A business plan might be one of the most important documents you’ll write as an entrepreneur.
Yet it’s a task that’s often put off (or never completed) because it’s not easy to do.
A business plan is a critical element of your business’s foundation. Think of your business idea as a destination. Your business plan is the map that helps you get there (ideally without too many detours or unexpected stops).
We’ll help get you started by outlining some of the key sections and information you should include in your business plan, regardless of your industry. And if you need additional help, we’ll share some resources that will guide you from start to finish.
Why You Need a Business Plan (Even If You’re Not Seeking Financing)
There’s a common misconception that you only need a business plan if you’re seeking funding to launch your business, whether from a bank, an investor or another source.
If you need an investment to start your business, you’ll need a strong, concise, polished business plan to help potential investors understand what you’re doing and why your business is a viable investment opportunity.
On the other hand, if you’re among the 81 percent of entrepreneurs who don’t pursue a bank loan or venture capital to start your business, it’s still a good idea to not only write a business plan, but also revisit it on an annual basis to see how your business (particularly your operations and finances) are evolving and ensure you’re on the right track toward achieving your long-term goals.
Even if you’re the only person who sees your business plan, it will help you gather your thoughts, figure out how you’ll meet your goals and document that critical information. There’s something official about a business plan that helps validate your idea and approach.
Remember, too, that a business plan is also a living, evolving document. It will likely change as your business grows, which is why we recommend revisiting your business plan each year to monitor how the plan — and your business itself — is progressing.
Seven Sections to Include in Your Business Plan
Business plans typically include seven sections:
Executive summary — This is where you summarize your business plan and also lay out what you need to launch your business, i.e. funding. Executive summaries are notoriously tricky because they need to be short (usually no more than one page in length) but also compelling. We recommend writing the rest of your business plan first and saving the executive summary for last.
Business description and organization — Detail your business, including its industry, operations, your chosen business structure and the products and/or services you’ll offer. Opt to include information about your company’s executive team here (if you have one) or you can add it to the “Business Operations and Management” section. Consider also including information about the factors that will help make your business profitable.
Market strategy — This is where you delve into your target market, including its makeup and how your business fits into the landscape. Use this section to also take a closer look at your customers: who and where are they? Why will they support your business? Introduce your differentiators and what will help you stand out from the competition. Consider also including information on projected market share and product pricing and distribution.
Competitive analysis — You might find some slight overlap between this and the previous section, but a competitive analysis is a more detailed look at your competition, including their strengths and weaknesses. Highlight any advantages or differentiators your business has over the competition that will not only help you grow your customer base, but also limit disruption to your business from existing or new competitors.
Product design and development — What are the details of your product’s design and how it will be developed and produced? Consider including helpful visuals that will help readers of your business plan better understand the product. Then, detail development of the product itself, as well as how the product’s marketing strategy and the business itself will develop over time. The staff of Entrepreneur Media, Inc., authors of Start Your Own Business, recommend including “a schedule that shows how the product, marketing strategies and organization will develop over time. The schedule should be tied to a development budget so expenses can be tracked throughout the design and development process.”
Lastly, a quick bit of good news. If your business offers a service instead of a product, you’ll only need to focus on the development part of this section.
Business operations and management — Share how your business will run from day to day. If you haven’t yet introduced your management team, do so here and share information about their qualifications and responsibilities. Will you have employees or a support staff to help run the business? What additional capital and expense requirements need to be met to keep your business running?
Financial outlook — Put down the Magic 8 ball and grab your calculator — it’s time to crunch some numbers. This is where you demonstrate your business’s profitability, both in the short- and long-term. You’ll want to include income statements (monthly for the first year, quarterly for the second and annual for the following years), a cash-flow statement and a balance sheet. Choose how far into the future you want to project your company’s finances, but it’s a good idea to outline at least three years’ worth of financial information, especially if you’re seeking start-up capital.
Two Common Places You’ll Get Stuck (And How to Move Forward)
Writing a business plan is hard. And it’s likely that, at some point, you’ll get stuck. We’ve identified the two most common sources of business plan writer’s block and how you can keep moving forward.
Getting started — If you find yourself hesitant to get started when facing a daunting project, you’re not alone. There’s an assumption that entrepreneurs are fearless and can easily tackle any challenge that comes their way. The reality, however, is that entrepreneurs fight anxiety and fear like everyone else.
Writing a business plan can seem like climbing a mountain. And as a result, many entrepreneurs completely avoid the task because they’re overwhelmed. If you find yourself struggling to start your business plan, it’s important to first recognize that you’re not alone.
Then, take a step back and examine ways you can make the task ahead a little easier. What about breaking the business plan up into the sections mentioned earlier and focusing on one at a time? By dividing a large project into smaller, more manageable pieces, you might find it easier to pick a place and dive in.
Maybe you feel like you have too many thoughts and details running through your brain and it’s tough to get everything down on paper. If you haven’t already, try a brain dump. Make notes or an outline to help you approach your business plan from a more organized mindset. You might also spot gaps in your information that you can fill before or as you start writing.
One last tip? Approach your business plan like a writer does a first draft. Your business plan isn’t going to be perfectly polished out of the gate. Instead, the bigger goal is to simply get everything documented and in a readable format. Then, consider giving your plan to a couple of trusted friends or colleagues so they can help you edit before you distribute your plan on a more widespread basis.
Financial projections — As you try to project revenue, expenses and losses, you might find yourself wishing for a fortune-teller. After all, how can you predict earnings and costs for the next three months, let alone three years, especially if you haven’t yet launched your business?
First, understand that much of the information in this section will be a guess, albeit an educated one. There’s no way you can know exact numbers, especially years ahead. What you’re instead trying to show is that your business will eventually be profitable, and, based on what you said earlier in your plan about your market and business operations, here’s how.
As you work on your financial projections, be realistic. If you’re seeking start-up funding, you don’t want to mislead prospective investors with wildly optimistic conjectures about their ROI. Instead, stick to the information you know to make your best (modest) financial guess.
If you get stuck here, try reaching out to your accountant. They might be able to help take the data you’ve compiled so far to organize it into the elements you’ll need to complete this section.