Business Plan in 9 Steps
Before you launch a firm, a strong business plan can assist you in defining your strategy, seeing potential obstacles, choosing the resources you’ll require, and assessing the sustainability of your concept or expansion plans.
Many founders find benefit in taking the time to step back, investigate their idea and the market they’re aiming to enter, and comprehend the scale and the strategy behind their methods, even though not every successful business debuts with a formal business plan. Writing a business strategy can help with that.
Table of Contents
- What is a business plan?
- Why write a business plan?
- Business plan formats
- How to write a business plan, step by step
- Tips for creating a small business plan
- Common mistakes when writing a business plan
- Business planning gives you a foundation for growth
- Business plan FAQ
What is a business plan?
A business plan is a document that describes a company, its products or services, how it makes money (or plans to make money), its management and staffing, funding, operational model, and many other crucial information.
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.
Why write a business plan?
Business plans are frequently related to securing a loan since lenders use them to assess a company’s viability before investing in it. But even if you don’t require finance, there are still a number of compelling reasons to think about creating a business plan.
In addition to helping you comprehend the breadth of your business and the amount of time, money, and resources you’ll need to get started, writing down your strategy is a very useful exercise for crystallising your ideas.
If you have several ideas in mind, creating a preliminary business plan for each will assist you in concentrating your time and efforts on the projects that have the best potential of succeeding.
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.
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.
It will be much simpler for them to decide whether your business is a good fit for theirs if you plan to approach other businesses for collaboration if you have a clear understanding of your vision, your audience, and your business strategy—especially if they’re further along in their growth trajectory than you are.
Numerous business plan competitions award rewards like mentorships, grants, or funding for investments. Try Googling “business plan competition + [your location]” and “business plan competition + [your industry]” to locate relevant competitions in your field.
A business plan is a great place to start if you’re searching for an organised strategy to organise your thoughts and ideas and communicate them with people who can have a significant impact on your success.
We own a brick-and-mortar and ecommerce jewellery business that moved from Magento over to Shopify. We created a business plan for the move, just as we did with our original website and ecommerce business. Our business plan included an overview of why we were making the move, the issues with the current business, the benefits of moving to a new platform, the potential issues during the move, the main task, added costs, and a timeline. It really covered everything we felt was the most important. This business plan was given to everyone working on the project, from the photographers to the marketing team to the developers. This way, we were all on the same page. It worked pretty well the first time and even better this time around.
Business plan formats
Business plans might be one page long or several pages long, with intricate graphs and reports. A business strategy can be written in a variety of ways. The objective is to give readers the most crucial information about your business.
Common types of business plans we see include, but are not limited to, the following:
- Traditional.The majority of company strategies look like this. In the sections that follow, we’ll go through the essential components of a business plan in more detail. Traditional business plans might be many pages long and take more time to prepare. Lenders and venture capital firms request this plan.
- Lean.The standard business plan has been condensed into a lean business plan. The format is the same, but it just contains the most crucial details. This strategy is used by businesses to adapt current plans for a particular target market or onboard new personnel.
- Nonprofit. Any organisation that operates for the benefit of the public or society needs a nonprofit business strategy. It includes all the information found in a conventional business plan as well as a section outlining the impact the company hopes to have. For instance, a speaker and headphone company that wants to assist those who have hearing impairments. Often, donors ask for this strategy.
How to write a business plan in 9 steps
- 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
You can also start with a free business plan template and use it to inform the structure of your plan.
Another option is to begin with a free business plan template and use it to guide the format of your document.
We’ve created a high-level overview you can copy into your blank document to get you started because creating an outline is such an essential step in the process of producing a business plan (and avoid the terror of facing a blank page).
It’s time to add details to your business plan outline now that it is in place. To assist you in creating your plan step-by-step, we’ve divided it down into sections. It’s time to add details to your business plan outline now that it is in place. To assist you in creating your plan step-by-step, we’ve divided it down into sections.
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 objective of an executive summary is to summarise the rest of the document and persuade time-pressed reviewers (such potential lenders and investors) to continue reading by providing a high-level overview of your company.
Again, since this is a summary, emphasise the important ideas you discovered when drafting your plan. You can completely omit the summary if you’re writing for your own planning needs, but you might want to give it a shot just for practice.
One page is the maximum length for an executive summary. It’s true that the space restriction can make fitting in all of the important information a little challenging, but it’s not impossible. The executive summary of your business plan needs to include the following:
- 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. Who’s involved in the business?
2. Describe your company
Who are you and what do you propose to do should be addressed in this area of your business strategy. By responding to these inquiries, you can introduce your firm, your uniqueness, your advantages, and your suitability as an investment. As an illustration, the clean makeup firm Saie posts a letter from its founder outlining the goals and rationale behind the business.
Even if no one else will see these subtleties, clarifying them is still a good exercise. It’s a chance to formalise some of your company’s more abstract elements, such as your values, ideals, and cultural tenets.
Here are some of the components you should include in your company overview:
- 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
While some of these assertions are true, some will need a little more explanation, especially when it comes to your company’s vision, goal, and values. Here, you can begin to explore the fundamental reasons behind your company’s existence as well as your goals and key 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.
Consider all the stakeholders your business is responsible to, such as owners, employees, suppliers, consumers, and investors, while defining your values. Now think about how you want to interact with each of them on business. Your key values ought to start to become clear as you construct a list.
Knowing your values will help you create a mission statement. Your statement should be no longer than one sentence and should convincingly explain why your firm exists.
The purpose of Shopify, for instance, is to “Make commerce better for everyone.” Everything we do has a “why” and because it is so obvious, there is no need for further explanation.
What impact do you envision your business having on the world once you’ve achieved your vision?
Create your vision statement next. Once you’ve accomplished your goal, what impact do you see your company having on the world? If you open the statement with “We will,” you’ll be off to a terrific start by framing this impact as an assertion. In contrast to your mission statement, your vision statement can contain more than one sentence, but try to limit it to three at most. The most effective vision statements are brief.
Finally, both short- and long-term goals should be included in your company overview. In general, short-term goals should be accomplished within the next year, whereas long-term goals should be accomplished during the next one to five years. Make sure all of your objectives are SMART: time-bound, specified, measurable, achievable, and reasonable.
3. Perform a market analysis
It is true that your market has the power to build or ruin any type of business you establish. You’ll have a head start on success if you choose the correct market for your goods—one where there are lots of clients who understand and need your product. You can find yourself fighting for every sale if you select the incorrect market or the appropriate market at the incorrect time.
Market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it.
Because of this, whether or not you ever intend for anybody else to see it, a crucial portion of your business plan should include market research and analysis. An assessment of the size of the market for your products, a study of your company’s position in the market, and an evaluation of the competitive environment should all be included. As you carry out your plan, it’s crucial to conduct thorough research to back your conclusions in order to convince investors and confirm your own hypotheses.
How big is your potential market?
While imagining sky-high sales figures is fascinating, you should confirm your estimated potential market using as much relevant, independent data as you can.
Since this can be a daunting process, here are some general tips to help you begin your research:
- Understand your ideal customer profile.You might start by looking for government statistics about the size of the millennial market in the US. You might also consider future changes in the population of people in your target age group.
- Research relevant industry trends and trajectory.Find out how many individuals will be retiring in the next five years if your product caters to seniors, and also learn as much as you can about their consumption habits. If you’re selling fitness equipment, you might investigate the prevalence of gym memberships as well as general health and fitness levels among your target market or the general populace. Find out, last but not least, if there are any predictions for future growth or decline in your sector.
- Make informed guesses.It’s impossible to have perfect, comprehensive knowledge about the size of your total addressable market. In order to make a confident guess, you want to base your estimates on as many independently verified data points as possible.
Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry.
Your strengths, weaknesses, opportunities, and threats are examined in a SWOT analysis. What features of your business stand out as the best? What do you lack skill in? What changes in the market or business can you seize upon and transform into opportunities? Are there outside forces preventing you from succeeding?
You can generally omit writing lengthy paragraphs at this stage because these analyses are frequently presented as a grid with bullet points that break down the most important information in each part. The internal firm elements of strengths and weaknesses are stated first, followed by opportunities and threats in the subsequent row. Your reader will be able to rapidly understand the elements that could affect your company and identify your competitive edge in the market thanks to this visual presentation.
There are three overarching factors you can use to differentiate your business in the face of competition:
- Cost leadership. Offering cheaper prices than the majority of your competitors will allow you to maximise profits. Businesses like Mejuri and Endy are examples.
- Differentiation. Your business depends on standing out from the competition due to how different it is from the present market leaders in your sector. Consider businesses like Qalo and Knix.
- Segmentation.You concentrate on a very particular, or niche, target market with the intention of gaining success with a smaller audience before expanding to a larger one. Great examples of this method are businesses like TomboyX and Heyday Footwear.
To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape.
Even with a unique product, there will always be rivalry in the market, thus it’s critical to include a competitive analysis in your business strategy. If you’re breaking into an established market, select a few businesses you believe to be direct rivals and describe how you intend to set your goods and company apart from theirs.
You’ll always have competition in the market, even with an innovative product.
If you sell jewellery, for instance, your competitive advantage might be that, in contrast to many high-end rivals, you give a portion of your profits to a reputable charity or pass discounts on to your consumers.
If you’re entering a market where it’s difficult to pinpoint your competitors, think about your indirect competitors—companies who sell goods that can be used as a replacement for your own. For instance, it’s too simple to claim that you have no competition if you’re selling a cutting-edge new piece of kitchen equipment. Take into account what your target clients are doing to find solutions to the issues your product addresses.
4. Outline of management and organization
Readers should learn who is in charge of your business in the management and organisation part of your business plan. Describe your company’s legal structure in detail. Decide whether your company will be incorporated as a S corporation, a limited partnership, or a sole proprietorship.
If your business has a management team, utilise an organisational chart to demonstrate the roles, responsibilities, and connections among the individuals in your chart as well as your internal organisational structure. Share the specific ways that each employee will help your startup succeed.
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 a lot of products, you can include more basic information about each of your product lines; if you only sell a small number, give more details about each. For instance, the bag store BAGGU offers a wide variety of bags in addition to home items and other accessories. The bags would be listed in its business strategy along with some critical information for 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.
6. Perform customer segmentation
Your target market, also referred to as your ideal client, is the cornerstone of your marketing strategy, if not your entire business strategy. An overview of this person is crucial to comprehend and incorporate into your plan because you’ll want to keep them in mind while you make strategic selections.
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 behaviour 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
Depending on what you’re offering, this information will change, but you should be detailed enough to make it crystal apparent who you’re attempting to reach. More importantly, you should explain why you made the decisions you did in light of who your clients are and what they value.
A 50-year-old executive at a Fortune 500 business, for instance, has different hobbies, buying preferences, and price sensitivity than a college student. Depending on which of them was your ideal customer, your business plan and decisions would seem very different.
7. Define a marketing plan
Your ideal customer immediately influences your marketing strategies. Your marketing strategy should describe your present choices and your anticipated course of action, with an emphasis on how well your concepts match the needs of your ideal client.
If you’re going to spend a lot of money on Instagram marketing, for instance, you might want to consider whether Instagram is the most popular platform for your target audience. If it’s not, you might want to reconsider your marketing strategy.
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?
Although promotion may make up the majority of your plan since you can more easily go into tactical specifics, each of the other three areas is a crucial strategic lever in your marketing mix and should be discussed at least briefly..
8. Provide a logistics and operations plan
The routines you’ll implement to make your ideas a reality are logistics and operations. Even while you might not need to go into as much detail as if you were looking for investment, this is still a crucial element to take into account when developing a business plan for your own planning needs.
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 create, produce, sell at a loss, or dropship your goods? How long does it take to manufacture your goods before shipping them to you? How will you respond to a busy time of year or an unanticipated increase 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 equipment and technologies are needed for you to operate? From computers to lightbulbs and everything in between, this encompasses everything.
- Shipping and fulfilment. Will you be handling all the fulfilment tasks in-house, or will you use a third-party fulfilment partner?
- Inventory.What would you store it in, and how much will you keep on hand? How will you handle inventory management and how will you transport it to partners if necessary?
This part should demonstrate to your reader that you have a firm grasp of your supply chain and effective backup procedures in place to deal with any potential uncertainties. If you are the reader, this information should help you decide how to price your products to meet your expected expenditures and when you will break even on your original investment.
9. Make a financial plan
No matter how brilliant your idea is or how much time, money, or effort you put into it, a firm will either succeed or fail depending on its financial situation. People prefer to work with companies they believe will remain profitable for the foreseeable future.
Your audience and your objectives will determine the level of detail needed in your financial plan, but generally you’ll want to include an income statement, a balance sheet, and a cash-flow statement as the three main views of your finances. The inclusion of financial information and estimates could also be appropriate.
Readers can view your sources of income and outlays on your income statement for a specific time period. With those two pieces of information, they can determine your company’s crucial bottom line, or the profit or loss it made during that period. If your company hasn’t yet launched, you can forecast future milestones using the same data.
The equity you have in your company is visible on your balance sheet. You put all of your business’s assets (what you own) on one side and all of its liabilities on the other (what you owe). This gives a quick glimpse of the shareholder equity of your company, which is computed as: