How to Write a Business Plan Outline [2022 Guide & Format]
When starting a business, having a well-thought-out business plan prepared is necessary for success. It serves as the foundation of your business, helps guide your strategy, and prepares you to overcome the obstacles and risks associated with entrepreneurship. In short, a business plan makes you more like to succeed.
However, like everything in business, starting is often the hardest part. What information do you need? How in-depth should each section be? How should the plan be structured?
All good questions that you can answer by following this business plan outline.
What is a business plan outline?
Starting with a business plan outline helps ensure that you’re covering all of the necessary information to complete your plan. A traditional business plan typically includes—an executive summary, an overview of your products and services, thorough market and industry research, a marketing and sales strategy, operational details, financial projections, and an appendix.
Depending on what you intend to do with your plan, you may not need all of this information right away. If you’re going to speak with investors or pursue funding, then yes, you’ll need to include everything from this outline. But, if you’re using your plan to test an idea or help you run your business, you may want to opt for a lean plan. This is a simpler and faster method that is designed to be updated and used day-to-day.
If you’re unsure of which plan is right for you, check out our guide explaining the differences and use cases for each .
What are the 7 essential parts of a business plan?
No matter the type of business plan you create, these are the seven basic sections you should include. Be sure to download your free business plan template so that you can start drafting your own plan as you work through this outline.
1. Executive summary
While it may appear first, it’s best to write your executive summary last. It’s a brief section that highlights the high-level points you’ve made elsewhere in your business plan.
Summarize the problem you are solving for customers, your solution, the target market, the founding team, and financial forecast highlights. Keep things as brief as possible and entice your audience to learn more about your company.
Keep in mind, this is the first impression your plan and business will make. After looking over your executive summary, your target reader is either going to throw your business plan away or keep reading. So make sure you spend the time to get it just right.
2. Product and services
This is really the opportunity section of your business plan, with the products and services being how you plan to take advantage of the opportunity. You’ll need to describe the problem that you solve for your customers and the solution that you are selling.
Lastly, if there are any major competitive products or services already in the market, it may be valuable to mention them here. Detail how you differ, what your strengths and weaknesses are in comparison, and how you’ll differentiate from what is already available. If you have any intellectual property or patents that help strengthen your position list them here as well.
3. Market analysis
You need to know your target market —the types of customers you are looking for—and how it’s changing, and your market analysis summary will help you get clear on it.
Use this business plan component to discuss your customers’ needs, where your customers are, how to reach them and how to deliver your product to them.
You’ll also need to know who your competitors are and how you stack up against them—why are you sure there’s room for you in this market?
4. Marketing and sales
Use this business plan section to outline your marketing plan, your sales plan, and the other logistics involved in actually running your business.
You’ll want to cover your sales channels, broad marketing activities, your pricing strategy, as well as your intended market position. This will likely evolve over time, but it’s best to include anything that clearly details how you will sell and promote your products and services.
5. Organization and management
The company and management section is an overview of who you are.
It should describe the organization of your business, and the key members of the management team . It should also provide any historical background about your business. When your company was founded, who is/are the owner(s), what state your company is registered in and where you do business, and when/if your company was incorporated for example.
Be sure to include summaries of your managers’ backgrounds and experience—these should act like brief resumes—and describe their functions with the company. You should also include any professional gaps you intend to fill, as well as projected milestones for your business.
6. Financial projections and metrics
At the very least this section should include your projected sales forecast , profit and loss , cash flow projections, and balance sheet , along with a brief description of the assumptions you’re making with your projections.
Finally, if you are raising money or taking out loans, you should highlight the money you need to launch the business. This part should also include a use of funds report—basically an overview of how the funding will be used in business operations.
And while it’s not required, it may be wise to briefly mention your exit strategy. This doesn’t need to be overly detailed, just a general idea of how you may eventually want to exit your business.
The end of your business plan should include any additional information to back up specific elements of your plan. More detailed financial statements, resumes for your management team, patent documentation, credit histories, marketing examples, etc. Basically, include anything that can promote your credibility as a business owner.
Business plan outline template
If you’re looking for greater insight into what goes into specific planning sections, check out the following outline. It can help you develop a detailed business plan or provide guidance as to what may be missing in your current plan.
Keep in mind that each business plan will look different depending on numerous factors , including the type of business and what you will be using the plan for. Consider the following outline to be a master version to reference and consider. Just be sure to focus on the plan type and sections that are most beneficial to your business, pitch, or overall strategic planning .
1.0 Executive Summary
A summary of the problem you are solving and an identifiable need in the market you are filling.
A description of the product or service you will provide to solve the problem.
1.3 Target Market
A defined customer base who will most likely purchase the product or service. For info on how to define your target market, check out our guide on the subject.
The current alternatives or substitutes in the market that you and your business will be competing against.
1.5 Financial Summary
Key highlights of your financial plan that covers costs, sales, and profitability.
1.6 Funding Requirements
A brief outline of the amount of money you will need to start your business. Include this if you plan on pitching to investors.
1.7 Milestones and Traction
A roadmap of where you currently are and specific milestones you plan to hit.
2.0 Product and services
2.1 problem worth solving.
A thorough description of the problem or pain point you intend to solve for your customer base.
2.2 Our Solution
A thorough description of your proposed product or service that alleviates the problem of your customer base.
2.3 Validation of Problem and Solution
Any data or relative information that supports your solution. If you’ve already run tests that verify your idea , this is the place to include your results.
2.4 Product Overview
A description of your product and/or service that explains what it does, who its for, and how it benefits your customers.
Any information explaining current competitive offerings and how your product differs from them.
2.6 Roadmap/Future Plans
A list of steps taken so far, along with an outline of steps you plan to take in establishing or growing your business.
3.0 Market Analysis
3.1 market segmentation.
Potential groups of customers separated by specific characteristics.
3.2 Target market segment strategy
Your ideal customer who would most likely benefit from your business.
3.2.1 Market needs
A description of how your target market is not effectively served and how your business fulfills a need.
3.2.2 Market trends
How consumers in your target market tend to act including purchasing habits, financial trends, and any other relevant factors.
3.2.3 Market growth
The perceived potential increase or decrease in the size of your target market.
3.3 Key customers
Your ideal customer archetype who will be the main advocate for your business.
3.4 Future markets
A snapshot of the potential market based on the last few sections and how your business strategy works within it.
A list of potential competitors. Identifying the competition isn’t always obvious and it may take some digging on your part .
3.5.1 Competitors and alternatives
A list of potential indirect competitors that provide products or services that are alternatives to your business.
3.5.2 Competitive advantage
The strategic advantage(s) that makes your target market more likely to choose you over the competition.
4.0 Marketing and Sales
4.1 marketing plan.
An outline of your marketing and advertising strategy including costs, advertising channels, and goals.
4.2 Sales plan
An estimate of the number of sales you anticipate based on market conditions, capacity, pricing strategy, and other factors.
4.3 Location and facilities
Details of your physical business location (if necessary) including location and costs of operation.
An explanation of any new technology that defines your business.
4.5 Equipment and tools
Any required production equipment or tools and the cost associated with purchasing or renting them.
5.0 Organization and management
5.1 organizational structure.
An overview of the structure of your business including roles and responsibilities of specific employees and the flow of information between levels of the organization.
5.2 Management team
A list of potential candidates you anticipate taking on high-level management roles within your company.
5.3 Management team gaps
Any positions or areas of expertise that you currently do not have candidates ready to fill those roles.
5.4 Personnel plan
A list of potential positions that you expect to require in order to run your business effectively.
5.5 Company history and ownership
A summary of your company’s history and how it relates to planning your business.
A detailed roadmap of specific goals and objectives you plan to achieve that will help you manage and steer your business.
5.7 Key metrics
Performance measurements that help you gauge the overall performance and health of your business.
6.0 Financial projections and metrics
Standard financial documentation that showcases the current and projected health of your business.
6.1 Revenue and sales forecast
Expected revenue and sales for the next 1-3 years, broken down into month-by-month increments for at least the first year.
Expected or incurred costs necessary to start and operate your business.
6.3 Projected profit and loss
How much money you will bring in by selling products and/or services and how much profit you will make or lose after accounting for production costs.
6.4 Projected cash flow
Money that is expected to cycle in and out of your business. This can also include your overall cash position and cash runway.
6.5 Projected balance sheet
Expected balances for business assets, liabilities, and equity.
6.6 Personnel plan
Outline of how and who you intend to hire, what compensation will be, and how employees will fit into business operations.
6.7 Use of funds
Explanation of how funds were or will be used. This is typically meant to be shared with investors or lenders.
6.8 Exit strategy
A brief description of how you intend to eventually exit from your business. Acquisition, selling, passing along to a family member/employee, etc.
A repository for any additional information , including charts and graphs, to support your business plan.
How to organize your business plan
There’s no real established order to business plans, aside from keeping the Executive Summary at the top. As long as you have all of the main business plan components, then the order should reflect your goals .
If this is meant solely for your personal use, lay it out as a roadmap with similar sections grouped together for easy reference. If you’re pitching this to potential investors, lead with the stronger sections to emphasize the pitch. Then if you’re unsure of what order makes sense, then just stick to the outline in this article.
Should you include tables and charts in your business plan?
Every business plan should include bar charts and pie charts to illustrate the numbers. It’s a simple way for you, your team, and investors to visualize and digest complex financial information.
Cash flow is the single most important numerical analysis in a business plan, and a standard cash flow statement or table should never be missing. Most standard business plans also include a sales forecast and income statement (also called profit and loss), and a balance sheet .
How long should your business plan be?
There’s no perfect length for a business plan . A traditional business plan can be anywhere from 10 to 50 pages long depending on how much detail you include in each section. However, as we said before unless you intend to pursue funding, you likely don’t need a lengthy business plan at first.
Instead, you can start with a lean plan that can be completed in as little as 30-minutes. This one-page business plan is designed to help you get the core information down about your business. It encourages you to focus on your financials and functions moreso as a long-term management tool that’s easy to review and update regularly.
So, if you’re pursuing funding check out our full guide on how to write a traditional business plan . If you’re looking for a faster, easier, and more effective long-term planning method, check out this guide from LivePlan on how to write a lean plan in under an hour .
Tim Berry is the founder and chairman of Palo Alto Software and Bplans.com. Follow him on Twitter @Timberry .
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How to Write a Business Plan Outline
A step-by-step guide to your best first impression.
Susan Ward wrote about small businesses for The Balance for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.
Business Plan Outline
- Organize Your Business Plan
- Title Page and Table of Contents
- Appearance Matters
Adrian Mangel / The Balance
Are you an entrepreneur looking to turn your idea into a business? Do you have a business plan? There is some debate about whether new businesses need a business plan when just starting out, especially if they're not asking for money. According to Carl Schramm, author of "Burn the Business Plan," many large corporations didn't have business plans when they first started:
"If you look at all our older major corporations—U.S. Steel, General Electric, IBM, American Airlines—and then you look at our newer companies like Amazon, Apple, Facebook, Microsoft, none of these companies ever had a business plan before they got started."
The U.S. Small Business Administration takes a middle-of-the-road approach, recognizing that not all businesses need a comprehensive plan. Instead, it suggests that smaller businesses and startups use a "leaner" and more streamlined version to outline the essentials and highlight strengths. Lean or long, your business plan should cover the basics.
The outline below offers a brief overview of what each section of your business plan should cover. It is not a definitive guide, as you may wish to expand or combine sections, or add extra detail in a way that is customized to your particular venture. Keep in mind the idea is to present your venture in the most attractive and professional way possible.
Though it appears first in the business plan, the executive summary is a section that is usually written last, as it encapsulates the entire plan. It provides an introduction and high-level overview of your business, including your mission statement and details about what product(s) and/or service(s) you offer.
Since the executive summary is your business's first impression, it's critical that it be outstanding, especially if you're seeking funding.
Provide information about the business you're starting, including what sort of problem your products/services solve and your most likely buyers. You can also expand this description by offering an overview of the industry that your business will be a part of, including trends, major players, and estimated sales. This section should give a positive perspective on your place within the industry. Set your business apart from the competition by describing your or your team's expertise, as well as your competitive advantage.
The market analysis is a crucial section of the business plan, as it identifies your best customers or clients. To create a compelling market analysis, thoroughly research the primary target market for your products/services, including geographic location, demographics, your target market's needs, and how these needs are currently being met. Your purpose here is to demonstrate that you have a solid and thorough understanding of the people you are planning to sell your products/services to so that you can make informed predictions about how much they might buy, and convince other interested parties.
In preparing to write the competitive analysis section, you'll learn how successful your direct and indirect competitors are in the marketplace. This section of your business plan includes an assessment of your competition's strengths and weaknesses, any advantages they may have, and the unique qualities that make your business stand out from the competition. It also includes an analysis of how you will overcome any barriers to entry in your chosen market.
The primary goal here is to distinguish your business from the competition, but a strong competitive analysis will be able to persuade potential funding sources that your business can compete in the marketplace successfully . A useful tool to help articulate this section of the plan is sometimes referred to as a SWOT analysis, or a "Strengths, Weaknesses, Opportunities, and Threats" assessment.
Sales and Marketing Plan
The sales and marketing section offers a detailed explanation of your sales strategy, pricing plan, proposed advertising and promotion activities, and all the benefits of your products/services. This is where to outline your business's unique selling proposition, describe how you plan to get your products/services to market, and how you'll persuade people to buy them.
When developing your unique selling proposition, your goal is to answer the question: Why should people buy from me over my competition?
Ownership and Management Plan
This section outlines your business's legal structure and management resources, including the internal management team, external management resources, and human resources needs. Include any experience or special skills that each person in your management team brings to the business. If the goal of your business plan is to get funding, it's wise to include an advisory board as a management resource.
The operating plan offers detailed information about how your business will be run. It provides your business's physical location, descriptions of facilities and equipment, types of employees needed, inventory requirements, suppliers, and any other applicable operating details that pertain to your precise type of business, such as a description of the manufacturing process, or specialty items needed in day-to-day operations.
Starting a business is usually about making a profit, so it's important to demonstrate that you have a solid sense of your current finances, funding needs, as well as projected income. In the financial section , provide a description of your funding requirements, your detailed financial statements, and a financial statement analysis. This part of the business plan is where you present the three main financial documents of any business: the balance sheet, the income statement, and the cash flow statement, or in the case of a new business, a cash flow projection.
Appendices and Exhibits
In addition to the sections outlined above, at the end of your business plan, include any additional information that will help establish the credibility of your business idea, or bolster your potential success. You may choose to include marketing studies, photographs of your product, permits, patents and other intellectual property rights, credit histories, résumés, marketing materials, and any contracts or other legal agreements pertinent to your business.
How to Organize Your Business Plan
There is no set order to your business plan, the only exception being that the executive summary should always come first. Beyond that, the order depends on your goals.
If your purpose for writing a business plan is to help you organize, gather information, and create a roadmap, organize it in the way that is most intuitive to your process. You might group similar content together, such as all the material relating to markets (industry overview, marketing analysis, competitive analysis, and marketing plan).
If your goal is to seek funding, organize the plan based on what your audience values, and lead with the best, most convincing material first. If you have a stellar group of people serving on your new business's advisory board, put that section directly after the executive summary. Highlighting your new business's strengths will encourage your reader to continue reading your plan.
Add a Title Page and Table of Contents
After completing all the sections, don't forget to insert a title page at the beginning of the plan followed by a table of contents listing each section with page numbers.
The Appearance of Your Business Plan Matters
If you're writing a business plan as an organizational exercise—for your eyes only—feel free to get loose with the style and organization; the simple act of putting all your ideas into a practical template may be a valuable brainstorming tool. However, if you're looking for funding or investors, the business plan is a formal document, so it should look like one. Every aspect of your business plan should impress your potential funding source.
Pay attention to margins and formatting; make sure it's spell-checked and grammatically sound. If you're not good at this, pay a professional to do it.
Hiring a professional to design, edit, or review your business plan may be a good idea, regardless of how skilled you are; a fresh pair of eyes can often spot issues that the original writer missed.
If you need printed copies, get them professionally printed and bound. Keep in mind that you may only have a short amount of time to sell your idea, and first impressions pack a powerful punch.
How Long Should a Business Plan Be?
A good business plan can't be pinned to a minimum or maximum page count. This is because the right length depends on your business. Your business plan should be brief enough to convey the essentials without redundancy or fluff content, yet long enough to demonstrate to your audience that your business is well-researched and fully considered. A simple plan for a modest startup might be around 40 pages, while a more complex business plan may need 100 pages to convey an ambitious financing strategy, product diagrams, industry data, or the full scope of the venture. The goal is to allow for a full explanation of the pertinent information about your business, presented in a concise and well-organized fashion.
Knowledge@Wharton. " Why Creating a Business Plan Is a ‘Waste of Time’ ."
U.S. Small Business Administration. " Write Your Business Plan ."
Corporate Finance Institute. " Barriers to Entry ."
U.S. Small Business Administration. " SBA Recommended Business Plans and Length ."
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Practical example of a business plan outline
This article provides a detailed business plan outline as well as a step by step guide to writing a business plan.
I encourage you to read this article in relation to our series of articles on how to write a business plan .
Business plan outline
Below is our recommended business plan outline. Every company is different and the business plan needs to be tailored to reflect that, therefore this is more a guideline than a strict template.
Our business plan outline is structured so that each section answers a specific set of investor questions about your business. It also offers a natural progression making it suitable for both the investor who wants to read the plan cover to cover and the one who wants to simply jump into specific parts to clarify particular points.
- Business Overview
- Market Overview
- Financial Highlights
Structure & Ownership
- Products and Services
Demographics and Segmentation
Target market, market need, competition, barriers to entry, competitive edge, marketing plan.
- Risks and Mittigants
Key assets and ip, start-up funding, important assumptions, sales forecast, cost structure.
Let me walk you through each section and get into the details of what to write and where to find the information.
1. Executive Summary
The first section, the executive summary, is the most important one. It is only if they find this section attractive enough that potential investors will dive into the other sections of your plan to get more details.
Because this section is a summary of the rest of the plan this is the one you will write last.
The executive summary is all about getting your investor excited in 5 minutes. Do not try to tell everything about your business. Keep it short and to the point.
There are four things that you must cover:
- who you are
- what you sell
- how big and profitable it can get
- how much you need
The objective of this section is to introduce the company and its management. The content of this section will vary slightly depending on if you already have a business or if you are starting a new venture.
This is a purely descriptive part, the key questions you need to answer here are:
- who are the shareholders: as part of the anti-money laundering regulation, investors have the legal obligation to check the identity of the shareholders of any business they invest in or lend money to. Giving them the full list enables them to do a quick sanity check and gives them the opportunity to raise any concern they might have. If your reader is an equity investor it also gives him a grasp of who the other shareholders are. It is also important that you mention if any of your co-shareholders brings more than just money to the company (for example if one of your shareholders is an expert in your industry and also brings advice and credibility to the company).
- where is the company registered and what is the legal structure: this is also one of the anti-money laundering requirements. But it also gives the reader an indication of the size of the business and the applicable tax system. Some investors also have geographical restrictions on investments, hence this is also where they will check if you are eligible.
If you are writing a business plan for an existing company this is where you would present the key highlights to date. The idea here is to build your credibility and show to your reader that you have a viable business. The main points you want to touch on are:
- how long you have been in business: this is a real reassuring factor for any investor as it proves that your business is a viable one.
- company milestones: you want to show what has been achieved so far in terms of growth, product launches, internationalisation. If you are seeking growth capital this will build your credibility and show that you have the ability to execute your plan.
- past difficulties: if there have been periods when the company was in danger (for example because of a new entrant in the market, or a sudden drop in demand) and you managed to turn things around and stay in business.
If you are writing a plan for a business for which location is important (for example a shop or a restaurant) or if you are managing a large business with multiple stores or factories this is where you would describe (ideally using a map) the main location(s) of your business.
This is one of the most important section of your business plan. You must demonstrate that your team has strong experience in your sector and the skills to run this business.
If there are any important skill gaps in your team, you need to address them and mitigate them here. It could be that you are looking for someone with these skills or that you have a board member or a non-executive director that can fill the gap.
Try to put some pictures if you can. It is always better when one can put a face on a name! And it helps if you are due to meet your investors at some point.
Now that you have introduced the company it is time to dive into what it does.
3. Products and Services
The key to writing a good product and services section is to be precise about the product or service you sell, the client you are targeting, and the channel you are targeting him through.
After this section, your reader will start thinking about how big, how crowded and how profitable your market is and try to guess what the overall strategy is going to be. You want to send him in the right direction! So be ultra-precise, don't say for example "I sell shoes" but "I sell leather boots targeted at women aged 16-25 who buy online".
If you can try to include pictures of your products.
By now your reader knows who you are and what business you are in. It is time you show him why this is a good opportunity.
4. Market Analysis
This part is a summary of our article on how to do a market analysis, please refer to the article for more details
The objectives of the market analysis section are to show the investors that:
- the market is large enough to build a sustainable business
- you know who your customers are and why they buy
- despite the competition, it exists a gap in the market where your business will fit
The first step of the analysis consists of assessing the size of the market.
The way you look at the market will depend on your type of business. If it is a small business, such as a coffee shop for example, then you need to look at the market on a local basis (your town, your street). If you are targeting a wider audience, then you need to evaluate the market at a national or an international level.
When assessing the size of your market, you need to come up with two variables: the number of potential customers and the value of the market.
The idea here is to get a sense of how atomised your market is. If you are in a market where there is a small set of high-value customers then it might be complicated to compete against more established players and your business is likely to be dependent on a handful of customers meaning that losing one would potentially threaten your business. Now if you are in a market with lots of low-value customers it might be complicated and costly to reach enough of them to get to the minimum volume for your business to be profitable. Ideally, you want to be in a market with a high number of medium value customers meaning that there are enough customers to leave room for a few players and that each customer brings a decent amount of revenues.
Once you have estimated the market size you need to explain to your reader which segment(s) of the market you view as your target market.
The target market is the type of customers you target within the market. You need to identify the different segments in your market and explain who you are going after and why. One way to identify the segments is to group customers by buying pattern or demographics. For example in the fashion market you could have:
- men vs. women
- low price vs. premium clothing
- online vs. in-store
- shoes, accessories, and outfit
This section is where you demonstrate that you have insight into your market. You know what makes people buy!
You need to describe the buying pattern of your target customers. What triggers a purchase? Is it something they need such as food? Is it a value associated with the product or a brand perception? Etc.
Later in your plan, you will use this analysis to justify your market positioning.
Here you have to explain who your competitors are, how they are positioned on the market, and what their strength and weaknesses are. Some of the items you need to cover are
- who are they? (name, brand, independent vs. part of a larger group, location)
- how big are they? (turnover, number of staff, etc.)
- which customer do they target? (segments)
- what are the key characteristics of their offerings? (price, associated services, etc.)
You should write this part in parallel with the Competitive Edge part of the Strategy section, as the idea here is to find a weakness in your competitors' positioning that your company will be able to use in its own market positioning.
Here, the objective is to show to investors that the risk of having new competitors entering the market is fairly remote. Hence if you are writing your business plan for a start-up then this section is a bit tricky as you need to show that you will succeed where others will fail!
Once again, you can find more details on this section in our market analysis article .
In this section, you need to details which regulation is applicable to your sector and how you are going to comply with it.
Until now all the sections of the business plan outline we covered were very descriptive, this is where things get a bit more interesting.
Strategy is a big word for what is really just explaining your view of the market, how you want to attack it, and why it should work.
The first part of the strategy section is the Competitive Edge sub-section which is where you explain your market positioning.
The competitive edge part is where you answer investors' favourite question: "what makes you different from the competition?"
Hopefully, you will have laid the groundwork for this section in the previous ones and orientated your analysis of the market in a way that prepares the reader to embrace your positioning.
In order to explain and justify your pricing strategy you must touch on the following points:
- Compare it to your competitor's pricing
- Show that you are profitable at that level
- Explain the rationale behind your price
I won't touch on the two first points which are pretty obvious but I think the third one deserves a bit more explanation. Setting a price is not easy but there are a couple of techniques you can use to guide you.
The first thing to do is to assess if you have control over your prices. It could very well be that you have limited control over your prices. If you are in a price a driven market where all your competitor's price at £9.90 it can be complicated to justify a higher price to your customers.
Now if you have control over your prices you then need to come up with a figure. Here are the two main strategies that you can use to do so:
Cost-plus pricing: this consist of adding a percentage margin to the cost of the good or service you are selling. The advantage of this strategy is that you are guaranteed to earn your margin on every sale. The disadvantage is that your price could be below or above what customers are willing to pay for a product or service.
Benefit driven pricing: this consist of estimating the gain procured by your good or service to the customer and set the price as a fraction of this gain. It is easier to do when your product or service procure a hard benefit (i.e. when you can quantify the money your customer will save) than when your product procures a soft benefit (i.e. when you cannot easily quantify the value of the benefit as for example if it makes your customer save time). The advantage of this technique is that it allows you to maximise the price of your goods and services. The disadvantage is that it usually requires trying different price points in order to find the right market price.
It is always a good thing to test different prices. Do one week with price A and one week with price B and compare the results in terms of sales and volume.
Ok, so now we know who you will target and how you will price your products. It is time to explain how you are going to reach those customers.
This is the first section where we start to leave aside the helicopter view of the market to really dive into the implementation and execution strategy of your plan. Therefore you need to show your investor that not only you know your market inside-out but that you also have a credible plan to conquer that market.
The best way to show that your business plan is realistic is to get into the specifics of the implementation. Your reader needs to feel that you are ready to go and that he just has to push on a button (write you a check) to make it happen.
In the marketing plan section, you need to show that you have identified the best channels to use to target your customers.
By channel, I mean both the distribution network (online, owned stores, third party network, door to door, etc.) and the means of communication (flyers, print advertising, online marketing, etc.).
You want to start by listing all the different options and then start diving into the ones you picked and explain why you think they are the most relevant in terms of:
- reach: why do you think you will be able to touch most of your potential customers through that channel?
- cost: why do you think this will be cost-effective? What is the budget allocated in your plan?
- competition: why do you think you stand a better chance against your competitors by using this channel?
- implementation: who is going to be responsible for that? What makes him relevant? Which partners/suppliers have you approached so far?
This section is where you set the goals for your company. This is a commitment you are making to your investors and you will be judged on your ability to achieve these goals. It is therefore important that you take time to identify goals that are:
- relevant: i.e. objectives that will make a real difference to the business
- achievable: you don't want to get labelled as a dreamer but rather want to be perceived as an entrepreneur who delivers his business plan
- measurable: you want to be able to get back to your investors and say "we said we'll get 1,000 customers by year-end and we delivered 1,200!".
Here you will be judged on your ability to identify and focus on the key objectives to bring your business to the next level. This will help build your credibility towards your investor and ultimately play a part in his investment decision.
From a relationship perspective, being able to over-achieve these objectives will be key if you are to raise more money in the future.
Risks and Mitigants
The risks and mitigants section has one key objective: enable you to anticipate any objection or doubt an investor might have on your plan or your ability to deliver it and give you an opportunity to show that:
- you know this is a key risk,
- you thought about it,
- you have a contingency measure in place.
It is very important to be transparent in this section. If an investor spots a key risk in your plan that you haven't disclosed he is going to think "well I am not sure he knows this market as well as he claims", and that looks bad. You want to do everything to build credibility and trust with your investors because the moment they start doubting you they will start doubting the investment.
This section is where you get into the details of how your company will operate. It usually starts with the personnel plan.
In the personnel plan section, you must explain how many people you will employ and what will be their roles. If your staff is planned to increase over the duration of your business plan, it is recommended to explain what will be the driver. It could be that you plan a new shop opening or that you will increase support staff with sales.
If you have a shop or a restaurant it is also recommended to put the staff plan in perspective with the opening hours.
The idea behind this section is to identify or dismiss any operational risks that could arise on the asset side.
You need to explain which are the assets and intellectual property without which the company could not operate (for example a delivery truck or a licence) and the steps you took to protect them.
In this section, your investor will want to check that you intend to do business with respectable counterparties and that you are not dependent on a single supplier. Therefore you need to explain who will be your main suppliers, the relationship you have with them (if any) and what is your backup plan if one was to be replaced.
You also need to mention the main terms you have negotiated with your suppliers (price, days of credit, delivery schedule, etc.).
Now that you have explained how your company will be operated it is time to dive into the numbers.
7. Financial Plan
This is the most crucial part of your business plan. The tone of this section will depend on who the recipient of your business plan is.
If the recipient of your business plan is a lender you need to show that your business is going to be stable, profitable and cash generative and that you are not going to take too many risks. If it is an equity investor you need to show that your business can become big and cash generative enough to make it easy to sell and enable him to reach his target return.
As a minimum, you will need to show a full set of financial statements (P&L, cash flow statement and balance sheet) over three years and a monthly cash flow statement. It is also good practice to show a monthly P&L and balance sheet for the first year.
The reason why investors like to see monthly numbers for the first year is that it is going to be the most critical year as:
- it is the year you are the most vulnerable
- any delay or underperformance will have some repercussions over the year 2 and 3
If you don't have a finance background it is recommended that you use a professional tool to help you with the financial forecast. The Business Plan Shop offers an easy to use online solution that can help you easily produce your financial statements as well as a professional-looking business plan exportable in PDF. In our application, you will find most of the tips included in this guide along with precise examples for each section of the plan. You can learn more about our solution here .
In this section, you will list the sources and uses of funds required to start your business.
The investor will look at how much is needed and how much money is brought to the table by the shareholders. If you are writing your plan for a retail bank it is important that you isolate the assets, inventory and VAT on a separate line as they often offer specific loans adapted to each of these categories.
This section is a disclaimer section. You must identify the key assumptions underlying your financial forecasts. These are the assumptions the investor will stress (i.e. run scenarios on) to test the viability of your plan and estimate the potential downsides and upsides.
Try to identify both assumptions on the revenue and on the cost side of the business. Let's take an example and look at an e-commerce site.
If you are operating an e-commerce site there are usually two main things your business profitability will depend on:
- the average basket: which is how much one customer is expected to spend in average
- the customer acquisition cost: which is how much you need to spend in marketing to acquire one customer
The first item is revenue related and has the most significant impact on your plan. This assumption has a 1:1 impact on your sales forecast and even a greater impact on your profit. The second one is also crucial as it impacts your profitability and your ability to scale.
Let's look at a numerical example in order to get a better understanding of the impacts of these two drivers:
As you can see from the table above a 10% deviation on price will have a 30% impact on profit, a 10% deviation in the customer acquisition cost would cost you 20% of your profit and both impacts would reduce your profit by 50%!
And these are not remote possibilities. Let's say that your acquisition costs are related to pay per click advertising on the internet and that your average cost per click is £0.4. An £8 cost per customer means that you have a conversion rate of 5%: it takes 20 clicks to make one sale. Now a £8.8 cost per customer means that it takes you 22 clicks to make one sale. As little as 2 more clicks can cost you 20% of your profit!
Now the positive thing is that if you built a complete financial model and identified these key drivers you can closely monitor these two elements. Chances are that you will get these wrong in your first plan but if you monitor them you will be able to quickly update your plan and get a revised financial projection. This will enable you to get a better view of how much cash your business will generate or need. And give you the ability to anticipate any upcoming difficulties with your investors or plan what to do with the excess cash flow if things go better than expected.
Note that in my example I did not take the number of customers as a key assumption. This is because I made the assumption that 100% of the traffic was coming from advertising. This is specific to e-commerce sites: chances are your site in its first year will rank on page 20 of Google and that you will have to acquire the main part of your traffic.
The sales forecast section is probably the second most important one in your business plan. This section relates directly to the market analysis, competitive edge, marketing plan and pricing sections. The objective here is to build and justify your sales estimate for the next three years.
Building a sales forecast is a double exercise. You first need to build the numbers using a bottom-up approach and then sanity checks them using a top-down approach. For a complete how-to guide, we encourage you to read our sales forecast article .
Once you have built a realistic top line, you need to focus on the costs.
This part is all about analysing the operational risk of a business. The analysis resides in two fundamental notions: operating leverage and breakeven point.
Let's start with the breakeven point which is the level of sales required to reach profitability.
Every business has 2 types of costs: fixed and variable costs. The fixed costs as their name indicates are the costs that will be incurred independently from the level of sales. For example the rent of a shop. The variable costs are the costs that depend on the level of activity. For example the cost of the goods sold in a shop.
The breakeven point is then computed by dividing the total amount of fixed costs by the margin of variable costs.
Let's take an example. If the only fixed cost of a shop is its rent of £2,000/month and if the shop sells goods it buys at £30/item at a price of £50/item. Then the shops make 50 - 30 = £20 of profit over variable costs per item. This means it needs to sell 2,000 / 20 = 100 items to cover the cost of the rent. The breakeven point of this shops is therefore 100 items.
The direct conclusion of this is that the higher the fixed costs, the more sales are required to cover them, and therefore the higher the risk of the business is. In plain English variable costs are great fixed costs are bad!
What about operating leverage then? Well, operating leverage has to do with operating profit elasticity, which is the impact of a difference of 1% in sales on the operating profit. This seems complex but it is in fact really simple. There are two dimensions in the operating leverage: the level of fixed vs. variable costs and the margin on variable costs.
As we just saw above the more fixed costs a business has the more sales it needs in order to start making a profit. But this is not the whole story. Consider two businesses in the same industry. Business A is manufacturing its goods in the house while business B is outsourcing the manufacture to a supplier. As a result business A has higher fixed costs than business B (the cost of the factory), but at the same time business A is earning more on each sale than business B because it doesn't have to pay the supplier's margin. Therefore there is an expectation that a more operationally leveraged business will generate higher returns past its breakeven point.
The second aspect of operating leverage is the level of contribution (or margin on variable costs). If your contribution is high then it takes only a few sales to cover your fixed costs and start making a profit. The flip side of this is that a small forecasting error will have a huge impact on your level of profit and cash flows.
The key takeaways here are that investors will look at the level of fixed vs. variable costs in your business to evaluate its operating risk. They will expect to see the calculation of your breakeven point either expressed in units or days of sales.
Investors will also judge you on your ability to use operating leverage to your advantage. If you are starting up in a niche where the market is uncertain they will expect you to focus on sales and to have outsourced as many services as possible. You will make less profit but will require fewer sales to make a profit hereby de-risking the cost side of your business to balance with the risks on the revenue side. Now if you are an established business in a price-driven market, investors will expect you to do the exact opposite: outsource services only if it makes you save money and try to limit margin frictions to the maximum by using economies of scale to either increase your margin or reduce your price to increase market share.
This section is where you present your financial statements. You can have the yearly statements here along with the monthly cash flow projections and put the monthly balance sheet and P&L in the appendix.
You need to walk the reader through the key items of each statement:
- P&L: revenues, growth, EBITDA, EBITDA margin and any unusual or one-off items
- Cash flow statement: operating cash flow, operating cash flow conversion (% of EBITDA), any major investments, main debt repayments if any, and any unusual items.
- Monthly cash flow statement: any working capital swings or seasonal peaks or troughs.
- Balance sheet: level of cash, debt and equity.
Your funding needs to be balanced (positive cash position) and you need to break even during the course of your plan. You might also want to touch on some additional ratios. In particular, if your business has a significant working capital requirement, you can mention the working capital ratios (WC / sales, days of payables and receivables). You can also mention either some credit ratios if the plan is for a bank (debt/EBITDA, net debt/EBITDA, interest coverage ratio) or some more equity-focused ratios (operating cash flow / capital employed, revenues / total assets, dividend yield and dividend per share if relevant).
This is where you add any detailed piece of data or backup materials you might have. The objective of the appendix section is to serve as a reserve of materials that the investor can use either to investigate certain areas of your business plan in more details or as a starting point to do his due diligence.
Congratulations, you now know the basics of writing a business plan. Now let's get to work!
Also on The Business Plan Shop
- Free business plan template
- How investors analyse business plans
- TAM SAM SOM - what it means and why does it matter
- The difference between business case and business plan
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More From Forbes
Business plan outline - 23 point checklist for success.
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If you’re looking for funding for a new or existing business, you need a business plan. Your business plan gives lenders and investors the information they need to determine whether or not they should consider your company.
Your business plan outline is the first step in organizing your thoughts. And, when you follow the outline below, you ensure your business plan is in the format that prompts investors and lenders to take action.
In the business plan outline below, you will see the ten (10) sections common to business plans, and the twenty-three (23) sub-sections you must complete. Also, to help you out, here is my proven business plan template , that allows you to quickly and easily complete all the sections of your business plan.
Section I - Executive Summary
1 - Executive Summary
The Executive Summary is the most important part of your business plan. Because if it doesn’t interest readers, they’ll never even get to the rest of your plan.
Start your Executive Summary with a brief and concise explanation of what your company does. Next, explain why your company is uniquely qualified to succeed. For example, does your management team have unique competencies? Do you have any patents? Are you the first mover in your market? Does a huge, unmet market opportunity exist? Etc.
Finally, include a synopsis of your financial projections in your Executive Summary. Specifically, include your expected revenues, expenses and profits for each of the next five years, how much funding you are seeking, and the key uses of these funds.
Section II - Company Overview
2 - Company Overview
The Company Overview section provides a brief history of your company.
Here you will answer questions such as when and how your organization was formed, what type of legal entity you are, and accomplishments to date.
Importantly, your past accomplishments are perhaps the best indicator of potential future success, so be sure to identify and include all key milestones your company has achieved to date.
Section III - Industry Analysis
Your Industry Analysis section has two sub-sections as follows:
3 - Market Overview
The Market Overview section discusses the size and characteristics of your market. For example, if you are a restaurant, you would include the size of the restaurant market, a brief discussion of sectors (e.g., fast food versus fine dining) and market trends.
4 - Relevant Market Size
The relevant market size is a much more specific calculation of your market size. It is the annual revenue your company could attain if it attained 100% market share. Your relevant market size is calculated by multiplying 1) the number of customers who might be interested in purchasing your products and/or services each year and 2) the amount these customers might be willing to spend, on an annual basis, on your products and/or services.
Section IV - Customer Analysis
Your Customer Analysis section has two sub-sections as follows:
5 - Target Customers
Your Target Customers section precisely identifies your current and/or intended customers. Include as much demographic data on your target customers as possible, such as their gender, age, salary, geography, marital status and education.
6 - Customer Needs
In this section of your business plan, specify why customers want or need your products and/or services. For example, do customers care most about speed, quality, location, reliability, comfort, price, value, etc.?
Section V - Competitive Analysis
Your Competitive Analysis section has three sub-sections as follows:
7 - Direct Competitors
Direct competitors are companies that fill the same customer need you fill with the same solution. For example, if you operate an Italian restaurant, other Italian restaurants would be direct competitors.
In this section of your business plan, outline who your direct competitors are, and their strengths and weaknesses.
8 - Indirect Competitors
Indirect competitors are companies that fill the same customer need you fill with a different solution. For example, if you operate an Italian restaurant, a French restaurant would be an indirect competitor.
In this section of your business plan, outline who your indirect competitors are, and their strengths and weaknesses.
9 - Competitive Advantages
Importantly, identify your Competitive Advantages in this section. Specifically, state what is it about your company that will allow you to effectively compete (and win) against both direct and indirect competitors.
Section VI - Marketing Plan
Your Marketing Plan section has four sub-sections as follows:
10 - Products & Services
Here is where you give the details of the products and/or services your company offers.
11 - Pricing
Detail your pricing here. In particular, discuss how your pricing relates to competition. For example, are you the premium brand? The low cost brand?
Discuss your expected branding based on your chosen pricing model.
12 - Promotions Plan
Your promotions plan details the tactics you will use to attract new customers. For example, you might choose radio advertising, or online pay-per-click ads, or press releases, and so on. In this section, detail each form of promotions you will use.
13 - Distribution Plan
Your Distribution Plan outlines the ways in which customers can buy from you. In many cases, they can only buy directly from you, perhaps at your physical location or web address. In other cases, you might have distributors or partners who sell your products or services. In such a case, detail this structure.
Section VII - Operations Plan
Your Operations Plan section has two sub-sections as follows:
14 - Key Operational Processes
Your Key Operational Processes are the daily functions your business must conduct. In this section, you will detail these functions. For example, will you maintain a Customer Service department? If so, what specific role will it fill?
By completing this section, you’ll get great clarity on the organization you hope to build.
15 - Milestones
In this section of your business plan, list the key milestones you hope to achieve in the future and the target dates for achieving them.
Here is where you set goals for specific and critical undertakings, such as when a new product will be created and launched, by when you plan to execute new partnerships, etc.
Section VIII - Management Team
Your Management Team section has three sub-sections as follows:
16 - Management Team Members
This section details the current members of your management team and their backgrounds.
17 - Management Team Gaps
Particularly if you’re a startup venture, you will have holes in your team; roles that you’d like to fill later. Identify such roles here, and the qualifications of the people you will seek later to fill them.
18 - Board Members
If you maintain a Board of Advisors or Board of Directors, detail your Board members and their bios in this section.
Section IX - Financial Plan
Your Financial Plan section has four sub-sections as follows:
19 - Revenue Model
As simple as it seems, this section of your business plan gives clarity on how you generate revenues. Do you sell products? Do you sell advertising space? Do you sell by-products, like data? Do you sell all of the above?
20 - Financial Highlights
Your full financial model (income statement, balance sheet and cash flow statement) belong in your Appendix, but in this section you’ll include the highlights. For instance, include your revenues, key expenses, and projected net income for the next five years.
21 - Funding Requirements/Use of Funds
If you are seeking funding for your company, detail the amount here, and importantly for what you will use the funds.
22 - Exit Strategy
Particularly if you are seeking equity funding, detail your expected exit strategy. The most likely exit strategy is to sell your company to a larger firm. If so, detail the types of firms that might be interested in purchasing you and why. List the specific names of potential acquirers if applicable.
Section X - Appendix
23 - Supporting Documentation
As mentioned above, your full financial model (income statement, balance sheet and cash flow statement) belong in your appendix.
Likewise, include any supporting documentation that will help convince readers your company will succeed. For example, include customer lists, awards, and patents received among others.
I hope this business plan outline has helped you organize your thoughts and answer the key questions needed to start and grow a successful business. While twenty-three sections seems like a lot, if you complete them one at a time, you can make progress and finish your entire plan quickly and effectively. Likewise, feel free to use my proven business plan template to complete your business plan.
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How To Write the Perfect Business Plan in 9 Steps (2023)
- by Desirae Odjick
- Dec 3, 2022
- 25 minute read
A great business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need in the way of resources, and evaluate the viability of your idea or your growth plans before you start a business .
Not every successful business launches with a formal business plan, but many founders find value in taking time to step back, research their idea and the market they’re looking to enter, and understand the scope and the strategy behind their tactics. That’s where writing a business plan comes in.
Table of Contents
What is a business plan?
Why write a business plan, business plan formats, how to write a business plan in 9 steps, tips for creating a small business plan, common mistakes when writing a business plan, prepare your business plan today, business plan faq.
A business plan is a document describing a business, its products or services, how it earns (or will earn) money, its leadership and staffing, its financing, its operations model, and many other details essential to its success.
We had a marketing background but not much experience in the other functions needed to run a fashion ecommerce business, like operations, finance, production, and tech. Laying out a business plan helped us identify the “unknowns” and made it easier to spot the gaps where we’d need help or, at the very least, to skill up ourselves. Jordan Barnett, Kapow Meggings
Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans are commonly associated with getting a loan. But there are several compelling reasons to consider writing a business plan, even if you don’t need funding.
- Strategic planning: Writing out your plan is an invaluable exercise for clarifying your ideas and can help you understand the scope of your business, as well as the amount of time, money, and resources you’ll need to get started.
- Evaluating ideas: If you’ve got multiple ideas in mind, a rough business plan for each can help you focus your time and energy on the ones with the highest chance of success.
- Research: To write a business plan, you’ll need to research your ideal customer and your competitors—information that will help you make more strategic decisions.
- Recruiting: Your business plan is one of the easiest ways to communicate your vision to potential new hires and can help build their confidence in the venture, especially if you’re in the early stages of growth.
- Partnerships: If you plan to approach other companies to collaborate, having a clear overview of your vision, your audience, and your business strategy will make it much easier for them to identify whether your business is a good fit for theirs—especially if they’re further along than you in their growth trajectory.
- Competitions: There are many business plan competitions offering prizes such as mentorships, grants, or investment capital. To find relevant competitions in your industry and area, try Googling “business plan competition + [your location]” and “business plan competition + [your industry].”
If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, a business plan is an excellent starting point.
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Business plans can span from one page to multiple pages with detailed graphs and reports. There’s no one way to create a business plan. The goal is to convey the most important information about your company for readers.
Common types of business plans we see include, but are not limited to, the following:
- Traditional. These are the most common business plans. Below, we’ll cover the standard elements of a business plan and go into detail for each section. Traditional business plans take longer to write and can be dozens of pages long. Venture capitalist firms and lenders ask for this plan.
- Lean. A lean business plan is a shorter version of a traditional business plan. It follows the same format, but only includes the most important information. Businesses use this plan to onboard new hires or modify existing plans for a specific target market.
- Nonprofit. A nonprofit business plan is for any entity that operates for public or social benefit. It covers everything you’ll find in a traditional business plan, plus a section describing the impact the company plans to make. For example, a speaker and headphone brand that aims to help people with hearing disabilities. Donors often request this plan.
Check out real-world examples of different business plans by reading The Road to Success: Business Plan Examples to Inspire Your Own .
- Draft an executive summary
- Describe your company
- Perform a market analysis
- Outline the management and organization
- List your products and services
- Perform customer segmentation
- Define a marketing plan
- Provide a logistics and operations plan
- Make a financial plan
Few things are more intimidating than a blank page. Starting your business plan with a structured outline and key elements for what you’ll include in each section is the best first step you can take.
Since an outline is such an important step in the process of writing a business plan, we’ve put together a high-level overview you can copy into your blank document to get you started (and avoid the terror of facing a blank page). You can also start with a free business plan template and use it to inform the structure of your plan.
Once you’ve got your business plan outline in place, it’s time to fill it in. We’ve broken it down by section to help you build your plan step by step.
1. Draft an executive summary
A good executive summary is one of the most crucial sections of your plan—it’s also the last section you should write.
The executive summary’s purpose is to distill everything that follows and give time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your business that persuades them to read further.
Again, it’s a summary, so highlight the key points you’ve uncovered while writing your plan. If you’re writing for your own planning purposes, you can skip the summary altogether—although you might want to give it a try anyway, just for practice.
An executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing in all of the salient information a bit stressful—but it’s not impossible. Here’s what your business plan’s executive summary should include:
- Business concept. What does your business do?
- Business goals and vision. What does your business want to do?
- Product description and differentiation. What do you sell, and why is it different?
- Target market. Who do you sell to?
- Marketing strategy. How do you plan on reaching your customers?
- Current financial state. What do you currently earn in revenue?
- Projected financial state. What do you foresee earning in revenue?
- The ask. How much money are you asking for?
- The team. strong> Who’s involved in the business?
2. Describe your company
This section of your business plan should answer two fundamental questions: who are you, and what do you plan to do? Answering these questions with a company description provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment bet. For example, clean makeup brand Saie shares a letter from its founder on the company’s mission and why it exists.
Clarifying these details is still a useful exercise, even if you’re the only person who’s going to see them. It’s an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies.
Here are some of the components you should include in your company description:
- Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or incorporated company?)
- Your business model
- Your industry
- Your business’s vision, mission, and value proposition
- Background information on your business or its history
- Business objectives, both short and long term
- Your team, including key personnel and their salaries
Some of these points are statements of fact, but others will require a bit more thought to define, especially when it comes to your business’s vision, mission, and values. This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
To define your values, think about all the people your company is accountable to, including owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge.
Once you know your values, you can write a mission statement . Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single sentence.
As an example, Shopify’s mission statement is “Making commerce better for everyone.” It’s the “why” behind everything we do and clear enough that it needs no further explanation.
What impact do you envision your business having on the world once you’ve achieved your vision?
Next, craft your vision statement: what impact do you envision your business having on the world once you’ve achieved your vision? Phrase this impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise.
Finally, your company description should include both short- and long-term goals. Short-term goals, generally, should be achievable within the next year, while one to five years is a good window for long-term goals. Make sure all your goals are SMART: specific, measurable, attainable, realistic, and time-bound.
3. Perform a market analysis
No matter what type of business you start, it’s no exaggeration to say your market can make or break it. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. If you choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale.
Market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it.
This is why market research and analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it. It should include an overview of how big you estimate the market is for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan.
How big is your potential market?
The potential market is an estimate of how many people need your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as possible to validate your estimated potential market.
Since this can be a daunting process, here are some general tips to help you begin your research:
- Understand your ideal customer profile . If you’re targeting millennial consumers in the US, you first can look for government data about the size of that group. You also could look at projected changes to the number of people in your target age range over the next few years.
- Research relevant industry trends and trajectory. If your product serves retirees, try to find data about how many people will be retiring in the next five years, as well as any information you can find about consumption patterns among that group. If you’re selling fitness equipment, you could look at trends in gym memberships and overall health and fitness among your target audience or the population at large. Finally, look for information on whether your general industry is projected to grow or decline over the next few years.
- Make informed guesses. You’ll never have perfect, complete information about the size of your total addressable market. Your goal is to base your estimates on as many verifiable data points as necessary for a confident guess.
Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry.
A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best things about your company? What are you not so good at? What market or industry shifts can you take advantage of and turn into opportunities? Are there external factors threatening your ability to succeed?
These breakdowns often are presented as a grid, with bullet points in each section breaking down the most relevant information—so you can probably skip writing full paragraphs here. Strengths and weaknesses—both internal company factors—are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market.
Here’s an example:
Free: SWOT Analysis Template
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There are three overarching factors you can use to differentiate your business in the face of competition:
- Cost leadership. You have the capacity to maximize profits by offering lower prices than the majority of your competitors. Examples include companies like Mejuri and Endy .
- Differentiation. Your product or service offers something distinct from the current cost leaders in your industry and banks on standing out based on your uniqueness. Think of companies like Knix and Qalo .
- Segmentation. You focus on a very specific, or niche, target market, and aim to build traction with a smaller audience before moving on to a broader market. Companies like TomboyX and Heyday Footwear are great examples of this strategy.
To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape.
You’ll always have competition in the market, even with an innovative product, so it’s important to include a competitive overview in your business plan. If you’re entering an established market, include a list of a few companies you consider direct competitors and explain how you plan to differentiate your products and business from theirs.
You’ll always have competition in the market, even with an innovative product.
For example, if you’re selling jewelry, your competitive differentiation could be that, unlike many high-end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your customers.
If you’re entering a market where you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours. For example, if you’re selling an innovative new piece of kitchen equipment, it’s too easy to say that because your product is new, you have no competition. Consider what your potential customers are doing to solve the same problems your product solves.
4. Outline management and organization
The management and organization section of your business plan should tell readers about who’s running your company. Detail the legal structure of your business. Communicate whether you’ll incorporate your business as an S corporation or create a limited partnership or sole proprietorship.
If you have a management team, use an organizational chart to show your company’s internal structure, including the roles, responsibilities, and relationships between people in your chart. Communicate how each person will contribute to the success of your startup.
5. List your products and services
Your products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers.
If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide additional information on each. For example, bag shop BAGGU sells a large selection of different types of bags, in addition to home goods and other accessories. Its business plan would list out those bags and key details about each.
Describe new products you’ll launch in the near future and any intellectual property you own. Express how they’ll improve profitability.
It’s also important to note where products are coming from—handmade crafts are sourced differently than trending products for a dropshipping business, for instance.
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6. perform customer segmentation.
Your ideal customer, also known as your target market, is the foundation of your marketing plan , if not your business plan as a whole. You’ll want to keep this person in mind as you make strategic decisions, which is why an overview of who they are is important to understand and include in your plan.
To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes:
- Where they live
- Their age range
- Their level of education
- Some common behavior patterns
- How they spend their free time
- Where they work
- What technology they use
- How much they earn
- Where they’re commonly employed
- Their values, beliefs, or opinions
This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on who your customers are and what they value.
For example, a college student has different interests, shopping habits, and pricing sensitivity than a 50-year-old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer.
7. Define a marketing plan
Your marketing efforts are directly informed by your ideal customer. Your marketing plan should outline your current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal customer.
If you’re planning to invest heavily in > Instagram marketing , for example, it might make sense to include whether Instagram is a leading platform for your audience—if it’s not, that might be a sign to rethink your marketing plan.
Most marketing plans include information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience.
- Price. How much do your products cost, and why have you made that decision?
- Product. What are you selling and how do you differentiate it in the market?
- Promotion. How will you get your products in front of your ideal customer?
- Place. Where will you sell your products?
Promotion may be the bulk of your plan since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix.
8. Provide a logistics and operations plan
Logistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were seeking investment.
Cover all parts of your planned operations, including:
- Suppliers. Where do you get the raw materials you need for production, or where are your products produced?
- Production. Will you make, manufacture, wholesale , or dropship your products? How long does it take to produce your products and get them shipped to you? How will you handle a busy season or an unexpected spike in demand?
- Facilities. Where will you and any team members work? Do you plan to have a physical retail space? If yes, where?
- Equipment. What tools and technology do you require to be up and running? This includes everything from computers to lightbulbs and everything in between.
- Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you use a third-party fulfillment partner?
- Inventory. How much will you keep on hand, and where will it be stored? How will you ship it to partners if required, and how will you approach inventory management ?
This section should signal to your reader that you’ve got a solid understanding of your supply chain and strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you plan to break even on your initial spending.
9. Make a financial plan
No matter how great your idea is, and regardless of the effort, time, and money you invest, a business lives or dies based on its financial health. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future.
The level of detail required in your financial plan will depend on your audience and goals, but typically you’ll want to include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include financial data and projections.
Here’s a spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections if needed.
Your income statement is designed to give readers a look at your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information.
Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own), and on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity, which is calculated as:
Assets - Liabilities = Equity
Cash flow statement
Your cash flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid.
When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent .
It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required. Here’s a full guide to working through cash-flow projections for your business.
Download your copy of these templates to build out these financial statements for your business plan.
Know your audience
When you know who will be reading your plan—even if you’re just writing it for yourself to clarify your ideas—you can tailor the language and level of detail to them. This can also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as impactful.
Have a clear goal
You’ll need to put in more work and deliver a more thorough plan if your goal is to secure funding for your business versus working through a plan for yourself or even your team.
Invest time in research
Sections of your business plan will primarily be informed by your ideas and vision, but some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re selling to, whether there’s demand for your products, and who else is selling similar products or services.
Keep it short and to the point
No matter who you’re writing for, your business plan should be short and readable—generally no longer than 15 to 20 pages. If you do have additional documents you think may be valuable to your audience and your goals, consider adding them as appendices.
Keep the tone, style, and voice consistent
This is best managed by having a single person write the plan or by allowing time for the plan to be properly edited before distributing it.
Use a business plan software
Writing a business plan isn’t the easiest task for business owners. But it’s important for anyone starting or expanding a business. Fortunately, there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan software also have templates and tutorials to help you finish a comprehensive plan in hours, rather than days.
A few curated picks include:
- LivePlan : the most affordable option with samples and templates
- Bizplan : tailored for startups seeking investment
- GoSmallBiz : budget-friendly option with industry-specific templates
For a more in-depth look at the available options, read Get Guidance: 6 Business Plan Software to Help Write Your Future .
Other articles on business plans would never tell you what we’re about to tell you: your business plan can fail. The last thing you want is for time and effort to go down the drain. Avoid these common mistakes:
- Bad business idea. Not every idea is going to win. Sometimes your idea may be too risky and you won’t be able to get funding for it. Other times it’s too expensive or there’s no market. Aim for small business ideas that require little money and bypass traditional startup costs.
- No exit strategy. Investors reading your business plan want to know one thing: will your venture make them money? If you don’t show an exit strategy, or a plan for them to leave the business with maximum profits, you’ll have little luck finding capital.
- Unbalanced teams. A great product is the cost of entry to starting a business. But an incredible team will take it to the top. Unfortunately, many business owners overlook a balanced team. They assume readers want to see potential profits, without worrying about how you’ll get it done. If you’re pitching a new software idea, it makes sense to have at least one developer or IT specialist on your team.
- Missing financial projections. Your numbers are the most interesting part for readers. Don’t leave out your balance sheet, cash flow statements, P&L statements, and income statements. Include your break-even analysis and return-on-investment calculations to create a successful business plan.
- Spelling and grammar errors. Some businesses think hiring a professional editor is overkill. The reality is, all the best organizations have an editor review their documents. If someone spots typos while reading your business plan, how can they believe you’ll run a successful company?
Read through the following business plan example. You can download a copy in Microsoft Word or Google Docs and use it to inspire your own business planning.
Download sample business plan example (.doc)
A business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether you’ve written a business plan for a new online business idea , a retail storefront, growing your established business, or purchasing an existing business , you now have a comprehensive guide and the information you need to help you start working on the next phase of your own business.
Illustrations by Rachel Tunstall
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How do i write a business plan.
- Executive summary
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations
- Financial plan
What is a good business plan?
What are the 3 main purposes of a business plan, what are the different types of business plans, about the author.
Desirae is a senior product marketing manager at Shopify, and has zero chill when it comes to helping entrepreneurs grow their businesses.
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How to Write a Business Plan, Step by Step
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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. add additional information to an appendix, business plan tips and resources.
A business plan is a document that outlines your business’s financial goals and explains how you’ll achieve them. A strong, detailed plan will provide a road map for the business’s next three to five years, and you can share it with potential investors, lenders or other important partners.
Here’s a step-by-step guide to writing your business plan.
» Need help writing? Learn about the best business plan software .
This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, 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, which should contain 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, it should cover 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 exactly what you’d like to accomplish, both in the near term and over the long term.
If you’re looking for a business loan or outside investment, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.
For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result.
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.
Your sales strategy.
Your distribution 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.
» 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.
You may also include 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.
» NerdWallet’s picks for setting up your business finances:
The best business checking accounts .
The best business credit cards .
The best accounting software .
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.
List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.
Here are some tips to help your business plan stand out:
Avoid over-optimism: If you’re applying for a business loan at a local bank, the loan officer likely knows your market pretty well. Providing unreasonable sales estimates can hurt your chances of loan approval.
Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. 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. You can search for a mentor or find a local SCORE chapter for more guidance.
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.
A traditional business plan typically includes—an executive summary, an overview of your products and services, thorough market and industry
Executive Summary · Note · Business Description · Market Analysis · Competitive Analysis · Sales and Marketing Plan · Note · Ownership and Management
Traditional business plan format · Executive summary · Company description · Market analysis · Organization and management · Service or product line · Marketing and
Sample Business Plan Outline · 1. Executive Summary · 2. Company Description · 3. Market Analysis · 4. Customer Analysis · 5. Competitor Analysis.
This article contains a detailed business plan outline as well as a complete, section by section, guide to writing a business plan.
1 - Executive Summary. The Executive Summary is the most important part of your business plan. · 2 - Company Overview · 3 - Market Overview · 4 -
How to write a business plan in 9 steps. Draft an executive summary; Describe your company; Perform a market analysis; Outline the management
Do this section last (it includes the total project costs page). This will summarize your whole business plan. No more than 4 pages. It should sizzle and be
A business plan is a document that outlines your business's financial goals and explains how you'll achieve them. A strong, detailed plan
Use the following outline to summarize your business planning decisions. Title each section of your written plan as indicated in the outline. Write, in your