One of the questions I am asked most frequently by my clients is how to write a business plan. I decided to compile the advice I give into a blog post to help aspiring entrepreneurs get started – first with a few quick tips to keep in mind overall, and next with a breakdown of the sections any good business plan should include.
1-KISS It – In other words, keep it short and simple!
Often people are intimidated by the idea of writing a business plan because they have the idea that it’s going to be a long and complicated process – but that couldn’t be further from the truth!
A good business plan, especially for a startup, is going to be twenty pages or less. If you have more to say than that, you may want to work with a business coach to help you simplify your plans and become more precise in the language you use to describe what you’re doing.
2-Consider Your Audience
Many people ask me HOW to write a business plan, but fewer people ask me WHY – and the answer to this question provides a crucial aspect in knowing how and what to write.
Firstly, your business plan may be used to outline your operations for potential partners, investors, managers or mentors. Although you may have advanced technical knowledge of your field, it’s quite possible that you’ll be showing your business plan to someone who may have valuable skills in other areas of business, but who lacks your specific industry or technical training. For that reason, imagine you are writing this business plan for an AP English class in high school – in other words, it should (of course) sound clear and professional, but also be simplified enough that any intelligent person with a general education can follow it.
Pro tips: Ask a friend who is NOT a colleague to read your plan, and then talk to them about the plan to see if they understand what you wrote – in fact, ask two or three friends! It should also go without saying that your document should be edited for grammar and spelling. Even the best writers will occasionally make typos.
Secondly, your business plan will frequently be used by YOU. This is a document you will go back to time and again, both to remind yourself of your vision and direction as well as to re-evaluate your operations vis-a-vis current market needs. Keeping in mind that you will want to be able to quickly refer back to your work, do yourself the favor of breaking out each section with clear, bold headlines, and edit down everything you want to say into concise summaries at the top of each section, with elaboration (if it’s even needed) below your summary.
3-Write The First Part Last
Your business plan should start with an Executive Summary. When most people approach writing their plans, they think they need to write the executive summary section first, and get stalled out by trying to summarize what they haven’t yet written in full.
One of the reasons for writing a business plan is that the process helps you clarify your vision – you my discover things during thr writing process that you didn’t have in mind before you started. That’s another reason why you should wait until the end to summarize your plans.
Capture this basic structure outlined below, but don’t feel locked into writing in a linear fashion. Start by filling in whichever sections you are most drawn to write about first. Feel free to jump around, knowing you are almost certainly going to come back in fill in more details of a section later.
Once the body of your business plan is complete, write your executive summary last, like adding the whipped cream and cherry on top of your finished document.
STRUCTURE FOR A BUSINESS PLAN
You’ll definitely want to include most of these sections, but feel free to add, subtract or mix around the sections in whatever way best suits your unique needs.
One page or less that hits on the main components of your plan: who you are, what market need you are filling, and how you’re going to fill it.
A deeper look at why you are passionate about filling this particular market need. This is also an excellent place to articulate your values and how your company will embody them.
Will you be a corporation, LLC or sole proprietorship? Who will own the company? Who will be your chief decision-makers? Are there opportunities for partnership or investment in your business?
Operations & Management Plan
This can segue with the section above. Think of this as your longer-term plan for how the business will be structured. What (if any) departments will exist? How will the departments be managed, and who will make decisions for or within each department? How will you set and evaluate performance goals? How you will select, compensate and promote your team?
I would like to encourage all entrepreneurs to use this section as an opportunity to question your own personal values – what do you believe is successful about existing business paradigms, and what would you like your business to do differently? For example, do you want to replicate a hierarchical leadership style, or develop a system for relational leadership instead? If you have moral qualms about racial and gender bias in the way people are hired and compensated, what specific measures will you take to ensure these biases are not replicated in your business?
This describes in more detail the products or services you will provide, who you will provide them to, and how you will provide them. This is also a good place to decide whether you intend to establish a physical location for your business, or if your business (especially if it is service-based) will be virtual or location independent.
Who (if anyone) is already in business meeting your market need? If you answer “several companies” then how do you know there is still a need for additional companies in your sector? What will you do differently that isn’t already being done? If you answered “nobody” then how have you validated your concept? How do you know people will even want what you’re trying to sell?
How much do you have set aside to invest in starting your company? What will your initial expenses be? How are you pricing your products or services? What is your timeline to profitability? What are your milestones and longterm financial goals? If you are seeking investors, how will they realize a return on their investment?
Points you may also wish to include in your plans:
What is your receivables timeline (especially if you are a service-based business)?
Map your accounts payable timeline to your accounts receivable – how far into the red will you go (if at all)?
If you need to fill the gaps between these two, how much “cash on hand” do you have set aside to cover expenses, and how much debt are you willing to incur?
Describe any market research you have done to date. What do you know about your target audience? What do they need? How will you intersect their needs with your products or services? How will your company values be reflected in the development of your brand? What is your company ethos, and how will that be articulated in your marketing? Also include specific tactics you will use, such as digital community building, paid advertisements, in person promotions and more.
A good business plan will outline the phases of your growth, including the evolution of your business structure, marketing plans and revenue targets for the next 3-5 years (at least). Be sure to include milestones within your timeline, so you can gauge whether or not you are you are on track for meeting your goals. Keep in mind that your timeline can always be adjusted – in fact, it almost certainly will be!
Find Out More
Where can anyone reading your business plan find out more about your operations? (i.e. a website, social media)
HAVE I FORGOTTEN ANYTHING?
If I have forgotten a crucial aspect of how to write a business plan, or if there is another section that should be added to this list, please let us know in the comments!