So you’ve got a brilliant business idea. Great! You’ve shared your idea with friends or colleagues and maybe even some potential investors. Their feedback is encouraging and you’re feeling motivated. But now everyone is waiting for the next step: the business plan. If you haven’t drafted one before, you might be struggling with how to write a business plan, deciphering what it should include and if it’s even worth the time and effort. (Spoiler: it is!)
A good business plan serves as a roadmap for how to start and manage your business. At a basic level, business plans will guide you through your entire business and the process of running it. It can provide a look at what you want your business to look like and achieve in years to come, which can help influence potential investors.
There are also a variety of benefits for having a business plan in place as an entrepreneur before you start applying for grants and establishing your business. If you’re hoping to apply for funding like entrepreneurship grants, a good business plan will be essential. If you’re wondering how to create a quick business plan to put into action immediately, this breakdown will help you nail it every time.
What Is a Business Plan?
A business plan guides you through each stage of starting and running your business. It’s usually put together by the business owner (you) or your management team and should empower you to transform your business idea into action. The plan should include all the key steps that are required to set up and manage a successful business, tailored to your specific industry.
Business plans can include a range of elements, including how you’re going to structure your business, manage it and grow it for the future. It lays out everything that you need to think about as you start out. Depending on the type of business you’re planning, a plan can look a little bit different and serve a few different purposes.
Sure, you could try to start a business without a plan, but why reinvent the wheel or learn by trial and error when a simple business plan offers a clear and reliable path? Recent reports highlight some reasons why a business plan can set you up for success.
A solid business plan can help you score grants and funding as well as attract potential investors or business partners. According to a survey done by CBInsights, the number one reason startups fail is running out of cash or failing to raise new capital. A business plan can become a tool to demonstrate to others that your business is legitimate and deserving of investment.
Data from the U.S. Bureau of Labor Statistics suggests that most new ventures are more than likely going to fail, with only around 33 percent of entrepreneurial ventures surviving beyond 10 years. This is why a business plan can be extremely helpful in plotting a path to follow as you go through the startup process.
Having a business plan is also linked to greater success. According to research done on U.S.-based entrepreneurs, creating a formal business plan made startups 16 percent more likely to achieve viability than non-planning entrepreneurs. And another study showed that entrepreneurs who had a business plan were twice as likely to get funding for their businesses.
Depending on the business, there are a few different types of business plans that might serve a purpose for you:
Standard/traditional plan: A traditional approach is to write a robust plan that looks at the whole picture and goes into detail about each element of your business. This can be around 40 pages long, give or take, depending on the scope. For a more complex business or industry, this type of plan will guide you through a more intricate step-by-step approach. Our business plan outline below will help you put together this more traditional or standard type plan.
Lean plan: A shorter business plan is more like an overview that shows the highlights or main elements of your business. This is a good option if you’re looking for how to create a quick business plan. Generally, they are around 10 pages long and are very brief with only limited detail. It can sometimes be all a small business needs for most purposes.
There can also be more specific business plans suited for different purposes. For example, if you’re just starting out or looking to expand and grow an already established business, you can tailor your plan to suit this specific stage.
Startup plan: A more specific type of business plan, a startup plan will outline the initial steps for starting and managing a new business or venture. It can provide a framework for how to set up your successful business and help demonstrate to potential investors that you have a serious approach to making this business work.
Growth plan: Like a startup plan, a growth plan looks at a specific stage of your business, which in this case is scaling up beyond the initial startup. This plan would focus more on what the expansion of the business looks like and how it’s going to be done, including capital needs, budgets, milestones and projections. This type of plan can help secure funding for the next phase of your business.
How to Write a Business Plan: Step-by-Step Guide
Now that you know a plan is an important part of establishing and growing a new venture, you might be wondering how to actually create a business plan. Some people find it handy to have a startup guide with milestones to achieve along the way.
You can look at a business plan like a long to-do list, with a projected vision of what you can achieve with your company over time. Our business plan guide below highlights the essential components, which you can tailor to your needs.
1. Executive Summary
The executive summary is a brief but important summary of the whole plan. It should include what your company is, your mission statement and values, an outline of products and services and basic information about the management structure.
It should also include basic financial information and a growth plan, especially if you plan on using the business plan to seek funding or investment. This is just an overview of what you will detail further below.
2. Company Description
This section is for detailed information about your company and the industry in which it plans to operate in. You can start out by describing the industry and the future possibilities of it, including how your company will fit in.
Then, you can go into the problems or gaps that your company plans to serve or fix, including any competitive advantage you will have. It’s perfectly fine to boast a little about your business’s strengths and possibilities in this section.
3. Market Analysis
You’ll need to understand your industry and the target market in order to put together your business plan outline. After describing your company and how it works in the industry, this section goes into more detail about the market you’re targeting and any competitors you face.
This can outline trends and themes in the market and how it applies to your business plan. You should also make comparisons between your company and competitors to show how you’re going to do better and grow bigger.
This is all about doing your market research, which is a highly underrated part of starting a company. According to CBInsights, around 35 percent of failed startups realized that there was no market need for their products or service after launch. Undertaking a thorough market analysis can assist in being clearer about the industry and reveal whether there is a real need for your solution.
4. Organization and Management Structure
Building on from the company description, this section is more about explaining how your business is structured and managed. This will include how the business is legally structured, such as whether it’s a C or S Corporation, general or limited partnership, Limited Liability Company (LLC) or a sole proprietorship.
You can use an organizational chart to show the layout of the management structure and the responsibilities of the team and each employee, if you have any. It should also show the logistics of the organization and the basic operations plan.
5. Services or Products
Describe all that your business has to offer. This will include any services or products that you sell and how it benefits the customer, client or consumer. You can link this back to the market analysis undertaken in section three to prove that your product or service has a need and what that entails.
This section of the business plan should also include any plans for intellectual property, like copyrights, trademarks or patent filings, even if this is planned further down the track.
This section should outline how you intend to attract and retain customers from the start. This might include what marketing strategies you intend to put into practice to target your intended audience, such as social media marketing or television advertising.
You should also describe what a sale process looks like. It can also be helpful to describe your pricing strategy, sales plans and how you’re going to measure marketing success throughout your company’s growth.
7. Financial Projections and Data
One of the most important aspects of a business plan is the financial section, especially if you’re planning on using it as a way of attracting new investors. The financial plan section can include a wide range of different subsections, including income statements, balance sheets and cash flow statements if you’re already established.
However, if you’re a completely new startup, then you should provide an outlook or projection for the first five years. You can include forecasted income statements, capital expenditure budgets and cash flow.
If you’re specifically going to be asking for funding, then you might want to include your financing requirements. You should outline what you need and how you’re going to spend it in detail, including how the debt will be paid or what return investors can expect.
An investor could expect to get anywhere from a 20%-60% return on their capital, compounded annually for new ventures. This means you should be able to convince any investors that you have a financial plan in place to deliver on your projections.
8. Supporting Documents and Appendix
An appendix section can be used to provide any supporting documents or materials to showcase what you’ve claimed throughout the business plan. This might include things like resumes, permits, patents, contracts, financial projection graphs, credit histories or sales data.
Final Tips for Writing a Successful Business Plan
Tailor your business plan depending on the intended reader. You should change some of the details and focus of the plan if you’re primarily going to be sending it to potential investors, instead of keeping it as an internal guide. Knowing your audience will help you write a more tailored plan.
There’s no hard and fast rule as to what should be included in a business plan, as it’s not a legal document. This means business plan examples can look rather different. The template outlined above should be used as a guide for you to write your own plan.
Don’t spend too long on your business plan. It's been found that if you spend any longer than three months crafting a plan, it can become futile. So, formulate your plan, then get busy putting it into action.
Now that you’ve reviewed the essential components of how to create a business plan, you’re ready to get started. There are plenty of ways to start a business with little or no money, as long as you have a strong plan. Remember that investing the proper time into crafting a good plan will help you attract investors, nab grants and excite your potential business partners.
For even more help, check out our Business Plan Worksheet — a free download that provides a template for getting your business plan officially written.
Jenna Scatena is a writer and content strategist with a love for stories that have never been told before. More than a decade of working with prominent magazines and brands informs her approach to impactful storytelling. Her stories have reached more than 30 million readers, won multiple awards and been anthologized in books. Jenna's work has appeared in Conde Nast Traveler, Vogue, Marie Claire, The San Francisco, BBC and The Atlantic. She's the founder of the editorial consultancy, Lede Studio.