For those thinking about starting their own business, among the most foundational first steps is to craft a detailed business plan early in the process. Making projections for a company’s growth well into the future doesn’t guarantee its ultimate success; only about 35% of businesses launched in 2013 were still operating in 2023, according to data from the United States Bureau of Labor Statistics (BLS). However, with a business plan as a roadmap outlining specific action items to execute, entrepreneurs can be better prepared to flourish.
This practical guide covers key elements that compose a solid business plan, step by step.
What Is a Business Plan?
A business plan is a written document that details just about every aspect of how the business will be run. Business plans cover not just long-term goals and objectives but also how they will be achieved, along with other details about the company, such as:
- The products and/or services it will offer.
- The management/decision-making team.
- Details about the industry/target market.
- Financial projections and funding requirements.
In simplest terms, a business plan helps entrepreneurs clarify their vision while attracting potential investors and guiding business decisions.
Why You Need a Business Plan
Having a business plan isn’t just a good idea — it’s vital to a new business in today’s competitive landscape. In particular, a well-crafted business plan:
- Provides much-needed direction, acting as a roadmap for decision-making.
- Improves financial projections, which can help with cash flow management and overall budgeting.
- Unifies management and decision-making teams to keep everybody on the same page.
- Can be used to secure funding from potential investors, which could lead to long-term growth and success.
Step-by-Step Guide to Writing a Business Plan
While the thought of writing a business plan from scratch may seem overwhelming, it doesn’t have to be. Below, you’ll find a guide to walk you through the process.
Step 1: Write an Executive Summary
A business plan typically begins with an executive summary, presenting a general overview of your company and what will lead it to success. This section also includes your mission statement, any products/services offered, location, and other high-level details.
Keep in mind, too, that it’s sometimes easier to write this section last. Despite being listed as the first step, it’s perfectly fine to start with an “Executive Summary” subheading as a placeholder and come back to it later.
Step 2: Explain Your Business
The next section in most business plans includes a detailed description of the company itself. Here, you might describe the kinds of problems your business aims to solve or the competitive advantages that set it apart. Additionally, this section is an optimal place to introduce your measurable short- and long-term objectives.
Step 3: Conduct Market and Industry Research
Knowing your audience and industry is essential to business success. Thus, your business plan should demonstrate that you’ve done your research.
There are numerous ways to conduct market research, ranging from surveys and focus groups to interviews and observational research. Your business plan can lay out the findings of your research in detail, identifying the target audience and demonstrating market demand for your product/service.
Step 4: Outline Your Organization and Management Structure
Another important section in your business plan is one that covers your company’s overall organization and management structure. Include the legal structure of your business as well as a brief bio on each member of leadership. For small businesses, you may also want to discuss any advisors or contractors with whom you work, as this can build investor confidence.
Step 5: Describe Your Products or Services
This section of your business plan can go into detail on the unique products and/or services your company will offer. More specifically, describe how your offerings benefit your target customers and what sets them apart from the competition. For instance, do you offer a more affordable price or friendlier customer service?
Step 6: Develop a Marketing and Sales Strategy
Marketing and sales are critical to the success of any business, especially in regard to reaching your target audience and building brand awareness. In your business plan, then, explain:
- How your company plans to attract and retain a customer base.
- The strategies you’ll rely on to inform and measure your marketing/sales goals (e.g., increasing purchases or growing social media and email list subscribers).
- Marketing channels to target (e.g., billboards, commercials, social media advertising).
For your sales strategy, the U.S. Small Business Administration (SBA) advises, “List the sales methods you’ll use, like retail, wholesale, or your own online store. Explain each step your customer takes once they decide to buy.”
Step 7: Explain Your Operational Plan
An operational plan is another key component of the business plan, offering a high-level roadmap of your company’s day-to-day operations. This section should include information on how your everyday operations will align with your long-term goals as well as what specific processes and workflows will look like.
Step 8: Present Your Financial Plan
For investors in particular, the financial section of your business plan is crucial. Include detailed financial projections, including:
- Income statements
- Cash flow forecasts
- Balance sheets
If your business hasn’t already been launched, you may need to pivot and include financial forecasts instead. You can do this by using recent industry trends, creating a budget of anticipated expenses, and predicting your break-even point — all of which can help investors see the viability of your plan.
Step 9: Include a Risk Analysis
No business comes without inherent risks, so it’s always better to plan ahead. Your business plan will ideally identify any potential risks to your company and explain what kinds of proactive steps you’ll take to mitigate them.
Step 10: Add Supporting Documents
Lastly, it’s useful for business plans to include an appendix with relevant supporting documents to which potential investors can refer as needed. Examples of documents you may want to include here are:
- Business licenses
- Product patents
- Legal contracts
Tips for Writing a Great Business Plan
Following the above steps, you can complete a first draft of your business plan. As you write, however, there are a few additional tips worth keeping in mind.
Keep It Clear and Concise
When it comes to business plans, less is often more. Keep your writing as clear and concise as possible, avoiding superfluous language and including only the details that are absolutely necessary. Remember that potential investors may be reading your business plan — and if it’s needlessly long, this may be perceived as inconsiderate of their valuable time.
Write for Your Audience
At the end of the day, your business plan isn’t just for you; it’s for your entire decision-making team as well as your potential investors. Keep your target audience top of mind as you write, and try to include only the information that would be most pertinent to them.
Use Visuals Wisely
Visuals can go a long way in helping your readers understand financial projections, market trends, and other critical information. This is especially true when presenting data or numbers that may otherwise be difficult for your audience to grasp or visualize. These visuals can also help break up long blocks of text.
If you decide to use visuals (such as charts and graphs) in your business plan, just be mindful not to overdo it or rely on them too much.
Be Honest and Realistic
As much as all entrepreneurs would love for their startups to rise to the top of the ranks right away, the reality is that the average business doesn’t become profitable for two to three years. As you write your business plan, then, remember that honesty is the best policy. At the end of the day, potential investors would likely prefer to work with a business owner who is authentic and realistic in their projections rather than someone overly optimistic.
Review and Update Regularly
A business plan is never truly complete. It’s often better to view it as a living, breathing document that can evolve alongside the needs of a growing business. With this in mind, it’s good practice to make a habit of reviewing and updating your business plan regularly.
Markets and industries can change rapidly, so conducting a new market analysis and updating this section of your business plan at least once a year is recommended. The same goes for financial projections and risk assessments. By keeping your business plan continually up to date, you can prepare for any curveballs thrown your way.
Learn More in a Business Program at JWU
A well-written business plan serves as a guide entrepreneurs can leverage to handle a full range of situations with confidence and vision. With the practical tips shared above, you may be in a better position to start crafting your own business plan.
Looking to further your business acumen ahead of your next venture? Johnson & Wales University Online offers a Bachelor of Science in Business Administration in Entrepreneurship that helps students master the major concepts, skills, and values of starting a successful business. Plus, this program is offered entirely online for added convenience and flexibility.
For more information about completing your degree online, fill out the Request Info form, call 855-JWU-1881, or email [email protected]. You can also get started with your online application for admission here.