A detailed business plan serves as your personal roadmap, providing a comprehensive overview of your business, its goals, marketing strategies, financial projections, and more. And as your business grows, your plan can help you make smarter decisions and find success faster.
Writing a business plan may seem intimidating, but breaking it down into manageable steps can simplify the process. And with the help of our free business plan template, all you have to do is fill in the blanks.
How to Write a Business Plan in 9 Steps
Learn how to write a traditional business plan step-by-step:
1. Block Out an Executive Summary
The executive summary is the first section of your business plan, but we recommend writing it last. That's because it's used to cover the most important points of the rest of your business plan, including your goals, competitors, business model, and the like.
So, for now, simply block out the space where you want your executive summary to go, then come back and flesh everything out once you've written the rest of your plan.
2. Outline Your Goals
Setting clear and measurable goals is essential for any business. Goals provide a sense of direction and help you stay focused on what you want to achieve.
When outlining your business plan, consider using SMART goals:
- Specific: Resist the urge to make vague goals and nail down the exact outcome you're after.
- Measurable: Each goal should be measurable, either by revenue, client number, or some other concrete metric.
- Achievable: Keep your goals realistic and achievable to avoid setting your expectations too high.
- Relevant: Make sure your goals are highly relevant to your business and what it will do.
- Time-based: Give your goals a time frame to help organize your priorities and stay motivated.
3. Describe Your Business
Make sure to add an in-depth description of your business to your business plan. Include information about your company's mission statement, vision, and values, as well as your products or services, target market, and the things that set your business apart.
In addition, be sure to include all details about your business's location. For instance, if you plan on renting retail space in your city's downtown neighborhood, mention exactly which part of the neighborhood and why. Or, if you're planning to run your business entirely from home, make sure to note whether or not you'll have a dedicated workspace, where you'll keep your inventory stored, and other key details.
4. Conduct Market Research
Market research is essential for understanding your niche, customers, and competitors. It should include the following:
- A thorough analysis of your target market, including its size, trends, demographics, and customer needs
- A rundown of your potential competitors and their strengths, weaknesses, success, and pricing
- An evaluation of your target audience's likely demand for your product or services
Use this information to identify market gaps your business can leverage, learn more about your target customers, and give your business a sharper competitive edge.
5. Summarize Your Business Structure
In this section, you'll create an overview of your business's legal structure, ownership, and organizational structure.
First, specify your business' entity type. Your options include the following:
- Sole proprietorship or partnership: These entity types don't require official paperwork to set up, but they also don't protect your personal assets.
- Limited Liability Company (LLC): In addition to being relatively easy and inexpensive to set up, LLCs also offer robust personal asset protection. Your car, house, or personal items will never be on the line if your business gets sued.
- S Corp: If you already have a corporation with less than 100 shareholders, an S Corp could offer you tax benefits. However, an LLC is likely a better choice if you're starting a small business.
- C Corp: This entity type is perfect for entrepreneurs looking to start a large company with publicly traded stocks. For everyone else, an LLC is typically more practical and affordable.
- Nonprofit: Do you want to put all your business's revenue toward a cause? A nonprofit organization could be the best entity type for you.
(Hint: If you're unsure which entity type is right for you, take our Business Entity Quiz to find out.)
Next, describe your business's ownership structure and all key personnel. For example, mention whether you'll be running your business alone or with a partner, and include any people you intend to hire or work with immediately.
Finally, highlight any business partnerships or alliances you want to pursue.
6. Explain Your Business Model
Here, explain your business model, which is how your business will drive revenue and make a profit. Mention the following:
- Your target customers
- Your pricing strategy (will you undercut the competition or charge a premium for top-notch quality?)
- Where you plan to sell your products or services to customers (i.e., in person or online)
- Your brand or unique offering (i.e., the value you offer to customers that they can't find anywhere else)
7. Devise a Marketing Strategy
A well-rounded marketing strategy outlines how you plan to promote your products or services to your target market. You must provide a comprehensive plan that includes your branding, advertising, and promotional strategies.
For instance, you can describe the brand image you plan to create, the advertising and marketing platforms you plan to use (such as search engines, social media, or local publications), or the promotions you plan to attract customers with.
Don't forget to provide an estimate of your marketing and advertising budget along with a timeline for executing your marketing strategy.
8. Calculate Financial Projections
Based on your business model and the market research you conducted earlier, estimate your revenue, expenses, and profits for the next one to five years.
Include important information about your startup costs, deductible business expenses, and any business loans you plan on applying for and how you intend to repay them.
9. Compile Appendices
For your final step, compile any additional information or notes that support your business plan.
This could include market research data, product or service brochures, legal documents, prototype photos, industry reports, or financial calculations.
To make sure you can easily find the information you're looking for when referring back to your business plan, take the time to organize and label the appendices.
Different Business Plan Types
Not all business plans are alike, and there are just as many types of business plans as there are businesses.
So while the steps described above will help you write a traditional business plan, you have other options, too:
With abundant details and a structured format, a traditional business plan is comprehensive and well-researched. You can use a traditional business plan exclusively for your own purposes, or you can submit it to investors when you seek funding.
A lean business plan is like a pared-down version of a traditional business plan. It typically contains all the same critical information but may include less precise and in-depth research and calculations.
Startups looking to bring an innovative product or service to market can benefit from a startup business plan. Specifically tailored for new businesses with lots of growth potential, this type of business plan often includes the founders' strategy for obtaining funding from venture capitalists.
If your business is already established and you want to grow it even more, a growth business plan could be right for you. A growth plan generally includes strategies for increasing sales, expanding into new markets, offering new products, and optimizing current processes.
An internal business plan is specifically geared toward a business's internal members. For example, a business plan could be created to help a company's executive staff stay focused on their most important goals, or it could help a marketing team improve its efficacy and efficiency.
Your first business plan can become irrelevant to your business's current needs over time. To solve this issue, create annual business plans that address your company's most recent changes and highlight any areas of focus.
Business Plan Template
Want to know how to write a business plan template? It's just like writing a business plan, but instead of filling in the details as you go, you begin by creating placeholders for each section ahead of time.
For example, your business plan template could include placeholders for your:
- executive summary;
- company description;
- market analysis;
- products or services;
- marketing strategy; or
- financial projections.
These placeholders could be entirely blank, or they could include an indication of what each section contains:
Skip the writing process and opt for a ready-to-go template. Download our business plan worksheet to get started immediately.
Tips for Creating a Foolproof Business Plan
We talked to experienced small business owners and examined the most widely-shared tips to find the best advice on writing the best business plan possible:
Describe the Issue You'll Tackle
Leo Ye, co-founder and CEO of the online office software Cubo, believes that "every business plan should begin with an explanation of the problem that the business intends to solve, as opposed to a description of the company and the items it will offer."
Be sure to "explain the issue in straightforward language" and always "quantify and justify the cost in dollars or hours. Specificity is preferable to generalizations, which can only weaken your argument."
Analyze Your Risks
In addition to the other sections of a business plan, Joshua Rich, CEO and founder of Bullseye Locations, recommends including a section on risk analysis. In this section, you can "Identify potential risks and challenges that your startup may face, and provide a plan for mitigating [them]."
Prioritize Your Budget
To create a foolproof business plan, Aima Irfan, editor-in-chief of InsideTechWorld, advises entrepreneurs to "always emphasize budget planning" and "be transparent when including income and expenses." This helps to better keep track of progress.
"Don’t forget to include any investments you have already made or plan to make in the future," she says. "Review your budget [consistently] to cut down on unnecessary expenses."
Know Your Reader
Depending on the type of business plan you're writing, its end reader could be potential investors, fellow business owners, specific employees, or just yourself.
So, be sure to tailor your business plan to the intended reader, and you'll not only see better results but also save yourself some time and effort in the process.
Don't Spend Too Much Time on Your Plan
If you've already performed the necessary research and thought about your business's most crucial elements, you may be able to write your business plan in just a few days. But if you're starting with nothing more than a single product idea, your plan might take months to complete.
But no matter how long it takes to write your plan, make sure you're not spending undue time on it. In other words, if your plan is essentially complete but you keep going back to tweak its wording or organization, it's time to stop planning and start taking action.
Common Mistakes When Writing a Business Plan
When it comes to business plan mistakes, learning what not to do can be just as important as learning what you should do. According to the seasoned business owners we consulted, these are the most common mistakes new entrepreneurs make when writing a business plan:
"Many entrepreneurs get ahead of themselves by including unsupported assumptions," said Alex Miles, UK Managing Director of the small business credit card and spend management platform Capital on Tap. Instead, "critical market size calculations should be based on reliable data sources such as surveys and market analysis."
Similarly, Philadelphia Weekly co-founder Sharon Sanders observed that some entrepreneurs "just rely on Google-generated data and sometimes it is not an accurate representation of the market. Hence, they end up failing."
Using Business Jargon
Tatsiana Kerimova, CEO at Orangesoft, recommends resisting the urge to use "business jargon, fancy words, and cliches," as those can "hide the real value from the [reader]."
Prioritizing Profits Over Cash
"Losing focus on cash while writing a business plan is a common mistake," explains Irfan of InsideTechWorld.
"Most people pay attention to profits while creating a plan, and they emphasize on the concept of sales minus costs and expenses equals to profit." But "we spend cash in business, not profits. Hence, it is critical to focus on cash flows."
Frequently Asked Business Plan Questions
We have the answers to your most important questions about writing a business plan.
What Basic Items Should Be Included in a Business Plan?
To ensure all your bases are covered, be sure to include these core sections:
- Executive summary
- Main goals
- Business description
- Market analysis
- Business structure
- Business model
- Marketing strategy
- Financial projections
How Do I Write a Business Plan?
Write a complete business plan by following these nine steps:
- Create a placeholder for your executive summary.
- Specify your core goals using the SMART model.
- Describe your business's values, mission, competitive advantages, location, and other key details.
- Perform in-depth market research and include your findings.
- State your business' entity type and ownership structure.
- Explain your business model.
- Create a marketing strategy.
- Calculate your estimated revenue, expenses, cash flow, startup costs, and other financial projections.
- Store any additional information, notes, or documents in the appendices.
Get Your Business on Track With a Killer Business Plan
A detailed business plan can set your business up for success, but it's just the beginning of your entrepreneurial journey. With our services, you can confidently tackle everything that comes next, from forming your business entity and getting the right licenses to filing taxes and managing your finances.