Do you know how many moving parts an average mechanical watch has?
Now imagine your business as a watch. But not the typical $20 mechanical one you could buy on Amazon.
Imagine something more akin to the Patek Philippe Caliber 89 Pocket Watch.
It has 1,728 components and is one of the most complicated watches in the world. But what does this have to do with how to write a business plan?
Imagine each of these 1,728 tiny moving parts is something that could make or break your business. You know, stuff like competition, demand, funding, personnel, etc.
You have to have intimate knowledge of all your business’s aspects and the industry you are entering.
The lack of such insight and planning is one of the main reasons why 90% of new startups fail.
Additionally, you’ll probably need funding at some point.
And that’s where business plans come into play.
What Is a Business Plan?
The simplest definition of a business plan is that it’s a roadmap for your company’s future.
It represents an overview of your business, the goals you are chasing, the means to achieve them, and all the aspects of your company’s current state and future expectations.
Creating a business plan is a time-consuming, nerve-racking, and tedious task. Nonetheless, I could add another adjective – necessary.
Thankfully, we live in a day and age when a short and simple business plan can be as efficient as a 40-page one.
In fact, Airbnb is famous for having one of the most complicated business plans. And it’s only one page long.
In other good news, a business plan isn’t set in stone. You can and should revise it from time to time. As your business evolves, so should the document.
Now, let’s move on to a more fundamental question.
Why Do You Need a Business Plan?
Coming up are the reasons why you should stop delaying writing one.
- The first and most obvious answer is to get funding.
Each bank, lender, or investor would like to see proof of your business’s viability. And most importantly, what distinguishes it from hundreds, if not thousands of similar companies.
Generally, you’ll need a good business plan to secure funding. For that to happen, you must show your current financial data, projected sales, and what you will use their money for. But first and foremost, you should convince your readers that it is you and your team who deserve funding.
- A business plan can help you organize your operations more efficiently.
Writing a business plan is especially helpful for startups. It’s one thing to have a great business idea and a different one to drill it down into specific numbers, forecasts, and analysis.
But don’t get me wrong – startups aren’t the only ones that need a business plan. Companies that have been operating successfully for years also need one. It helps them plan their strategies efficiently, and as circumstances change, so do their plans.
- Business plans help you create or adjust your strategies.
Making a business plan is like creating a time capsule for your company. By reviewing it, you can easily see where your business is now and if it has met your goals. These plans let you examine where you are doing a great job and where you need to improve or change your strategy.
Since you already know what a business plan is and how it could benefit your business, let’s take a look at the various types of business plans.
Different Types of Business Plans
When you are wondering what to include in a business plan, first you have to clarify why you need one.
There are two main categories of business plans – internal and external, which could be either lean or standard.
Standard business plan
Standard business plans paint the whole picture. They include the company’s details, its services or products, target market, strategies, goals, and finances. Usually, these plans are detailed and more extended than lean ones.
Typically, these plans are for external use since most banks and investors will need one to decide whether your venture is worth financing.
If you need help, use these standard business plan examples to get an idea of how to write one.
Internal business plan
These plans have several variations depending on their purpose, but they are usually for internal use. Typically, they are lean, meaning they are shorter and include only the highlights of standard ones.
They focus on strategies, deadlines, budgeting, and goals. Lean plans lack detailed descriptions, company background, and other information intended for third parties. Moreover, they use informal language and consist mainly of bullet points.
So, if you want to know how to make a business plan, keep in mind each one serves a different function. For example, lean business plans are mostly for internal use, and they could target different audiences – like your stakeholders, your marketing or sales departments.
Now that you know the two main categories, let’s dive into the specifics.
Startup business plan
Startup business plans could be either lean or standard, but more often than not, their structure follows the standard business plan format. And since you are here to understand how to write a business plan, here are the questions a startup one should answer.
- Who are you, and what is your company?
- What problems will your products or services solve?
- Who are your main competitors? Why are you better than them?
- What are your strategies, tactics, and milestones?
- And last but not least, you should include financial analysis, forecast, cash flow, and balance sheets.
Also, If your startup needs funding (which is often the case), you should include a section about what you will do with the money.
So, what does a startup business plan look like?
Feasibility business plan
This plan’s purpose is to answer two simple questions – will anyone purchase your product or service, and could your venture be profitable.
It’s usually for internal use, except when you need funding. If that’s the case, it will have to include the components of the standard plan.
One-page business plan
Also known as a business pitch, this is a summary of your business. It’s for external use, and you can show it to potential investors, banks, and vendors who aren’t interested in reading the complete standard plan.
It shows only the bare-bone highlights of your business – overview of the company, its products or services, market, and financial data.
Here you can download a one-page business plan template you could use.
Growth business plan
This plan is also known as an expansion one. It can be either lean or standard and used both internally and externally.
When you are creating such a business plan, you should focus on a specific area of your business and its potential growth. It could be a new product, service, or an entire subset of your business. This plan illustrates the step-by-step process of achieving that growth.
If you don’t need outside funding, you can forego company descriptions and other unrelated components that your stakeholders already know. Still, if you seek external financing, you’ll need to follow the standard business plan format and include all of your company’s details.
If you need help writing a growth business plan, here’s a template.
Strategic business plan
As the name suggests, you make such a business plan to outline your company’s strategy. It answers two questions – where you are going and how you are going to get there.
It lays the foundational policy for your employees and includes your company’s vision and mission. Additionally, it consists of milestones and the strategies to reach them.
Also, when making a strategic business plan, you should include a SWOT1This is an analysis of your company’s Strengths, Weaknesses, Opportunities, and Threats. analysis. That way, you can create your strategies more efficiently.
If you are wondering how to write a strategic business plan, here’s a sample you can use.
Operational business plan
It’s also known as an annual business plan, and its function is to outline who is going to do what in the next 365 days. This plan is mostly for internal use, but you could use it to attract investors if you plan any significant changes in the following year.
Put simply, this plan includes your deadlines, targets, and employees’ responsibilities.
If you need any help, Hubspot offers a free business plan template.
These plans may differ from company to company, but the definitions above outline the must-have elements.
Okay, now that you know the different variations, it’s time to learn how to create a business plan. Still, before you get down to the actual writing, there are a couple of steps you need to take first.
Things to Do Before Writing a Business Plan
Before you fire up your laptop and start typing the document that will define your business future, do your homework first.
Analyze and research your market.
Unless you’ve invented a whole new industry (like manufacturing time-machines), you must have complete knowledge of the one you are entering. What’s more, you should know your competitors, their strengths and weaknesses.
Additionally, you should know who your potential customers will be and how much they are willing to pay for your product or service.
You can’t be successful at business planning unless you know everything about your chosen niche.
Define the purpose of your plan.
By now, you already know the different types of plans. With that said, if you are creating a business plan for internal use, you can skip some of the information, like company overview and management.
On the other hand, if you need funding, it will have to be more detailed. And since you are creating a document that will bring you much-needed capital, you could consider hiring a professional business plan writer. If you have any doubts you could do it yourself, that is.
Know your audience.
Writing business plans can be a tricky endeavor if you don’t consider who is going to read them. Choosing between formal and informal language and using industry-specific terms could attract or push away potential investors.
For example, if you are starting a healthcare-related company but your investors aren’t in the same field, they wouldn’t necessarily be familiar with medical jargon. So choose your words wisely and consider who will read your business plan.
Keep your business plan concise.
Although you may be tempted to add as much information as you can – don’t. Keep it short and to the point. To be blunt – no one wants to read a 100-page business plan. And no one will.
Furthermore, as circumstances change, you’ll have to revise that plan. That’s why you should include only the necessary elements without any fluff.
Choose the right time to write your business plan.
This could seem strange, but there is such a thing as the perfect time for writing business plans. And it’s between 6 and 12 months after you decide to start a business.
A study by Harvard Business Review shows writing a plan in this period increases the probability of your idea’s success by 8%.
Furthermore, you’ll need to spend about three months writing your plan. The same study shows this is the optimal period for its creation. This increases the chances of creating a viable company by 12%.
Once you’ve taken all of the above tips into account, it’s time to see how to make a business plan.
How to Write a Business Plan in Nine Simple Steps
Coming up is a step-by-step business plan guide that could help create a standard (traditional) one.
First of all, remember that your business plan should have a cover page (duh).
Add your company logo.
Use your brand colors.
Make it stand out.
You can even apply color psychology to create an excellent first impression.
Okay, now let’s see how to write a business plan step by step:
1. Executive summary
This is arguably the most crucial part of your business plan. It’s a summary of the entire document, highlighting its key elements.
It’s the first thing your readers will see, but I’d advise you to write it last.
Because once you’ve written all the chapters, you’ll have a better idea of how to create an outstanding summary.
You can think of the executive summary as a movie teaser. If you manage to grab your readers’ attention with it, it’s more likely they’ll read the entire document.
2. Company description
Here you have to describe your company and the problems it’s going to solve. This is where you should show your readers your company’s strengths and why you deserve funding (if you need it).
3. Market analysis
Next on our business plan guide is your market analysis.
In this chapter, you should focus on in-depth industry research, your target market, and its size and needs.
Also, you should include your product or service pricing, estimate your market share, and point out any difficulties you may face. You can add a competitive analysis here (or do it in a standalone chapter).
4. Organization and management structure
Now it’s time to introduce yourself, your team, and your company in detail. In this chapter, you should highlight your team’s strengths. Also, add any future hires that you may need once your business expands.
If your company is already up and running, you have to explain your legal structure, location, history, and other company details. If it’s not, you should provide a quick overview of the potential business structure and location.
5. Products and services
What’s the next step in creating a business plan?
The source of your revenue.
Here you should go into details about your products or services. This chapter should answer several questions.
- What do you offer?
- What problems will it solve?
- How is it different from similar products or services?
Also, describe the development/creation process. For example, if you are a manufacturer, explain how and from where you receive your materials.
6. Sales and marketing plan
Now is the time to delve into your marketing and sales strategy.
Here you’ll describe how you’ll attract customers and how you’ll retain them. Include all the details of your plan – from your product or service pricing to advertising, promotions, distributors, and sales reps.
7. Financial analysis and projections
When you are making a business plan, you place the financial data at the end of the document. Although it’s one of the last chapters your readers will see, it’s incredibly important.
Here you’ll add your balance sheet, income, and cash flow statements. If you are starting a new business, the latter will be a projection. Additionally, provide a forecast of your business financials.
8. Funding request
You can add such a chapter if you require funding, or you could do it in the previous section.
Generally, this is where you explain how much money you need and what you will do with it. Also, this part of the document will show your investors, or the bank, how much ROI they will get or how you intend to repay your loan.
Your business plan doesn’t require an appendix, but if you want to add additional information you couldn’t find a place for elsewhere – this is where you should put it.
The appendix can include charts, studies, product images, your and your teams’ resumes. You can also provide any other documents that could help your readers see the big picture – like contracts, legal agreements, permits, and so on.
And that’s it.
Doesn’t look so difficult now, does it?
Now you know how to write a business plan.
But before you create your masterpiece, there are a few more things you should know about writing business plans.
Common Business Plan Mistakes and How to Avoid Them
By now, you already know how to make a business plan. Now we’ll make sure it’s an outstanding one that doesn’t end up in the bin.
Don’t put off writing your business plan.
We can all agree that running a business is a time-consuming endeavor. Usually, a business plan will be one of your last priorities until you “have time” or until the bank or investors request it.
Don’t wait for that to happen.
Nike’s slogan applies perfectly for your business plan – “Just do it.”
Set realistic goals.
Writing a business plan isn’t about overestimating the value of your idea.
Nor is it about impressing banks and investors.
It’s a document where you should be brutally honest, admit your weaknesses, and share the threats you’ll face.
In terms of finances, don’t be overly optimistic about the future. Some conservative pessimism could pay off better than a chart with skyrocketing sales predictions.
Do your research well.
From my personal experience, I can tell you that research isn’t a walk in the park. For every study and stat you find, there are at least two others that disprove it.
Don’t tailor obscure facts to suit your business in front of the investors. Use reliable sources and conduct your own research. That way you’ll know where your business is among the ocean of other companies.
Also, don’t neglect the competition. It is out there, no matter the industry. Compare your business to similar ones and your SWOT analysis to theirs. Find your unique selling point.
Edit, edit, edit. And when you are done – edit again.
Make sure there are no typos and grammatical errors in your text. Also, let other people read your business plan. That way, you can get feedback and edit individual paragraphs and sections.
Also, be consistent – when you are overwhelmed with numbers, you could accidentally quote conflicting statistics or dilute your strategies with irrelevant information.
Generally, when writing a business plan, you have to be honest, precise, and keep it short and on point. Additionally, you must know your industry, target market, and business inside out.
Now you know how to make a business plan that will wow your readers. Remember, your idea is worth something only if you can present it as a realistic, functional, and profitable business.
Okay champ, we’ve covered all the basics of writing a business plan.
Throughout the article, you’ll find different templates and examples of business plans to help you create yours.
You now know how to write a business plan, the different types there are, and the common mistakes you should avoid. All you have to do is sit down and start writing.
Reread all the points as many times as you need, take the tips into account, and you’ll be good to go.
And just before you leave, here are some online tools that could simplify the process and make it much faster:
And remember what Winston Churchill once said – “He who fails to plan is planning to fail.”
Good luck, and I’ll see you next time.
What needs to be in a business plan?
The answer to this question depends on the purpose your plan will serve. Generally, the standard business plan includes the following chapters:
- Executive summary
- Company description
- Market analysis
- Organization and management structure
- Products and services
- Sales and marketing plan
- Financial analysis and projections
How long does it take to write a business plan?
In reality, you can never complete your business plan, since it’s a living document and you’ll have to update it now and then.
To complete the initial business plan, you’ll need anywhere from two months to a year. As I mentioned earlier, the optimal time for writing one is three months. Keep in mind that research also takes time.
How do I write a business plan for a small business?
A small business plan doesn’t differ from a standard one. Sure, it will be simpler than that of an enterprise, but you’ll still have to include all the chapters outlined above.
This business plan guide is the only thing you need to write one. Here you’ll find everything you need to understand how to write a business plan, be it for a small business or an enterprise.