8 Steps for Writing a Business Plan
If you’re just starting a business, you need a business plan. In many ways, your business plan is your roadmap—it not only guides you and other key stakeholders as you grow your business, but it also shows investors, lenders, or potential partners where your business is headed. Therefore, a successful business requires a well-thought-out business plan.
Although the prospect of writing a business plan may seem intimidating, it doesn’t have to be. As long as you take some time, include essential information, and follow a handful of simple steps, you’ll be on your way to creating the perfect plan. To help you through the process, we’ve created this guide on how to write a business plan, step by step. We’ll take you through each step and section so that you’ll be able to get yours completed in no time. Of course, to make the process even more seamless, you may decide to use a business plan template or business plan software as well.
How to Write a Business Plan in 8 Steps
Generally, a business plan can be broken into eight core sections. The best way to approach these sections, especially if this is your first time writing a business plan, is to take each section as a step to walk through one at a time.
Max Babych, CEO at SpdLoad, agrees with this approach on how to write a business plan, saying: “A business plan can simply be considered as answers to a number of questions. Try to answer only a few questions at a time. Preparing a small part of a business plan at a time is easier than locking yourself in your office for several weeks to complete the job immediately and completely.”
Then, once you’ve completed each section, step by step, your end result will be a comprehensive analysis of your company, as it is now and as you hope it will be in the future.
Step 1: Create Your Executive Summary
The first step you’ll want to take when writing a business plan is to create your executive summary. This executive summary will be the first chapter in your business plan—it will explain what your business does, where your business currently stands, where you want to take your business in three to five years, and why you’ll be successful.
Although this seems like a significant amount of information, the executive summary doesn’t need to be more than one or two pages in length. However, just because this is a short section of your plan doesn’t mean it’s unimportant. In fact, it might be the most important part of your business plan. Some investors might only ask for your executive summary when deciding whether to work with your business—so you’ll want to ensure that it can stand on its own.
Keep in mind that any information that doesn’t answer the “what, where, and why” questions we listed above shouldn’t be in your executive summary. Make this step of your business plan simpler by sticking to the following six pieces of information, as recommended by the SBA:
- Mission statement: In no more than a paragraph, your mission statement should explain what your business is and the overarching goals you have.
- General company information: State when your business was formed, the name of any founders and their roles, the number of employees, and any locations.
- Highlights: Next, include examples (with graphs and charts) of any growth you’ve seen since starting the business. This could be financial market highlights or key milestones of the business. You should think of this part of your executive summary as evidence supporting why you’ll be successful. If you’re a startup, you might not have any numbers to show here. If that’s the case, give information on your experiences and highlights from your past endeavors.
- Products and services: Briefly describe what you actually sell and who you sell it to. If you don’t have a product just yet, describe your plans for your product offering.
- Financial information: If you’re looking for business financing, you’ll want to include your funding goals at the end of your executive summary. Be sure to include any information about banks or lenders you’ve worked with so far.
- Future plans: Summarize where you’re planning on taking your business in the future.
Remember—although it may seem extensive, this is first and foremost a summary, so you’ll want to keep it short and sweet. At this point, you still have seven steps left to complete, so you’ll have plenty of time to get into the details later. With this first step, you’re showing readers what they’re getting into. However, it’s also important to remember that as the first step—and a brief one—every word of your executive summary counts. If you haven’t put enough thought into your business plan, it will show.
If you’re struggling with writing your executive summary right off the bat, try working on it after you’re done writing your business plan from start to finish—that way, you’ll have a solid grasp of the details and will be better equipped to summarize them.
Step 2: Add Your Company Overview
The second step you’ll want to take when writing a business plan is to add your company overview. Although this step may sound similar to what you just wrote in the executive summary, the company overview is a top-level look into the structure of your business and what you do.
When writing your company overview, therefore, you can think about breaking it down like this:
- What does your business do: Start your company overview section with a few sentences describing what your business does. You can think of this part as your elevator pitch in writing. The first piece of your company overview is intended to give readers and investors a general sense of your business.
- Industry and marketplace of your business: Next, you’ll want to explain the nature of the industry and marketplace that your business services. Where do you fit in? What is the need that your business is specifically serving, and how do you meet that need? Again, your explanation of your marketplace offering should be brief and concise.
- The legal structure of your business: Once you’ve given your elevator pitch and explained your value proposition, you’ll want to describe the legal structure of your business. Are you an S-Corp or C-Corp, or LLC? Be sure to explain what kind of business entity your company is and provide an overview of your ownership structure as well.
Remember, just like the executive summary, you’ll want to keep your company overview short—again, this isn’t the section to dive deep into the details. Essentially, a business plan’s company overview gives a quick—but catchy—pitch about what you do, who you serve, and why you’ll be able to serve them. Plus, this section also includes a brief look into the existing legal and ownership structure of your business so potential investors know what they’re getting into.
Step 3: Perform Your Market Analysis
Your next step is to perform an in-depth analysis of your industry, market, and competitors. Whereas the first two sections were high-level overviews, this section is where you’ll start to get into the details.
The purpose of the market analysis is to allow investors to come away feeling confident that you, the business owner, have a solid understanding of the dynamics of your industry, market, and competitors.
To display this understanding, your market analysis should include the following sections:
- Industry description: Give the reader a look into your industry. Describe how big it is, how it’s grown in the past, how industry leaders predict it will grow in the future, and other important trends and characteristics. Then, list out the important players in your industry.
- Target market overview: You’ve looked at your industry as a whole, now you’ll want to discuss your target market.
- Target market characteristics: Who are the customers in your target market, and what are their needs? Who is currently trying to serve those needs? Where is your target market located? What’s the key demographic you’re serving? These are the questions you should be answering as you give in-depth information on your target market.
- Target market size and growth: You should also give readers a look into how big your target market is. Try to give as much data as possible into how your target market makes purchases in the overall industry—how many, how often, and at what time of the year. Once you’ve looked into the current state of your target market, give a sense of the projected growth of your market. You can reference the SBA’s guide for more information on how to conduct market research to get these numbers.
- Your market share potential: Now that you know what your target market looks like without you, what will it look like with you? How much market share do you expect to gain in your targeted geographic area?
- Market pricing: By conducting this market research, you can give the best estimate of how you should be pricing your products, how you should distribute your product, and how you can get ahead with promotional strategies.
- Barriers: Be sure to include any barriers to market entry you might come across. This might be regulation, changing technology, high investment outlays, or lack of personnel in the area.
- Competitor research: Now that you’ve looked into your target market as a whole, you can narrow in on your top competitors. Look at their market share, strengths and weaknesses, any barriers they present, partnerships, and so on.
Due to the data, research, and amount of information involved in this section, when you’re writing a business plan, this step may very well take the longest. However, as such a crucial piece to your overall business plan, you’ll want to be sure it contains all the necessary details, is well-researched, and will show readers that you’re knowledgable about your specific market and your business’s role in that market.
When we talked to business owner Athan Slotkin, about his top tips on how to write a business plan, he highlighted the importance of this section: “You need to clearly spell out the logic for why you are attacking a market opportunity in a certain way—part of that is derived from customers’ needs—and the other part from the fact that your competitors aren’t meeting these needs. Help your audience see what you see.”
Step 4: Define Your Business’s Organization
What’s the next step in writing a business plan? Defining your business’s organization and management structure.
This section explains who does what in your business, what everyone’s background is, and what their past experiences bring to the team.
Here’s what you need to break down:
- Organizational structure: Before you dive into the details of each stakeholder, explain where they fit into the whole picture. The start of this section should include an organizational chart showing how your business is structured. This will illustrate that you know who is managing what aspect of your business.
- Ownership structure: You’ve mentioned this before in your company overview, but here, you should go into a little more depth on how your company is legally structured. Explain who owns what, and how much they own.
- Background of owners and board of directors: Next, explain the background of your team, managers, partners, and board of directors. These backgrounds will prove to potential investors that you’ve surrounded yourself with individuals who can and will make your business a success.
- Hiring need: If your team isn’t that big right now, you’ll probably need to expand in the future. List out any key hires you’ll need to make in order to achieve your goals.
Step 5: Lay out Your Products and Services
After you’ve described your business’s organizational structure, it’s time to dive into the product or service your business provides. With this step, your goal is to lay out your plans for positioning your product.
When writing a business plan, you can start off this part by describing your service or product and who it’s intended for. What need does it specifically fulfill?
To break this down further, here’s exactly what this section should contain:
- A description of your product or service: Include the details of your product here, and highlight what makes your product or service stand out. Be sure to speak toward how your product serves the needs of your customers and how it’s different than your competitors. This is all about framing the problem as well as the solution your business is offering.
- Current status of products: Explain where your offering currently stands. Is it just in the idea stage or do you have a final product ready to go to market? Give a realistic and honest picture of how developed your core product or service is.
- Product development research and goals: If your product is still in the ideation or creation phase, describe how you’ll bring it to a finalized product. What research and development activities need to be done before you get to market? Also, if you have any plans for future products you’d like to research and develop, note them here.
- Intellectual property: This mostly applies to technology or scientific companies, but if you have intellectual property that is proprietary to your business and crucial for your success, you should explain that in your product development section. Note if you have patents or are in the patent application process.
- Sourcing and fulfillment: Do you rely on other vendors to provide your product or service? If so, be sure to make that clear when you’re writing a business plan. Include information about where any inventory or materials are coming from, how you receive them, and how often you need fulfillment.
Ultimately, this is the section of your business plan reserved for letting the core of your business—your product or service—shine.
Step 6: Explain Your Marketing and Sales Plan
Now that you’ve given all the crucial details of your core product offering, the next step in writing a business plan is to explain how you’ll market and sell your product or service.
Let’s start with the marketing side. How will you create customers and get them interested in your business?
In general, here’s what the marketing part of this section might look like:
- Positioning: The first part of your marketing plan covers how you’re positioning your business and products. The way you position your brand determines how customers find and interact with you. Are you a free service? Or the service that can guarantee quality? This is what makes you stand out against your competitors in a branding sense.
- Promotion: After you’ve explained how you’ll uniquely position yourself, now explain where you’ll get the word out and how you’ll reach your customers. This involves any plans you have for packaging your product, advertising the product (online or in traditional media sources), dealing with public relations, or engaging in content marketing practices.
Once you have a marketing framework explained, now dive into your sales plan:
- Sales force: Describe who will be selling your product. Do you need a sales force? If so, how big does your sales team need to be? Who will train them? Now’s the time for you to put on the hat of a chief sales officer.
- Selling strategy: Give an overview of how you will sell your product or service. Will your team be cold-calling potential customers? Or attend sales meetings in person? This is how you’ll start and close the deal. Be sure to describe what the sales funnel looks like for your business.
Although you might not know exactly how your sales and marketing will play out just yet, or which channels will be most successful for you, you’ll nevertheless want to give a clear and concise overview of how you plan on selling your product.
As Phil Strazzulla, founder of SelectSoftware, told us with regard to his top tip for how to write a business plan: “The most important part of any business plan is listing the key hypotheses that need to be proven for the new venture to work, as well as the tests that will be run to prove or disprove these hypotheses.” Therefore, as your business progresses and can test your sales and marketing hypothesis and as you learn more, you can come back to this section and change or adjust information as necessary.
Step 7: Detail Your Financial Plan and Projections
Although this section comes at the end of your business plan, it can be the most important part of the entire document. With this step, therefore, you’ll detail your financial plan and projections—giving a look into the current state of your finances and mapping out where you’d like to be financially in the future.
If you’ve been in business for a little while now, you’ll use financial data from past performance in this section. If you have previous data to show, you should include the following financial statements:
- Income statements
- Cash flow statements
- Balance sheets
- Accounts receivable statements (if applicable)
- Accounts payable statements (if applicable)
- Documentation of debt obligations (if applicable)
Even if you don’t have any previous financial data from your company, you need to include financial projections in this section. Financial projections are either supported by your past data, or they’re determined by research and analysis on the industry and your top competitors.
This being said, when you’re forecasting your business’s financials, you’ll want to include these essential documents:
- Statements of projected income
- Cash flow forecasts
- Balance statements
- Capital expenditure budgets
Typically, a thorough business plan has financial projections for the first 12 months of business, but also takes a longer outlook and illustrates a plan for the next three to five years. To get into all of the details involved with creating a financial projection, you might decide to consult a business accountant or other financial advisor.
The last part of your financial plan should include any funding needs your business has or will have in the future.
Whether you plan to get funding through equity financing with angel investors or venture capital firms, or through debt financing with small business loans, here’s what you need to include in a funding request:
- The funding amount you need right now
- Any funding you’ll need in the future
- The purpose and impact of the funds (working capital, equipment purchases, franchising fees, acquiring a business, etc.)
With this piece of your financial plan, a potential investor reading your business plan will be able to determine exactly how any financial contributions they make will impact the business. And if you specifically need a business plan for funding purposes, this guide can help.
Finally, this is also the section where you’ll want to include graphs and charts to visually illustrate your business’s current financial situation and plans for the future.
Step 8: Add an Appendix
When you look at all of the steps involved in writing a business plan, this final step may seem inconsequential—however, that’s not the case. Although the appendix will be at the very end of your business plan, it will also hold all of the supporting information you didn’t include thus far in your document.
Specifically, if you have any additional data points, charts, footnotes, or further explanations that are essential to creating a complete plan, you’ll include those in the appendix. You might also add any contracts, legal documents, permits, and product pictures in this section.
Moreover, the appendix is also a great place to insert your own resume and resumes of any key members of your management team—that way your readers can refer to the appendix if they need more—but aren’t distracted by long text explanations or confusing numbers while parsing through the plan.
As small business expert and consultant Sophia Sunwoo explained to us with regard to how to write a business plan: “Remember that you are telling a story of your unique vision. There’s nothing more disruptive to a great story than a bunch of tables, graphs, historical context, and images that snap the reader out of the world your story is creating. Any additional information that is ‘nice to have’ but not completely aligned with the core purpose of the business plan should be pushed to the Appendix, where the reader can choose to digest this additional information at will.”
Logistically, therefore, the appendix should begin with a table of contents that breaks down the sections of your business plan, followed by the additional information that corresponds to each section.
The Bottom Line
There you have it—as we’ve broken down how to write a business plan, step-by-step, you now have the tools you need to create a comprehensive business plan.
The best place to start is to thoroughly research your industry, competitors, and financials so that you’ll have the bulk of information you’ll need to reference and include in your business plan available as you sit down to write it.
Once you get to writing, remember to be concise and efficient, keep your audience in mind, and if you’re struggling, refer to that business plan software or template that we mentioned at the start of this article.
Our final tip? Dive right in. This crucial business document won’t write itself, so it’s time to get going—and once you’re done, this will be one more thing you can check of your starting a business checklist.