment, you’ll elaborate on communicating your value proposition to customers.
List the different marketing and communication channels you’ll use.
What type of relationship does your business want with its customers? How will your business acquire and maintain those relationships?
Answering these two questions is the purpose of this segment.
Detail how your business will generate revenue and how much revenue you expect.
Most established businesses have multiple income streams, but it’s OK if your startup only has one. What’s important is clearly showing the origin of that revenue stream.
This segment describes the infrastructure and equipment you need to support your business operations, including the required staff and capital.
Highlight the processes that generate value for your business. You also need to explain why they are important.
New businesses rarely own all their essential resources, nor do they perform all key activities themselves.
You’ll likely have a list of external suppliers and service providers. Mention all of them in this segment.
Business Plan Writing Tips
Implementing these tips will make writing a business plan easier.
Be efficient with your plan.
Write clearly and concisely. Every word and image in your plan should serve a defined purpose. For example, don’t include any information just for increasing the plan’s length.
Keep yourself honest
When writing a business plan, remain as honest as possible.
A good business plan is realistic. Optimistic predictions are good, but only if they’re reasonably plausible and backed by objective reasoning.
There are numerous free and paid resources you can use for developing a business plan.
For example, non-profit organizations like SCORE provide free mentoring for writing business plans.
Things to Know Before You Begin Writing
Before starting, there are some things you need to know.
Firstly, understand your audience.
The biggest mistake most people make in their business plan is using industry-specific terms and jargon–a general audience does not appreciate being confused.
Potential investors want to understand your business as much as possible, so including jargon and complex terms hurts you. Your business plan needs to be simple but not simplistic.
Don’t bombard your audience with information, either. Thes best business plans are only as long as they need to be.
Pick Your Format (traditional vs. lean startup)
Nowadays, there are two ways to write business plans for your marketing strategy:
These are the most common. Traditional plans contain the most details and are appropriate for most scenarios, like applying for a business loan.
Lean startup plans are usually a page long and contain only a few high-level details.
Lean plans are appropriate for businesses that expect to change rapidly or have short timelines.
You could decide which format you prefer by checking business plan examples online.
Ready to Write a Business Plan That’ll Get You to the Next Level?
These documents help entrepreneurs acquire capital, define their goals, and have an overall framework for their business.
Decide what sections to include and write them sequentially. Writing a business plan aims to provide yourself and others with a clear perspective of your business’s overall strategy and goals.
If you were researching how to write a business plan to get a loan. Why not apply with a lender that doesn’t ask for one? It’ll make your life easier.
At Camino Financial, we have minimal requirements and a fast and paperless process.
We can offer you business loans from $1,500 to $400,000, so you can invest in your business.
Why is a business plan important?
A business plan is a strategic tool that helps entrepreneurs understand their business and its goals.
Is a business plan worth the time and effort?
Yes, the Journal of Business Venturing studied the business growth of 11,046 companies and reported that those with better business planning grew faster.
What must an entrepreneur do after creating a business plan?
They should execute the strategy they outlined in their business plan.
For example, they could use their plan to apply for credit or find investors and partners.
How to build a business plan?
To write a traditional business plan, you need to describe your business, its operational structure, products/services, and capital requirements. You also need to mention the industry and the market and add financial projections.
What is one purpose of writing a business plan before entering the market?
The most common purposes of writing business plans are to have a roadmap to help the business become successful or apply for commercial credit.
What does a business plan consist of?
A business plan consists of several sections that detail your financial, operational, marketing plan, and strategies.
How do I write a simple business plan?
You should try writing a lean startup business plan. It only includes the bare minimum information to make a simple business plan.