A 14-Step Guide on How to Write a Business Plan
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While a business plan is important for the success of any business, learning how to write a good business plan can prove to be an ordeal. It is a time-consuming process and takes a lot of effort and expertise.
Many business owners resort to professional business plan writing services to help them create a business plan and for good reason. The market research, assumptions and technical understanding that comes to the fore when expert writers are involved are hard to match when you do it yourself.
In this article, you will learn everything you need to know about a business plan and how to write one for your business.
A business plan is a key strategic tool not only for startups but also for established businesses looking to expand their horizons and grow. A well-researched and well-written business plan is necessary to take your business towards towering growth and success. It gives key decision-makers and investors a clear description of the short-term and long-term objectives to work towards.
Creating a business plan for startups is absolutely essential. It gives you a sense of direction that can help you reach your goals and attract investors. Many entrepreneurs don’t pay heed to the importance of creating a business plan and as a result, their business venture goes haywire and hits avoidable roadblocks.
In addition to new ventures, already established businesses also need to write a business plan to help them stay focused on their short-term and long-term objectives. Business plans help business owners stay true to their vision and make the right decisions.
So basically, whether you are a startup or an established business, you need a business plan to keep your business on track.
To make it simple, here are four reasons why every business needs a business plan.
Writing a business plan helps you not only define, but also focus on your business strategies and ideas. It not only has information on financial matters, but also human resources, management, planning, technology, marketing, and even on how you can create value for your customers.
A business plan helps business owners make sound and efficient decisions that decide the future of the business.
This is perhaps the most important reason why most businesses, startups or otherwise need a business plan. You need a written and detailed business plan for funding through loans or investment. Just giving them a description of what your business is will not help you convince anyone.
If you want to raise money for your business, then you must give investors or lenders access to a comprehensive business plan that gives them a clear idea of your business and the funds you need for it.
A business plan helps you identify potential weaknesses in your idea. Due to thorough market and competitor research, you can flesh out your ideas and judge it on its merits.
Just working off of a brief description of your idea and no workable plan will get you nowhere. Professional business plan writing services provide invaluable opinions and advice that will help you make better decisions.
A business plan not only helps a business secure funds but also serves as a great communication tool between you and your stakeholders. It can help you convince potential employees to work for you, attract potential customers, and also secure credit from the best suppliers.
We recommend you check out this infographic if you want to know more about why every business needs a business plan.
Many entrepreneurs drag the business plan writing step for too long. They spend a lot of time rehashing the plan, which takes away some optimal funding opportunities for them. A number of entrepreneurs also try to reduce their business plan into a simple business pitch.
This won’t impress investors and lenders.
Aspiring entrepreneurs and business owners are not able to get the funding they need if they don’t have a business plan.
According to a Harvard Business Review, being responsive to opportunities and showing flexibility is the real key to success. Many entrepreneurs have to shift their business direction when they find out that their products or services suit a different target market better than the one they initially thought.
It’s critical that you spend time writing a business plan because a weak plan may prove to be nothing but a pipedream.
Here are some stats that you should know before deciding if you need to learn how to write a business plan:
- Writing a business plan between 6 to 12 months after an entrepreneur decides to start a business increases the probability of success by 8%.
- Spending no longer than 3 months on creating a business plan increases the chances of success by 12%.
- The venture viability chances increase by 27% if the business plan is created when the entrepreneurs are preparing marketing and talking to customers.
According to The Rule Book of Business Plans for Startups, entrepreneurs must consider the following factors when they start creating their business plan:
- Vesting of the business
- Main objectives and goals
- Mission statement
- Factors that determine the success
- Industry analysis
- Competitor analysis
- Market analysis
- Core strategies
- Marketing plans
- Key operations
- Organizational structure
- Break-even analysis
- Proformas and projections
- Financial needs
Before we get into the main contents of a business plan, there are some important rules you need to keep in mind. Follow these, and you’ll most likely create a solid business plan that does its job.
Your business plan must be short, concise, and to the point. The ideal length is between 30 to 50 pages. Anything longer than that will most likely not be read by the investors and potential lenders. Anything shorter than that may seem arbitrary and just scratching the surface.
The sweet spot is to aim for 30 to 50 pages.
It can be tempting to add all the market research results and all other details in the business plan. However, it will not add any substance to the business plan if it doesn’t make any difference to the bottom line. Your business plan should be easy to skim through and should also be a quick read. Make sure you don’t omit any important details from it just to make it short.
Before you start writing your business plan, you must think carefully about what makes you unique. You must have a unique proposition that differentiates you from all the other businesses out there that offer the same products and services that you do.
You must use language that the business plan readers understand. For example, if you plan to develop complex scientific instruments, but the prospective lenders and investors are not scientists, then you must avoid unfamiliar acronyms or jargons in your business plan.
Your business plan should be written keeping the investors and lenders in mind. So, keep it as simple as you can so that everyone understands what you are proposing. You can add the technical details in the appendix section of the business plan if necessary.
Your business plan is not set in stone. In fact, you can, and you should update it as needed. It is a living and breathing document. You should update it with any new developments or when you are applying for more funding.
The Small Business Administration recommends that a business plan should include the following at the very least:
- An Executive Summary – A brief description of your business for executives.
- Company Description – A description of what you do.
- Market Analysis – A description of your market, competitor and industry research.
- Management and Organization – A description of your management and business structure.
- Product or Service – A description of the products or services that you are offering.
- Sales and Marketing – A description of your marketing and sales strategy.
- Funding Request – The amount of money you will need for the coming years.
- Financial Projections – A description of your financial projections that includes balance sheets, payroll, and other statements.
- Appendix – Any other information you want to include such as resumes, permits, and product descriptions.
A business plan with all the above-mentioned sections should be comprehensive enough to get attention but not too long that it bores investors.
Here is a step-by-step guide on how to write a business plan that helps you win over investors and stakeholders.
14-Step Business Plan Guide (Learn How to Write a Business Plan)
Research takes up twice as much time as you would need to write your business plan. Research as much as you can about the market and your product or service.
Evaluate what you have researched and then spend more time researching.
If you want to write the perfect business plan, you must know everything about the product, your company, the market, and the competition. You must know everything about not only your company but also the market you are trying to enter.
Talk to industry experts and your audience to start your journey of writing a business plan successfully.
2. Purpose of the Plan
A business plan written for a startup will be different from the one written for an established company. It is important to determine the purpose of your business plan and then write it. Similarly, if you are writing a business plan to be used in-house to follow your objectives and goals, then it won’t be the same as the ones written for investment and lending needs.
You must define the purpose of your business plan before you start writing.
3. Write an Executive Summary
The executive summary is the first chapter of the business plan. However, most people prefer writing it at the end. This is because it is a summary of your entire business plan. It shouldn’t be more than 1 or 2 pages long.
This is the most important part of your business plan, as many investors will only read the executive summary before they decide if they want to read the business plan further.
The executive summary should be short, concise, and to the point. Here are the things that you should include in your executive summary:
- Mission Statement
- General Overview of the Company
- Highlights of the Business
- Products and Services
- Financial Information
- Future Plans
You should keep the executive summary short and sweet. Everything will be written in detail later on, and this is just the summary. Therefore, treat it like a summary and don’t get into too many unnecessary details.
4. Write an Overview of the Company
Your company overview is basically the company profile. Write about the history of your organization and the products or services you offer. Write about your niche, target audience, market, and resources. Also, mention your unique selling proposition and what makes you different from the other companies out there.
Here’s how you can breakdown this section:
- Describe what your business does. This is the elevator pitch that gives the readers an idea about your business.
- Explain the industry and marketplace you want to serve with your products or services. Mention the specific need your business serves and where you fit in in the industry.
- Mention the legal structure of your business and give an overview of the ownership structure of the business.
A company overview is an important and essential part of your business plan. It is also one of the first parts written for the business plan. Writing the company overview is much easier when you already have a company profile.
5. Document Everything
Investors only invest in ventures that they are sure is going to make them money in the near future. Thus, they want to know everything about the business and its financial condition. This is why you must document everything from your cash-flow to expenses and industry projections.
6. Analyze Your Market
The next step in writing a business plan is to perform an in-depth analysis of the market you want to operate in and the competitors in that particular market. Investors and readers are more interested in businesses that have a solid understanding of their environment and all its dynamics.
Here are important points to add to the market analysis section of your business plan.
- Industry Description
- Target Market Overview
- Target Market Description
- Target Market Characteristics
- Target Market Size and Growth
- Market Share Potential
- Marketing Price
- Barriers to Entry
- Competitor Research
This section will take the longest time to complete as in-depth research is required for each part.
7. Business Organization
The next section in the business plan is your business organization and management structure. Here’s what this section should include:
- Organizational Structure
- Ownership Structure
- Background of the Board of Directors and Owners
- Hiring Needs
8. Products and Services
Once you have described your organizational and management structure in detail, the next step is to write about your products and services. This is the section that will give investors and lenders information about your products and services and their position in the market.
Here’s what this section should contain:
- A description of your services and products
- Information about the current status of your products
- Product research and development goals
- Intellectual property
- Sourcing and fulfillment
You must invest a lot of time and effort in this section. After all, this is the section that highlights the core of your business.
9. Marketing Plan
If done correctly, you’ve already provided a detailed overview of your products and services in the section right before the marketing plan. In this step, you should explain how are you going to market your products and services to get the attention of your target audience.
Here is what the marketing plan should include:
- The positioning of your business and products in the market
- Promotion plans to get the word out for your products and services
Your marketing plan should discuss all your marketing and promotion plans in detail.
10. Sales Plan
Now that you’ve devised and written your marketing plan, the next step is to write a comprehensive sales plan. Here’s what it should include:
- SalesForce: Describe who will be selling your product and how big a sales team you need. Also, mention who will be training your sales force and how will it be done.
- Selling Strategy: Include an overview of how are you going to sell your products or services.
Most business owners are not sure which sales channels will work best for them until they have started the sales process. You just have to include an overview of how you intend to market and sell. You can update this section if you find better ways to market and sell your products and services.
11. Financial Plan & Projections
This may be the real last section of the business plan, but it is the most important one. This section gives investors an outlook of your current state of finances and projects where you would like to take it in the future.
If you are an already established business, then you can include details of your past performance in this section.
Here are the important financial documents that you can include in this section:
- Income statements
- Balance sheets
- Cash flow statements
- Account payable statements
- Accounts receivable statements
- Debt obligation documents
If you are starting a new business, then you should include your financial projections in this section. These projections depend on the analysis and research of your industry and the top competitors.
Here are the important documents to include in the financial projections sections of your business plan:
- Cash flow forecasts
- Projected income
- Capital expenditure
- Balance statements
Your financial planning and projection section also includes another very important sub-section, your funding needs.
Here’s the information to include about your funding needs:
- The amount you need right now
- The amount you will need in the future
- The purpose of funds
- The impact of funds
Including all these details will let the lenders and investors know where their funds will be used. It also gives them an idea about the amount of money they need to contribute to making an impact on the business.
As mentioned at the beginning of the article, you must not stretch your business plan unnecessarily. If you have any supporting documents, attach them in the appendix section of the business plan.
Here are the things that you can attach in the appendix section:
- Data points
- Explanations that are necessary to understand the business plan
- Product descriptions
13. Make the Business Plan Adaptable
Your business plan will be read by a varied bunch of people. From employees to venture capitalists and investors to bankers. You must tweak your business plan depending on the reader. Modify your business plan if you know the interests of your audience.
For example, bankers are more interested in cash-flow statements and balance sheets. Venture capitalists, on the other hand, are more interested in your management team and your basic business concept.
Similarly, your managers will use the same business plan to keep in line with and track their objectives and goals.
Your business plan should be open to modifications depending on the kind of audience who reads it. However, don’t try to change too much information. It will take a lot of time. Only change what you think is necessary.
14. Show Your Passion and Dedication
Your business plan should reflect your dedication and passion for your business and your plan. It should describe your values and mention the problems that you are hoping to resolve. It should establish why and how you are different from all the competitors out there.
Now that you know the steps to write a business plan, you must also know that not all business plans are alike. You will need to create a different business plan if you are planning to create a startup and a different business plan if you are looking for loans and funding for an already established business.
While the basic steps remain the same, there are some things that need more attention in each of these plans.
To help you out, we have listed here the things to keep in mind when writing a business plan for startups or for funding through a loan.
Here are some important things that investors look for in a business plan for startups.
The first thing investors look for in a business plan for startups is your business idea and its scalability.
Does your startup have the potential to grow and reach exponential growth? Investors look for the scalability of your business idea before they consider investing in your venture. A typical investor will only be willing to take the investment risk if they see that your business idea can scale up in the near future, and you have enough expertise and management to do it.
Is there enough market opportunity for your business idea? As mentioned before, investors only invest in ventures where they think they can get a return.
As an entrepreneur, you must conduct extensive market research and mention the findings in the business plan before taking it to potential investors. Many business plans are rejected because of flaws in market research. You must look for all opportunities and threats of the market before you try to jump into it.
Investors don’t invest in startups that they think haven’t done enough market research and that don’t have a great market opportunity. They want a return on their investments, and that is only possible when there is a market for the business idea that you are pitching.
3. Investment Needs
If the investors are interested in the business idea and are convinced that it has great scalability opportunities, then they will look at your funding needs. They will look at how much money you need and what will they get if they invest in this venture. Include a clear plan of how you are going to use these funds. Include a section about what you plan to achieve through their investment.
Investors will not give their money to people they don’t know anything about. You must introduce your team to them and tell your investors why the people on your team are the best people for the job.
Your team overview section should include a bio of each team member. It should include their skills and experiences that can help the startup reach its goals.
However, don’t make it too lengthy. Aim for 3-5 sentences for each member of your team.
A business plan for funding through loans is different than a business plan that you write for startups.
While lenders are interested in your overall business plan, they are most interested in the financial outlook of your company. Furthermore, they also look for information about how and when you intend to pay them back.
If you’re here to learn how to write a business proposal for funding, below are some details it must include:
Make sure you cover the following points in your business plan.
- Loan purpose
- Loan amount
- Business credit score
- Personal credit score
- Time in business
- Entity type
- Proof of collateral
- Business permits and licenses
- Employer identification number
- Bank statements
- Annual profits
- Annual business revenue
- Balance sheets
- Unpaid bills and invoices
- Commercial lease copy
- Business tax returns
- Personal tax returns
- Legal agreements and contracts
- Ownership structure
Some lenders may ask for additional financial information that must be provided to them along with your loan application. Lenders are interested in the financial situation of your company and whether or not you will be able to pay them back.
Another thing that lenders consider is your management. If you have credible management made up of expert, experienced, and well-reputed people, it increases your chances of getting approved for the loan. Lending institutions want a guarantee that the business will pay back the loan in a specified period of time. You can get the funding if you can prove it in your business plan.
Read our post on how to create a business plan for an SBA loan application to understand the process in detail.
Writing a business plan can be overwhelming. There are so many sections and too many things to be careful about. The stakes are high, and you cannot take chances with investors and lenders. If you’re not confident about writing a successful business plan, then it is best to leave the task to experts.
Content Development Pros has a dedicated team of business plan writers. We have helped businesses in securing funding and attracting investors by creating business plans that are created to impress. Get in touch with us to get custom-made business plans with proven success. Our writers are also great at writing business proposals!