describe the contents of a solid business plan

How to Write a Business Plan: Step-by-Step Guide + Examples

Noah Parsons

24 min. read

Updated May 7, 2024

Writing a business plan doesn’t have to be complicated. 

In this step-by-step guide, you’ll learn how to write a business plan that’s detailed enough to impress bankers and potential investors, while giving you the tools to start, run, and grow a successful business.

• The basics of business planning

If you’re reading this guide, then you already know why you need a business plan . 

You understand that planning helps you: 

• Raise money
• Grow strategically
• Keep your business on the right track 

As you start to write your plan, it’s useful to zoom out and remember what a business plan is .

At its core, a business plan is an overview of the products and services you sell, and the customers that you sell to. It explains your business strategy: how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

Most business plans also include financial forecasts for the future. These set sales goals, budget for expenses, and predict profits and cash flow. 

A good business plan is much more than just a document that you write once and forget about. It’s also a guide that helps you outline and achieve your goals. 

After completing your plan, you can use it as a management tool to track your progress toward your goals. Updating and adjusting your forecasts and budgets as you go is one of the most important steps you can take to run a healthier, smarter business. 

We’ll dive into how to use your plan later in this article.

There are many different types of plans , but we’ll go over the most common type here, which includes everything you need for an investor-ready plan. However, if you’re just starting out and are looking for something simpler—I recommend starting with a one-page business plan . It’s faster and easier to create. 

It’s also the perfect place to start if you’re just figuring out your idea, or need a simple strategic plan to use inside your business.

Dig deeper : How to write a one-page business plan

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• What to include in your business plan

Executive summary

The executive summary is an overview of your business and your plans. It comes first in your plan and is ideally just one to two pages. Most people write it last because it’s a summary of the complete business plan.

Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. 

In fact, it’s common for investors to ask only for the executive summary when evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation , or more in-depth financial forecasts .

Your executive summary should include:

• A summary of the problem you are solving
• A description of your product or service
• An overview of your target market
• A brief description of your team
• A summary of your financials
• Your funding requirements (if you are raising money)

Dig Deeper: How to write an effective executive summary

Products and services description

This is where you describe exactly what you’re selling, and how it solves a problem for your target market. The best way to organize this part of your plan is to start by describing the problem that exists for your customers. After that, you can describe how you plan to solve that problem with your product or service. 

This is usually called a problem and solution statement .

To truly showcase the value of your products and services, you need to craft a compelling narrative around your offerings. How will your product or service transform your customers’ lives or jobs? A strong narrative will draw in your readers.

This is also the part of the business plan to discuss any competitive advantages you may have, like specific intellectual property or patents that protect your product. If you have any initial sales, contracts, or other evidence that your product or service is likely to sell, include that information as well. It will show that your idea has traction , which can help convince readers that your plan has a high chance of success.

Market analysis

Your target market is a description of the type of people that you plan to sell to. You might even have multiple target markets, depending on your business. 

A market analysis is the part of your plan where you bring together all of the information you know about your target market. Basically, it’s a thorough description of who your customers are and why they need what you’re selling. You’ll also include information about the growth of your market and your industry .

Try to be as specific as possible when you describe your market. 

Include information such as age, income level, and location—these are what’s called “demographics.” If you can, also describe your market’s interests and habits as they relate to your business—these are “psychographics.” 

Related: Target market examples

Essentially, you want to include any knowledge you have about your customers that is relevant to how your product or service is right for them. With a solid target market, it will be easier to create a sales and marketing plan that will reach your customers. That’s because you know who they are, what they like to do, and the best ways to reach them.

Next, provide any additional information you have about your market. 

What is the size of your market ? Is the market growing or shrinking? Ideally, you’ll want to demonstrate that your market is growing over time, and also explain how your business is positioned to take advantage of any expected changes in your industry.

Dig Deeper: Learn how to write a market analysis

Competitive analysis

Part of defining your business opportunity is determining what your competitive advantage is. To do this effectively, you need to know as much about your competitors as your target customers. 

Every business has some form of competition. If you don’t think you have competitors, then explore what alternatives there are in the market for your product or service. 

For example: In the early years of cars, their main competition was horses. For social media, the early competition was reading books, watching TV, and talking on the phone.

A good competitive analysis fully lays out the competitive landscape and then explains how your business is different. Maybe your products are better made, or cheaper, or your customer service is superior. Maybe your competitive advantage is your location – a wide variety of factors can ultimately give you an advantage.

Dig Deeper: How to write a competitive analysis for your business plan

Marketing and sales plan

The marketing and sales plan covers how you will position your product or service in the market, the marketing channels and messaging you will use, and your sales tactics. 

The best place to start with a marketing plan is with a positioning statement . 

This explains how your business fits into the overall market, and how you will explain the advantages of your product or service to customers. You’ll use the information from your competitive analysis to help you with your positioning. 

For example: You might position your company as the premium, most expensive but the highest quality option in the market. Or your positioning might focus on being locally owned and that shoppers support the local economy by buying your products.

Once you understand your positioning, you’ll bring this together with the information about your target market to create your marketing strategy . 

This is how you plan to communicate your message to potential customers. Depending on who your customers are and how they purchase products like yours, you might use many different strategies, from social media advertising to creating a podcast. Your marketing plan is all about how your customers discover who you are and why they should consider your products and services. 

While your marketing plan is about reaching your customers—your sales plan will describe the actual sales process once a customer has decided that they’re interested in what you have to offer. 

If your business requires salespeople and a long sales process, describe that in this section. If your customers can “self-serve” and just make purchases quickly on your website, describe that process. 

A good sales plan picks up where your marketing plan leaves off. The marketing plan brings customers in the door and the sales plan is how you close the deal.

Together, these specific plans paint a picture of how you will connect with your target audience, and how you will turn them into paying customers.

Dig deeper: What to include in your sales and marketing plan

Business operations

The operations section describes the necessary requirements for your business to run smoothly. It’s where you talk about how your business works and what day-to-day operations look like. 

Depending on how your business is structured, your operations plan may include elements of the business like:

• Supply chain management
• Manufacturing processes
• Equipment and technology
• Distribution

Some businesses distribute their products and reach their customers through large retailers like Amazon.com, Walmart, Target, and grocery store chains. 

These businesses should review how this part of their business works. The plan should discuss the logistics and costs of getting products onto store shelves and any potential hurdles the business may have to overcome.

If your business is much simpler than this, that’s OK. This section of your business plan can be either extremely short or more detailed, depending on the type of business you are building.

For businesses selling services, such as physical therapy or online software, you can use this section to describe the technology you’ll leverage, what goes into your service, and who you will partner with to deliver your services.

Dig Deeper: Learn how to write the operations chapter of your plan

Key milestones and metrics

Although it’s not required to complete your business plan, mapping out key business milestones and the metrics can be incredibly useful for measuring your success.

Good milestones clearly lay out the parameters of the task and set expectations for their execution. You’ll want to include:

• A description of each task
• The proposed due date
• Who is responsible for each task

If you have a budget, you can include projected costs to hit each milestone. You don’t need extensive project planning in this section—just list key milestones you want to hit and when you plan to hit them. This is your overall business roadmap. 

Possible milestones might be:

• Website launch date
• Store or office opening date
• First significant sales
• Break even date
• Business licenses and approvals

You should also discuss the key numbers you will track to determine your success. Some common metrics worth tracking include:

• Conversion rates
• Customer acquisition costs
• Profit per customer
• Repeat purchases

It’s perfectly fine to start with just a few metrics and grow the number you are tracking over time. You also may find that some metrics simply aren’t relevant to your business and can narrow down what you’re tracking.

Dig Deeper: How to use milestones in your business plan

Organization and management team

Investors don’t just look for great ideas—they want to find great teams. Use this chapter to describe your current team and who you need to hire . You should also provide a quick overview of your location and history if you’re already up and running.

Briefly highlight the relevant experiences of each key team member in the company. It’s important to make the case for why yours is the right team to turn an idea into a reality. 

Do they have the right industry experience and background? Have members of the team had entrepreneurial successes before? 

If you still need to hire key team members, that’s OK. Just note those gaps in this section.

Your company overview should also include a summary of your company’s current business structure . The most common business structures include:

• Sole proprietor
• Partnership

Be sure to provide an overview of how the business is owned as well. Does each business partner own an equal portion of the business? How is ownership divided? 

Potential lenders and investors will want to know the structure of the business before they will consider a loan or investment.

Dig Deeper: How to write about your company structure and team

Financial plan

Last, but certainly not least, is your financial plan chapter. 

Entrepreneurs often find this section the most daunting. But, business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. 

A typical financial forecast in a business plan includes the following:

• Sales forecast : An estimate of the sales expected over a given period. You’ll break down your forecast into the key revenue streams that you expect to have.
• Expense budget : Your planned spending such as personnel costs , marketing expenses, and taxes.
• Profit & Loss : Brings together your sales and expenses and helps you calculate planned profits.
• Cash Flow : Shows how cash moves into and out of your business. It can predict how much cash you’ll have on hand at any given point in the future.
• Balance Sheet : A list of the assets, liabilities, and equity in your company. In short, it provides an overview of the financial health of your business. 

A strong business plan will include a description of assumptions about the future, and potential risks that could impact the financial plan. Including those will be especially important if you’re writing a business plan to pursue a loan or other investment.

Dig Deeper: How to create financial forecasts and budgets

This is the place for additional data, charts, or other information that supports your plan.

Including an appendix can significantly enhance the credibility of your plan by showing readers that you’ve thoroughly considered the details of your business idea, and are backing your ideas up with solid data.

Just remember that the information in the appendix is meant to be supplementary. Your business plan should stand on its own, even if the reader skips this section.

Dig Deeper : What to include in your business plan appendix

Optional: Business plan cover page

Adding a business plan cover page can make your plan, and by extension your business, seem more professional in the eyes of potential investors, lenders, and partners. It serves as the introduction to your document and provides necessary contact information for stakeholders to reference.

Your cover page should be simple and include:

• Company logo
• Business name
• Value proposition (optional)
• Business plan title
• Completion and/or update date
• Address and contact information
• Confidentiality statement

Just remember, the cover page is optional. If you decide to include it, keep it very simple and only spend a short amount of time putting it together.

Dig Deeper: How to create a business plan cover page

How to use AI to help write your business plan

Generative AI tools such as ChatGPT can speed up the business plan writing process and help you think through concepts like market segmentation and competition. These tools are especially useful for taking ideas that you provide and converting them into polished text for your business plan.

The best way to use AI for your business plan is to leverage it as a collaborator , not a replacement for human creative thinking and ingenuity. 

AI can come up with lots of ideas and act as a brainstorming partner. It’s up to you to filter through those ideas and figure out which ones are realistic enough to resonate with your customers. 

There are pros and cons of using AI to help with your business plan . So, spend some time understanding how it can be most helpful before just outsourcing the job to AI.

Learn more: 10 AI prompts you need to write a business plan

• Writing tips and strategies

To help streamline the business plan writing process, here are a few tips and key questions to answer to make sure you get the most out of your plan and avoid common mistakes .  

Determine why you are writing a business plan

Knowing why you are writing a business plan will determine your approach to your planning project. 

For example: If you are writing a business plan for yourself, or just to use inside your own business , you can probably skip the section about your team and organizational structure. 

If you’re raising money, you’ll want to spend more time explaining why you’re looking to raise the funds and exactly how you will use them.

Regardless of how you intend to use your business plan , think about why you are writing and what you’re trying to get out of the process before you begin.

Keep things concise

Probably the most important tip is to keep your business plan short and simple. There are no prizes for long business plans . The longer your plan is, the less likely people are to read it. 

So focus on trimming things down to the essentials your readers need to know. Skip the extended, wordy descriptions and instead focus on creating a plan that is easy to read —using bullets and short sentences whenever possible.

Have someone review your business plan

Writing a business plan in a vacuum is never a good idea. Sometimes it’s helpful to zoom out and check if your plan makes sense to someone else. You also want to make sure that it’s easy to read and understand.

Don’t wait until your plan is “done” to get a second look. Start sharing your plan early, and find out from readers what questions your plan leaves unanswered. This early review cycle will help you spot shortcomings in your plan and address them quickly, rather than finding out about them right before you present your plan to a lender or investor.

If you need a more detailed review, you may want to explore hiring a professional plan writer to thoroughly examine it.

Use a free business plan template and business plan examples to get started

Knowing what information to include in a business plan is sometimes not quite enough. If you’re struggling to get started or need additional guidance, it may be worth using a business plan template. 

There are plenty of great options available (we’ve rounded up our 8 favorites to streamline your search).

But, if you’re looking for a free downloadable business plan template , you can get one right now; download the template used by more than 1 million businesses. 

Or, if you just want to see what a completed business plan looks like, check out our library of over 550 free business plan examples . 

We even have a growing list of industry business planning guides with tips for what to focus on depending on your business type.

Common pitfalls and how to avoid them

It’s easy to make mistakes when you’re writing your business plan. Some entrepreneurs get sucked into the writing and research process, and don’t focus enough on actually getting their business started. 

Here are a few common mistakes and how to avoid them:

Not talking to your customers : This is one of the most common mistakes. It’s easy to assume that your product or service is something that people want. Before you invest too much in your business and too much in the planning process, make sure you talk to your prospective customers and have a good understanding of their needs.

• Overly optimistic sales and profit forecasts: By nature, entrepreneurs are optimistic about the future. But it’s good to temper that optimism a little when you’re planning, and make sure your forecasts are grounded in reality. 
• Spending too much time planning: Yes, planning is crucial. But you also need to get out and talk to customers, build prototypes of your product and figure out if there’s a market for your idea. Make sure to balance planning with building.
• Not revising the plan: Planning is useful, but nothing ever goes exactly as planned. As you learn more about what’s working and what’s not—revise your plan, your budgets, and your revenue forecast. Doing so will provide a more realistic picture of where your business is going, and what your financial needs will be moving forward.
• Not using the plan to manage your business: A good business plan is a management tool. Don’t just write it and put it on the shelf to collect dust – use it to track your progress and help you reach your goals.
• Presenting your business plan

The planning process forces you to think through every aspect of your business and answer questions that you may not have thought of. That’s the real benefit of writing a business plan – the knowledge you gain about your business that you may not have been able to discover otherwise.

With all of this knowledge, you’re well prepared to convert your business plan into a pitch presentation to present your ideas. 

A pitch presentation is a summary of your plan, just hitting the highlights and key points. It’s the best way to present your business plan to investors and team members.

Dig Deeper: Learn what key slides should be included in your pitch deck

Use your business plan to manage your business

One of the biggest benefits of planning is that it gives you a tool to manage your business better. With a revenue forecast, expense budget, and projected cash flow, you know your targets and where you are headed.

And yet, nothing ever goes exactly as planned – it’s the nature of business.

That’s where using your plan as a management tool comes in. The key to leveraging it for your business is to review it periodically and compare your forecasts and projections to your actual results.

Start by setting up a regular time to review the plan – a monthly review is a good starting point. During this review, answer questions like:

• Did you meet your sales goals?
• Is spending following your budget?
• Has anything gone differently than what you expected?

Now that you see whether you’re meeting your goals or are off track, you can make adjustments and set new targets. 

Maybe you’re exceeding your sales goals and should set new, more aggressive goals. In that case, maybe you should also explore more spending or hiring more employees. 

Or maybe expenses are rising faster than you projected. If that’s the case, you would need to look at where you can cut costs.

A plan, and a method for comparing your plan to your actual results , is the tool you need to steer your business toward success.

Learn More: How to run a regular plan review

Free business plan templates and examples

Kickstart your business plan writing with one of our free business plan templates or recommended tools.

Free business plan template

Download a free SBA-approved business plan template built for small businesses and startups.

Download Template

One-page plan template

Download a free one-page plan template to write a useful business plan in as little as 30-minutes.

Sample business plan library

Explore over 500 real-world business plan examples from a wide variety of industries.

View Sample Plans

How to write a business plan FAQ

What is a business plan?

A document that describes your business , the products and services you sell, and the customers that you sell to. It explains your business strategy, how you’re going to build and grow your business, what your marketing strategy is, and who your competitors are.

What are the benefits of a business plan?

A business plan helps you understand where you want to go with your business and what it will take to get there. It reduces your overall risk, helps you uncover your business’s potential, attracts investors, and identifies areas for growth.

Having a business plan ultimately makes you more confident as a business owner and more likely to succeed for a longer period of time.

What are the 7 steps of a business plan?

The seven steps to writing a business plan include:

• Write a brief executive summary
• Describe your products and services.
• Conduct market research and compile data into a cohesive market analysis.
• Describe your marketing and sales strategy.
• Outline your organizational structure and management team.
• Develop financial projections for sales, revenue, and cash flow.
• Add any additional documents to your appendix.

What are the 5 most common business plan mistakes?

There are plenty of mistakes that can be made when writing a business plan. However, these are the 5 most common that you should do your best to avoid:

• 1. Not taking the planning process seriously.
• Having unrealistic financial projections or incomplete financial information.
• Inconsistent information or simple mistakes.
• Failing to establish a sound business model.
• Not having a defined purpose for your business plan.

What questions should be answered in a business plan?

Writing a business plan is all about asking yourself questions about your business and being able to answer them through the planning process. You’ll likely be asking dozens and dozens of questions for each section of your plan.

However, these are the key questions you should ask and answer with your business plan:

• How will your business make money?
• Is there a need for your product or service?
• Who are your customers?
• How are you different from the competition?
• How will you reach your customers?
• How will you measure success?

How long should a business plan be?

The length of your business plan fully depends on what you intend to do with it. From the SBA and traditional lender point of view, a business plan needs to be whatever length necessary to fully explain your business. This means that you prove the viability of your business, show that you understand the market, and have a detailed strategy in place.

If you intend to use your business plan for internal management purposes, you don’t necessarily need a full 25-50 page business plan. Instead, you can start with a one-page plan to get all of the necessary information in place.

What are the different types of business plans?

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. Here are a few common business plan types worth considering.

Traditional business plan: The tried-and-true traditional business plan is a formal document meant to be used when applying for funding or pitching to investors. This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix.

Business model canvas: The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea.

One-page business plan: This format is a simplified version of the traditional plan that focuses on the core aspects of your business. You’ll typically stick with bullet points and single sentences. It’s most useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Lean Plan: The Lean Plan is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance. It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

What’s the difference between a business plan and a strategic plan?

A business plan covers the “who” and “what” of your business. It explains what your business is doing right now and how it functions. The strategic plan explores long-term goals and explains “how” the business will get there. It encourages you to look more intently toward the future and how you will achieve your vision.

However, when approached correctly, your business plan can actually function as a strategic plan as well. If kept lean, you can define your business, outline strategic steps, and track ongoing operations all with a single plan.

Noah is the COO at Palo Alto Software, makers of the online business plan app LivePlan. He started his career at Yahoo! and then helped start the user review site Epinions.com. From there he started a software distribution business in the UK before coming to Palo Alto Software to run the marketing and product teams.

Table of Contents

• Use AI to help write your plan
• Common planning mistakes
• Manage with your business plan
• Templates and examples

Related Articles

7 Min. Read

How to Write a Bakery Business Plan + Sample

5 Min. Read

How To Write a Business Plan for a Life Coaching Business + Free Example

1 Min. Read

How to Calculate Return on Investment (ROI)

3 Min. Read

What to Include in Your Business Plan Appendix

The Bplans Newsletter

The Bplans Weekly

Subscribe now for weekly advice and free downloadable resources to help start and grow your business.

We care about your privacy. See our privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

Home > Business > Business Startup

How To Write a Business Plan

We are committed to sharing unbiased reviews. Some of the links on our site are from our partners who compensate us. Read our editorial guidelines and advertising disclosure .

Starting a business is a wild ride, and a solid business plan can be the key to keeping you on track. A business plan is essentially a roadmap for your business — outlining your goals, strategies, market analysis and financial projections. Not only will it guide your decision-making, a business plan can help you secure funding with a loan or from investors .

Writing a business plan can seem like a huge task, but taking it one step at a time can break the plan down into manageable milestones. Here is our step-by-step guide on how to write a business plan.

Table of contents

• Write your executive summary
• Do your market research homework
• Set your business goals and objectives
• Plan your business strategy
• Describe your product or service
• Crunch the numbers
• Finalize your business plan

By signing up I agree to the Terms of Use and Privacy Policy .

Step 1: Write your executive summary

Though this will be the first page of your business plan , we recommend you actually write the executive summary last. That’s because an executive summary highlights what’s to come in the business plan but in a more condensed fashion.

An executive summary gives stakeholders who are reading your business plan the key points quickly without having to comb through pages and pages. Be sure to cover each successive point in a concise manner, and include as much data as necessary to support your claims.

You’ll cover other things too, but answer these basic questions in your executive summary:

• Idea: What’s your business concept? What problem does your business solve? What are your business goals?
• Product: What’s your product/service and how is it different?
• Market: Who’s your audience? How will you reach customers?
• Finance: How much will your idea cost? And if you’re seeking funding, how much money do you need? How much do you expect to earn? If you’ve already started, where is your revenue at now?

Step 2: Do your market research homework

The next step in writing a business plan is to conduct market research . This involves gathering information about your target market (or customer persona), your competition, and the industry as a whole. You can use a variety of research methods such as surveys, focus groups, and online research to gather this information. Your method may be formal or more casual, just make sure that you’re getting good data back.

This research will help you to understand the needs of your target market and the potential demand for your product or service—essential aspects of starting and growing a successful business.

Step 3: Set your business goals and objectives

Once you’ve completed your market research, you can begin to define your business goals and objectives. What is the problem you want to solve? What’s your vision for the future? Where do you want to be in a year from now?

Use this step to decide what you want to achieve with your business, both in the short and long term. Try to set SMART goals—specific, measurable, achievable, relevant, and time-bound benchmarks—that will help you to stay focused and motivated as you build your business.

Step 4: Plan your business strategy

Your business strategy is how you plan to reach your goals and objectives. This includes details on positioning your product or service, marketing and sales strategies, operational plans, and the organizational structure of your small business.

Make sure to include key roles and responsibilities for each team member if you’re in a business entity with multiple people.

Step 5: Describe your product or service

In this section, get into the nitty-gritty of your product or service. Go into depth regarding the features, benefits, target market, and any patents or proprietary tech you have. Make sure to paint a clear picture of what sets your product apart from the competition—and don’t forget to highlight any customer benefits.

Step 6: Crunch the numbers

Financial analysis is an essential part of your business plan. If you’re already in business that includes your profit and loss statement , cash flow statement and balance sheet .

These financial projections will give investors and lenders an understanding of the financial health of your business and the potential return on investment.

You may want to work with a financial professional to ensure your financial projections are realistic and accurate.

Step 7: Finalize your business plan

Once you’ve completed everything, it's time to finalize your business plan. This involves reviewing and editing your plan to ensure that it is clear, concise, and easy to understand.

You should also have someone else review your plan to get a fresh perspective and identify any areas that may need improvement. You could even work with a free SCORE mentor on your business plan or use a SCORE business plan template for more detailed guidance.

Compare the Top Small-Business Banks

Data effective 1/10/23. At publishing time, rates, fees, and requirements are current but are subject to change. Offers may not be available in all areas.

The takeaway

Writing a business plan is an essential process for any forward-thinking entrepreneur or business owner. A business plan requires a lot of up-front research, planning, and attention to detail, but it’s worthwhile. Creating a comprehensive business plan can help you achieve your business goals and secure the funding you need.

Related content

• 5 Best Business Plan Software and Tools in 2023 for Your Small Business
• How to Get a Business License: What You Need to Know
• What Is a Cash Flow Statement?

Best Small Business Loans

5202 W Douglas Corrigan Way Salt Lake City, UT 84116

Accounting & Payroll

Point of Sale

Payment Processing

Inventory Management

Human Resources

Other Services

Best Inventory Management Software

Best Small Business Accounting Software

Best Payroll Software

Best Mobile Credit Card Readers

Best POS Systems

Best Tax Software

Stay updated on the latest products and services anytime anywhere.

By signing up, you agree to our Terms of Use  and  Privacy Policy .

Disclaimer: The information featured in this article is based on our best estimates of pricing, package details, contract stipulations, and service available at the time of writing. All information is subject to change. Pricing will vary based on various factors, including, but not limited to, the customer’s location, package chosen, added features and equipment, the purchaser’s credit score, etc. For the most accurate information, please ask your customer service representative. Clarify all fees and contract details before signing a contract or finalizing your purchase.

Our mission is to help consumers make informed purchase decisions. While we strive to keep our reviews as unbiased as possible, we do receive affiliate compensation through some of our links. This can affect which services appear on our site and where we rank them. Our affiliate compensation allows us to maintain an ad-free website and provide a free service to our readers. For more information, please see our  Privacy Policy Page . |

© Business.org 2024 All Rights Reserved.

• Credit cards
• View all credit cards
• Banking guide
• Loans guide
• Insurance guide
• Personal finance
• View all personal finance
• Small business
• Small business guide
• View all taxes

You’re our first priority. Every time.

We believe everyone should be able to make financial decisions with confidence. And while our site doesn’t feature every company or financial product available on the market, we’re proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward — and free.

So how do we make money? Our partners compensate us. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. Here is a list of our partners .

How to Write a Business Plan, Step by Step

Many or all of the products featured here are from our partners who compensate us. This influences which products we write about and where and how the product appears on a page. However, this does not influence our evaluations. Our opinions are our own. Here is a list of our partners and here's how we make money .

What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

On a similar note...

Find small-business financing

Compare multiple lenders that fit your business

START YOUR ECOMMERCE BUSINESS FOR JUST $1

• Skip to primary navigation
• Skip to main content

A magazine for young entrepreneurs

The best advice in entrepreneurship

Subscribe for exclusive access, how to write a business plan (tips, templates, examples).

Written by Jesse Sumrak | May 14, 2023

Comments -->

Get real-time frameworks, tools, and inspiration to start and build your business. Subscribe here

Business plans might seem like an old-school stiff-collared practice, but they deserve a place in the startup realm, too. It’s probably not going to be the frame-worthy document you hang in the office—yet, it may one day be deserving of the privilege.

Whether you’re looking to win the heart of an angel investor or convince a bank to lend you money, you’ll need a business plan. And not just any ol’ notes and scribble on the back of a pizza box or napkin—you’ll need a professional, standardized report.

Bah. Sounds like homework, right?

Yes. Yes, it does.

However, just like bookkeeping, loan applications, and 404 redirects, business plans are an essential step in cementing your business foundation.

Don’t worry. We’ll show you how to write a business plan without boring you to tears. We’ve jam-packed this article with all the business plan examples, templates, and tips you need to take your non-existent proposal from concept to completion.

Table of Contents

What Is a Business Plan?

Tips to Make Your Small Business Plan Ironclad

How to Write a Business Plan in 6 Steps

Startup Business Plan Template

Business Plan Examples

Work on Making Your Business Plan

How to Write a Business Plan FAQs

What is a business plan why do you desperately need one.

A business plan is a roadmap that outlines:

• Who your business is, what it does, and who it serves
• Where your business is now
• Where you want it to go
• How you’re going to make it happen
• What might stop you from taking your business from Point A to Point B
• How you’ll overcome the predicted obstacles

While it’s not required when starting a business, having a business plan is helpful for a few reasons:

• Secure a Bank Loan: Before approving you for a business loan, banks will want to see that your business is legitimate and can repay the loan. They want to know how you’re going to use the loan and how you’ll make monthly payments on your debt. Lenders want to see a sound business strategy that doesn’t end in loan default.
• Win Over Investors: Like lenders, investors want to know they’re going to make a return on their investment. They need to see your business plan to have the confidence to hand you money.
• Stay Focused: It’s easy to get lost chasing the next big thing. Your business plan keeps you on track and focused on the big picture. Your business plan can prevent you from wasting time and resources on something that isn’t aligned with your business goals.

Beyond the reasoning, let’s look at what the data says:

• Simply writing a business plan can boost your average annual growth by 30%
• Entrepreneurs who create a formal business plan are 16% more likely to succeed than those who don’t
• A study looking at 65 fast-growth companies found that 71% had small business plans
• The process and output of creating a business plan have shown to improve business performance

Convinced yet? If those numbers and reasons don’t have you scrambling for pen and paper, who knows what will.

Don’t Skip: Business Startup Costs Checklist

Before we get into the nitty-gritty steps of how to write a business plan, let’s look at some high-level tips to get you started in the right direction:

Be Professional and Legit

You might be tempted to get cutesy or revolutionary with your business plan—resist the urge. While you should let your brand and creativity shine with everything you produce, business plans fall more into the realm of professional documents.

Think of your business plan the same way as your terms and conditions, employee contracts, or financial statements. You want your plan to be as uniform as possible so investors, lenders, partners, and prospective employees can find the information they need to make important decisions.

If you want to create a fun summary business plan for internal consumption, then, by all means, go right ahead. However, for the purpose of writing this external-facing document, keep it legit.

Know Your Audience

Your official business plan document is for lenders, investors, partners, and big-time prospective employees. Keep these names and faces in your mind as you draft your plan.

Think about what they might be interested in seeing, what questions they’ll ask, and what might convince (or scare) them. Cut the jargon and tailor your language so these individuals can understand.

Remember, these are busy people. They’re likely looking at hundreds of applicants and startup investments every month. Keep your business plan succinct and to the point. Include the most pertinent information and omit the sections that won’t impact their decision-making.

Invest Time Researching

You might not have answers to all the sections you should include in your business plan. Don’t skip over these!

Your audience will want:

• Detailed information about your customers
• Numbers and solid math to back up your financial claims and estimates
• Deep insights about your competitors and potential threats
• Data to support market opportunities and strategy

Your answers can’t be hypothetical or opinionated. You need research to back up your claims. If you don’t have that data yet, then invest time and money in collecting it. That information isn’t just critical for your business plan—it’s essential for owning, operating, and growing your company.

Stay Realistic

Your business may be ambitious, but reign in the enthusiasm just a teeny-tiny bit. The last thing you want to do is have an angel investor call BS and say “I’m out” before even giving you a chance.

The folks looking at your business and evaluating your plan have been around the block—they know a thing or two about fact and fiction. Your plan should be a blueprint for success. It should be the step-by-step roadmap for how you’re going from Point A to Point B.

How to Write a Business Plan—6 Essential Elements

Not every business plan looks the same, but most share a few common elements. Here’s what they typically include:

• Executive Summary
• Business Overview
• Products and Services
• Market Analysis
• Competitive Analysis
• Financial Strategy

Below, we’ll break down each of these sections in more detail.

1. Executive Summary

While your executive summary is the first page of your business plan, it’s the section you’ll write last. That’s because it summarizes your entire business plan into a succinct one-pager.

Begin with an executive summary that introduces the reader to your business and gives them an overview of what’s inside the business plan.

Your executive summary highlights key points of your plan. Consider this your elevator pitch. You want to put all your juiciest strengths and opportunities strategically in this section.

2. Business Overview

In this section, you can dive deeper into the elements of your business, including answering:

• What’s your business structure? Sole proprietorship, LLC, corporation, etc.
• Where is it located?
• Who owns the business? Does it have employees?
• What problem does it solve, and how?
• What’s your mission statement? Your mission statement briefly describes why you are in business. To write a proper mission statement, brainstorm your business’s core values and who you serve.

Don’t overlook your mission statement. This powerful sentence or paragraph could be the inspiration that drives an investor to take an interest in your business. Here are a few examples of powerful mission statements that just might give you the goosebumps:

• Patagonia: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.
• Tesla: To accelerate the world’s transition to sustainable energy.
• InvisionApp : Question Assumptions. Think Deeply. Iterate as a Lifestyle. Details, Details. Design is Everywhere. Integrity.
• TED : Spread ideas.
• Warby Parker : To offer designer eyewear at a revolutionary price while leading the way for socially conscious businesses.

3. Products and Services

As the owner, you know your business and the industry inside and out. However, whoever’s reading your document might not. You’re going to need to break down your products and services in minute detail.

For example, if you own a SaaS business, you’re going to need to explain how this business model works and what you’re selling.

You’ll need to include:

• What services you sell: Describe the services you provide and how these will help your target audience.
• What products you sell: Describe your products (and types if applicable) and how they will solve a need for your target and provide value.
• How much you charge: If you’re selling services, will you charge hourly, per project, retainer, or a mixture of all of these? If you’re selling products, what are the price ranges?

4. Market Analysis

Your market analysis essentially explains how your products and services address customer concerns and pain points. This section will include research and data on the state and direction of your industry and target market.

This research should reveal lucrative opportunities and how your business is uniquely positioned to seize the advantage. You’ll also want to touch on your marketing strategy and how it will (or does) work for your audience.

Include a detailed analysis of your target customers. This describes the people you serve and sell your product to. Be careful not to go too broad here—you don’t want to fall into the common entrepreneurial trap of trying to sell to everyone and thereby not differentiating yourself enough to survive the competition.

The market analysis section will include your unique value proposition. Your unique value proposition (UVP) is the thing that makes you stand out from your competitors. This is your key to success.

If you don’t have a UVP, you don’t have a way to take on competitors who are already in this space. Here’s an example of an ecommerce internet business plan outlining their competitive edge:

FireStarters’ competitive advantage is offering product lines that make a statement but won’t leave you broke. The major brands are expensive and not distinctive enough to satisfy the changing taste of our target customers. FireStarters offers products that are just ahead of the curve and so affordable that our customers will return to the website often to check out what’s new.

5. Competitive Analysis

Your competitive analysis examines the strengths and weaknesses of competing businesses in your market or industry. This will include direct and indirect competitors. It can also include threats and opportunities, like economic concerns or legal restraints.

The best way to sum up this section is with a classic SWOT analysis. This will explain your company’s position in relation to your competitors.

6. Financial Strategy

Your financial strategy will sum up your revenue, expenses, profit (or loss), and financial plan for the future. It’ll explain how you make money, where your cash flow goes, and how you’ll become profitable or stay profitable.

This is one of the most important sections for lenders and investors. Have you ever watched Shark Tank? They always ask about the company’s financial situation. How has it performed in the past? What’s the ongoing outlook moving forward? How does the business plan to make it happen?

Answer all of these questions in your financial strategy so that your audience doesn’t have to ask. Go ahead and include forecasts and graphs in your plan, too:

• Balance sheet: This includes your assets, liabilities, and equity.
• Profit & Loss (P&L) statement: This details your income and expenses over a given period.
• Cash flow statement: Similar to the P&L, this one will show all cash flowing into and out of the business each month.

It takes cash to change the world—lenders and investors get it. If you’re short on funding, explain how much money you’ll need and how you’ll use the capital. Where are you looking for financing? Are you looking to take out a business loan, or would you rather trade equity for capital instead?

Read More: 16 Financial Concepts Every Entrepreneur Needs to Know

Startup Business Plan Template (Copy/Paste Outline)

Ready to write your own business plan? Copy/paste the startup business plan template below and fill in the blanks.

Executive Summary Remember, do this last. Summarize who you are and your business plan in one page.

Business Overview Describe your business. What’s it do? Who owns it? How’s it structured? What’s the mission statement?

Products and Services Detail the products and services you offer. How do they work? What do you charge?

Market Analysis Write about the state of the market and opportunities. Use date. Describe your customers. Include your UVP.

Competitive Analysis Outline the competitors in your market and industry. Include threats and opportunities. Add a SWOT analysis of your business.

Financial Strategy Sum up your revenue, expenses, profit (or loss), and financial plan for the future. If you’re applying for a loan, include how you’ll use the funding to progress the business.

5 Frame-Worthy Business Plan Examples

Want to explore other templates and examples? We got you covered. Check out these 5 business plan examples you can use as inspiration when writing your plan:

• SBA Wooden Grain Toy Company
• SBA We Can Do It Consulting
• OrcaSmart Business Plan Sample
• Plum Business Plan Template
• PandaDoc Free Business Plan Templates

Get to Work on Making Your Business Plan

If you find you’re getting stuck on perfecting your document, opt for a simple one-page business plan —and then get to work. You can always polish up your official plan later as you learn more about your business and the industry.

Remember, business plans are not a requirement for starting a business—they’re only truly essential if a bank or investor is asking for it.

Ask others to review your business plan. Get feedback from other startups and successful business owners. They’ll likely be able to see holes in your planning or undetected opportunities—just make sure these individuals aren’t your competitors (or potential competitors).

Your business plan isn’t a one-and-done report—it’s a living, breathing document. You’ll make changes to it as you grow and evolve. When the market or your customers change, your plan will need to change to adapt.

That means when you’re finished with this exercise, it’s not time to print your plan out and stuff it in a file cabinet somewhere. No, it should sit on your desk as a day-to-day reference. Use it (and update it) as you make decisions about your product, customers, and financial plan.

Review your business plan frequently, update it routinely, and follow the path you’ve developed to the future you’re building.

Keep Learning: New Product Development Process in 8 Easy Steps

What financial information should be included in a business plan?

Be as detailed as you can without assuming too much. For example, include your expected revenue, expenses, profit, and growth for the future.

What are some common mistakes to avoid when writing a business plan?

The most common mistake is turning your business plan into a textbook. A business plan is an internal guide and an external pitching tool. Cut the fat and only include the most relevant information to start and run your business.

Who should review my business plan before I submit it?

Co-founders, investors, or a board of advisors. Otherwise, reach out to a trusted mentor, your local chamber of commerce, or someone you know that runs a business.

Ready to Write Your Business Plan?

Don’t let creating a business plan hold you back from starting your business. Writing documents might not be your thing—that doesn’t mean your business is a bad idea.

Let us help you get started.

Join our free training to learn how to start an online side hustle in 30 days or less. We’ll provide you with a proven roadmap for how to find, validate, and pursue a profitable business idea (even if you have zero entrepreneurial experience).

Stuck on the ideas part? No problem. When you attend the masterclass, we’ll send you a free ebook with 100 of the hottest side hustle trends right now. It’s chock full of brilliant business ideas to get you up and running in the right direction.

About Jesse Sumrak

Jesse Sumrak is a writing zealot focused on creating killer content. He’s spent almost a decade writing about startup, marketing, and entrepreneurship topics, having built and sold his own post-apocalyptic fitness bootstrapped business. A writer by day and a peak bagger by night (and early early morning), you can usually find Jesse preparing for the apocalypse on a precipitous peak somewhere in the Rocky Mountains of Colorado.

Related Posts

How Much To Unapologetically Charge For Public Speaking

Write the Perfect Consulting Proposal: Tools, Examples, and a Template

How to Create an Online Course That Sells in 2024

I Used this Product Launch Checklist to Start 5 Ecom Brands

How to Get Sponsored: From 0 to $50,000 in 4 Weeks

How Shay Mitchell Is Disrupting a $17B Industry

MaryRuth Ghiyam: From $700K in Debt to $100M in Revenue

His Ecommerce Funnel Generated $70M Last Year

How Do You Launch a Product?

Why Erin Deering Sold Swimwear Sensation Triangl

How Suneera Madhani’s Rejected Pitch Led to a Billion-Dollar Startup

When to Quit Your Job and Go All-in on Your Side Hustle

How to Choose the Right Color for Your Logo: The Ultimate Cheat Sheet

How becx’s Becky Verma Gained the Confidence to Become an Entrepreneur

How the D’Amelios Built an Empire Using TikTok

FREE TRAINING FROM LEGIT FOUNDERS

Actionable Strategies for Starting & Growing Any Business.

Don't Miss Out! Get Instant Access to foundr+ for Just $1!

1000+ lessons. customized learning. 30,000+ strong community..

How to make a business plan

Table of Contents

How to make a good business plan: step-by-step guide.

A business plan is a strategic roadmap used to navigate the challenging journey of entrepreneurship. It's the foundation upon which you build a successful business.

A well-crafted business plan can help you define your vision, clarify your goals, and identify potential problems before they arise.

But where do you start? How do you create a business plan that sets you up for success?

This article will explore the step-by-step process of creating a comprehensive business plan.

What is a business plan?

A business plan is a formal document that outlines a business's objectives, strategies, and operational procedures. It typically includes the following information about a company:

Products or services

Target market

Competitors

Marketing and sales strategies

Financial plan

Management team

A business plan serves as a roadmap for a company's success and provides a blueprint for its growth and development. It helps entrepreneurs and business owners organize their ideas, evaluate the feasibility, and identify potential challenges and opportunities.

As well as serving as a guide for business owners, a business plan can attract investors and secure funding. It demonstrates the company's understanding of the market, its ability to generate revenue and profits, and its strategy for managing risks and achieving success.

Business plan vs. business model canvas

A business plan may seem similar to a business model canvas, but each document serves a different purpose.

A business model canvas is a high-level overview that helps entrepreneurs and business owners quickly test and iterate their ideas. It is often a one-page document that briefly outlines the following:

Key partnerships

Key activities

Key propositions

Customer relationships

Customer segments

Key resources

Cost structure

Revenue streams

On the other hand, a Business Plan Template provides a more in-depth analysis of a company's strategy and operations. It is typically a lengthy document and requires significant time and effort to develop.

A business model shouldn’t replace a business plan, and vice versa. Business owners should lay the foundations and visually capture the most important information with a Business Model Canvas Template . Because this is a fast and efficient way to communicate a business idea, a business model canvas is a good starting point before developing a more comprehensive business plan.

A business plan can aim to secure funding from investors or lenders, while a business model canvas communicates a business idea to potential customers or partners.

Why is a business plan important?

A business plan is crucial for any entrepreneur or business owner wanting to increase their chances of success.

Here are some of the many benefits of having a thorough business plan.

Helps to define the business goals and objectives

A business plan encourages you to think critically about your goals and objectives. Doing so lets you clearly understand what you want to achieve and how you plan to get there.

A well-defined set of goals, objectives, and key results also provides a sense of direction and purpose, which helps keep business owners focused and motivated.

Guides decision-making

A business plan requires you to consider different scenarios and potential problems that may arise in your business. This awareness allows you to devise strategies to deal with these issues and avoid pitfalls.

With a clear plan, entrepreneurs can make informed decisions aligning with their overall business goals and objectives. This helps reduce the risk of making costly mistakes and ensures they make decisions with long-term success in mind.

Attracts investors and secures funding

Investors and lenders often require a business plan before considering investing in your business. A document that outlines the company's goals, objectives, and financial forecasts can help instill confidence in potential investors and lenders.

A well-written business plan demonstrates that you have thoroughly thought through your business idea and have a solid plan for success.

Identifies potential challenges and risks

A business plan requires entrepreneurs to consider potential challenges and risks that could impact their business. For example:

Is there enough demand for my product or service?

Will I have enough capital to start my business?

Is the market oversaturated with too many competitors?

What will happen if my marketing strategy is ineffective?

By identifying these potential challenges, entrepreneurs can develop strategies to mitigate risks and overcome challenges. This can reduce the likelihood of costly mistakes and ensure the business is well-positioned to take on any challenges.

Provides a basis for measuring success

A business plan serves as a framework for measuring success by providing clear goals and financial projections . Entrepreneurs can regularly refer to the original business plan as a benchmark to measure progress. By comparing the current business position to initial forecasts, business owners can answer questions such as:

Are we where we want to be at this point?

Did we achieve our goals?

If not, why not, and what do we need to do?

After assessing whether the business is meeting its objectives or falling short, business owners can adjust their strategies as needed.

How to make a business plan step by step

The steps below will guide you through the process of creating a business plan and what key components you need to include.

1. Create an executive summary

Start with a brief overview of your entire plan. The executive summary should cover your business plan's main points and key takeaways.

Keep your executive summary concise and clear with the Executive Summary Template . The simple design helps readers understand the crux of your business plan without reading the entire document.

2. Write your company description

Provide a detailed explanation of your company. Include information on what your company does, the mission statement, and your vision for the future.

Provide additional background information on the history of your company, the founders, and any notable achievements or milestones.

3. Conduct a market analysis

Conduct an in-depth analysis of your industry, competitors, and target market. This is best done with a SWOT analysis to identify your strengths, weaknesses, opportunities, and threats. Next, identify your target market's needs, demographics, and behaviors.

Use the Competitive Analysis Template to brainstorm answers to simple questions like:

What does the current market look like?

Who are your competitors?

What are they offering?

What will give you a competitive advantage?

Who is your target market?

What are they looking for and why?

How will your product or service satisfy a need?

These questions should give you valuable insights into the current market and where your business stands.

4. Describe your products and services

Provide detailed information about your products and services. This includes pricing information, product features, and any unique selling points.

Use the Product/Market Fit Template to explain how your products meet the needs of your target market. Describe what sets them apart from the competition.

5. Design a marketing and sales strategy

Outline how you plan to promote and sell your products. Your marketing strategy and sales strategy should include information about your:

Pricing strategy

Advertising and promotional tactics

Sales channels

The Go to Market Strategy Template is a great way to visually map how you plan to launch your product or service in a new or existing market.

6. Determine budget and financial projections

Document detailed information on your business’ finances. Describe the current financial position of the company and how you expect the finances to play out.

Some details to include in this section are:

Startup costs

Revenue projections

Profit and loss statement

Funding you have received or plan to receive

Strategy for raising funds

7. Set the organization and management structure

Define how your company is structured and who will be responsible for each aspect of the business. Use the Business Organizational Chart Template to visually map the company’s teams, roles, and hierarchy.

As well as the organization and management structure, discuss the legal structure of your business. Clarify whether your business is a corporation, partnership, sole proprietorship, or LLC.

8. Make an action plan

At this point in your business plan, you’ve described what you’re aiming for. But how are you going to get there? The Action Plan Template describes the following steps to move your business plan forward. Outline the next steps you plan to take to bring your business plan to fruition.

Types of business plans

Several types of business plans cater to different purposes and stages of a company's lifecycle. Here are some of the most common types of business plans.

Startup business plan

A startup business plan is typically an entrepreneur's first business plan. This document helps entrepreneurs articulate their business idea when starting a new business.

Not sure how to make a business plan for a startup? It’s pretty similar to a regular business plan, except the primary purpose of a startup business plan is to convince investors to provide funding for the business. A startup business plan also outlines the potential target market, product/service offering, marketing plan, and financial projections.

Strategic business plan

A strategic business plan is a long-term plan that outlines a company's overall strategy, objectives, and tactics. This type of strategic plan focuses on the big picture and helps business owners set goals and priorities and measure progress.

The primary purpose of a strategic business plan is to provide direction and guidance to the company's management team and stakeholders. The plan typically covers a period of three to five years.

Operational business plan

An operational business plan is a detailed document that outlines the day-to-day operations of a business. It focuses on the specific activities and processes required to run the business, such as:

Organizational structure

Staffing plan

Production plan

Quality control

Inventory management

Supply chain

The primary purpose of an operational business plan is to ensure that the business runs efficiently and effectively. It helps business owners manage their resources, track their performance, and identify areas for improvement.

Growth-business plan

A growth-business plan is a strategic plan that outlines how a company plans to expand its business. It helps business owners identify new market opportunities and increase revenue and profitability. The primary purpose of a growth-business plan is to provide a roadmap for the company's expansion and growth.

The 3 Horizons of Growth Template is a great tool to identify new areas of growth. This framework categorizes growth opportunities into three categories: Horizon 1 (core business), Horizon 2 (emerging business), and Horizon 3 (potential business).

One-page business plan

A one-page business plan is a condensed version of a full business plan that focuses on the most critical aspects of a business. It’s a great tool for entrepreneurs who want to quickly communicate their business idea to potential investors, partners, or employees.

A one-page business plan typically includes sections such as business concept, value proposition, revenue streams, and cost structure.

Best practices for how to make a good business plan

Here are some additional tips for creating a business plan:

Use a template

A template can help you organize your thoughts and effectively communicate your business ideas and strategies. Starting with a template can also save you time and effort when formatting your plan.

Miro’s extensive library of customizable templates includes all the necessary sections for a comprehensive business plan. With our templates, you can confidently present your business plans to stakeholders and investors.

Be practical

Avoid overestimating revenue projections or underestimating expenses. Your business plan should be grounded in practical realities like your budget, resources, and capabilities.

Be specific

Provide as much detail as possible in your business plan. A specific plan is easier to execute because it provides clear guidance on what needs to be done and how. Without specific details, your plan may be too broad or vague, making it difficult to know where to start or how to measure success.

Be thorough with your research

Conduct thorough research to fully understand the market, your competitors, and your target audience . By conducting thorough research, you can identify potential risks and challenges your business may face and develop strategies to mitigate them.

Get input from others

It can be easy to become overly focused on your vision and ideas, leading to tunnel vision and a lack of objectivity. By seeking input from others, you can identify potential opportunities you may have overlooked.

Review and revise regularly

A business plan is a living document. You should update it regularly to reflect market, industry, and business changes. Set aside time for regular reviews and revisions to ensure your plan remains relevant and effective.

Create a winning business plan to chart your path to success

Starting or growing a business can be challenging, but it doesn't have to be. Whether you're a seasoned entrepreneur or just starting, a well-written business plan can make or break your business’ success.

The purpose of a business plan is more than just to secure funding and attract investors. It also serves as a roadmap for achieving your business goals and realizing your vision. With the right mindset, tools, and strategies, you can develop a visually appealing, persuasive business plan.

Ready to make an effective business plan that works for you? Check out our library of ready-made strategy and planning templates and chart your path to success.

Get on board in seconds

Join thousands of teams using Miro to do their best work yet.

• Sources of Business Finance
• Small Business Loans
• Small Business Grants
• Crowdfunding Sites
• How to Get a Business Loan
• Small Business Insurance Providers
• Best Factoring Companies
• Types of Bank Accounts
• Best Banks for Small Business
• Best Business Bank Accounts
• Open a Business Bank Account
• Bank Accounts for Small Businesses
• Free Business Checking Accounts
• Best Business Credit Cards
• Get a Business Credit Card
• Business Credit Cards for Bad Credit
• Build Business Credit Fast
• Business Loan Eligibility Criteria
• Small-Business Bookkeeping Basics
• How to Set Financial Goals
• Business Loan Calculators
• How to Calculate ROI
• Calculate Net Income
• Calculate Working Capital
• Calculate Operating Income
• Calculate Net Present Value (NPV)
• Calculate Payroll Tax

12 Key Elements of a Business Plan (Top Components Explained)

Starting and running a successful business requires proper planning and execution of effective business tactics and strategies .

You need to prepare many essential business documents when starting a business for maximum success; the business plan is one such document.

When creating a business, you want to achieve business objectives and financial goals like productivity, profitability, and business growth. You need an effective business plan to help you get to your desired business destination.

Even if you are already running a business, the proper understanding and review of the key elements of a business plan help you navigate potential crises and obstacles.

This article will teach you why the business document is at the core of any successful business and its key elements you can not avoid.

Let’s get started.

Why Are Business Plans Important?

Business plans are practical steps or guidelines that usually outline what companies need to do to reach their goals. They are essential documents for any business wanting to grow and thrive in a highly-competitive business environment .

1. Proves Your Business Viability

A business plan gives companies an idea of how viable they are and what actions they need to take to grow and reach their financial targets. With a well-written and clearly defined business plan, your business is better positioned to meet its goals.

2. Guides You Throughout the Business Cycle

A business plan is not just important at the start of a business. As a business owner, you must draw up a business plan to remain relevant throughout the business cycle .

During the starting phase of your business, a business plan helps bring your ideas into reality. A solid business plan can secure funding from lenders and investors.

After successfully setting up your business, the next phase is management. Your business plan still has a role to play in this phase, as it assists in communicating your business vision to employees and external partners.

Essentially, your business plan needs to be flexible enough to adapt to changes in the needs of your business.

3. Helps You Make Better Business Decisions

As a business owner, you are involved in an endless decision-making cycle. Your business plan helps you find answers to your most crucial business decisions.

A robust business plan helps you settle your major business components before you launch your product, such as your marketing and sales strategy and competitive advantage.

4. Eliminates Big Mistakes

Many small businesses fail within their first five years for several reasons: lack of financing, stiff competition, low market need, inadequate teams, and inefficient pricing strategy.

Creating an effective plan helps you eliminate these big mistakes that lead to businesses' decline. Every business plan element is crucial for helping you avoid potential mistakes before they happen.

5. Secures Financing and Attracts Top Talents

Having an effective plan increases your chances of securing business loans. One of the essential requirements many lenders ask for to grant your loan request is your business plan.

A business plan helps investors feel confident that your business can attract a significant return on investments ( ROI ).

You can attract and retain top-quality talents with a clear business plan. It inspires your employees and keeps them aligned to achieve your strategic business goals.

Key Elements of Business Plan

Starting and running a successful business requires well-laid actions and supporting documents that better position a company to achieve its business goals and maximize success.

A business plan is a written document with relevant information detailing business objectives and how it intends to achieve its goals.

With an effective business plan, investors, lenders, and potential partners understand your organizational structure and goals, usually around profitability, productivity, and growth.

Every successful business plan is made up of key components that help solidify the efficacy of the business plan in delivering on what it was created to do.

Here are some of the components of an effective business plan.

1. Executive Summary

One of the key elements of a business plan is the executive summary. Write the executive summary as part of the concluding topics in the business plan. Creating an executive summary with all the facts and information available is easier.

In the overall business plan document, the executive summary should be at the forefront of the business plan. It helps set the tone for readers on what to expect from the business plan.

A well-written executive summary includes all vital information about the organization's operations, making it easy for a reader to understand.

The key points that need to be acted upon are highlighted in the executive summary. They should be well spelled out to make decisions easy for the management team.

A good and compelling executive summary points out a company's mission statement and a brief description of its products and services.

An executive summary summarizes a business's expected value proposition to distinct customer segments. It highlights the other key elements to be discussed during the rest of the business plan.

Including your prior experiences as an entrepreneur is a good idea in drawing up an executive summary for your business. A brief but detailed explanation of why you decided to start the business in the first place is essential.

Adding your company's mission statement in your executive summary cannot be overemphasized. It creates a culture that defines how employees and all individuals associated with your company abide when carrying out its related processes and operations.

Your executive summary should be brief and detailed to catch readers' attention and encourage them to learn more about your company.

Components of an Executive Summary

Here are some of the information that makes up an executive summary:

• The name and location of your company
• Products and services offered by your company
• Mission and vision statements
• Success factors of your business plan

2. Business Description

Your business description needs to be exciting and captivating as it is the formal introduction a reader gets about your company.

What your company aims to provide, its products and services, goals and objectives, target audience , and potential customers it plans to serve need to be highlighted in your business description.

A company description helps point out notable qualities that make your company stand out from other businesses in the industry. It details its unique strengths and the competitive advantages that give it an edge to succeed over its direct and indirect competitors.

Spell out how your business aims to deliver on the particular needs and wants of identified customers in your company description, as well as the particular industry and target market of the particular focus of the company.

Include trends and significant competitors within your particular industry in your company description. Your business description should contain what sets your company apart from other businesses and provides it with the needed competitive advantage.

In essence, if there is any area in your business plan where you need to brag about your business, your company description provides that unique opportunity as readers look to get a high-level overview.

Components of a Business Description

Your business description needs to contain these categories of information.

• Business location
• The legal structure of your business
• Summary of your business’s short and long-term goals

3. Market Analysis

The market analysis section should be solely based on analytical research as it details trends particular to the market you want to penetrate.

Graphs, spreadsheets, and histograms are handy data and statistical tools you need to utilize in your market analysis. They make it easy to understand the relationship between your current ideas and the future goals you have for the business.

All details about the target customers you plan to sell products or services should be in the market analysis section. It helps readers with a helpful overview of the market.

In your market analysis, you provide the needed data and statistics about industry and market share, the identified strengths in your company description, and compare them against other businesses in the same industry.

The market analysis section aims to define your target audience and estimate how your product or service would fare with these identified audiences.

Market analysis helps visualize a target market by researching and identifying the primary target audience of your company and detailing steps and plans based on your audience location.

Obtaining this information through market research is essential as it helps shape how your business achieves its short-term and long-term goals.

Market Analysis Factors

Here are some of the factors to be included in your market analysis.

• The geographical location of your target market
• Needs of your target market and how your products and services can meet those needs
• Demographics of your target audience

Components of the Market Analysis Section

Here is some of the information to be included in your market analysis.

• Industry description and statistics
• Demographics and profile of target customers
• Marketing data for your products and services
• Detailed evaluation of your competitors

4. Marketing Plan

A marketing plan defines how your business aims to reach its target customers, generate sales leads, and, ultimately, make sales.

Promotion is at the center of any successful marketing plan. It is a series of steps to pitch a product or service to a larger audience to generate engagement. Note that the marketing strategy for a business should not be stagnant and must evolve depending on its outcome.

Include the budgetary requirement for successfully implementing your marketing plan in this section to make it easy for readers to measure your marketing plan's impact in terms of numbers.

The information to include in your marketing plan includes marketing and promotion strategies, pricing plans and strategies , and sales proposals. You need to include how you intend to get customers to return and make repeat purchases in your business plan.

5. Sales Strategy

Sales strategy defines how you intend to get your product or service to your target customers and works hand in hand with your business marketing strategy.

Your sales strategy approach should not be complex. Break it down into simple and understandable steps to promote your product or service to target customers.

Apart from the steps to promote your product or service, define the budget you need to implement your sales strategies and the number of sales reps needed to help the business assist in direct sales.

Your sales strategy should be specific on what you need and how you intend to deliver on your sales targets, where numbers are reflected to make it easier for readers to understand and relate better.

6. Competitive Analysis

Providing transparent and honest information, even with direct and indirect competitors, defines a good business plan. Provide the reader with a clear picture of your rank against major competitors.

Identifying your competitors' weaknesses and strengths is useful in drawing up a market analysis. It is one information investors look out for when assessing business plans.

The competitive analysis section clearly defines the notable differences between your company and your competitors as measured against their strengths and weaknesses.

This section should define the following:

• Your competitors' identified advantages in the market
• How do you plan to set up your company to challenge your competitors’ advantage and gain grounds from them?
• The standout qualities that distinguish you from other companies
• Potential bottlenecks you have identified that have plagued competitors in the same industry and how you intend to overcome these bottlenecks

In your business plan, you need to prove your industry knowledge to anyone who reads your business plan. The competitive analysis section is designed for that purpose.

7. Management and Organization

Management and organization are key components of a business plan. They define its structure and how it is positioned to run.

Whether you intend to run a sole proprietorship, general or limited partnership, or corporation, the legal structure of your business needs to be clearly defined in your business plan.

Use an organizational chart that illustrates the hierarchy of operations of your company and spells out separate departments and their roles and functions in this business plan section.

The management and organization section includes profiles of advisors, board of directors, and executive team members and their roles and responsibilities in guaranteeing the company's success.

Apparent factors that influence your company's corporate culture, such as human resources requirements and legal structure, should be well defined in the management and organization section.

Defining the business's chain of command if you are not a sole proprietor is necessary. It leaves room for little or no confusion about who is in charge or responsible during business operations.

This section provides relevant information on how the management team intends to help employees maximize their strengths and address their identified weaknesses to help all quarters improve for the business's success.

8. Products and Services

This business plan section describes what a company has to offer regarding products and services to the maximum benefit and satisfaction of its target market.

Boldly spell out pending patents or copyright products and intellectual property in this section alongside costs, expected sales revenue, research and development, and competitors' advantage as an overview.

At this stage of your business plan, the reader needs to know what your business plans to produce and sell and the benefits these products offer in meeting customers' needs.

The supply network of your business product, production costs, and how you intend to sell the products are crucial components of the products and services section.

Investors are always keen on this information to help them reach a balanced assessment of if investing in your business is risky or offer benefits to them.

You need to create a link in this section on how your products or services are designed to meet the market's needs and how you intend to keep those customers and carve out a market share for your company.

Repeat purchases are the backing that a successful business relies on and measure how much customers are into what your company is offering.

This section is more like an expansion of the executive summary section. You need to analyze each product or service under the business.

9. Operating Plan

An operations plan describes how you plan to carry out your business operations and processes.

The operating plan for your business should include:

• Information about how your company plans to carry out its operations.
• The base location from which your company intends to operate.
• The number of employees to be utilized and other information about your company's operations.
• Key business processes.

This section should highlight how your organization is set up to run. You can also introduce your company's management team in this section, alongside their skills, roles, and responsibilities in the company.

The best way to introduce the company team is by drawing up an organizational chart that effectively maps out an organization's rank and chain of command.

What should be spelled out to readers when they come across this business plan section is how the business plans to operate day-in and day-out successfully.

10. Financial Projections and Assumptions

Bringing your great business ideas into reality is why business plans are important. They help create a sustainable and viable business.

The financial section of your business plan offers significant value. A business uses a financial plan to solve all its financial concerns, which usually involves startup costs, labor expenses, financial projections, and funding and investor pitches.

All key assumptions about the business finances need to be listed alongside the business financial projection, and changes to be made on the assumptions side until it balances with the projection for the business.

The financial plan should also include how the business plans to generate income and the capital expenditure budgets that tend to eat into the budget to arrive at an accurate cash flow projection for the business.

Base your financial goals and expectations on extensive market research backed with relevant financial statements for the relevant period.

Examples of financial statements you can include in the financial projections and assumptions section of your business plan include:

• Projected income statements
• Cash flow statements
• Balance sheets
• Income statements

Revealing the financial goals and potentials of the business is what the financial projection and assumption section of your business plan is all about. It needs to be purely based on facts that can be measurable and attainable.

11. Request For Funding

The request for funding section focuses on the amount of money needed to set up your business and underlying plans for raising the money required. This section includes plans for utilizing the funds for your business's operational and manufacturing processes.

When seeking funding, a reasonable timeline is required alongside it. If the need arises for additional funding to complete other business-related projects, you are not left scampering and desperate for funds.

If you do not have the funds to start up your business, then you should devote a whole section of your business plan to explaining the amount of money you need and how you plan to utilize every penny of the funds. You need to explain it in detail for a future funding request.

When an investor picks up your business plan to analyze it, with all your plans for the funds well spelled out, they are motivated to invest as they have gotten a backing guarantee from your funding request section.

Include timelines and plans for how you intend to repay the loans received in your funding request section. This addition keeps investors assured that they could recoup their investment in the business.

12. Exhibits and Appendices

Exhibits and appendices comprise the final section of your business plan and contain all supporting documents for other sections of the business plan.

Some of the documents that comprise the exhibits and appendices section includes:

• Legal documents
• Licenses and permits
• Credit histories
• Customer lists

The choice of what additional document to include in your business plan to support your statements depends mainly on the intended audience of your business plan. Hence, it is better to play it safe and not leave anything out when drawing up the appendix and exhibit section.

Supporting documentation is particularly helpful when you need funding or support for your business. This section provides investors with a clearer understanding of the research that backs the claims made in your business plan.

There are key points to include in the appendix and exhibits section of your business plan.

• The management team and other stakeholders resume
• Marketing research
• Permits and relevant legal documents
• Financial documents

Was This Article Helpful?

Martin luenendonk.

Martin loves entrepreneurship and has helped dozens of entrepreneurs by validating the business idea, finding scalable customer acquisition channels, and building a data-driven organization. During his time working in investment banking, tech startups, and industry-leading companies he gained extensive knowledge in using different software tools to optimize business processes.

This insights and his love for researching SaaS products enables him to provide in-depth, fact-based software reviews to enable software buyers make better decisions.

Business Plan Development

Masterplans experts will help you create business plans for investor funding, bank/SBA lending and strategic direction

Investor Materials

A professionally designed pitch deck, lean plan, and cash burn overview will assist you in securing Pre-Seed and Seed Round funding

Immigration Business Plans

A USCIS-compliant business plan serves as the foundation for your E-2, L-1A, EB-5 or E-2 visa application

Customized consulting tailored to your startup's unique challenges and goals

Our team-based approach supports your project with personal communication and technical expertise.

Pricing that is competitive and scalable for early-stage business services regardless of industry or stage.

Client testimonials from just a few of the 18,000+ entrepreneurs we've worked with over the last 20 years

Free tools, research, and templates to help with business plans & pitch decks

Writing a Solid Business Plan: Fundamentals and Principles

I’ve worked as a business plan writer since 2006, and it’s been a remarkably fun and fulfilling career for me. I get to see entrepreneurs of all sorts, from all over the world, live out their dreams.

When I’m out and about meeting people in the real world, I don’t dread the question, “What do you do for a living,” like some people do, because I love talking about what I do for a living. 

But what I am quite used to is the blank stare that I tend to get, and the follow-up question, “What does that mean?” Other people nod their heads knowingly, especially if they have some experience with business or finance, but once they ask subsequent questions I realize they’re thinking of something completely different. So, I thought it might be helpful to talk about the top questions the Masterplans team gets about business plan writing and what happens when you hire a business plan writer.

What even is a business plan? 

The most basic possible question, and what people really mean when they ask me what my job title really means. I love to answer this question, except when I’m trying to explain it to relatives in Greece, or my Spanish-speaking friends! My second- and third-language skills are not strong enough to begin to explain what a business plan is. But, when I try to explain it to them, I break it down into the simplest terms, so maybe that’s the best place to start here. I do this with a series of questions and statements that go like this:

• Have you ever thought about starting your own business? (Inevitably, the answer is yes)
• Well, when you want to start your own business, you will probably need to apply for a loan, or ask an investor for funding. (People nod at this one…  I’ve still got their comprehension). 
• When you do that, you need to present a document that tells all about the business you’re starting. I write that document. 

And bingo, we have a basic level of understanding of what I do. But of course, it’s so much more complicated than that . A traditional business plan is made up of a complete outline of topics and sub-topics that any entrepreneur needs to be able to answer. It’s not always about funding either, even though that’s how I present it to friends. The truth is that every entrepreneur needs a business plan, even if they’re bootstrapping the project out of their own pocket. 

In actuality, a business plan is a comprehensive document that explains the details about your business, sets goals and objectives, and guides you going forward. That said, if you are pursuing funding like most entrepreneurs, your document needs to cover a range of required topics. 

Let’s take a look at the SBA requirements for the sections that need to be in a business plan:

• Executive Summary
• Company Description
• Market Analysis
• Organization and Management
• Service or Product line
• Marketing and Sales
• Funding request
• Financial projections
• Appendix (optional)

However, this is an overly broad listing, which doesn’t include many of the sub-sections that are involved. For example, at Masterplans, our Market Analysis covers a variety of sub-sections like Market Segmentation, Market Need, Industry Analysis, Competitive Comparison, and Competitive Edge. 

Part of being a good business plan writer means understanding what goes within each section and keeping the content organized into the appropriate area. Some customers have a hard time keeping straight the difference between the "Competitive Comparison" and the "Competitive Edge" sections, but they are quite distinct. Or, it can be tempting to talk about who your customers are in the "Market Analysis" instead of the "Market Segmentation." I’ve even had people mix up marketing tactics with products or services. It takes an experienced hand to keep the content organized.

What is the purpose of a business plan? 

A business plan’s highest purpose is to guide entrepreneurs in operating their business on the day-to-day level. It is a foundational document that I think of as the constitution of your business. It tells you everything you need to know about your idea, your goals, your strategy, and the financial picture of a business. 

Here at Masterplans, we strongly believe that entrepreneurs need to understand that a business plan is not a one-time use product, like applying for a business loan. Instead, we want our clients to use their business plan all the time, for years into the future, as long as the business exists. It should guide board meetings and management decisions. Your employees should read it so that they understand what your mission is, what steps you need to take to achieve success, and what their role is within your company.

But we admit that there are those one-time, single-serving uses for a business plan that will likely come up for you. You need it to apply for a bank loan. You need it to ask for investment. You need it when applying for a lease on a location. You often need it when applying for certain permits, especially those dealing with compliance issues. And for those of you who are foreign investors seeking a visa , you need it to include in your application packet to USCIS. 

Thus, a comprehensive business plan needs to be able to not just guide you in your daily decision-making, but it also needs to answer all the questions that an outside party might ask you when deciding whether to fund your idea or let you lease their space.

Who should write a business plan? 

Why, the entrepreneurial team should take the helm in writing a business plan, of course. Did you expect a different answer from a professional business plan writer? At Masterplans, we don’t shy away from delivering honest truth to our clients, because we thrive when they thrive. 

The truth is that an entrepreneur who isn’t intimately involved in the writing of their business plan from the start will never fully understand it, and that can hamper them on their path to achieving their goals. It’s imperative that an entrepreneur have a deep understanding of their business plan, or else they won’t be able to follow it! 

But, writing a business plan is an intense endeavor that requires a better-than-average command of English writing and style, as well as business theory and financial modeling. Very few people represent the total package, which is why at Masterplans, we work in teams of specialists who together have those skills. 

I can write a beautiful market analysis summary, analyze your competitive landscape in-depth, and wrap it all up with an attention-grabbing executive summary, but don’t ask me to explain a complex financial concept like Internal Rate of Return. (I’m being modest; I can tell you all about it, but I’ll leave that to our brilliant financial modelers who understand it in more depth than I do.)

While some entrepreneurs may somehow possess the bare minimum of skills that are required to create a decent business plan, they most certainly don’t have the time.  Starting a business involves numerous steps, and entrepreneurs are often pursuing each of those steps while juggling a full-time career and sometimes a family. It’s a lot. 

But a key quality shared by the best leaders is knowing when and what to delegate. If you have a dual major in English and Business, and you’ve done this a few times before, then sure, you could probably write a stellar business plan from scratch. 

But if you have virtually any other combination of experience, you could benefit greatly from delegating it to a company like ours that can counsel you every step of the way, scheduling out the project into meetings and discrete tasks so that you can be as involved as you should be in the process while still freeing up your time to handle the many other to-dos on your plate. (This benefit still holds true for the dual major, as well!)

Remember, the most important thing is that the business plan actually gets done so that you can use it to start your business, but like any long writing project, it can fall to the wayside when life’s pressures get in the way. Working with a deadline-driven consultancy like ours can help you reach the finish line.

Now that you have a basic introduction to the traditional business plan document, you probably have plenty of questions that go deeper. We’ve done our best to address those with our frequently asked questions about writing business plans . 

How to Write a Management Summary for Your Business Plan

Entrepreneurs are often celebrated for their uncanny ability to understand others – their customers, the market, and the ever-evolving global...

Understanding Venture Debt vs Venture Capital

Despite growth in sectors like artificial intelligence, venture capital funding has seen better days. After peaking at $347.5 billion in 2021, there...

Going Beyond Writing: The Multifaceted Role of Business Plan Consultants

Most people think of a professional business plan company primarily as a "business plan writer." However, here at Masterplans, we choose to approach...

Contents of a Business Plan: Everything You Need to Know

The contents of a business plan consist of a detailed description of what, when, why, where, and how the business's operations will be accomplished. 3 min read updated on January 01, 2024

Overview of a Business Plan

A business plan includes the cost of organizing the business, the anticipated sources of revenue, how the products and services are customer oriented, and anticipated profit margins. Business plans serve two main purposes. First, they are a guide business owners use to streamline management and planning/organization of the business. Second, they show potential venture capitalists, bankers, and other lenders a comprehensive plan to encourage them to invest in the business.

Sublevels of a business plan include:

• Marketing plan
• Financial plan
• Human resource plan
• Production plan

Elements of a Business Plan

A well-written business plan will include the following:

• Cover letter

Table of Contents

Executive Summary

• Mission statement
• Company background
• Products and services
• Competitive analysis

Marketing/Realization

• Location/Production/Administrative
• Management and international organization
• Risk analysis
• Financial planning

Summary/Conclusion

Cover Letter

The business plan's cover letter has the same purpose as a cover letter for a resume. The point is to engage prospective investors using the cover letter so they'll look at the entire plan. The cover letter should include the recipient's address, the date, and your address. Begin the cover letter with "Dear" followed by the person's name.

In the body of the cover letter, let the recipient know you're submitting a business plan with a short one-sentence description of the business and what the recipient can expect when reading the plan. In the next paragraph, indicate that you look forward to hearing from them and provide a phone number they can call at their convenience.

Thank them for their time. Sign off. Include your name in typewritten form along with your signature.

Keep this page short and to the point. Include your business logo, business name, if there is a founder, and the name. Add "Business Plan," an image (optional), and the date.

The table of contents is a roadmap to help the recipient peruse the list and easily find each section. Some people may choose to read sections one after the other while others may choose to skip around. Include every section and subsection that may be of interest to a potential investor.

This is an important section. Because you're targeting executives, the overview of your business should be top-quality information to entice them to read the complete plan. The focus should be a summary of the main facets of your business plan.

Mission Statement

This section is a short statement about your business's goal and what you plan to create through the enterprise.

Company Background

This is a short statement including the date the business was developed, its founders, stages of development, the date it was incorporated, and, for existing businesses, the level of success.

Also, include the key figures in the business and the ownership and legal structure.

Products and Services

Under this section, provide a detailed description of your customer needs, benefits to customers, marketing services, and advantages and disadvantages of any competitor services or products.

Marketing Plan

This will include an overview of the market in general with an emphasis on purchase incentives, market analysis, and customer structure. It will also include the position your business holds in the market using information from target customer groups, canvassed market segments, and sale channels.

Competitive Analysis

Provide information about your main competitors' names, locations, market positions, weaknesses, strengths, and target markets.

This section covers details about product range, services, and pricing strategies. Sales targets for the next five years should also be included.

Location/Production/Administration

Include the location of the business and the advantages and disadvantages of its location. The production should discuss in-house and/or outsourced production and material costs. The administration portion will discuss the office infrastructure, such as accounting and technical support.

Management and International Organization

This section could work written as an organizational chart outlining member functions and responsibilities, special skills, and salaries.

Risk Analysis

Provide information on anticipated internal risks such as marketing, production, management, and financing. External risks would include information on ecological, economic, social, and legal areas.

Financial Planning

Lay out your plan for short- and long-term financial planning.

This is a final wrap up of the business plan that binds the everything together.

If you need help with outlining the contents of a business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.

Hire the top business lawyers and save up to 60% on legal fees

Content Approved by UpCounsel

• Creating a Business Plan
• Business Plan Contents Page
• How to Make a Business Plan Format
• Business Description Outline
• Service Business Plan
• LLC Business Plan Template
• Business Plan for Existing Company
• Parts of Business Plan and Definition
• IT Company Business Plan
• Business Plan Format: Everything you Need to Know

• Starting a Business
• Growing a Business
• Small Business Guide
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

Elements of a Business Plan There are seven major sections of a business plan, and each one is a complex document. Read this selection from our business plan tutorial to fully understand these components.

Now that you understand why you need a business plan and you've spent some time doing your homework gathering the information you need to create one, it's time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn't include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.

Executive Summary

Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you're asking for in the summary.

The statement should be kept short and businesslike, probably no more than half a page. It could be longer, depending on how complicated the use of funds may be, but the summary of a business plan, like the summary of a loan application, is generally no longer than one page. Within that space, you'll need to provide a synopsis of your entire business plan. Key elements that should be included are:

• Business concept. Describes the business, its product and the market it will serve. It should point out just exactly what will be sold, to whom and why the business will hold a competitive advantage.
• Financial features. Highlights the important financial points of the business including sales, profits, cash flows and return on investment.
• Financial requirements. Clearly states the capital needed to start the business and to expand. It should detail how the capital will be used, and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.
• Current business position. Furnishes relevant information about the company, its legal form of operation, when it was formed, the principal owners and key personnel.
• Major achievements. Details any developments within the company that are essential to the success of the business. Major achievements include items like patents, prototypes, location of a facility, any crucial contracts that need to be in place for product development, or results from any test marketing that has been conducted.

When writing your statement of purpose, don't waste words. If the statement of purpose is eight pages, nobody's going to read it because it'll be very clear that the business, no matter what its merits, won't be a good investment because the principals are indecisive and don't really know what they want. Make it easy for the reader to realize at first glance both your needs and capabilities.

Business Description

Tell them all about it.

The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate. This is important if you're seeking funding; the investor will want to know just how dependable your information is, and won't risk money on assumptions or conjecture.

When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i.e. wholesale, retail, food service, manufacturing or service-oriented. Also state whether the business is new or already established.

In addition to structure, legal form should be reiterated once again. Detail whether the business is a sole proprietorship, partnership or corporation, who its principals are, and what they will bring to the business.

You should also mention who you will sell to, how the product will be distributed, and the business's support systems. Support may come in the form of advertising, promotions and customer service.

Once you've described the business, you need to describe the products or services you intend to market. The product description statement should be complete enough to give the reader a clear idea of your intentions. You may want to emphasize any unique features or variations from concepts that can typically be found in the industry.

Be specific in showing how you will give your business a competitive edge. For example, your business will be better because you will supply a full line of products; competitor A doesn't have a full line. You're going to provide service after the sale; competitor B doesn't support anything he sells. Your merchandise will be of higher quality. You'll give a money-back guarantee. Competitor C has the reputation for selling the best French fries in town; you're going to sell the best Thousand Island dressing.

How Will I Profit?

Now you must be a classic capitalist and ask yourself, "How can I turn a buck? And why do I think I can make a profit that way?" Answer that question for yourself, and then convey that answer to others in the business concept section. You don't have to write 25 pages on why your business will be profitable. Just explain the factors you think will make it successful, like the following: it's a well-organized business, it will have state-of-the-art equipment, its location is exceptional, the market is ready for it, and it's a dynamite product at a fair price.

If you're using your business plan as a document for financial purposes, explain why the added equity or debt money is going to make your business more profitable.

Show how you will expand your business or be able to create something by using that money.

Show why your business is going to be profitable. A potential lender is going to want to know how successful you're going to be in this particular business. Factors that support your claims for success can be mentioned briefly; they will be detailed later. Give the reader an idea of the experience of the other key people in the business. They'll want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.

The business description can be a few paragraphs in length to a few pages, depending on the complexity of your plan. If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in three or four paragraphs that will end the statement.

While you may need to have a lengthy business description in some cases, it's our opinion that a short statement conveys the required information in a much more effective manner. It doesn't attempt to hold the reader's attention for an extended period of time, and this is important if you're presenting to a potential investor who will have other plans he or she will need to read as well. If the business description is long and drawn-out, you'll lose the reader's attention, and possibly any chance of receiving the necessary funding for the project.

Market Strategies

Define your market.

Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales. A market analysis also enables the entrepreneur to establish pricing, distribution and promotional strategies that will allow the company to become profitable within a competitive environment. In addition, it provides an indication of the growth potential within the industry, and this will allow you to develop your own estimates for the future of your business.

Begin your market analysis by defining the market in terms of size, structure, growth prospects, trends and sales potential.

The total aggregate sales of your competitors will provide you with a fairly accurate estimate of the total potential market. Once the size of the market has been determined, the next step is to define the target market. The target market narrows down the total market by concentrating on segmentation factors that will determine the total addressable market--the total number of users within the sphere of the business's influence. The segmentation factors can be geographic, customer attributes or product-oriented.

For instance, if the distribution of your product is confined to a specific geographic area, then you want to further define the target market to reflect the number of users or sales of that product within that geographic segment.

Once the target market has been detailed, it needs to be further defined to determine the total feasible market. This can be done in several ways, but most professional planners will delineate the feasible market by concentrating on product segmentation factors that may produce gaps within the market. In the case of a microbrewery that plans to brew a premium lager beer, the total feasible market could be defined by determining how many drinkers of premium pilsner beers there are in the target market.

It's important to understand that the total feasible market is the portion of the market that can be captured provided every condition within the environment is perfect and there is very little competition. In most industries this is simply not the case. There are other factors that will affect the share of the feasible market a business can reasonably obtain. These factors are usually tied to the structure of the industry, the impact of competition, strategies for market penetration and continued growth, and the amount of capital the business is willing to spend in order to increase its market share.

Projecting Market Share

Arriving at a projection of the market share for a business plan is very much a subjective estimate. It's based on not only an analysis of the market but on highly targeted and competitive distribution, pricing and promotional strategies. For instance, even though there may be a sizable number of premium pilsner drinkers to form the total feasible market, you need to be able to reach them through your distribution network at a price point that's competitive, and then you have to let them know it's available and where they can buy it. How effectively you can achieve your distribution, pricing and promotional goals determines the extent to which you will be able to garner market share.

For a business plan, you must be able to estimate market share for the time period the plan will cover. In order to project market share over the time frame of the business plan, you'll need to consider two factors:

• Industry growth which will increase the total number of users. Most projections utilize a minimum of two growth models by defining different industry sales scenarios. The industry sales scenarios should be based on leading indicators of industry sales, which will most likely include industry sales, industry segment sales, demographic data and historical precedence.
• Conversion of users from the total feasible market. This is based on a sales cycle similar to a product life cycle where you have five distinct stages: early pioneer users, early users, early majority users, late majority users and late users. Using conversion rates, market growth will continue to increase your market share during the period from early pioneers to early majority users, level off through late majority users, and decline with late users.

Defining the market is but one step in your analysis. With the information you've gained through market research, you need to develop strategies that will allow you to fulfill your objectives.

Positioning Your Business

When discussing market strategy, it's inevitable that positioning will be brought up. A company's positioning strategy is affected by a number of variables that are closely tied to the motivations and requirements of target customers within as well as the actions of primary competitors.

Before a product can be positioned, you need to answer several strategic questions such as:

• How are your competitors positioning themselves?
• What specific attributes does your product have that your competitors' don't?
• What customer needs does your product fulfill?

Once you've answered your strategic questions based on research of the market, you can then begin to develop your positioning strategy and illustrate that in your business plan. A positioning statement for a business plan doesn't have to be long or elaborate. It should merely point out exactly how you want your product perceived by both customers and the competition.

How you price your product is important because it will have a direct effect on the success of your business. Though pricing strategy and computations can be complex, the basic rules of pricing are straightforward:

• All prices must cover costs.
• The best and most effective way of lowering your sales prices is to lower costs.
• Your prices must reflect the dynamics of cost, demand, changes in the market and response to your competition.
• Prices must be established to assure sales. Don't price against a competitive operation alone. Rather, price to sell.
• Product utility, longevity, maintenance and end use must be judged continually, and target prices adjusted accordingly.
• Prices must be set to preserve order in the marketplace.

There are many methods of establishing prices available to you:

• Cost-plus pricing. Used mainly by manufacturers, cost-plus pricing assures that all costs, both fixed and variable, are covered and the desired profit percentage is attained.
• Demand pricing. Used by companies that sell their product through a variety of sources at differing prices based on demand.
• Competitive pricing. Used by companies that are entering a market where there is already an established price and it is difficult to differentiate one product from another.
• Markup pricing. Used mainly by retailers, markup pricing is calculated by adding your desired profit to the cost of the product. Each method listed above has its strengths and weaknesses.
• Distribution

Distribution includes the entire process of moving the product from the factory to the end user. The type of distribution network you choose will depend upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, then decide whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

Some of the more common distribution channels include:

• Direct sales. The most effective distribution channel is to sell directly to the end-user.
• OEM (original equipment manufacturer) sales. When your product is sold to the OEM, it is incorporated into their finished product and it is distributed to the end user.
• Manufacturer's representatives. One of the best ways to distribute a product, manufacturer's reps, as they are known, are salespeople who operate out of agencies that handle an assortment of complementary products and divide their selling time among them.
• Wholesale distributors. Using this channel, a manufacturer sells to a wholesaler, who in turn sells it to a retailer or other agent for further distribution through the channel until it reaches the end user.
• Brokers. Third-party distributors who often buy directly from the distributor or wholesaler and sell to retailers or end users.
• Retail distributors. Distributing a product through this channel is important if the end user of your product is the general consuming public.
• Direct Mail. Selling to the end user using a direct mail campaign.

As we've mentioned already, the distribution strategy you choose for your product will be based on several factors that include the channels being used by your competition, your pricing strategy and your own internal resources.

Promotion Plan

With a distribution strategy formed, you must develop a promotion plan. The promotion strategy in its most basic form is the controlled distribution of communication designed to sell your product or service. In order to accomplish this, the promotion strategy encompasses every marketing tool utilized in the communication effort. This includes:

• Advertising. Includes the advertising budget, creative message(s), and at least the first quarter's media schedule.
• Packaging. Provides a description of the packaging strategy. If available, mockups of any labels, trademarks or service marks should be included.
• Public relations. A complete account of the publicity strategy including a list of media that will be approached as well as a schedule of planned events.
• Sales promotions. Establishes the strategies used to support the sales message. This includes a description of collateral marketing material as well as a schedule of planned promotional activities such as special sales, coupons, contests and premium awards.
• Personal sales. An outline of the sales strategy including pricing procedures, returns and adjustment rules, sales presentation methods, lead generation, customer service policies, salesperson compensation, and salesperson market responsibilities.

Sales Potential

Once the market has been researched and analyzed, conclusions need to be developed that will supply a quantitative outlook concerning the potential of the business. The first financial projection within the business plan must be formed utilizing the information drawn from defining the market, positioning the product, pricing, distribution, and strategies for sales. The sales or revenue model charts the potential for the product, as well as the business, over a set period of time. Most business plans will project revenue for up to three years, although five-year projections are becoming increasingly popular among lenders.

When developing the revenue model for the business plan, the equation used to project sales is fairly simple. It consists of the total number of customers and the average revenue from each customer. In the equation, "T" represents the total number of people, "A" represents the average revenue per customer, and "S" represents the sales projection. The equation for projecting sales is: (T)(A) = S

Using this equation, the annual sales for each year projected within the business plan can be developed. Of course, there are other factors that you'll need to evaluate from the revenue model. Since the revenue model is a table illustrating the source for all income, every segment of the target market that is treated differently must be accounted for. In order to determine any differences, the various strategies utilized in order to sell the product have to be considered. As we've already mentioned, those strategies include distribution, pricing and promotion.

Competitive Analysis

Identify and analyze your competition.

The competitive analysis is a statement of the business strategy and how it relates to the competition. The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.

The first step in a competitor analysis is to identify the current and potential competition. There are essentially two ways you can identify competitors. The first is to look at the market from the customer's viewpoint and group all your competitors by the degree to which they contend for the buyer's dollar. The second method is to group competitors according to their various competitive strategies so you understand what motivates them.

Once you've grouped your competitors, you can start to analyze their strategies and identify the areas where they're most vulnerable. This can be done through an examination of your competitors' weaknesses and strengths. A competitor's strengths and weaknesses are usually based on the presence and absence of key assets and skills needed to compete in the market.

To determine just what constitutes a key asset or skill within an industry, David A. Aaker in his book, Developing Business Strategies , suggests concentrating your efforts in four areas:

• The reasons behind successful as well as unsuccessful firms
• Prime customer motivators
• Major component costs
• Industry mobility barriers

According to theory, the performance of a company within a market is directly related to the possession of key assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. This analysis, in conjunction with an examination of unsuccessful companies and the reasons behind their failure, should provide a good idea of just what key assets and skills are needed to be successful within a given industry and market segment.

Through your competitor analysis, you will also have to create a marketing strategy that will generate an asset or skill competitors don't have, which will provide you with a distinct and enduring competitive advantage. Since competitive advantages are developed from key assets and skills, you should sit down and put together a competitive strength grid. This is a scale that lists all your major competitors or strategic groups based upon their applicable assets and skills and how your own company fits on this scale.

Create a Competitive Strength Grid

To put together a competitive strength grid, list all the key assets and skills down the left margin of a piece of paper. Along the top, write down two column headers: "weakness" and "strength." In each asset or skill category, place all the competitors that have weaknesses in that particular category under the weakness column, and all those that have strengths in that specific category in the strength column. After you've finished, you'll be able to determine just where you stand in relation to the other firms competing in your industry.

Once you've established the key assets and skills necessary to succeed in this business and have defined your distinct competitive advantage, you need to communicate them in a strategic form that will attract market share as well as defend it. Competitive strategies usually fall into these five areas:

• Advertising

Many of the factors leading to the formation of a strategy should already have been highlighted in previous sections, specifically in marketing strategies. Strategies primarily revolve around establishing the point of entry in the product life cycle and an endurable competitive advantage. As we've already discussed, this involves defining the elements that will set your product or service apart from your competitors or strategic groups. You need to establish this competitive advantage clearly so the reader understands not only how you will accomplish your goals, but also why your strategy will work.

Design and Development Plan

What you'll cover in this section.

The purpose of the design and development plan section is to provide investors with a description of the product's design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.

There are generally three areas you'll cover in the development plan section:

• Product development
• Market development
• Organizational development

Each of these elements needs to be examined from the funding of the plan to the point where the business begins to experience a continuous income. Although these elements will differ in nature concerning their content, each will be based on structure and goals.

The first step in the development process is setting goals for the overall development plan. From your analysis of the market and competition, most of the product, market and organizational development goals will be readily apparent. Each goal you define should have certain characteristics. Your goals should be quantifiable in order to set up time lines, directed so they relate to the success of the business, consequential so they have impact upon the company, and feasible so that they aren't beyond the bounds of actual completion.

Goals For Product Development

Goals for product development should center on the technical as well as the marketing aspects of the product so that you have a focused outline from which the development team can work. For example, a goal for product development of a microbrewed beer might be "Produce recipe for premium lager beer" or "Create packaging for premium lager beer." In terms of market development, a goal might be, "Develop collateral marketing material." Organizational goals would center on the acquisition of expertise in order to attain your product and market-development goals. This expertise usually needs to be present in areas of key assets that provide a competitive advantage. Without the necessary expertise, the chances of bringing a product successfully to market diminish.

With your goals set and expertise in place, you need to form a set of procedural tasks or work assignments for each area of the development plan. Procedures will have to be developed for product development, market development, and organization development. In some cases, product and organization can be combined if the list of procedures is short enough.

Procedures should include how resources will be allocated, who is in charge of accomplishing each goal, and how everything will interact. For example, to produce a recipe for a premium lager beer, you would need to do the following:

• Gather ingredients.
• Determine optimum malting process.
• Gauge mashing temperature.
• Boil wort and evaluate which hops provide the best flavor.
• Determine yeast amounts and fermentation period.
• Determine aging period.
• Carbonate the beer.
• Decide whether or not to pasteurize the beer.

The development of procedures provides a list of work assignments that need to be accomplished, but one thing it doesn't provide are the stages of development that coordinate the work assignments within the overall development plan. To do this, you first need to amend the work assignments created in the procedures section so that all the individual work elements are accounted for in the development plan. The next stage involves setting deliverable dates for components as well as the finished product for testing purposes. There are primarily three steps you need to go through before the product is ready for final delivery:

• Preliminary product review . All the product's features and specifications are checked.
• Critical product review . All the key elements of the product are checked and gauged against the development schedule to make sure everything is going according to plan.
• Final product review . All elements of the product are checked against goals to assure the integrity of the prototype.

Scheduling and Costs

This is one of the most important elements in the development plan. Scheduling includes all of the key work elements as well as the stages the product must pass through before customer delivery. It should also be tied to the development budget so that expenses can be tracked. But its main purpose is to establish time frames for completion of all work assignments and juxtapose them within the stages through which the product must pass. When producing the schedule, provide a column for each procedural task, how long it takes, start date and stop date. If you want to provide a number for each task, include a column in the schedule for the task number.

Development Budget

That leads us into a discussion of the development budget. When forming your development budget, you need to take into account all the expenses required to design the product and to take it from prototype to production.

Costs that should be included in the development budget include:

• Material . All raw materials used in the development of the product.
• Direct labor . All labor costs associated with the development of the product.
• Overhead . All overhead expenses required to operate the business during the development phase such as taxes, rent, phone, utilities, office supplies, etc.
• G&A costs . The salaries of executive and administrative personnel along with any other office support functions.
• Marketing & sales . The salaries of marketing personnel required to develop pre-promotional materials and plan the marketing campaign that should begin prior to delivery of the product.
• Professional services . Those costs associated with the consultation of outside experts such as accountants, lawyers, and business consultants.
• Miscellaneous Costs . Costs that are related to product development.
• Capital equipment . To determine the capital requirements for the development budget, you first have to establish what type of equipment you will need, whether you will acquire the equipment or use outside contractors, and finally, if you decide to acquire the equipment, whether you will lease or purchase it.

As we mentioned already, the company has to have the proper expertise in key areas to succeed; however, not every company will start a business with the expertise required in every key area. Therefore, the proper personnel have to be recruited, integrated into the development process, and managed so that everyone forms a team focused on the achievement of the development goals.

Before you begin recruiting, however, you should determine which areas within the development process will require the addition of personnel. This can be done by reviewing the goals of your development plan to establish key areas that need attention. After you have an idea of the positions that need to be filled, you should produce a job description and job specification.

Once you've hired the proper personnel, you need to integrate them into the development process by assigning tasks from the work assignments you've developed. Finally, the whole team needs to know what their role is within the company and how each interrelates with every position within the development team. In order to do this, you should develop an organizational chart for your development team.

Assessing Risks

Finally, the risks involved in developing the product should be assessed and a plan developed to address each one. The risks during the development stage will usually center on technical development of the product, marketing, personnel requirements, and financial problems. By identifying and addressing each of the perceived risks during the development period, you will allay some of your major fears concerning the project and those of investors as well.

Operations & Management

The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business. In fact, within the operations plan you'll develop the next set of financial tables that will supply the foundation for the "Financial Components" section.

The financial tables that you'll develop within the operations plan include:

• The operating expense table
• The capital requirements table
• The cost of goods table

There are two areas that need to be accounted for when planning the operations of your company. The first area is the organizational structure of the company, and the second is the expense and capital requirements associated with its operation.

Organizational Structure

The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. This is critical to the formation of financial statements, which are heavily scrutinized by investors; therefore, the organizational structure has to be well-defined and based within a realistic framework given the parameters of the business.

Although every company will differ in its organizational structure, most can be divided into several broad areas that include:

• Marketing and sales (includes customer relations and service)
• Production (including quality assurance)
• Research and development
• Administration

These are very broad classifications and it's important to keep in mind that not every business can be divided in this manner. In fact, every business is different, and each one must be structured according to its own requirements and goals.

The four stages for organizing a business are:

Calculate Your Personnel Numbers

Once you've structured your business, however, you need to consider your overall goals and the number of personnel required to reach those goals. In order to determine the number of employees you'll need to meet the goals you've set for your business, you'll need to apply the following equation to each department listed in your organizational structure: C / S = P

In this equation, C represents the total number of customers, S represents the total number of customers that can be served by each employee, and P represents the personnel requirements. For instance, if the number of customers for first year sales is projected at 10,110 and one marketing employee is required for every 200 customers, you would need 51 employees within the marketing department: 10,110 / 200 = 51

Once you calculate the number of employees that you'll need for your organization, you'll need to determine the labor expense. The factors that need to be considered when calculating labor expense (LE) are the personnel requirements (P) for each department multiplied by the employee salary level (SL). Therefore, the equation would be: P * SL = LE

Using the marketing example from above, the labor expense for that department would be: 51 * $40,000 = $2,040,000

Calculate Overhead Expenses

Once the organization's operations have been planned, the expenses associated with the operation of the business can be developed. These are usually referred to as overhead expenses. Overhead expenses refer to all non-labor expenses required to operate the business. Expenses can be divided into fixed (those that must be paid, usually at the same rate, regardless of the volume of business) and variable or semivariable (those which change according to the amount of business).

Overhead expenses usually include the following:

• Maintenance and repair
• Equipment leases
• Advertising & promotion
• Packaging & shipping
• Payroll taxes and benefits
• Uncollectible receivables
• Professional services
• Loan payments
• Depreciation

In order to develop the overhead expenses for the expense table used in this portion of the business plan, you need to multiply the number of employees by the expenses associated with each employee. Therefore, if NE represents the number of employees and EE is the expense per employee, the following equation can be used to calculate the sum of each overhead (OH) expense: OH = NE * EE

Develop a Capital Requirements Table

In addition to the expense table, you'll also need to develop a capital requirements table that depicts the amount of money necessary to purchase the equipment you'll use to establish and continue operations. It also illustrates the amount of depreciation your company will incur based on all equipment elements purchased with a lifetime of more than one year.

In order to generate the capital requirements table, you first have to establish the various elements within the business that will require capital investment. For service businesses, capital is usually tied to the various pieces of equipment used to service customers.

Capital for manufacturing companies, on the other hand, is based on the equipment required in order to produce the product. Manufacturing equipment usually falls into three categories: testing equipment, assembly equipment and packaging equipment.

With these capital elements in mind, you need to determine the number of units or customers, in terms of sales, that each equipment item can adequately handle. This is important because capital requirements are a product of income, which is produced through unit sales. In order to meet sales projections, a business usually has to invest money to increase production or supply better service. In the business plan, capital requirements are tied to projected sales as illustrated in the revenue model shown earlier in this chapter.

For instance, if the capital equipment required is capable of handling the needs of 10,000 customers at an average sale of $10 each, that would be $100,000 in sales, at which point additional capital will be required in order to purchase more equipment should the company grow beyond this point. This leads us to another factor within the capital requirements equation, and that is equipment cost.

If you multiply the cost of equipment by the number of customers it can support in terms of sales, it would result in the capital requirements for that particular equipment element. Therefore, you can use an equation in which capital requirements (CR) equals sales (S) divided by number of customers (NC) supported by each equipment element, multiplied by the average sale (AS), which is then multiplied by the capital cost (CC) of the equipment element. Given these parameters, your equation would look like the following: CR = [(S / NC) * AS] * CC

The capital requirements table is formed by adding all your equipment elements to generate the total new capital for that year. During the first year, total new capital is also the total capital required. For each successive year thereafter, total capital (TC) required is the sum of total new capital (NC) plus total capital (PC) from the previous year, less depreciation (D), once again, from the previous year. Therefore, your equation to arrive at total capital for each year portrayed in the capital requirements model would be: TC = NC + PC - D

Keep in mind that depreciation is an expense that shows the decrease in value of the equipment throughout its effective lifetime. For many businesses, depreciation is based upon schedules that are tied to the lifetime of the equipment. Be careful when choosing the schedule that best fits your business. Depreciation is also the basis for a tax deduction as well as the flow of money for new capital. You may need to seek consultation from an expert in this area.

Create a Cost of Goods Table

The last table that needs to be generated in the operations and management section of your business plan is the cost of goods table. This table is used only for businesses where the product is placed into inventory. For a retail or wholesale business, cost of goods sold --or cost of sales --refers to the purchase of products for resale, i.e. the inventory. The products that are sold are logged into cost of goods as an expense of the sale, while those that aren't sold remain in inventory.

For a manufacturing firm, cost of goods is the cost incurred by the company to manufacture its product. This usually consists of three elements:

As in retail, the merchandise that is sold is expensed as a cost of goods , while merchandise that isn't sold is placed in inventory. Cost of goods has to be accounted for in the operations of a business. It is an important yardstick for measuring the firm's profitability for the cash-flow statement and income statement.

In the income statement, the last stage of the manufacturing process is the item expensed as cost of goods, but it is important to document the inventory still in various stages of the manufacturing process because it represents assets to the company. This is important to determining cash flow and to generating the balance sheet.

That is what the cost of goods table does. It's one of the most complicated tables you'll have to develop for your business plan, but it's an integral part of portraying the flow of inventory through your operations, the placement of assets within the company, and the rate at which your inventory turns.

In order to generate the cost of goods table, you need a little more information in addition to what your labor and material cost is per unit. You also need to know the total number of units sold for the year, the percentage of units which will be fully assembled, the percentage which will be partially assembled, and the percentage which will be in unassembled inventory. Much of these figures will depend on the capacity of your equipment as well as on the inventory control system you develop. Along with these factors, you also need to know at what stage the majority of the labor is performed.

Financial Components

Financial statements to include.

Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the business concept and the management team. Astute investors look carefully at the charts, tables, formulas and spreadsheets in the financial section, because they know that this information is like the pulse, respiration rate and blood pressure in a human--it shows whether the patient is alive and what the odds are for continued survival.

Financial statements, like bad news, come in threes. The news in financial statements isn't always bad, of course, but taken together it provides an accurate picture of a company's current value, plus its ability to pay its bills today and earn a profit going forward.

The three common statements are a cash flow statement, an income statement and a balance sheet. Most entrepreneurs should provide them and leave it at that. But not all do. But this is a case of the more, the less merry. As a rule, stick with the big three: income, balance sheet and cash flow statements.

These three statements are interlinked, with changes in one necessarily altering the others, but they measure quite different aspects of a company's financial health. It's hard to say that one of these is more important than another. But of the three, the income statement may be the best place to start.

Income Statement

The income statement is a simple and straightforward report on the proposed business's cash-generating ability. It's a score card on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result--which is either a profit or a loss.

For a business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second, and annually for each year thereafter. It's formed by listing your financial projections in the following manner:

• Income . Includes all the income generated by the business and its sources.
• Cost of goods . Includes all the costs related to the sale of products in inventory.
• Gross profit margin . The difference between revenue and cost of goods. Gross profit margin can be expressed in dollars, as a percentage, or both. As a percentage, the GP margin is always stated as a percentage of revenue.
• Operating expenses . Includes all overhead and labor expenses associated with the operations of the business.
• Total expenses . The sum of all overhead and labor expenses required to operate the business.
• Net profit . The difference between gross profit margin and total expenses, the net income depicts the business's debt and capital capabilities.
• Depreciation . Reflects the decrease in value of capital assets used to generate income. Also used as the basis for a tax deduction and an indicator of the flow of money into new capital.
• Net profit before interest . The difference between net profit and depreciation.
• Interest . Includes all interest derived from debts, both short-term and long-term. Interest is determined by the amount of investment within the company.
• Net profit before taxes . The difference between net profit before interest and interest.
• Taxes . Includes all taxes on the business.
• Profit after taxes . The difference between net profit before taxes and the taxes accrued. Profit after taxes is the bottom line for any company.

Following the income statement is a short note analyzing the statement. The analysis statement should be very short, emphasizing key points within the income statement.

Cash Flow Statement

The cash-flow statement is one of the most critical information tools for your business, showing how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. It shows a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year. In a cash-flow statement, both profits and losses are carried over to the next column to show the cumulative amount. Keep in mind that if you run a loss on your cash-flow statement, it is a strong indicator that you will need additional cash in order to meet expenses.

Like the income statement, the cash-flow statement takes advantage of previous financial tables developed during the course of the business plan. The cash-flow statement begins with cash on hand and the revenue sources. The next item it lists is expenses, including those accumulated during the manufacture of a product. The capital requirements are then logged as a negative after expenses. The cash-flow statement ends with the net cash flow.

The cash-flow statement should be prepared on a monthly basis during the first year, on a quarterly basis during the second year, and on an annual basis thereafter. Items that you'll need to include in the cash-flow statement and the order in which they should appear are as follows:

• Cash sales . Income derived from sales paid for by cash.
• Receivables . Income derived from the collection of receivables.
• Other income . Income derived from investments, interest on loans that have been extended, and the liquidation of any assets.
• Total income . The sum of total cash, cash sales, receivables, and other income.
• Material/merchandise . The raw material used in the manufacture of a product (for manufacturing operations only), the cash outlay for merchandise inventory (for merchandisers such as wholesalers and retailers), or the supplies used in the performance of a service.
• Production labor . The labor required to manufacture a product (for manufacturing operations only) or to perform a service.
• Overhead . All fixed and variable expenses required for the production of the product and the operations of the business.
• Marketing/sales . All salaries, commissions, and other direct costs associated with the marketing and sales departments.
• R&D . All the labor expenses required to support the research and development operations of the business.
• G&A . All the labor expenses required to support the administrative functions of the business.
• Taxes . All taxes, except payroll, paid to the appropriate government institutions.
• Capital . The capital required to obtain any equipment elements that are needed for the generation of income.
• Loan payment . The total of all payments made to reduce any long-term debts.
• Total expenses . The sum of material, direct labor, overhead expenses, marketing, sales, G&A, taxes, capital and loan payments.
• Cash flow . The difference between total income and total expenses. This amount is carried over to the next period as beginning cash.
• Cumulative cash flow . The difference between current cash flow and cash flow from the previous period.

As with the income statement, you will need to analyze the cash-flow statement in a short summary in the business plan. Once again, the analysis statement doesn't have to be long and should cover only key points derived from the cash-flow statement.

The Balance Sheet

The last financial statement you'll need to develop is the balance sheet. Like the income and cash-flow statements, the balance sheet uses information from all of the financial models developed in earlier sections of the business plan; however, unlike the previous statements, the balance sheet is generated solely on an annual basis for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas:

To obtain financing for a new business, you may need to provide a projection of the balance sheet over the period of time the business plan covers. More importantly, you'll need to include a personal financial statement or balance sheet instead of one that describes the business. A personal balance sheet is generated in the same manner as one for a business.

As mentioned, the balance sheet is divided into three sections. The top portion of the balance sheet lists your company's assets. Assets are classified as current assets and long-term or fixed assets. Current assets are assets that will be converted to cash or will be used by the business in a year or less. Current assets include:

• Cash . The cash on hand at the time books are closed at the end of the fiscal year.
• Accounts receivable . The income derived from credit accounts. For the balance sheet, it's the total amount of income to be received that is logged into the books at the close of the fiscal year.
• Inventory . This is derived from the cost of goods table. It's the inventory of material used to manufacture a product not yet sold.
• Total current assets . The sum of cash, accounts receivable, inventory, and supplies.

Other assets that appear in the balance sheet are called long-term or fixed assets. They are called long-term because they are durable and will last more than one year. Examples of this type of asset include:

• Capital and plant . The book value of all capital equipment and property (if you own the land and building), less depreciation.
• Investment . All investments by the company that cannot be converted to cash in less than one year. For the most part, companies just starting out have not accumulated long-term investments.
• Miscellaneous assets . All other long-term assets that are not "capital and plant" or "investments."
• Total long-term assets . The sum of capital and plant, investments, and miscellaneous assets.
• Total assets . The sum of total current assets and total long-term assets.

After the assets are listed, you need to account for the liabilities of your business. Like assets, liabilities are classified as current or long-term. If the debts are due in one year or less, they are classified as a current liabilities. If they are due in more than one year, they are long-term liabilities. Examples of current liabilities are as follows:

• Accounts payable . All expenses derived from purchasing items from regular creditors on an open account, which are due and payable.
• Accrued liabilities . All expenses incurred by the business which are required for operation but have not been paid at the time the books are closed. These expenses are usually the company's overhead and salaries.
• Taxes . These are taxes that are still due and payable at the time the books are closed.
• Total current liabilities . The sum of accounts payable, accrued liabilities, and taxes.

Long-term liabilities include:

• Bonds payable . The total of all bonds at the end of the year that are due and payable over a period exceeding one year.
• Mortgage payable . Loans taken out for the purchase of real property that are repaid over a long-term period. The mortgage payable is that amount still due at the close of books for the year.
• Notes payable . The amount still owed on any long-term debts that will not be repaid during the current fiscal year.
• Total long-term liabilities . The sum of bonds payable, mortgage payable, and notes payable.
• Total liabilities . The sum of total current and long-term liabilities.

Once the liabilities have been listed, the final portion of the balance sheet-owner's equity-needs to be calculated. The amount attributed to owner's equity is the difference between total assets and total liabilities. The amount of equity the owner has in the business is an important yardstick used by investors when evaluating the company. Many times it determines the amount of capital they feel they can safely invest in the business.

In the business plan, you'll need to create an analysis statement for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points about the company.

Source: The Small Business Encyclopedia , Business Plans Made Easy, Start Your Own Business and Entrepreneur magazine.

Business Plan Guide

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick Red Arrow

• Lock 3 Things Your Business Idea Must Have to Succeed — as Proven By Famous Harvard Business School Startups
• This Couple Cashed in Their 401ks to Launch a Virtual Business — Here's How It Led to a 9-Figure Exit and Co-Owning 2 Professional Soccer Teams
• Lock The No. 1 State to Retire in Might Not Even Be on Your Radar, According to a New Report
• Lock 12 Books That Self-Made Millionaires Swear By
• Lock These Are the Highest-Paying Side Hustles for a Single Day of Work
• Use These 3 Steps to Find the Perfect Franchise Opportunity for You

Most Popular Red Arrow

'creators left so much money on the table': kickstarter's ceo reveals the story behind the company's biggest changes in 15 years.

In an interview with Entrepreneur, Kickstarter CEO Everette Taylor explains the decision-making behind the changes, how he approaches leading Kickstarter, and his advice for future CEOs.

Canva Is Going Viral For a Questionable Musical Performance at a Company Conference: 'Peak Cringe'

Canva Create took place in Los Angeles on May 23.

87 Service Business Ideas to Start Today

Get started in this growing industry, with options that range from IT consulting to childcare.

How to Become an AI-Centric Business (and Why It's Crucial for Long-Term Success)

Learn the essential steps to integrate AI at the core of your operations and stay competitive in an ever-evolving landscape.

Melinda French Gates Reveals Her Next Move After Leaving Gates Foundation: 'Set Your Own Agenda or Someone Else Will Set It For You'

French Gates announced that she is donating $1 billion over the next two years.

5 Steps to Preparing an Engaging Industry Presentation

You can make a great impression and generate interest with an exciting, informative presentation. Find out my five secrets to creating an industry presentation guaranteed to wow.

Successfully copied link

Accessibility Quick Links

• Skip to Online Banking
• Skip to Content
• Skip to Navigation

Are you sure you want to delete this saved card number?

• CIBC Advice Centre
• Smart Business Advice
• The Dos and Don’ts of Writing a Solid Business Plan

Business Plans 201: The dos and don’ts of writing a solid business plan

We get it. That new business or venture that you’ve been dreaming about can be nerve-racking, but it’s possible. 

Starting a new business starts with an idea which comes to life with a strong business plan. Your business plan is more than a piece of paper or a writing exercise. It’s a roadmap that will keep you focused and give you a baseline for measuring success and achieving your goals. 

It isn’t a fixed or final artifact. Instead, think of it as a living document that you’ll revisit, learn from and adjust as your business grows. 

Writing your plan at first may take a lot of effort and it’s normal to go through several drafts. Consult your advisory team as they can support your plan’s development. And your plan will develop as you get new ideas, make new decisions and learn about changing business developments. 

Your plan is also key to unlocking funding. Whether you finance your business or solicit investors, either party will want to learn more about your plan before they invest. Effective language is key to communicating your business plan successfully to potential investors.

Follow these guidelines to start writing a solid business plan that communicates your vision and speaks to your audience.

The “dos” for writing a solid business plan

Be professional yet simple.

Writing with a professional tone allows investors to appreciate your vision and understand your short- and long-term goals. At the same time, it’s best to write in a simple manner. Aim for your plan to be understood by a non-expert. Replace jargon with active verbs. You can always get your final draft edited by a professional.

Refer to your business in third person

Writing in third person allows objectivity which can be more convincing and accepted by audiences like banks and investors. Avoid using “we” or “I” throughout your business plan. Writing in first person may come across as too personal. Remember to keep it business, not personal.

Be direct throughout your plan. Avoid ambiguous or vague language. Being direct allows you to be convincing about the steps you’ll take to bring your idea to life.

Supply evidence 

Do your research and present data to support your case. Showing statistics about your business, competitors, customers and industry allows investors to get a bigger picture of the survival and growth of your business.

Be realistic 

Avoid adding assumptions in your business plan. Instead of over-promising, show solid data backed up by research on how your business can be successful.

Practice makes perfect

Read your business plan out loud. Ask yourself these questions: Does it sound effective? Does it have the tone of confidence? Is it easily understood by your audience? What are the strengths and opportunities to tackle in your plan? Have a friend read your plan and summarize it back to you .

Be optimistic

The language of your business plan should be assertive, yet optimistic. Allow your passion to shine through in your business plan and show your advisor that you’re serious about bringing your vision to life.

The “don’ts ” of writing your business plan

Avoid acronyms and abbreviations.

Use industry specific abbreviations and acronyms only if necessary and if they’re part of your business operations. 

Don’t assume the reader knows your industry

Investors and advisors are here to support you. Allow them to understand what industry your business lives in. Provide in-depth knowledge of your industry so they can understand your business functions.

Don’t turn it into an essay

When writing your business plan and conducting industry research, sometimes it’s easy to get sidetracked and turn your plan into an essay. Make sure your business plan has a solid focus and includes all the required information. 

Avoid extensive research

Use only credible sources and findings for your research and analysis. It’s a great practice to use government-issued statistics and data. Use this data in your own language for business projections and goals. Simplicity is key.

Don’t be repetitive

Avoid repeating yourself throughout the plan. You can do this by reading your plan out loud and removing duplicate ideas. Include the key points and messages you need to relay.

Don’t forget about it

Be proactive and don’t forget to follow up with your advisor within the right time frame. Communicate with your advisory team and take advantage of your relationships with your investors, business partners and CIBC business advisor. 

Updating your business plan on a quarterly basis is a great practice for staying on track of your business growth. Our team is here to support you as you develop your plan and assemble your team.

To create a tailored plan for your business needs and help you achieve your goals, meet with us opens in a new window. . We’re here to help. Talk to a CIBC Business Advisor today by calling 1-866-992-7223 . Opens your phone app.

Written By Lauren Rabindranath

Lauren Rabindranath is a copywriter and communications consultant based in Toronto, Ontario, who works with clients across industries. Working with CIBC Business Banking, Lauren supports content development for online platforms, relating her personal experience as an entrepreneur to CIBC’s tailored services.

Connect with a business banking expert on your schedule or in your community.

Telephone Banking:  1-800-465-2422 Opens your phone app.   |   Contact us Opens in a new window.

Select your country and language

• English United States English. Opens in a new window.

Please note: Multilanguage sites do not provide full access to all content on CIBC.com. The full CIBC website is available in English and French.

5 Steps to Developing a Solid Business Plan

Choncé Maddox

• Debt Expert and Financial Writer
• Updated on January 17th, 2022

You have a great business idea and want to jump right in. The one thing holding you back may be lack of a clear business plan . While some would say having a business plan is an absolute must, others would argue that you can get started and be successful without one.

I think the answer lies in how confident you are in your idea and how organized you are in terms of executing it. If you already have a clear plan in your head along with the steps you need to take and the means to take them, you may not see the need to create a 20-page business plan.

On the flip side, if your idea lacks clarity and you are considering seeking out funding from others sources, it would be best if you came up with a solid business plan. The good news, is that you can sit down and create a business plan in under a day. It doesn’t have to be super extensive so long as you hit all your main points and follow stick to outlining these steps.

Table of Contents

1. Executive Summary

The executive summary is the first part of your business plan. This is where you capture the reader’s attention be explaining the specifics of your business. What is the name? What will you be doing? What is the mission of your business and what are your goals?

Be sure to include what makes your business unique and summarize why you feel it will succeed.

2. Market Analysis

Next you want to analyze the market in order to prove that there is a need and target audience for your business. This is a great way to validate your business idea as well. If you can’t narrow down your target market or find that they aren’t interested in what you are offering, that could be a huge red flag.

Be sure to clarify who you wish to serve along with some detailed statistics that describe them, their interests, what products and services they buy, along with and their needs and wants.

3. Financial Projections

The financial projections section is where you get to have some fun with numbers. Map out the financial progress you plan to make with your business over the next 3-5 years. Include revenue goals and you might want to specify how much you’d need from an investor or a loan to bring those goals to fruition.

This is also a great place to mention various different start-up costs you’ll have so investors can know why you need money to support your business.

4. Organizational Structure

Have you ever thought about how your business will operate and be structured? Will you act as the CEO? Will you have a team or hire interns ? Will you eventually need to work with accounting, sales, and marketing experts? Or will you be more of a solopreneur.

This is a great section to answer all of those questions and map out how you might expect your business to grow in the future and which roles you’ll have and need.

5. Products or Services

Finally, in step 5 you want to go into more detail about your products and services. Most people start with this step (especially if they don’t consider making a business plan) but it’s best to end here after you’ve covered your bases in the previous steps.

Discuss what makes your product or service unique and how you plan to execute it in a competitive marketplace. If you’re going to be selling products include descriptions and images along with whether you’d need to trademark anything.

A business plan can be a crucial tool to help you get organized and perform neccessary research before moving forward with your new venture. If you’re considering asking for funding or financial assistance, a solid business plan is usually a requirement.

Even so, it’s a great way to get crystal clear on your goals and intentions so you can focus in on carrying out your plans and being successful.

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Top Trending Posts

Kohl’s Q1 financials cause shares to slump

Elon Musk agrees to testify in SEC probe of $44 billion Twitter deal

McDonald’s CEO releases public statement addressing price hikes

Mass Ave Global and CEO charged for misleading investors

Glass Lewis urges Musk’s $56 billion pay be voted down

US Cellular snapped up by T-Mobile in $4.4 billion deal

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below…  Learn More

• school Campus Bookshelves
• menu_book Bookshelves
• perm_media Learning Objects
• login Login
• how_to_reg Request Instructor Account
• hub Instructor Commons

Margin Size

• Download Page (PDF)
• Download Full Book (PDF)
• Periodic Table
• Physics Constants
• Scientific Calculator
• Reference & Cite
• Tools expand_more
• Readability

selected template will load here

This action is not available.

1.1: Chapter 1 – Developing a Business Plan

• Last updated
• Save as PDF
• Page ID 21274

• Lee A. Swanson
• University of Saskatchewan

\( \newcommand{\vecs}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}} } \)

\( \newcommand{\vecd}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash {#1}}} \)

\( \newcommand{\id}{\mathrm{id}}\) \( \newcommand{\Span}{\mathrm{span}}\)

( \newcommand{\kernel}{\mathrm{null}\,}\) \( \newcommand{\range}{\mathrm{range}\,}\)

\( \newcommand{\RealPart}{\mathrm{Re}}\) \( \newcommand{\ImaginaryPart}{\mathrm{Im}}\)

\( \newcommand{\Argument}{\mathrm{Arg}}\) \( \newcommand{\norm}[1]{\| #1 \|}\)

\( \newcommand{\inner}[2]{\langle #1, #2 \rangle}\)

\( \newcommand{\Span}{\mathrm{span}}\)

\( \newcommand{\id}{\mathrm{id}}\)

\( \newcommand{\kernel}{\mathrm{null}\,}\)

\( \newcommand{\range}{\mathrm{range}\,}\)

\( \newcommand{\RealPart}{\mathrm{Re}}\)

\( \newcommand{\ImaginaryPart}{\mathrm{Im}}\)

\( \newcommand{\Argument}{\mathrm{Arg}}\)

\( \newcommand{\norm}[1]{\| #1 \|}\)

\( \newcommand{\Span}{\mathrm{span}}\) \( \newcommand{\AA}{\unicode[.8,0]{x212B}}\)

\( \newcommand{\vectorA}[1]{\vec{#1}}      % arrow\)

\( \newcommand{\vectorAt}[1]{\vec{\text{#1}}}      % arrow\)

\( \newcommand{\vectorB}[1]{\overset { \scriptstyle \rightharpoonup} {\mathbf{#1}} } \)

\( \newcommand{\vectorC}[1]{\textbf{#1}} \)

\( \newcommand{\vectorD}[1]{\overrightarrow{#1}} \)

\( \newcommand{\vectorDt}[1]{\overrightarrow{\text{#1}}} \)

\( \newcommand{\vectE}[1]{\overset{-\!-\!\rightharpoonup}{\vphantom{a}\smash{\mathbf {#1}}}} \)

Learning Objectives

After completing this chapter, you will be able to

• Describe the purposes for business planning
• Describe common business planning principles
• Explain common business plan development guidelines and tools
• List and explain the elements of the business plan development process
• Explain the purposes of each element of the business plan development process
• Explain how applying the business plan development process can aid in developing a business plan that will meet entrepreneurs’ goals

This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.

Purposes for Developing Business Plans

Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.

Internal Purposes

As the road map for a business’s development, the business plan

• Defines the vision for the company
• Establishes the company’s strategy
• Describes how the strategy will be implemented
• Provides a framework for analysis of key issues
• Provides a plan for the development of the business
• Helps the entrepreneur develop and measure critical success factors
• Helps the entrepreneur to be realistic and test theories

External Purposes

The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.

Business Plan Development Principles

Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles .

First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity , the context within the proposed venture will operate (internal and external environment), and the business model (Hindle & Mainprize, 2006).

There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team . Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal , or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).

General Guidelines for Developing Business Plans

Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.

As You Write Your Business Plan

1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.

2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.

3. Make certain all of your pages are ordered and numbered correctly.

4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:

1. First main heading

1.1 First subheading under the first main heading

1.1.1. First sub-subheading under the first subheading

2. Second main heading

2.1 First subheading under the second main heading

Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.

5. Prior to submitting your plan, be 100% certain each of the following requirements are met:

• Everything must be completely integrated. The written part must say exactly the same thing as the financial part.
• All financial statements must be completely linked and valid. Make sure all of your balance sheets balance.
• Everything must be correct. There should be NO spelling, grammar, sentence structure, referencing, or calculation errors.
• Your document must be well organized and formatted. The layout you choose should make the document easy to read and comprehend. All of your diagrams, charts, statements, and other additions should be easy to find and be located in the parts of the plan best suited to them.
• In some cases it can strengthen your business plan to show some information in both text and table or figure formats. You should avoid unnecessary repetition , however, as it is usually unnecessary—and even damaging—to state the same thing more than once.
• You should include all the information necessary for readers to understand everything in your document.
• The terms you use in your plan should be clear and consistent. For example, the following statement in a business plan would leave a reader completely confused: “There is a shortage of 100,000 units with competitors currently producing 25,000. We can help fill this huge gap in demand with our capacity to produce 5,000 units.”

• Search Search Please fill out this field.

Market Research

Business planning, website development, product or service selection, marketing and promotion, is it a good idea to start an online business, can i start an online business with $100, what are different types of online marketing strategies, the bottom line.

• Small Business
• How to Start a Business

Starting an Online Business: A Step-by-Step Guide

Crafting a Winning Business Plan: Setting Goals and Strategies

Katie Miller is a consumer financial services expert. She worked for almost two decades as an executive, leading multi-billion dollar mortgage, credit card, and savings portfolios with operations worldwide and a unique focus on the consumer. Her mortgage expertise was honed post-2008 crisis as she implemented the significant changes resulting from Dodd-Frank required regulations.

• How to Start a Business: A Comprehensive Guide and Essential Steps
• How to Do Market Research, Types, and Example
• Marketing Strategy: What It Is, How It Works, How To Create One
• Marketing in Business: Strategies and Types Explained
• What Is a Marketing Plan? Types and How to Write One
• Business Development: Definition, Strategies, Steps & Skills
• Business Plan: What It Is, What's Included, and How to Write One
• Small Business Development Center (SBDC): Meaning, Types, Impact
• How to Write a Business Plan for a Loan
• Business Startup Costs: It’s in the Details
• Startup Capital Definition, Types, and Risks
• Bootstrapping Definition, Strategies, and Pros/Cons
• Crowdfunding: What It Is, How It Works, and Popular Websites
• Starting a Business with No Money: How to Begin
• A Comprehensive Guide to Establishing Business Credit
• Equity Financing: What It Is, How It Works, Pros and Cons
• Best Startup Business Loans
• Sole Proprietorship: What It Is, Pros & Cons, and Differences From an LLC
• Partnership: Definition, How It Works, Taxation, and Types
• What is an LLC? Limited Liability Company Structure and Benefits Defined
• Corporation: What It Is and How to Form One
• Starting a Small Business: Your Complete How-to Guide
• Starting an Online Business: A Step-by-Step Guide CURRENT ARTICLE
• How to Start Your Own Bookkeeping Business: Essential Tips
• How to Start a Successful Dropshipping Business: A Comprehensive Guide

Oscar Wong / Getty Images

If you want to get into the online business game, it’s a good time to start. The COVID-19 pandemic reshaped online consumer spending, including how people shop online and how they research products.

Today, 76% of Americans buy products online. Furthermore, roughly a third of people purchase items online weekly. From setting up an ecommerce business to offering web design services, there are countless avenues to explore as an entrepreneur.

Below, we’ll walk through each step to building an online business.

Key Takeaways

• When starting an online business, comprehensive market research is critical for identifying your target audience and learning how to resonate with your customers and understand their needs.
• Creating a business plan is an important step for outlining your business goals. It also includes your product description, target market, and financial projections, among other core components.
• Building your website involves setting up a domain name, finding a hosting company, and designing a strong website with consistent branding that allows your customers to navigate it intuitively.
• Choosing the right product or service to sell is essential. It’s important to think about how you’re addressing an unmet need.
• Several digital marketing strategies can be utilized, from content marketing to paid advertising, to help your business grow.

Successful online entrepreneurs study hard in order to have a thorough understanding of their market. This is important for knowing exactly how to reach your target market , because these are the people who will buy your products and drive your business growth.

At its core, market research is about understanding your customers’ needs, pain points, and solutions. It is designed to help your business better meet these needs.

Steps to Conduct Market Research

Market research involves understanding key aspects of your current and future customers. To get a clear sense of your target market, outline the characteristics of your audience—for example, age, location, gender, income, job title, and key pain points.

Once you have identified your target audience, conduct research on the following topics, which will tell you about how they make decisions and how you can better position your business:

• What are the challenges that your target market faces?
• Where do they research a given product or service?
• What are their views on pricing for this product or service?
• What factors influence their decision to make a purchase?
• Who are your competitors?

To put this market research into action, there are a number of different avenues you can take:

• Focus groups
• Competitive analysis
• Brand awareness research
• Market segmentation research

Consider the following questions that may be asked in an interview or focus group to learn more about your audience:

• “How do you search for that product?”
• “How useful was it?”
• “What words do you use when you search on Google?”

When you have completed your market research, identify what you have learned as well as your next steps based on these insights.

Creating a business plan is a key first step for all business owners . It is important for companies looking to secure funding resources. It also serves as a blueprint to summarize your key business objectives and goals.

To write a business plan , incorporate these eight main sections, which are often found in traditional templates:

• Executive summary : This is typically a one-page section that explains your objectives and includes your mission statement, core team, and why your company is positioned for success.
• Company description : This describes what you offer, your competitive advantages, and your business goals.
• Market analysis : This is where you explain your target market, market size, market trends, and competitive landscape.
• Organization and management : Explain who is working on your team and their professional background and experience.
• Service or product line : Describe the product or service you are offering, including any copyright or plans for patenting.
• Marketing and sales : Discuss your marketing and sales strategy. Discuss your pricing, key metrics, and sales plan.
• Funding request : If you are a company looking for funding, here is where you outline the capital you are requesting and where it will be allocated.
• Financial projections : Include projections for your company’s revenue and expenses. Consider including an income statement, balance sheet, and cash flow statement in this section.

A business plan is important because it helps clarify your action points, who you are, and what you offer, all in a coherent template.

Getting your business online is the next key step. In an ever-changing environment, it is important to know the tools, trends, and strategies for building a strong online presence to allow your business to grow.

Registering Your Domain

The first step is registering your name, or your website address. This can be in the form of your business name “.com.” To purchase your domain name, you can go to sites like GoDaddy or Namecheap . If you decide to build your website using WordPress, you will need to use a site such as these to host your website.

Web Hosting Companies

Alternatively, you can buy your domain name at a hosting company. These are companies like Shopify , Wix , or Amazon Web Services , that may also offer tools to build your website and release content on them. 

Website Design

A well-designed website is important for many reasons. Using a website builder, such as Mailchimp or Squarespace , can allow you to choose a theme, customize your pages, create relevant content, and set up a payment page.

Other key aspects of your website design include its functionality, simplicity, and ease of use. Allowing your potential customers to navigate the site intuitively will be key to their experience. Brand consistency—in your logo, colors, and typeface, for example—is also key to creating a unified brand.

Another essential part of website design is its mobile application. You’ll want to ensure that your website runs smoothly on mobile, that images load properly, that the text is legible, and that buttons are intuitive to click.

This step focuses on how to choose the right product or service to sell. At the heart of this choice is the goal of solving a customer’s problem. But there are a number of strategies you can use to identify your product idea.

For example, you might consider analyzing companies with high-profit margins, products that align with your passion, burgeoning trends, items trending on online marketplaces, and/or customer reviews.

With this in mind, analyze how this product will get to your customers. Additionally, you may consider products that are not available in stores in your local market but are offered in communities such as Europe or Japan, for example.

Marketing strategy and promotion is an essential driver of business growth. As the digital landscape evolves, it’s important to have an effective marketing plan that resonates with changing consumer preferences and needs.

Here are questions that companies can consider as they create their marketing strategy, navigating today’s environment:

• Impact, value, and growth : What are the goals and key performance indicators (KPIs) that will measure success for your business? How will you explain the value that the business provides to its customers and/or society? Create an “elevator speech”—a 30-second description of what you offer and why it’s special.
• Customer need and brand promise : How does the brand meet a customer’s need through its products and services?
• Customer experience : How will the business deliver the best experiences at each stage of the customer journey?
• Organizational model : How will the business operate to serve the customer with the most impact?

These will help you understand what types of strategies can have real impact.

Types of Marketing Strategies

Consider the following digital marketing strategies that can be used for your online business:

• Email marketing
• Social media marketing
• Paid advertising
• Search engine optimization (SEO)
• Content marketing
• Influencer marketing

Each of these presents a different way to reach your target audience, drive conversions, or build brand awareness, depending on your marketing goals.

You need to determine that for yourself. But before starting an online business, it’s important to assess the time, investment, and resources you’ll need to get it off the ground. While the barrier to entry can be quite low, it’s worth considering your goals and strategies for making it a reality.

However, compared with starting up a traditional brick-and-mortar business, the risks of launching an online business may be reduced due to lower upfront costs such as rent, staff, and materials, among others.

The short answer: yes. While it depends on the type of business you hope to pursue, there are many ways to set up an online business at very little cost. For example, you could offer your services doing freelance work, photography, bookkeeping, or personal training. The primary costs involved include setting up your business website, which can cost as little as $2 to $20 each year with companies such as GoDaddy.

There are a number of digital marketing strategies that online businesses can use, such as content marketing, email marketing, paid advertising, SEO, and influencer marketing. Each of these strategies can be useful, depending on your product and goals.

Starting an online business can be a powerful way to launch a new product or service while reaching a wider audience. With market research, a solid business plan, a strong website, and a digital marketing strategy, you can get started in growing your company effectively. As customers increasingly make decisions virtually, building an online business is vital to any business owner’s success.

Pew Research Center. “ For Shopping, Phones Are Common and Influencers Have Become a Factor—Especially for Young Adults .”

U.S. Small Business Administration. “ Market Research and Competitive Analysis .”

U.S. Small Business Administration. “ Write Your Business Plan .”

Ogilvy. “ Getting Future Ready with Marketing Transformation ,” Page 15.

GoDaddy. “ How Much Does a Domain Name Cost? Find Out! ”

• Terms of Service
• Editorial Policy
• Privacy Policy
• Your Privacy Choices